The Dark Side of AmazonSmile
AmazonSmile is a hip way to support charities in the age of digital commerce. As Connie Chen reports at Business Insider, 0.5% of the purchases you make, minus subscription renewal fees such as Amazon Prime, go to a charity of your choice when you order through AmazonSmile. That’s cool. Who doesn’t like charities? They lift people up when the cold, cruel world leaves them behind. Amazon is doing God’s work and if I use AmazonSmile, so am I.
Or am I?
0.5% sounds significant because “5” looks like a lot. In actuality, it’s one-half of one per cent, which is mathematically represented as .005. In other words, a half a penny on the dollar, as Amanda McCormick points out in her DigitalCultureNYC vlog. To figure out what portion of your purchase goes to the charity you choose, multiply the price of the item by .005. For instance, if you buy something with a price tag of $1000 (and that item is on the list of eligible purchases), AmazonSmile contributes $5 to your charity — in theory, anyway. In reality, it’s probably less. Marc Gunther, writing for Nonprofit Chronicles, calculates that in 2015 Amazon donated “0.00012 percent of sales. That’s $1.20 in donations for every $10,000 of sales.” $1.20 is a lot less than $50, the amount you get if you multiply 10,000 by .005. How does that work? Gunther arrives at this calculation by taking total Amazon sales, and not just those made through AmazonSmile, and dividing it by .005 to arrive at his conclusion.
What’s really happening here?
Donations, Ms. Chen explains, come at no cost to Amazon customers, which means that they are picked up by Amazon — or, more specifically, by AmazonSmile, the foundation Amazon set up to direct this charity work, as Joanne Fritz notes. In that sense, Amazon sees a slightly lower profit margin. But the skeptic in me wonders if prices are adjusted so customers end up footing the bill for donations anyway. How would we know? In the comment thread on McCormick’s post, John Baumann writes that the price of some LED lights he purchased were $10 higher from the same vendor on AmazonSmile than they were on Amazon. It could be a coincidence, but that sounds like a clever way to pass off the cost of doing charitable work to customers. As Baumann suggests, more research would be necssary, but how accurate is the claim that donations come at no cost to the customer, as AmazonSmile states in its program details?
More importantly, customers who use AmazonSmile may not deduct the donations they make on their own taxes, which is customary whenever someone donates to charity. Incentivizing charitable donations through taxes is part of the appeal: I get a tax break if I support charities. But in the case of AmazonSmile, that raises a rather interesting question: who, or what, deducts those donations? Charity work might be God’s work (actually, it’s our work), but let’s not be naive here. Like any company, Amazon is in business to make money. Period.
In another piece at Business Insider, Alyssa Pagano and Steve Kovach write that Amazon had a negative net tax liability in 2017 and 2018. Despite raking in $230 billion in revenues and $10 billion in profits, Amazon paid no federal taxes in 2018. That’s pretty good for a company which, as the above Forbes piece claims, is worth $793 billion. How does Amazon do it? The company “avoids paying federal taxes,” Pagano and Kovach explain, “by using a variety of tax credits and tax exemptions that are legal and built into the U.S. federal tax code.” OK, so it’s all on the up and up — totally legit and legal. But which credits and exemptions?
“Some of these,” they write, “can include the research and development tax credit which allows [Amazon] to deduct some of the costs of new investments.” In other words, companies get tax breaks to expand their businesses. Indeed, that’s how government spurs entrepreneurial growth. Come to think of it, that is very similar to how government subsidizes charities. Pagano and Kovach further point out that President Trump lowered the corporate tax rate from 35% to a paltry 21%, which also helps Amazon lower its tax liabilities. The authors also note that one major (new) credit/exemption in fiscal year 2018 “was the ability [for Amazon] to deduct [the] stock-based compensation of executives.” How about that — a big win for the little guy. Why doesn’t Amazon claim the wages it pays employees and just get it over with? Because that’s not legal. Donating to charities, on the other hand, is.
If Amazon customers can’t write off the charitable donations they make through AmazonSmile, then who can? The foundation? Amazon? Bezos? Where exactly is the line between Amazon and Bezos, anyway? According to Forbes, he holds just 16% of the company’s stock, which might not seem like much, but the company is raking in bucko bucks. Bezos himself has become some kind of weird composite — a corporate-human cyborg, if you will. Incidentally, he owns the Washington Post and does contract work for the CIA (cloud computing). With Blue Origin, his start-up aerospace firm that specializes in rocketing, Bezos, through the company’s mission statement, declares that “we must go to space to tap its unlimited resources and energy.” For what, to colonize space? How has colonization worked out on good ol’ planet Earth?
Forget colonizing space. If Amazon, via its AmazonSmile foundation, gets a tax break for channeling customer donations to charities, that is a huge problem. As Ms. Chen notes, the net total of your donations might not be much, but that depends on how much you buy. Some people buy a lot. (I don’t. Not only do I severely limit my business with Amazon, I don’t have a Prime account. I gave up my student account in 2008 after the trial period ended.) In aggregate, those donations could be significant. Again, Marc Gunther reports that AmazonSmile donated nearly $13 million to various charities in 2015, according to the company’s 990-PF. Since then, Amazon has grown in leaps and bounds. How much? In 2015 Amazon saw revenues of approximately $36 billion. In 2018, the company’s revenues were nearly $230 billion. I predict Amazon’s charitable donations for 2019 will hit a record high. But guess what? So will the amount of charitable donations Amazon deducts on its tax sheet. Cha-ching.
Legally writing off these donations allows the company and Bezos (again, where is the distinction?) to lower its tax liability. For what — providing a service? Does Amazon actually get a legal tax break for funneling money? Which banks handle those transactions, and are they able to write off a portion of their operating expenses for doing charity work? I doubt the latter is true. But if the former is true, and I am pretty sure it is (again, that’s the financial incentive to begin with), then that doesn’t seem right, especially since the source of those donations (Amazon customers) cannot legally deduct them.
Who can? Amazon. Who does? Bezos.
AmazonSmile makes charitable donations a cinch. For example, Joanne Fritz suggests that “you may want to send items your organization says it needs through AmazonSmile Charity Lists. Like any gift registry,” she explains, “nonprofits can create a list of things they need, and you can purchase them and have them sent right to the organization.” Let me get this straight: your preferred non-profit needs office supplies — pens, copier paper, paperclips, staplers, toilet paper, and so on— so you should purchase that stuff at Amazon and send it directly to your charity. If those purchases qualify for AmazonSmile, it would seem your charity benefits twice. But again, who writes off those donations? Amazon, I bet.
Look, Amazon is one of the most successful companies in America. According to Wikipedia, it is the 13th largest worldwide by revenue. Its owner, Jeff Bezos, is the richest man on Earth. If part of that wealth comes from the legal cover of doing God’s work, does that mean Jeff Bezos is God? In the age of the U.S. Corporate Caliphate, it seems so. But he doesn’t have to be. We make him one through our purchases, our Amazon Prime accounts, and by donating to charities through AmazonSmile. Why?
You might want to do some research if you use AmazonSmile, especially if you think you’re doing it to help people. While Business Insider sells AmazonSmile on its altruistic merits, the program might be helping more than the downtrodden and the needy. If AmazonSmile legally writes off the donations it funnels to charities because it is a foundation, then it is just one more revenue stream for Bezos. If that is done by exploiting average, good-natured people who want to support their charity of choice, then that’s pretty effing gross.
Amazon customers should be able to claim those donations on their taxes. It’s their money, isn’t it? It sure as hell isn’t Bezos’s money — until you give it to him, that is. The choice is yours. But let me ask you this: why should a corporation and its owner get rich(er) just by enabling charitable donations? For me, that is the dark side of AmazonSmile.
My apologies if I am a buzzkill. To be clear, you can, and should, donate to charities. They are noble institutions that do amazing work. But if you do, forego AmazonSmile and donate directly. Not only are you helping people and the community, you can deduct those donations yourself.
Better you than Bezos, right?
