From one Washington to the other, investors, consumers and retailers are wondering how the Trump administration is going to attack Amazon.com. Here’s an idea: Cut off government assistance and then leave the online retailer alone.
“I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!,” tweets President Donald Trump today.
This morning’s presidential broadside at the Seattle-based tech giant follows a Wednesday report from the website Axios:
Capitol Hill wants Facebook’s blood, but President Trump isn’t interested. Instead, the tech behemoth Trump wants to go after is Amazon, according to five sources who’ve discussed it with him. “He’s obsessed with Amazon,” a source said. “Obsessed.”
What we’re hearing: Trump has talked about changing Amazon’s tax treatment because he’s worried about mom-and-pop retailers being put out of business.
A source who’s spoken to POTUS: “He’s wondered aloud if there may be any way to go after Amazon with antitrust or competition law.”
Mr. Trump need wonder no more. All he has to do is overturn the Obama policy of using antitrust law to protect Amazon against competition. The Justice Department spent much of the Obama presidency suing publishers and Apple for the crime of using a different business model to try to challenge Amazon’s dominance in the market for e-books. Much of this federal assault on marketplace competition was described in a 2014 Journal editorial entitled, “Amazon Loves Government.”
People who love economic liberty should urge the President to order Attorney General Jeff Sessions to do everything in his power to undo the damage, which extended well beyond simply providing government protection to Amazon. A 2016 Journal editorial noted that “Apple was arraigned on a quarter-baked theory of antitrust liability that makes a variety of routine business practices automatically illegal.”
As for the delivery services that Amazon enjoys, it seems that even people briefing the President may be confused about the benefits taxpayers are providing to the company. According to Axios:
Trump tells people Amazon has gotten a free ride from taxpayers and cushy treatment from the U.S. Postal Service.
“The whole post office thing, that’s very much a perception he has,” another source said. “It’s been explained to him in multiple meetings that his perception is inaccurate and that the post office actually makes a ton of money from Amazon.”
Maybe the reason Mr. Trump keeps ignoring these explanations is because they’re wrong. Last year in a Journal op-ed, FedEx investor Josh Sandbulte wrote:
In 2007 the Postal Service and its regulator determined that, at a minimum, 5.5% of the agency’s fixed costs must be allocated to packages and similar products. A decade later, around 25% of its revenue comes from packages, but their share of fixed costs has not kept pace. First-class mail effectively subsidizes the national network, and the packages get a free ride. An April analysis from Citigroup estimates that if costs were fairly allocated, on average parcels would cost $1.46 more to deliver. It is as if every Amazon box comes with a dollar or two stapled to the packing slip—a gift card from Uncle Sam.
Amazon is big enough to take full advantage of “postal injection,” and that has tipped the scales in the internet giant’s favor. Select high-volume shippers are able to drop off presorted packages at the local Postal Service depot for “last mile” delivery at cut-rate prices. With high volumes and warehouses near the local depots, Amazon enjoys low rates unavailable to its competitors. My analysis of available data suggests that around two-thirds of Amazon’s domestic deliveries are made by the Postal Service. It’s as if Amazon gets a subsidized space on every mail truck.
If a money-losing government-backed organization is providing a service at a price below private competitors, this is the very definition of a subsidy.
As for state and local sales taxes, Mr. Trump is off the mark. Amazon collects such taxes on the sales of its own goods. While it only collects in some places for third-party sellers using its platform, the company has for years been lobbying to give states and localities more authority to extract taxes from remote sellers, probably because burdensome tax compliance is easier for Amazon than for its smaller competitors. And this handy chart from the Federal Reserve Bank of St. Louis debunks the myth that the Internet has starved state and local governments of tax revenue.
But there is another big potential benefit that the federal government can withhold. Dan Clifton of Strategas Research writes in a note to clients today that much of the reporting on Mr. Trump and Amazon has missed a big story at the Pentagon:
Of all the stories we read yesterday... we saw very little attention paid to the one area where Trump could actually hurt Amazon – cloud computing contracts. Tech companies have been fuming at the possibility of Amazon being the sole company awarded a multi-year cloud services contract at DoD.
So while Mr. Trump is wrong on the issue of online sales taxes, he’s correct that taxpayers have been providing benefits to Amazon. Also, there are a number of appropriate and important ways the Trump administration can act to ensure that federal policy does not provide advantages to the giant retailer.
For Amazon founder and CEO Mr. Bezos, it may seem like a lot of bad news has been coming out of Washington, DC. Now along comes an “analysis” of Mr. Trump’s tweets about Amazon that appears in the Washington Post, which Mr. Bezos owns. The Post highlights many of Mr. Trump’s harshest attacks on the retail giant and then concludes that “it may be that Trump’s anti-Amazon animus, however self-interested and ill-informed, heralds a wider political reckoning with the power that tech giants have amassed.”
Post readers can make what they will of such analysis. Here’s hoping that instead of a wider political reckoning, the Trump administration focuses on simply ending Amazon’s government-created advantages.
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Bottom Stories of the Day
On Second Thought Maybe Tech Giants Should Face a Wider Political Reckoning
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Law & Order: Special Delivery Unit
“Cops confront Domino’s employee over undelivered pizza, get suspended,” Fox News, March 29
We’ve All Been There
“Pensacola woman mistakes 37-week pregnancy for bad Chinese food,” Pensacola News Journal, March 28
News You Can Use
“Our wine columnist tasted her way through a lot of wine to find her top 10 best budget bottles,” The Wall Street Journal, March 29
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“This Is What It’s Really Like to Be An Exorcist,” Reader’s Digest
Breaking News from 2008
“Can Obama Rescue the Democrats?,” Vanity Fair, April 2018
Longest Books Ever Written
“The Decision That Hurts Your Chances of Getting Into Harvard,” The Wall Street Journal, March 28
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(Carol Muller and Lisa Rossi help compile Best of the Web. Thanks to Irene DeBlasio, Tony Lima, Michele Schiesser, Chloe Davis, Mark Finkelstein and Alan Kuska.)
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