Amazon Pays Zero Federal Income Tax on $5.6 Billion Profit

Amazon reported $5.6 billion in U.S. profits for 2017 yet paid zero federal income tax, according to an analysis by the Institute on Taxation and Economic Policy (ITEP). The company used various tax credits and deductions—particularly tax breaks for executive stock options—to completely eliminate its federal tax liability while ordinary American workers paid effective rates of 10-25% on far smaller incomes. The same year, Amazon also received a $789 million windfall from the Trump tax cuts, further reducing future tax obligations.

The Tax Avoidance Details

According to ITEP’s analysis of Amazon’s financial disclosures:

2017 Performance:

• U.S. profits: $5.6 billion
• Federal income taxes paid: $0
• Effective federal tax rate: 0%
• Statutory corporate tax rate at the time: 35%

Tax Avoidance Mechanisms: Amazon’s financial statements indicated that “various tax credits and tax breaks for executive stock options” were responsible for zeroing out the company’s tax obligation. The company also benefited from deferred tax liability strategies that allowed indefinite postponement of tax payments.

Five-Year Pattern (2012-2017):

• Total U.S. profits: $8.2 billion
• Effective federal income tax rate: 11.4%
• This allowed Amazon to shelter over two-thirds of its profits from taxation even in years when it paid some federal tax

The Trump Tax Cut Windfall

In addition to paying zero taxes on its 2017 profits, Amazon received a massive one-time windfall from the Tax Cuts and Jobs Act passed in December 2017:

Additional Tax Break: $789 million from a grandfather clause allowing Amazon to pay the new 21% corporate rate instead of the previous 35% rate on previously deferred income—effectively a 40% discount on taxes the company had postponed paying.

This meant Amazon not only avoided all federal taxes on current profits but also received a massive discount on taxes it theoretically owed from previous years.

Context: Ordinary Workers Pay More

While Amazon paid zero federal income tax on $5.6 billion in profits, ordinary American workers faced effective federal tax rates of:

• 10% on incomes from $9,325 to $37,950 for single filers
• 15% on incomes from $37,950 to $91,900
• 25% on incomes from $91,900 to $191,650

An Amazon warehouse worker earning $30,000 per year paid a higher effective federal tax rate than the company that employed them—a company whose founder was rapidly becoming the world’s wealthiest individual.

The Bezos Wealth Connection

Jeff Bezos’s personal wealth grew by approximately $40 billion in 2017, driven by Amazon stock appreciation. This wealth accumulation was directly subsidized by Amazon’s tax avoidance:

How Tax Avoidance Inflates Stock Price:

• Every dollar Amazon avoids in taxes increases after-tax profits
• Higher profits increase earnings per share
• Increased earnings drive stock price appreciation
• Stock price appreciation increases Bezos’s wealth

The Subsidy Math: If Amazon had paid the statutory 35% corporate tax rate on $5.6 billion in profits, it would have paid approximately $1.96 billion in federal taxes. By paying zero, Amazon retained that $1.96 billion—value that flowed directly to shareholders, primarily Bezos.

Stock Option Tax Break: Paying Executives to Avoid Taxes

One of Amazon’s primary tax avoidance mechanisms was the stock option compensation deduction—a system that essentially rewards companies for paying executives in stock rather than cash:

How It Works:

1. Amazon pays executives in stock options instead of cash salary
2. When executives exercise options, Amazon deducts the difference between grant price and exercise price
3. The larger the stock price increase, the larger the tax deduction
4. Companies like Amazon with soaring stock prices get massive tax deductions

The Perverse Incentive: The system creates a tax incentive to compensate executives through stock options rather than cash, which:

• Concentrates wealth in the hands of executives
• Provides larger tax breaks to more successful companies (which need them least)
• Rewards stock price manipulation over sustainable business practices
• Reduces federal tax revenue precisely when companies are most profitable

Broader Pattern: Tax System Capture

Amazon’s zero-tax year was not an anomaly but part of a systematic pattern of corporate tax avoidance enabled by:

Legal Tax Avoidance Mechanisms:

• Accelerated depreciation allowing companies to deduct equipment costs immediately
• Research and development tax credits
• Stock compensation deductions
• Ability to carry forward losses from unprofitable years indefinitely
• Offshore profit shifting (though less relevant for Amazon’s domestic retail business)

Lobbying Investment: Amazon spent millions lobbying on tax policy, ensuring favorable treatment in tax reform efforts. The company’s lobbying expenditures represented an investment with returns measured in billions of dollars of avoided taxes.

Significance: Legalized Wealth Extraction

Amazon’s zero federal tax bill represented a form of legalized kleptocracy:

Public Subsidy, Private Profit: Amazon’s business model depended extensively on publicly-funded infrastructure:

• Roads and highways for delivery logistics
• Postal service subsidies for package delivery
• Internet infrastructure developed with public funding
• Educated workforce produced by public schools and universities
• Legal system protecting intellectual property and contracts
• Government contracts (like the $600 million CIA cloud deal)

Despite this dependence on public infrastructure, Amazon contributed nothing to federal tax revenue in 2017.

Political Power Through Wealth Extraction: The taxes Amazon avoided were converted into:

• Stock price appreciation benefiting Bezos and executives
• Increased lobbying power to preserve favorable tax treatment
• Political influence through campaign contributions and Super PACs
• Media influence (Bezos had purchased the Washington Post in 2013)
• Economic leverage over cities competing for Amazon facilities

Eroding Democratic Accountability: Amazon’s ability to generate billions in profits while paying zero federal taxes demonstrated the fundamental corruption of the tax system. The combination of legal tax avoidance mechanisms, lobbying power to preserve those mechanisms, and media influence to shape public discourse created a self-reinforcing system of wealth extraction and political power.

The Accountability Gap

The Institute on Taxation and Economic Policy’s analysis received some media coverage, but the Washington Post—owned by Jeff Bezos—treated Amazon’s tax avoidance as a technical business story rather than a democratic crisis. The Post ran articles explaining how Amazon legally avoided taxes but rarely framed the issue as kleptocracy or examined Bezos’s role in shaping tax policy through lobbying and political influence.

Amazon’s zero-tax year revealed a tax system that had been systematically captured to serve corporate interests. The same year Amazon paid zero federal taxes, Jeff Bezos became the world’s wealthiest person—a form of wealth accumulation subsidized by ordinary taxpayers who had no ability to deploy stock option deductions, depreciation schedules, or armies of tax lawyers.

Democracy dies in darkness, but tax avoidance thrives in plain sight—protected by complexity, lobbying power, and billionaire-owned media institutions that frame legalized theft as business savvy.