4 ms·

When you reinvest your profits back into the company, your net profits are zero and you don't pay any taxes. This is where the distortion comes in. It's gover

by snarfy 7y ago

When you reinvest your profits back into the company, your net profits are zero and you don't pay any taxes. This is where the distortion comes in. It's government subsidized growth. At this point it's grown over all the competitors and affects the market.

notyourwork 7y ago
I think that’s a completely different issue from ops concern regarding not turning a profit.
parasubvert 7y ago
Re-investment for the long term is government subsidized growth? That's a new one. I have to disagree pretty strongly that this is a distortion of anything, it's capitalism 101 in the face of a progressive corporate profit tax. If the US government wants to tax all business activity regardless of profit, they can do what the rest of the Western world has done and introduce a VAT. Amazon is otherwise doing a masterful exercise of long term planning and competition.
- nine_k 7y ago
  They are financed by investors initially, and are not paying back in cash. They re-invest their profits, in other words, keep them to themselves. The investors are paid back by the rising stock, which means by more investors who want to buy the stock and raise the price by their demand. This is indeed brilliant, and overpowers any org that needs to return part of its profits back to investors, lenders, etc.
  - parasubvert 7y ago
    Not paying a dividend in favour of being a growth stock is an old play... Microsoft famously took 28 years to begin paying a dividend (2003).
sjy 7y ago
Is that right? Shouldn't the reinvestment involve a significant amount of capital expenditure which is not immediately deductible?
- snarfy 7y ago
  It's a fairly common tactic with farmers. Buy next year's supplies using this year's profits and pay no taxes on profits.
mbesto 7y ago
If what you're suggesting is so exploitable (e.g. government subsidized growth) then why don't their competitors do the same? You're aware that most F500 don't pay taxes right?

by snarfy 7y ago

notyourwork 7y ago

I think that’s a completely different issue from ops concern regarding not turning a profit.

parasubvert 7y ago

Re-investment for the long term is government subsidized growth? That's a new one. I have to disagree pretty strongly that this is a distortion of anything, it's capitalism 101 in the face of a progressive corporate profit tax. If the US government wants to tax all business activity regardless of profit, they can do what the rest of the Western world has done and introduce a VAT. Amazon is otherwise doing a masterful exercise of long term planning and competition.

nine_k 7y ago
They are financed by investors initially, and are not paying back in cash. They re-invest their profits, in other words, keep them to themselves. The investors are paid back by the rising stock, which means by more investors who want to buy the stock and raise the price by their demand. This is indeed brilliant, and overpowers any org that needs to return part of its profits back to investors, lenders, etc.
- parasubvert 7y ago
  Not paying a dividend in favour of being a growth stock is an old play... Microsoft famously took 28 years to begin paying a dividend (2003).

sjy 7y ago

Is that right? Shouldn't the reinvestment involve a significant amount of capital expenditure which is not immediately deductible?

snarfy 7y ago
It's a fairly common tactic with farmers. Buy next year's supplies using this year's profits and pay no taxes on profits.

mbesto 7y ago

If what you're suggesting is so exploitable (e.g. government subsidized growth) then why don't their competitors do the same? You're aware that most F500 don't pay taxes right?