The Bezos Family Foundation: Mr. Bezos goes to Washington

The Bezos Family Foundation:  Mr. Bezos goes to Washington

By Jonathan Hanen, Foundation Watch, April 2014 (PDF here)

Summary: The foundation that bears the name of Jeff Bezos, founder of online retailing giant Amazon, provides insight into the political vision he will bring to Washington. The Bezos Family Foundation does advocate for some smart opportunity education policies, such as charter schools and testing, and Bezos has managed thus far to combine social liberalism with fiscal conservatism. But the far Left’s hope that Bezos will be a transformational post-partisan figure, as well as the center-right’s hope for a progressive reformer are overblown. The self-interested lobbying activities of Bezos’s PAC, as regards the Marketplace Fairness Act, reveal a pattern of Beltway politics as usual.

Jeff Bezos, 50, is best known as one of America’s greatest innovators and entrepreneurs of the Internet age. He is the face of the dotcom 1990s who founded Amazon, the online retail sales giant that raked in $27.2 billion in revenue for 2013. Forbes currently lists Bezos as 15th on its list of most powerful people, 12th on the Forbes 400 list of the wealthiest Americans, and 19th on the same magazine’s list of the world’s billionaires.

Bezos was born on January 12, 1964, in Albuquerque, New Mexico. He showed an early interest in electronics, according to Biography.com. In his teenage years, after his family moved to Miami, he developed a love for computers. He excelled in school, became the valedictorian, and started his first business, “the Dream Institute, an educational summer camp for fourth, fifth and sixth graders.”

Bezos graduated summa cum laude from Princeton in 1986 with a degree in computer science and electrical engineering. “After graduation, he found work at several firms on Wall Street including Fitel, Bankers Trust, and the investment firm D.E. Shaw where he met his wife Mackenzie and was named the youngest vice president in 1990.” Bezos was well-compensated on Wall Street, but in 1994 he took what was then a great risk by going into the brave new world of electronic commerce. He quit Wall Street and moved to Seattle to open an online bookstore.

Amazon opened for business on July 16, 1995, and took off like a rocket. Within two months, Amazon was selling books in the U.S. and 45 other countries at a clip of $20,000 weekly. Amazon had its initial public offering in 1997 and became a top e-commerce company in only two years. Amazon diversified its business in 1998 by adding compact discs and videos to its online offerings. The company subsequently partnered with other retailers to offer clothes, electronics, toys, and a cornucopia of other products.

Many profitable “dotcoms” of the early to mid-1990s have long since vanished, but Amazon has prospered and survived to become one of the greatest successes, with sales expanding from $510,000 in 1995 to over $17 billion in 2011.

Bezos is not merely a CEO with a gift for supply chain management; he is also an inventor who likes to take risks in order to innovate and evolve. In 2007, Amazon released the Kindle, the revolutionary digital book reader that allows users to download books with the touch of a button. Bezos entered the tablet computer marketplace with the Kindle Fire in 2011, and in September 2012, he announced the new Kindle Fire HD, the company’s next iteration of the tablet designed to compete against Apple’s iPad.

All of this commercial success would be enough to ensure Bezos a place among America’s greatest businessmen since the industrial age. Bezos, like his industrialist forbears, has now moved into the arena of political action. His own political views are the subject of intense speculation. The consensus amongst the commentariat is that he is some sort of left-leaning libertarian, or perhaps a social liberal and fiscal conservative.
Bezos donated an undisclosed sum to Reason Foundation, the publisher of the libertarian Reason magazine, and in 2010 he donated $100,000 to a successful campaign to stop a proposed tax hike on individuals earning over $200,000 per year in Washington State. In 2012, he and his wife donated $2.5 million to support a successful ballot initiative for same-sex marriage in Washington State. This donation far surpasses that of Bill Gates, one of Bezos’s peers in the pantheon of computer age entrepreneurs. The New York Times reports, “Bill Gates and Steven A. Ballmer of Microsoft each gave $100,000 to the referendum campaign, according to its officials.”

Apart from fighting an income tax hike, donating to Reason Foundation, and supporting same-sex marriage, Bezos has kept his political cards close to his chest in his public speeches and interviews. He hasn’t given much to political campaigns. He has donated just $15,000, and it was about equally split between Democratic and Republican candidates, according to Slate’s Dave Weigel, who wrote an article headlined, «Jeff Bezos, Inscrutable Libertarian Democrat.”

Amazon, for its part, has been aggressively lobbying Congress since 2011 on issues regarding telecommunications, copyright law, the Stop Online Piracy Act (SOPA), and most controversially, the Internet sales tax (the proposed Marketplace Fairness Act of 2013) and individual state Internet taxes. In 2003 the Bezos Family Foundation, based in Mercer Island, Washington, was launched to promote excellence in education and leadership training for the young. In August 2013, Bezos purchased the Washington Post for $250 million. This report aims to determine Bezos’s comprehensive political intention as it comes into focus by examining the projects and funding decisions of the Bezos Family Foundation (BFF) and in Amazon’s political action committee and lobbying efforts.

Mission
The Bezos Family Foundation states: “Our vision is that all young people are prepared to achieve their full potential and make a meaningful contribution to society.” The BFF “supports rigorous, inspired learning environments for young people, from birth through high school, to put their education into action.” By means of “investments in research, public awareness and programs,” the BFF seeks “to elevate the field of education and improve life outcomes for all children.” The BFF focuses specifically on “early learning, strengthening the K-12 public education system and supporting young leaders.”

The BFF lists one of its core beliefs to be “Equality of opportunity: All children are born with equal desire and potential to learn and all children deserve the chance to succeed at the highest levels.” The philanthropy pursues this goal through its educational programs and leadership training, such as the Bezos Scholar Program at the Aspen Institute and the Aspen Challenge.

Almost every left-wing foundation profiled in Foundation Watch declares its undying dedication to “equality of opportunity.” But, unlike all the rest, the BFF does not emphatically declare its unwavering commitment to vaguely defined causes like social justice, economic democracy, the common good, fairness, diversity and multiculturalism, environmental sustainability, gun control, and other far-left ideals. The BFF does not appear to be animated by the extreme progressive vision of human community and its ideologically driven desire to generate not mere equality of opportunity through increased social spending and educational programs, but a radically egalitarian equality of results through legislation and, whenever possible, regulatory fiat. The foundation does not try to erect a European-style social democracy in place of the American experiment in republican self-government, with its unprecedented emphasis on democratic ordered liberty in the form of limited government under the rule of law, combined with individual rights, economic freedom, freedom of civic association, and an ethos of self-reliance. The BFF website is not saturated with calls for “community organizing”—a term that by definition signifies that the whole of civil society—made up of families, schools, autonomous social institutions, corporations, small businesses, and free-markets—must be organized from the outside for the sake of the common good of the community.

To judge from the BFF website, it is even possible that Bezos himself takes the conservative view that social and economic problems are best solved or mitigated by the spontaneous emergence of social institutions and the “creative destruction” of inefficient businesses in free markets. To get a sense of Bezos’s vision of liberty and politics, one must first turn to the funding decisions of the BFF and consider the ideological company it keeps, and then turn to the lobbying activities of Amazon’s PAC.

Finances and Grant Making
In 2012, the foundation listed total assets of $32.6 million, with $3.7 million in revenues and $14.4 million paid out in grants. In 2011, total assets were $34.4 million, with revenues of $2.1 million and $11.3 million in grants. In 2010, total assets were $45.6 million with revenues of $358,000 and $3.4 million in grants. The BFF is a relatively new player in the world of institutional philanthropy, so it’s not surprising to find that its total assets are modest compared to other foundations that hold in the $300 to $500 million range in total assets.

For conservatives, the news about the foundation’s grant making is not all bad. It gave $15,000 in 2011 to New York-based Education Reform Now. This group seeks to place teachers in low-income communities across the nation for two-year stints. It does not appear to be a cash cow for the teachers’ unions and Democratic political campaigns. Quite to the contrary, Lee Fang of The Nation laments, “the Bezos Foundation has donated to Education Reform Now, a nonprofit organization that funds attack advertisements against teachers’ unions and other advocacy efforts to promote test-based evaluations of teachers. Education Reform Now also sponsors Democrats for Education Reform.” This spending decision by the foundation suggests it supports the common sense view that teachers should be evaluated, at least in part, on the basis of quantifiable results—just like any other professional in any line of work.

The Nation’s Lee Fang decries that “The Bezos Foundation provided $500,000 to NBC Universal to sponsor the Education Nation, a media series devoted to debating high-stakes testing, charter schools and other education reforms.” This funding decision suggests that the foundation not only supports competition between public and charter schools, but even advocates the almost revolutionary idea, fiercely opposed by teachers unions, that teachers should be held accountable for the performance of their students on standardized reading and math tests.

The BFF has donated $119,841 since 2011 to the Seattle-based League of Education Voters (not to be confused with the far-left League of Conservation Voters), a nonprofit group that worked to pass the law creating charter schools in Washington State in 2012, and the TPEP (Teacher and Principal Evaluation Pilot) in 2010, a protocol that takes student test scores into account when evaluating the performance of teachers and principals. Fang condemns the creation of charter schools in Washington State on the grounds that, “In many states, charter schools open the door for privatization by inviting for-profit charter management companies to take over public schools that are ostensibly run by nonprofits.” Although the foundation has not come out in support of for-profit charter school management, it appears to understand that the very same American system of competition and creative destruction that gave birth to Amazon can be harnessed to create publicly funded charter schools that offer educational choice to parents and improve student outcomes in reading, math, and science.

In 2011 the Bezos Foundation supplied $96,273 to the KIPP Foundation, a nonprofit that has established a network of 141 public charter schools in 20 states and the District of Columbia. KIPP has played a role in the charter school revival of the New Orleans school system after Hurricane Katrina. The KIPP website reports it has received, since 2000, over $60 million from the Walton Family Foundation and over $5 million from the Bill and Melinda Gates Foundation. The KIPP website has no ideological statements about social justice, fairness, income inequality, multiculturalism, or diversity on. Instead, KIPP focuses on explaining the principles of character formation and teaching methodologies that have allowed high-quality charter schools to outperform conventional public schools around the country. (KIPP’s rapid expansion was largely the product of wise philanthropy by the Fisher family, whose entrepreneurial patriarch made his fortune by founding The Gap. See Jay Mathews’ Work Hard. Be Nice.)

The BFF has funded Teach for America’s New York chapter in the amount of $1,403,829 since 2009. Teach for America (TFA) provides teacher training and placement for teachers in both public schools and charter schools across the country. According to its website, TFA received over $1 million from the U.S. Department of Education for the 2011-12 school year, but it has a large network of corporate donors and has also received over $5 million from the Walton Family Foundation and over $1 million from the Bill and Melinda Gates Foundation, among many other foundations. Unlike the KIPP Foundation, TFA does advance the diversity agenda by explicitly stating, “At the same time that we value each individual who commits to our cause, we also place a particular focus on attracting and fostering the leadership of individuals who share the racial and/or economic backgrounds of the students underserved by public schools.” It is unfortunate that TFA endorses the fallacy that a teacher with a specific ethnicity, national origin, or socio-economic background is somehow more suited to teaching a student from the same background, rather than judging teachers solely on their merit in the classroom. That said, TFA appears to have done a good job of recruiting and training motivated teachers in both charter and public schools.

 

On balance, it looks as if the BFF is strongly in support of rigorous student and teacher testing, using test performance to evaluate teachers and principals, and promoting the charter school movement. Conservatives may hold out the hope the foundation will adopt something like the educational vision of a reforming Democrat like Michelle Rhee, the former Washington, D.C. public school superintendent and scourge of the teachers’ unions, who advocates for allowing teachers to bargain collectively only on salary and benefits, but not on working hours, student testing, and teacher evaluation. Rhee’s “put students first” policies would thus enable boards of education to lengthen the school year and decide whether or not to retain teachers based on merit and student performance rather than just seniority.

In recent years the BFF has given $264,768 to the Aspen Institute in Colorado, $55,000 to the 24 Hours of Aspen Foundation, $50,000 to the Aspen Writer’s Foundation, $9,955 to the Aspen Center for Environmental studies, and $468,850 to the Aspen Institute in Queenstown, Maryland. These funds were presumably intended to support the BFF’s Aspen Challenge, which is designed to provide students with “the opportunity to develop their leadership skills, collaborate with peers, and engage with leading global visionaries, artists and entrepreneurs.” These funds presumably also support the BFF’s Aspen Scholars Program, which is designed for “public high school juniors and educators” who attend the Aspen Ideas Festival and then “continues through the following school year when Bezos Scholar teams return home to launch sustainable, Local Ideas Festivals that transform their schools and communities.” The BFF claims, “For ten years Scholar teams have mobilized communities around a range of critical issues to alleviate rural poverty, increase digital literacy, create healthier food environments, inspire conservation leadership, and more.” Nothing smacks of far-left indoctrination in these programs. To all appearances, the BFF’s dealings with the Aspen Institute appear to be directed at legitimate educational and philanthropic concerns.

The Aspen Institute claims to be nonpartisan and dedicated to hosting bipartisan panel discussions aimed at developing policy solutions on a broad range of issues. On the one hand, Aspen has provided a forum for Al Gore’s climate alarmism and for George Soros’s railings against the Bush administration’s handling of the war on terror. And DiscoverTheNetworks, the online encyclopedia of the Left, reports that Aspen has received funding from Soros’s Open Society Institute: “(OSI) has awarded the Aspen Institute numerous large grants over the years, including $50,000 in 2004, another $50,000 in 2005, $195,000 in 2008, and $125,000 in 2009.” On the other hand, Aspen has also sponsored talks by center-right intellectuals like David Brooks, former Secretary of State Henry Kissinger, and panel discussions with GOP governors Bobby Jindal (Louisiana), Mike Pence (Indiana), Scott Walker (Wisconsin), and Chris Christie (New Jersey). Aspen is headed up by CEO Walter Isaacson, and its board features both conservatives and libertarians, such as David Koch and Condoleezza Rice, and liberals, such as Henry Louis Gates Jr. and former Secretary of State Madeleine Albright. For the most part, however, Aspen has been an honest broker in the policy debates between conservatives and liberals. Unlike so many far-left foundations that, in effect, launder money by donating to far-left groups who in turn shift resources into political action, it is not possible to see the BFF’s funding of Aspen as any kind of semi-covert political action aimed at the usual targets of single-payer healthcare, voter fraud, destruction of the coal industry, or confiscatory taxation and wealth re-distribution.

In sum, the BFF’s pattern of giving indicates that the philanthropy has thus far managed to stand on the fence in the war between the conservative and liberal donor foundations, 501(c)(3) policy institutes, and 501(c)(4) social welfare/advocacy groups. The BFF will inevitably be drawn into this conflict. But apart from its advocacy of charter schools and student testing, it is too early to tell where it will land. Perhaps the political vision of the BFF, like that of Jeff Bezos himself, can rightly be called “inscrutable libertarian Democrat.”

Lobbying
Since 2000, the Amazon PAC has grown to become one of the top players on Capitol Hill. According to the Center for Responsive Politics, Amazon started lobbying in 2000 with $500,000 and increased its lobbying budget every year, reaching $2.5 million in 2012 and $3.5 million in 2013. Amazon has not yet cracked into the ranks of the top 20 corporations, but as regards lobbying on computer and Internet issues, Amazon currently ranks ninth with $3.4 million, behind first-place Google ($14 million), and second-place Microsoft ($10.4 million).

In the halcyon days of 2009 to 2011, certain states, such as Minnesota and California, realized that the vast majority of their citizens were not paying their “use tax” on goods purchased from out-of-state online businesses. The issue here is practical, not legal. Most consumers in states that levy a sales tax have no idea that they are legally required to remit use taxes to their home states. But every state that has a sales tax also has a corresponding use tax at the same tax rate. The idea is that if a state doesn’t capture tax at the time of sale, it is entitled to capture it when the product is “imported” into that state. If a sales tax state resident purchases a product taxable in his own state from a seller outside his state, the resident is required by the laws of his own state to pay the use tax to his state. Almost no individuals comply with use tax laws, though businesses have to do so because states enforce that tax more vigorously with businesses.

Minnesota and California lawmakers proposed bills to compel out-of-state online businesses to collect and remit the state sales taxes on the products they sold to their citizens over the Internet—regardless of whether the online business had a physical nexus (roughly, a legally significant presence) in the state. Although use taxes are nothing new, the idea of enforcing these largely ignored taxes is new. People perceived the compelled out-of-state collection of these use taxes as new taxes because they had never paid them before, and they quickly became known as the “Amazon tax,” owing to Amazon’s predominant market share of online sales. Amazon fought to prevent the implementation of an out-of-state collection of use taxes in California, and canceled its third-party sales affiliate programs in that state.

Fast forward to May 2013. The Senate takes up and passes the proposed Marketplace Fairness Act (MFA) in order to enable states to collect the so-called “Amazon tax” on online businesses or their in-state third party affiliates. The MFA legislation passed the Senate with strong bipartisan support, 69 to 27, and the House Judiciary Committee held a hearing on the bill as we went to press.

MFA opponents make the politically potent argument that compelling the collection of use taxes by out-of-state businesses is a clear case of taxation and regulation without representation, since out-of-state businesses cannot hold the elected officials of another state accountable at the polls. Curtis Dubay of the Heritage Foundation explains that some supporters of the MFA, including free-market economist Art Laffer, argue the bill involves a matter of basic fairness because it levels the playing field for brick-and-mortar stores by doing away with what is essentially a tax subsidy for out-of-state online businesses. Laffer and others add that increased revenue from use taxes would let states lower existing state income tax rates, thus fostering growth with a revenue-neutral tax swap. Of course, such tax cuts are not mandated by the bill, and it’s likely that most states would only spend the increased revenue.

For its part, the Amazon.com political action committee did a 180-degree turn and lobbied the Senate to pass the MFA. Why? It is doubtful Amazon was motivated by a public-spirited desire to level the playing field between online businesses and brick-and-mortar stores. Nor would the MFA actual achieve such leveling. The MFA would increase businesses’ costs by forcing them to collect use taxes for 9,600 tax jurisdictions and to comply with 46 sets of out-of-state regulations and audits. These burdens would tilt the playing field in favor of in-state brick-and-mortar shops and allow states to make the lives of out-of-state sellers difficult.

Eventually, the new tax regime could give a boost to proposals for a national sales tax, which may look administratively simple by comparison.

The only explanation is that the Amazon PAC and Jeff Bezos himself believe that the MFA, if it were to pass in the House, would crush Amazon’s online competition. Amazon stands to profit greatly even if it has to pay the “Amazon tax” in 46 states, because it would become the last man standing while the majority of its competitors would be driven into the ground. It’s the same reason why Walmart favors increasing the minimum wage. Walmart already pays well above the mandated wage and knows that boosting it would hurt its mom-and-pop retail competitors.

How is one to evaluate this self-interested lobbying by Amazon? In a Reason magazine essay entitled, “Crony Capitalism vs. Market Morality,” Tim Carney tackles the complex problem of the morality of lobbying and the good and bad forms it may assume. Carney argues it is moral for a company PAC to lobby government for the self-interested reasons of its client when the new law opens opportunity for other businesses and investors, or when it is a legitimate First Amendment-based petition for a redress of grievances. The cases are nuanced, but Carney offers a kind of libertarian rule of thumb: “What is wrong is to lobby for policies that enrich your business by taking away other people’s property or liberty.”

Amazon and Bezos’s lobbying on behalf of the MFA clearly does not meet Carney’s standard because an onerous tax, regulation, and compliance scheme for 9,600 tax jurisdictions would have a massive chilling effect on smaller players and would harm their ability to do business as they see fit.

The potential harm to small online businesses arising from the MFA is manifest. Katie McAuliffe, federal affairs manager at Americans for Tax Reform, opined in Forbes that the governors of certain states “want the MFA passed not for sales tax collection, which has been on the rise, but to set a precedent for exporting their taxes and laws across their borders so they can tax and regulate people who cannot vote against them.”  The MFA is a gateway for any particular state to tax and regulate every kind of out-of-state business, online or not, if it happens to profit from doing business in that state. R Street Institute’s Andrew Moylan predicts: “it’s only a matter of time before states begin demanding a proportional share of business income taxes from out-of-state business as well. After all, they’ll claim, if business X is selling 10 percent of their goods into my state, shouldn’t we get 10 percent of their business income taxes?”

In view of the unfairness to other online businesses, the decision by Jeff Bezos and his PAC to lobby in favor of the MFA Internet tax implies a stark deviation from the low regulatory burdens that are essential to a civil society’s autonomy and prosperity. This decision by Bezos could signify a classic case of Potomac fever, the disease whereby a politician or public figure comes to Washington with a robust faith in limited government, free markets, and individual rights, only to succumb to the temptation to influence government to regulate his competitors and future players out of existence.

Conclusion
The ancient Greek historian Thucydides famously remarks that history repeats or resembles itself. Thus one may reasonably fear that the BFF board will one day be infiltrated by leftists and converted into a self-regenerating wellspring of cash for lobbying, community organizing, and electioneering—exactly in the manner of the Ford Foundation, the Pew Charitable Trusts, Surdna Foundation, Nathan Cummings Foundation, and countless other philanthropies. If history is even a moderately competent guide, Bezos’s donor intent, to the extent that it is libertarian, will be betrayed in favor of the far Left’s overarching goal of so-called social justice. Since Bezos is a historian of sorts, he would do well to emulate the model of the John M. Olin Foundation by writing in an unconditional spend-down clause in the BFF’s charter.
Jeff Bezos, the “inscrutable libertarian Democrat,” has perplexed the pundits by supporting same-sex marriage, donating to Republican and Democrat campaigns, donating to Reason magazine, and fighting a tax hike on top earners. But he cannot forever sit on the fence between the Right and the Left.

Jonathan Hanen is a freelance writer and political consultant based in Washington, D.C. A native of Connecticut, he earned his Ph.D. in philosophy from Boston University.

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