The health of our democracy demands that we consider treating Facebook, Google, and Amazon with the same firm hand that led government to wage war on major monopolies
In our day, we can’t quite see anything wrong with monopoly. We’re certain that our tech giants achieved their dominance fairly and squarely through the free market, by dint of technical genius.
To conjure this image of meritocratic triumph requires overlooking several pungent truths about the nature of these new monopolies. Their dominance is less than pure.
They owe their dominance to innovation, but also to tax avoidance.
Of course, every big American corporation tries to limit the tax bill. Armies of accountants are a staple of capitalism; the manufacture of new deductions is one of our country’s greatest showcases of innovation. But the tech companies are especially slippery with the tax man. They have hatched schemes that their competitors – brick-and mortar firms, media companies – couldn’t dare attempt.
When Jeff Bezos first conceived of Amazon, he originally wanted to locate the company on a California Indian reservation, where it would pay hardly any tax. Authorities rejected that gambit. But Bezos understood that internet commerce challenged traditional ideas about taxation. Thanks to a court ruling, rendered just as he launched his company, Amazon could get away without paying sales tax to the states to which it shipped its goods.
Google has the same sort of unpatriotic accounting schemes. Google has also shifted assets to Bermuda, that famous mecca of high tech. By the end of 2015, it had “permanently reinvested” $58.3bn of its profits in foreign tax havens, earnings on which it pays no US tax.
The tech companies maintain every shred of data, yet seem to want to purge every bit of taxable earnings. The year Facebook went public, it recorded $1.1bn in American profits, but didn’t pay a cent of federal or state income tax. Indeed, it earned a $429m refund. According to Citizens for Tax Justice, Facebook bilked the treasury by taking a single deduction: it wrote off the stock options it gave to its executives.
These companies can afford to push the limits of acceptable behavior, because they have paid such care and attention to Washington. While the tech companies are hardly the image of corpulent K Street, they have built massive lobbying operations that pace the halls of the regulatory agencies and Congress, stacked with skillful hacks.
Google executives set foot in the Obama White House more often than those of any other corporation – its head lobbyist visited 128 times. Google spread its money across Washington with joyous ecumenicism. Google spent about $17m on influence peddlers of both partisan varietals. By one count, Google poured more into its DC apparatus than any other public company. An investigation by The Intercept concluded: “Google has achieved a kind of vertical integration with the government.” Somehow Google managed to overcome the recommendation of staffers on the Federal Trade Commission who found Google’s monopolistic machinations worthy of a lawsuit.
Lobbyists for the companies have preserved a blissful state of barely regulated, barely taxed monopoly. They have played the politics brilliantly. Obama spent his presidency cheering on the tech companies, even pleading with the Europeans not to collect the taxes owed to them. In return, the tech companies have sent their best brains to work for the Democratic administration and its political campaigns.
The tech companies have so mastered Washington, they have acquired such cultural prestige, that it’s hard to imagine the system ever restraining them. But we know that politics doesn’t repose in a steady state, and the companies have one gaping vulnerability – they aggressively surveil users. Thus far, the public has tolerated these invasions, but that won’t last forever.