Big Tech Fears Biden’s Taxes more than Congressional Antitrust

Today 7/29/20, four of the biggest tech companies will be questioned by Congress in a tough hearing. The companies in the hot seat are Amazon (AMZN), Apple (APPL), Facebook (FB), & Alphabet (GOOG). Part of the debate is if the companies have become too large and in violation of antitrust laws. There will also probably be a discussion on the companies’ responsibility for consumer privacy & managing the flood of false stories being posted.

Big Tech Fears Biden’s Taxes more than Congressional Antitrust

Big Tech Fears Biden’s Taxes more than Congressional Antitrust

While these companies are not thrilled to get grilled by Congress, the hearing will likely have little to no impact on them. Most of these companies will be more concerned about Biden’s tax law recommendations. 

Biden’s tax changes for businesses are as follows:

  • Raise corporate tax from 21% to 28%
  • Create a minimum tax on profits of $100 or higher, 15% minimum tax while still allowing for net operating loss and foreign tax credits.
  • The Global intangible Low Tax Income by foreign subsidiaries of US firms will double from 10.5% to 21% 

Big Tech 2019 Taxes

CompanyEarningsTaxes Tax Rate 
AMZN$13.9 Billion$162 Million1.2%
APPL$65.7 Billion$10.5 Billion6.3%
FB$24.8 Billion$6.3 Billion25.4%
GOOG$39.6 Billion$5.3 Billion13.4%

How did the companies get to pay such low tax rates? The answer is the use of tax credits and deductions to reduce its tax bill from the corporate 21% tax rate. 

Big Tech Taxes in 2019 with Biden Tax

CompanyEarningsTaxes Tax Rate New Taxes
AMZN$13.9 Billion$162 Million1.2%$2.1 Billion
APPL$65.7 Billion$10.5 Billion6.3%$9.9 Billion
FB$24.8 Billion$6.3 Billion25.4%No Change
GOOG$39.6 Billion$5.3 Billion13.4%$5.94 Billion

Large and powerful companies like these also use that power to influence Congress. Let’s review the lobbying efforts of the big tech companies:

  • Amazon deployed $16 million in 2019 to lobby Congress which was a personal record for the company. 
  • Apple has not spent nearly as much as the other tech companies as it only used $7 million on lobbing in 2019.
  • Facebook spent $17 million in 2019 lobbing and has spent $81 million over the past ten years.  
  • Google only spent $12 million in 2019, but it has spent almost $150 million over the past ten years.

Update from the Congressional Hearing

  • Congressional hearings are just like the rest of us and had technical issues that resulted in a brief recess to have one of the witnesses resolve their connectivity issues. 
  • All of the tech CEOs pitched; they are American companies for and by Americans. China was mentioned that the majority of tech companies are Chinese now, where they used to be all American.
  • Amazon
    • Today was Jeff Bezos first time defending Amazon before Congress, and it took almost 2 hours for anyone to ask him a question. Amazon’s boss was questioned about using third-party data to its advantage, which is an antitrust concern. Jeff responded that there was a policy to prevent it but admitted that he could not personally guarantee that it has never been violated. 
  • Facebook
    • Facebook was in the hot seat for questions about Instagram. Internal emails between CEO Mark Zuckerberg and the CFO stated that Instagram could be very disruptive to Facebook’s business. Not long after that email exchange Facebook bought Instagram. Congress tried to make the point that instead of competing with Instagram, Facebook just bought it. Zuckerberg responded that the FTC approved the acquisition of Instagram. 
    • Questions were floated if Instagram should be spun off from Facebook. Mark defended the company by stating that while Instagram does have one billion monthly users, it did not have anywhere near that size when it was acquired. Instagram was not a guaranteed success, argued Mr. Zuckerberg.
  • Google
    • Documents showed that Google worried about other websites, but Congressmen were making the point that Google controls access to the web and where users go. Google defended itself by stating that they focus on ensuring they deliver what people want. 
  • Apple
    • Tim Cook said his company is not aiming to be the biggest but rather the best. He continued that Apple does not have a dominant share in any market that it competes in. While all of that is true, the main issue Apple faces is around its App store. 

This post is my opinion, which is strictly for information & educational purposes only. The post is not intended to provide any investment advice. Please seek your own duly licensed professional for investment advice as they will be able to consider your situation. Please read my Terms & Conditions Page for a full disclaimer.

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