Trump is Wrong about Amazon
President Trump has been waging a war on Amazon through his Twitter feed, saying the giant online retailer is a big reason why the United States Postal Service is losing so much money.
Let’s break things down a bit and fact check the President’s claims.
“Unlike others, they pay little or no taxes to state & local governments”
At one time, this was accurate. But now, in 46 states, Amazon pays and collects taxes where sales tax exist. Five states have no sales tax, so Amazon does not collect taxes there. According to the Institute on Taxation and Policy, Amazon paid $957 million in income tax in 2017 but zero in federal taxes this year because of Trump’s tax bill.
They also found that sometimes Amazon doesn’t collect local taxes or they charge a lower tax rate than some local retailers in Alabama, Alaska, Idaho, Iowa, Mississippi, New Mexico and Pennsylvania. Politifact states that “the digital retailer’s decision to collect state sales tax is mostly voluntary, as a 1992 Supreme Court ruling effectively gave a free pass on state taxes to companies with no brick-and-mortar property or employees in the state.”
Amazon uses “our Postal System as their Delivery Boy (causing tremendous loss to the U.S.)”
Losses to the postal system can be attributed to the declining use of paper. As we move toward a more paperless society, people aren’t mailing as much. The USPS also spends billions of dollars in operating costs and have an unsustainable pricing model.
Interestingly enough, growth in the shipping and packages department (that includes Amazon), HELPED the financial woes of the USPS. They even said so in a 2017 press release.
The growth in our Shipping and Packages business provided some help to the financial picture of the Postal Service as revenue increased $2.1 billion, or 11.8 percent. However, that growth was offset in our financials by the decline in mail volumes discussed above, as well as a $1.1 billion 2016 noncash change in accounting estimate and the 2016 roll-back of the exigent surcharge mandated by the Postal Regulatory Commission which further reduced revenue by $1.1 billion from what it otherwise would have been.
Amazon is “putting many thousands of retailers out of business!”
It’s unfair to place the total blame of the decline of brick and mortar stores solely on Amazon. Consumers drive business and they’re flocking to online shopping because it’s easier, the deals are better and there’s more selection.
Business that don’t compete with online retailers, actually saw growth in 2017. And as Politifact points out, online retailers still need warehouses staffed with people to fulfill the orders and processes shipments. It’s usually seen as a positive thing when a major giant like Amazon wants to build a warehouse in your community because it brings hundreds of jobs with them.
Other factors to consider.
Much of their loss is because of a law that mandates the USPS pre-fund retirees health benefits. From CNBC:
US Postal Service workers have a retiree health care benefit in addition to their pension. Before Congress passed the Postal Accountability and Enhancement Act of 2006, the USPS operated under a pay-as-you-go model for retiree health care funding. The new law requires the Postal Service to pre-fund its benefit obligations.
First class mail usage is down. USPS revenue decreased $1.8 billion in 2017 compared to the previous year. According to the USPS site, “lower revenues were driven largely by accelerated declines in First-Class and Marketing Mail volumes.”
Could the postal service be making more off of Amazon? Probably so. After all they do ship about 40% of Amazon’s packages. From Politifact:
USPS ships about 40 percent of Amazon’s packages. Amazon bulk-delivers packages to a USPS distribution center, and the Postal Service brings it to your door. USPS negotiates the discounted rate for that service with Amazon, as it does all other bulk shippers.
That’s because the 2006 Postal Accountability and Enhancement Act made it illegal for USPS to price parcel delivery below its cost.
Looking at the facts, it appears our President is very wrong about Amazon. In fact, they actually helped the USPS with growth in shipping and packing revenue – to the tune of $7 billion in the 2017 fiscal year.