Thursday, April 5, 2018

Attacks on Amazon Threaten Middle Class Wallets

President Trump has recently turned his attention from the NFL and North Korea to launch a sustained attack on The assault on the online retailer is based on faulty assumptions by the president and risks angering a large swath of voters.

In a series of tweets, president has claimed that Amazon unfairly avoids paying sales taxes and benefits from low Post Office rates for delivering their products at the expense of taxpayers. The attacks have driven down Amazon's stock price and the value of NASDAQ as a whole.

Fox News' Shepherd Smith pointed out that the president's claim that “The Post Office is losing billions of dollars, and the taxpayers are paying for that money because it delivers packages for Amazon at a very below cost” is blatantly false.

“The Postal Service's own numbers show it makes money by delivering packages for Amazon and other companies,” Smith said. “As for taxpayers, the Post Office's own website points out, and I quote, 'The Postal Service receives no tax dollars for operating expenses.'”

President Trump also claimed that the Post Office “loses $1.47 on every package” it delivers for Amazon. Smith noted that the figure came from a Citigroup study that found that the Postal Service was charging “$1.46 below market rates for package delivery,” but not necessarily that it was losing the money.

Like other bulk shippers, Amazon negotiates shipping rates with the Post Office, but the Post Office is required to cover its costs. “By law our competitive package products, including those that we deliver for Amazon, must cover their costs,” an August 2017 USPS press release cited by Politifact said. “Our regulator, the Postal Regulatory Commission (PRC), looks carefully at this question every year and has determined that they do. The PRC has also noted that competitive products help fund the infrastructure of the Postal Service.”

Politifact also pointed out that package delivery is one of the few growth areas in the Post Office business. First-class mail delivery has declined with the growing popularity of email, but parcel delivery accounted for 28 percent of Post Office revenue in 2017, the largest revenue increase of any sector at $2.1 billion.

The president was also wrong about Amazon's avoidance of sales taxes. Sales taxes are a state and local matter and not all states collect sales taxes on internet purchases. CNN notes that internet retailers are not required to collect sales taxes in states where they do not have a physical presence, but Amazon announced last year that it would begin collecting sales taxes in every state. The company also pays property taxes on a network of distribution centers as well both property and sales taxes for its Whole Foods division.

In addition to being wrong on the facts, President Trump's attack on Amazon is not politically smart. As of September 2017, Amazon Prime had about 90 million subscribers. In other words, more than one in four Americans pays for Amazon's preferred shopping and shipping plan. There are more than 304 million active Amazon accounts, equivalent to more than nine in 10 Americans. When the president attacks Amazon, he is indirectly attacking American consumers in the same way that President Obama attacked blue collar Americans when he attacked Walmart.

Attacks on Amazon also hurt the entire stock market and a large number of 401(k) plans. CNN reports that Amazon is the fourth largest stock on the S&P 500 and is the 10th most widely held stock by large financial institutions. Amazon stock has lost about 12 percent of its value within the last month as the president has hinted at the possibility of federal action to punish the company. The decline in value has helped to drive the market into an overall decline and is being felt across the nation in shrinking 401(k) balances.

Along with his tariff threats, Trump's war of words against Amazon also contributes to uncertainty about government policy of the sort that hampered the economy under President Obama. Businesses thrive in an environment where the rule of law is in place and it is easy to know what is expected. In such cases, planning for the future is simple. Under Obama and Trump, the business environment is uncertain and the possibility of a trade war could drastically increase costs and hurt sales. Companies cannot be sure that they won't be the next target of Trump's tweets with their associated publicity problems and the threat of new federal regulations and cost increases.

President Trump's attack on Amazon is another wrongheaded assault on free markets. The president has the underlying facts wrong and his antics are hurting American investors and may ultimately end up forcing consumers to pay more for the same products and shipping. The president's tax reform was a boon to the economy, but his anti-business actions threaten to undermine its success.

Originally published on The Resurgent

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