Everyone helps pay the real cost of low prices

National news stories last week reported that a survey of almost 1,500 Amazon employees across 42 states found that one in three need government assistance, primarily food stamps or Medicaid.

The news matches a Government Accountability Office analysis in 2020 that covered nine states and found that Amazon — and Walmart, too — were among the biggest employers of workers whose earnings were low enough that they qualified for food stamps.

That Amazon and Walmart would be near the top is no surprise: Walmart is the largest private-sector employer in the country with about 1.6 million workers, more than the population of 11 states; Amazon is No. 2, at around 1.1 million.

Both Walmart and Amazon have raised wages in recent years to attract and retain workers. Those higher wages showed up in the survey of Amazon employees — almost two-thirds said they were earning more at the online retailer than in their previous job. But many still needed government assistance.

The two companies also share another trait: They built their businesses on low prices, lower than their competitors. In Amazon’s case, their prices are so low that the company loses money on many of its sales after it covers the cost of free shipping.

Shoppers enjoy the low prices. It saves tens of millions of people billions of dollars a year on food, clothes and everything else on the shelf or packed in a shipping box. The companies rang up about $1 trillion in U.S. sales last year.

But there is a cost to keeping prices and wages low, whether at Amazon or Walmart or other employers around the country. States and the federal government help cover employees’ cost of living through food stamps, Medicaid, housing assistance and other programs.

Government’s role is to help ensure that families have enough to eat, safe housing and medical care. It’s a political struggle at times, and it costs a lot of money, but generally the country pays attention to the needs of lower-income families.

Which is part of the reason for taxes, along with paying for national security, law enforcement, roads and all the other essentials. And not just personal income taxes, but corporate taxes.

Which brings me to Alaska.

The state Legislature this past session considered — but did not adopt — amending the corporate tax code to go after oil-and-gas producer Hilcorp, the biggest operator in Cook Inlet and which bought all of BP Alaska’s assets in 2020. Texas-based, privately owned Hilcorp does not pay corporate income tax in Alaska.

It’s not a scam, it’s what the law says.

The state’s tax code was written decades ago to apply to publicly held corporations, before companies like Hilcorp and thousands of other Alaska businesses organized as privately held corporations or limited liability companies (LLCs). Those increasingly popular corporate structures are not an issue at the federal level or in states with a personal income tax — the companies’ profits flow through to the owners, who pay personal income tax on the money.

But Alaska has no personal income tax; the Legislature abolished it in 1980 as the state got rich from oil. Which means the state collects no income taxes on the profits of privately owned companies.

All corporations, whether publicly owned biggies like Amazon and Walmart, or privately owned moneymakers like Hilcorp, big law firms or medical practices, are able to succeed at their businesses, in great part, because government provides services the companies and their employees and customers use, such as roads, ports and police. Government also provides financial assistance that their lower-paid employees need.

It’s fair to tax all businesses, just as it’s fair to tax all individuals, as all benefit from public services.

Low prices make life more affordable; public services without tax revenue are unaffordable.

 

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