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LJWorld.com weblogs Llama's Pasture.

Math and Corporate Taxes

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I just love hearing people who argue that the corporate tax burden in the United States is too high. GE, as an example didn't pay any corporate taxes in 2010, and was eligible for a refund, but there aren't any flaws in our system. People talk about the crushing 35-45% corporate tax rate, much of which is allegedly collected by the Federal Government, but let's throw out some truth. I did some number crunching, and by no means is this super scientific, but it's based on publicly available information. First, I set out to find out how much the federal government collected in tax revenue from corporate taxes in 2010.

$191.4 billion(1). Wow! That's a lot of money. About $1.7 trillion was paid by individual taxpayers between income and social insurance taxes as well(1), so the $191.4 billion doesn't seem like a lot.

Now, with a 35% tax rate, we can do the algebra: 0.35x = 191.4 billion. x/0.35 = 191.4 / 0.35. x = 546.9 billion. Thus, we would expect that American corporations profited approximately $546.9 billion in 2010.

What actually happened? Well, according to the New York Times, US corporate profits in 2010 were the highest ever at $1.659 trillion(2). To make it simple, I'll convert the billions to trillions. $191.4 billion actually paid= 0.1914 trillion. 0.1914 / 1.659 (actually made) = about 11.5%, which means effectively, the US has one of the LOWEST tax rates in the world for corporate entities(3).

References: 1- http://www.cbo.gov/ftpdocs/120xx/doc12039/HistoricalTables%5B1%5D.pdf 2 - http://www.nytimes.com/2010/11/24/business/economy/24econ.html 3- http://en.wikipedia.org/wiki/Tax_rate...

Comments

unwantedspork 3 years, 8 months ago

I'd be interested in seeing a refutation for this. Probably that lower tax rates for corporations are more conducive to domestic job growth, but then we're told that labor laws and unions work against that.

The truth is, no tax rate is going to be low enough until we've buried ourselves into a corporate utopia where the only thing that can save a person will be some extra-strong bootstraps. National cultural consciousness dictates that lower tax rates gives incentive for talent, but with the current way our economy is structured, all you need is a large beginning of wealth to buy into an existing company. So we don't reward people for hard work as much as we reward them for head starts.

We worry about the inefficacy of government and put our faith in corporations, but we're digging a hole that no amount of 'immutable' economic laws will allow us to rise from.

overthemoon 3 years, 8 months ago

"So we don't reward people for hard work as much as we reward them for head starts."

Bingo.

I think that's called plutocracy. or oligarchy. take your pick. And those who think they're all for 'small government' are handing them the keys, the credit card, and full permission to screw the heck out of us. They'll remember fondly the day when their vote counted and they had those 'freedoms' they thought government would take away.

notajayhawk 3 years, 8 months ago

"National cultural consciousness dictates that lower tax rates gives incentive for talent, but with the current way our economy is structured, all you need is a large beginning of wealth to buy into an existing company. So we don't reward people for hard work as much as we reward them for head starts."

As I mentioned below, something on the order of 55% of United States corporations have less than $250K in revenues (that's revenues, not income). Yep, that really sounds like millions of people with silver spoons sticking out of their mouths.

speak_up 3 years, 8 months ago

I'm pretty sure GE is not included in that statistic.

Lee Eldridge 3 years, 8 months ago

Hello Llama726. I'm curious if you separated out the different types of businesses and how their taxes are paid? For instance, an S-corp and a C-corp pay their taxes differently. With an S-corp, all "profits" are counted on the owner's tax returns, not the corporations tax returns. The S-corp doesn't pay income taxes. Same with an LLC, partnership and sole proprietorship. All taxes are paid through the individual's tax returns, not the company's returns (if the company files separately).

In order to have accurate information, you must ONLY compare profits vs taxes paid from C-corps to find the accurate corporate tax rate that is paid.

S-corps, LLCs, etc., pay taxes at the individual's tax rates.

The bigger problem with our corporate taxes (paid by C-corps) is that the gov't doesn't tax consistently. Some industries get tax breaks. Some industries get punished with extra taxes and fees (which are taxes). The gov't picks winners and losers through the tax code.

Personally I would do away with corporate taxes. But that's a discussion for another day.

notajayhawk 3 years, 8 months ago

Let's start with your terminology: "People talk about the crushing 35-45% corporate tax rate, much of which is allegedly collected by the Federal Government, but let's throw out some truth."

I think you'd be hard pressed to find anyone - anywhere - ever - that suggested the federal government "collected" anything approaching 35-45% of corporate income in taxes. That's the top marginal rate you're talking about. The federal government doesn't collect anything near 35% of individual income in taxes, either. The amount of individual income tax collected is more like 10% of individual income.

Next, it's ridiculous to lump in payroll taxes with the individual income taxes. Social Security and Medicare are counted as taxes, and the Supreme Court has ruled that they are taxes with no ownership rights to the money on the part of the tax payers, but in reality that money gets paid back out. It makes no more sense to count those in a discussion of income taxes than it does to count your Christmas Club deduction as a tax. Not to mention, corporations don't get to 'retire'. I.e., the government doesn't start sending them a monthly check when they reach a certain age until the business 'dies'. Omitting the payroll taxes, the number for individual federal taxes paid is less than $900 billion, on almost $9 trillion dollars of income. (And incidentally, that's adjusted gross income, which means income less the personal exemptions, less business losses reported on Schedule's C, E, and F, etc.)

Then we get to the fact that there are 300 million individuals in this country, and somewhat over 5-1/2 million corporations. And much similar to the situation with individual taxpayers, the bulk of the income, and the bulk of the taxes paid, apply to the less than 2% of those corporations that have revenues (yes, revenues, not profits) in excess of $50 million. And yes, that's right, only about 2% or less of corporations are even on the same planet, let alone the same income level, as GE. Roughly 55% of U.S. corporations have less than $250 thousand dollars in revenues.

There's more, but it gets pretty pointless. In short, you're complaining that since you don't get as much juice from a handful of apples as you do from a truckload of oranges, we're not squeezing the apples hard enough.

llama726 3 years, 8 months ago

Let's see.

" That's the top marginal rate you're talking about. The federal government doesn't collect anything near 35% of individual income in taxes, either. The amount of individual income tax collected is more like 10% of individual income."

Which is relatively insignificant, and proves that taxes aren't making the dramatic impact that some would have you believe. Thank you

"Next, it's ridiculous to lump in payroll taxes with the individual income taxes...."

Fair enough. Subtract half of the money from what individual taxpayers paid (for the social services taxes) and you still have the overwhelming amount coming from individuals, as it should, but doesn't address the point about large corporations.

"It makes no more sense to count those in a discussion of income taxes than it does to count your Christmas Club deduction as a tax..." "corporations don't get to 'retire'..."

And the government very rarely allows me not to pay taxes on my income, nor do I get a holiday from state taxes for moving in to a certain neighborhood... The list goes on. If a corporation has the same 1st amendment rights as an individual, why do they not have a responsibility to be taxed on their income?

"The bulk of the income, and the bulk of the taxes paid, apply to the less than 2% of those corporations that have revenues (yes, revenues, not profits) in excess of $50 million. And yes, that's right, only about 2% or less of corporations are even on the same planet, let alone the same income level, as GE. Roughly 55% of U.S. corporations have less than $250 thousand dollars in revenues."

And those 55% aren't who I am talking about. I'm talking about the around 100,000 largest and most profitable corporations in America who find ways not to pay anywhere near the amount they should, or (in GE's case) any income taxes, and even a child can tell you that it isn't fair that they don't have to pay, because the small businesses you guys keep defending on here can't hire a hundred accountants to analyze and exploit existing tax codes. Like it or not, the tax system is based on percentage of income.

"There's more, but it gets pretty pointless. In short, you're complaining that since you don't get as much juice from a handful of apples as you do from a truckload of oranges, we're not squeezing the apples hard enough."

I am not complaining about that at all. In fact, I think the tax code for everyone needs some work, because the country needs to begin to increase the revenue it brings in while decreasing spending in order to close the deficit. However, I picked on corporations right now. I admit that I should have specifically pointed out megacorporations, the big players - not the mom-and-pop businesses.

jafs 3 years, 8 months ago

According to something I heard on the radio the other day, about 2/3 of corporations pay no federal income tax at all.

Lee Eldridge 3 years, 8 months ago

That's because they're S-corps, and the owners pay the taxes through their individual returns.

jhawkinsf 3 years, 8 months ago

Absolutely correct. Small businesses, where the majority of new hires come from, are right here.

notajayhawk 3 years, 8 months ago

"According to something I heard on the radio the other day, about 2/3 of corporations pay no federal income tax at all."

Did they make any money?

Carol Bowen 3 years, 8 months ago

Unfortunately, corporations do not reinvest. They don't increase jobs, either. They take the profits in salaries and bonuses. During the Reagan administration, the trickle down theory did not work. Individual bankruptcies increased.

Corporations are not obligated to be responsible for social or economic conditions.

llama726 3 years, 8 months ago

In theory. In practice, they reinvest a sizable portion in dividends which aren't taxed very highly (not nearly as much as income). Which is why corporate execs often take pay in stock packages.

llama726 3 years, 8 months ago

And a sizable portion is given to the business owners (stockholders). Notice how businesses rarely reinvest in their people of late?

notajayhawk 3 years, 8 months ago

"Unfortunately, corporations do not reinvest."

This blog started with mention of GE. Last year, only about 43% of GE's net income was paid in dividends (i.e., in profits to the owners).

What do you think they did with the rest of it?

"Individual bankruptcies increased."

Because they were making less, or because they were spending too much?

http://www.house.gov/jec/middle/family/family.htm

"Real median (middle) family income increased 11 percent between 1981 and 1989 and 13 percent during the expansion (1982-89); the change is positive whether 1980, 1981, or 1982 is used as a base year."

"Corporations are not obligated to be responsible for social or economic conditions."

And they should be - why, again?

Carol Bowen 3 years, 8 months ago

No, they should not be expected to be responsible for social or economic conditions. I did not say they should. You are too quick with your conclusions. Their business is to produce and make profits.

bad_dog 3 years, 8 months ago

More accurately, profits are what the business, i.e. its board, managers and owners want. They "serve" the segment of the public they are primarily accountable to, i.e. their shareholders. To the extent an entity is profitable, it also enables them to meet payroll and expenses attributable to their employees. These are however, merely another rather discrete segment of "the public".

notajayhawk 3 years, 8 months ago

Well, except for the tiny detail that if they don't keep the larger public happy, there are no profits to keep the shareholders happy.

llama726 3 years, 8 months ago

Not necessarily true. Americans aren't exactly the most politically or socially aware people you can find on this planet. If you do something reprehensible, and the government doesn't come down on you too hard, and you keep providing the cheapest product that still works, you'll probably stay in business.

notajayhawk 3 years, 8 months ago

Your theory is predicated on the assumption that the public shares your values, objects to the policies of big business, and remains silent. Maybe they just don't have any objections.

llama726 3 years, 8 months ago

They use roads. They use the courts. They use our education system. They use our national infrastructure. Many of our laws and thus government are revolved around resolving their disputes.

llama726 3 years, 8 months ago

I would too, but they still need to help pay for the infrastructure they use. We still have a crapload of debt, and for right now, I think we need to work on getting back to 0.

llama726 3 years, 8 months ago

Sure. If I don't want to use the court / legal system here, I can just stop using it, right? That's how it works?

overthemoon 3 years, 8 months ago

Lets not forget corporations benefit and profit from those shared resources we all pay for--education, infrastructure, national defense etc etc. Why do they not help to pay for them? It is in their best interest to have excellent schools, affordable healthcare, trustworthy roads, sewers, and the protection of their shipments whether on land, sea or air.

They have recently gotten voting status thanks to Citizens United. While they aren't paying taxes, they are pouring billions into the purchase of our political system. And handing the working class an even larger share of the burden to turn the economy around.

One way of looking at it is a sizable portion of our taxes provide for the profits of corporations and their shareholders. And then we turn around and pay again when buying their goods or services and then we pay them AGAIN when they take control of our political system as our tax dollars pay the salaries of the politicians they purchased with billions of campaign dollars. I don't know what the math is, but I'm guessing we pay a higher rate to corporations than we ever do to the government.

And all the squawking is about 'Big' government. At least we have, or used to have, some say in the workings of government at the voting booth. That power of the American people is disappearing and not a much of a squeak from those who happily let this happen under the guise of conservatism.

notajayhawk 3 years, 8 months ago

"Lets not forget corporations benefit and profit from those shared resources we all pay for--education, infrastructure, national defense etc etc."

Yeah, sure, what with GE's international headquarters building being paid for with Section 8 funds, and the food in their cafeteria being paid for with food stamps and all ...

"They have recently gotten voting status thanks to Citizens United."

Corporations don't vote. They advertise, yes. Are you such a sheep that your vote goes to whoever does the most advertising? (Well, I guess that would explain Obama's victory ...)

"One way of looking at it is a sizable portion of our taxes provide for the profits of corporations and their shareholders."

One very twisted and bizarre way of looking at it.

overthemoon 3 years, 8 months ago

When you consider the huge dollar amounts for government contracts in the defense budget, subsidies to oil and big agri, medical costs etc etc etc it is not such a 'twisted and bizarre way of looking at it'. The majority of these companies are enjoying record profits while still avoiding taxes and happily taking taxpayers money while charging top dollar for their goods and services.

And in case you hadn't noticed, it ain't tricklin' down. We currently have the greatest disparity in wealth distribution since the 1920's.

notajayhawk 3 years, 8 months ago

As I just mentioned on another thread, GE employs over 300,000 people. Even if they were only making an average of $30K/year, that's more than twice what the owners (the stockholders) took home. In addition to that, out of their $150 billion in revenues, $140 billion was in the cost of that revenue, i.e., $140 billion dollars in purchases of goods and services from other companies, who spent over 90% of THAT on other companies, etc., etc., etc. That's actually quite a bit of trickling down.

That whole 'disparity in wealth distribution' is one of the biggest crocks the class-jealous crowd harps on. When did wealth change from something to be earned to something to be "distributed"? Everyone is doing better than they were, across the board from the lowest income groups to the highest. This whole 'disparity' BS is just a lot of people who are a little better off whining because someone else is doing even better.

llama726 3 years, 8 months ago

It's like a poker game. Would you want to walk up to a table where someone begins with over 100x more chips than you in the game?

notajayhawk 3 years, 8 months ago

Um, no. It is absolutely NOT like a poker game, and the basis for that comparison is also the basis for the entire concept of class jealousy. Poker is a zero sum game, i.e., one person can not profit unless someone else loses. That is not the case with either income or wealth, which are not finite quantities (in the strictest sense, the narrowest definition, they are finite, but in practical terms they are not).

llama726 3 years, 8 months ago

Are there only so many dollars and resources on Earth? I'd say yes. But that's far from the larger point about the elites (who mostly run the largest most successful businesses in our country, or help them in some capacity). The capacity to earn wealth is indeed limited when you look at the actual sociology and economic data from a multitude of studies which describes your earnings potential based upon what you start out with. Can you guess what happens? Despite outliers, most urban poor kids fare worse than privately educated children of the elite socioeconomic class in our country. They don't make the same networking connections, don't know the same people, don't go to the same schools, don't get the same quality of individual education, don't get the same access to quality nutrition and engaging intellectual activities, don't get sufficient adult interaction, but you are saying that none of that matters, that anyone could simply go become wealthy, that it isn't much, much, much more difficult for some than others.

http://www.nytimes.com/packages/html/national/20050515_CLASS_GRAPHIC/index_03.html

Wealth stagnates, whether or not you want to believe it is irrelevant. Although technically I could go out and earn money without a technical limit, the reality is that I'm hamstrung by circumstances to an extent as well.

I don't believe that the child of a billionaire and the child of a truck driver have the same odds of success and that's because the billionaire's child starts out without debt (generally), while the truck driver's child has to take on debt (generally) to get educated and trained in the relevant skills to make them wealthy, to make the purchase of relevant supplies, etc., and suffers as early as high school from having The billionaire's child attends prep academies and schools which focus on advanced and personalized training because they can afford it. The truck driver is doing well to send their child to a private (religious, usually) school. Do you legitimately believe that isn't a significant difference? That's why I used a crude metaphor, but you just made me type all this anyway, so I don't know why I wasted my time.

notajayhawk 3 years, 8 months ago

"Are there only so many dollars and resources on Earth? I'd say yes."

Tell that to Bill Gates. He came up with a product nobody knew they needed and now half the world can't live without. He literally made billions not by taking away a chunk of what someone else was making, but by coming up with something new.

As for the rest of your post, where did I ever claim that everyone had equal opportunity? I said that one person can make more without anyone else losing anything. But since you brought up that unequal opportunity, what would be your solution? Redistribution? Which is just a nice word for handouts? Do you realize just how paternalistic, condescending, and insulting it is to say "here, take this, we know you'll never be able to earn it on your own"?

llama726 3 years, 8 months ago

http://www.thinkgeek.com/books/humor/8e6c/images/2070/

Easy, easy. You're jumping to conclusions.

The only fair way (IMO) to do it would be to tax in a graduated manner which doesn't prevent people from getting wealthy, but affords adequate solutions for education, health standards, etc., which gives people a chance to innovate and earn things on their own. Does that mean taking away all (or even most) of Bill Gates' money and giving it to everyone who is poor? No.

overthemoon 3 years, 8 months ago

wages and income for 90% of the US population have been stagnant for 10 years, while going up dramatically for the top 10%. YOu can look it up.

notajayhawk 3 years, 8 months ago

Think the war that's been going on for the past decade might have had some effect?

In any event, the relative small losses in the past ten years don't come close to wiping out the substantial gains, across all income levels, of the preceding 20 years.

llama726 3 years, 8 months ago

And society, technology, etc., have moved forward since the 1500s, so of course life has improved for most/all people - it's called advancement, and it isn't solely because of unrestricted corporate wealth. Class jealousy? Not really. If I had class jealousy, I might resent the lawyers, doctors, etc., who make $250-$500k per year as specialists or seniors in their field, or the small business owners making a million or two a year. I don't. I don't resent anyone for making money if they can. I just also don't think they, morally, should be able to accept that they are worth many hundreds of times their average employee.

notajayhawk 3 years, 8 months ago

" it isn't solely because of unrestricted corporate wealth"

And I never said it was. If anything, you have the relationship reversed.

"I just also don't think they, morally, should be able to accept that they are worth many hundreds of times their average employee."

Which do you think a large corporation is more likely to survive financially - 500 of its employees going out on strike, or the CEO staying away from the office?

On any given day, which of these do you think has a greater capacity to affect the entire economies of communities, states, even countries around the world - the CEO of General Motors, or any group of 500 of its employees?

On any given day, which

llama726 3 years, 8 months ago

"Which do you think a large corporation is more likely to survive financially - 500 of its employees going out on strike, or the CEO staying away from the office?"

The CEO staying away from the office. There's an entire corporate board for most firms. A 1000 company firm having half their staff out for a given time would have a hard time accomplishing business functions.

"On any given day, which of these do you think has a greater capacity to affect the entire economies of communities, states, even countries around the world - the CEO of General Motors, or any group of 500 of its employees?"

Immeasurable.

notajayhawk 3 years, 8 months ago

B.S. it's "immeasurable". What planet is the sky on the planet where you believe 500 factory workers can have a direct effect on the global economy?

Oh, and by the way: GM has about 145,000 employees. You think it might be reasonable to expect that 0.34% of them are absent on any given day? Not that you'd be aware, or anyone else would notice - which kinda' was my point.

llama726 3 years, 8 months ago

CEOs are often not in the office. Corporate boards are usually able to make decisions in the absence of the chief executive. If the entire corporate board stays away? Yeah. That could be a problem, for sure. But bear in mind, there's not much to gain for them to stay away - why would they?

Using sophisticated machinery or accomplishing skilled tasks that require weeks or months of training - not something you can recover from as easily as an executive staying away. Sure, use GM as an example, but chide me and others for talking about GE because they're not representative of corporations. GM isn't representative of most corporations, either. If we're talking about a large corporation, what did you mean? You didn't specify 500 GM employees. You said 500 employees from a large corporation. Some would consider a 1000-5000 employee firm a large corporation, and a 100k plus corporation essentially a megacorporation. All the labels are arbitrary.

commuter 3 years, 8 months ago

Don't forget multinational corporations have income paid at different tax rates in different companies. You may see 10 billion in net income and very little in income tax expense, the income may be taxed in a low rate country.

notajayhawk 3 years, 8 months ago

I was wondering when someone was going to catch that.

matchbox81 3 years, 8 months ago

Corporations pay corporate tax. They try to preserve their income and pass tax costs onto their customers IF the market will pay the higher price. Some products will support the higher prices, some won't. Corporate profits fall when the market will not support the higher prices.

Rental property is a good local example. Landlords will try to pass the cost of property tax onto renters while preserving a profit margin, but if this pushes the cost above market rate, then the landlords won't be able to rent out the apartment. Landlords will then have to lower their profit margin to attract renters.

notajayhawk 3 years, 8 months ago

The slight flaw in your logic is that if property taxes rise, all the rental units in the market are affected, and the market rate goes up - unless, for some strange reason, the majority of landlords decide to eat the cost themselves. Seen that happen recently?

I should have said one of the flaws in your theory. There is at least one more. If the market will not bear an increase in price due to the higher taxes, they don't have to reduce their profits. They have other options, the most common and attractive of which is to reduce their labor costs. This can be accomplished by moving their operations offshore, through automation, by breaking a union, by layoffs, or through other means. Of course, it's possible that they could reduce their profits and avoid or at least mitigate such cuts.

Why should they?

(Incidentally, the same principle holds true for your rental example. The landlords can reduce the frequency of replacing carpeting, replace worn out appliances and fixtures with cheaper models, cut down on maintenance, etc.)

llama726 3 years, 8 months ago

Why shouldn't they cut their profits? If they're barely getting by, ok. If the reason for needing a large profit margin is reinvesting the money as dividends for principal stock owners who already enjoy a lucrative portfolio (they are able to become more wealthy by virtue of their wealth), then how does that benefit anyone but those few individuals?

There's nothing you can compare to running a business so it's difficult to really argue with you, and not have you try to paint me as a vicious communist that wants everyone to live in the same house. I'm not, and the profit motive is the most powerful motive we have to get people to do things that are necessary in our society, but it's also reason for undesirable side effects which we have to mitigate. Why should they not cut their profits? Why are they entitled to a seemingly unlimited amount of profit? It's a value judgement. You rate the right to earn profit more highly than the responsibility to ensure the collective well-being of other members of the community, and I (and others) do not.

notajayhawk 3 years, 8 months ago

"Why shouldn't they cut their profits?"

Still waiting to hear a reason why they should.

"Why are they entitled to a seemingly unlimited amount of profit? It's a value judgement. You rate the right to earn profit more highly than the responsibility to ensure the collective well-being of other members of the community, and I (and others) do not."

The slight difference being that it's THEIR money you're talking about. It's not a value judgment. It's their money to do with as they please, so yes, they ARE entitled to make as much money as they can. You have absolutely no compelling justification that entitles YOU, or even the 'collective well-being', to anything that belongs to them.

llama726 3 years, 8 months ago

"The slight difference being that it's THEIR money you're talking about. It's not a value judgment. It's their money to do with as they please, so yes, they ARE entitled to make as much money as they can. You have absolutely no compelling justification that entitles YOU, or even the 'collective well-being', to anything that belongs to them."

The business owners and their employees and clients use: -The courts -The roads, rails, transit system -The infrastructure (electric grid, Internet, etc). -Law enforcement -Firefighters -Postal service -The education system -Regulatory bodies that prevent competitors from selling a cheaper product that is actually unsafe

Some even profit directly from the government via: -Subsidies -Tax breaks for certain activities -Direct government contracts -Use of government technology (the GPS constellation is a prime example).

All of those things belong to all of us. I know you aren't going to advocate for them to be able to use all of that for no cost.

b22 3 years, 8 months ago

If you want to have these companies pay more tax, then you can kiss any job growth goodbye. Without companies we don't have to worry about personal income tax. Why? because there are no jobs.....good riddance all you liberals

notajayhawk 3 years, 8 months ago

"WASHINGTON – The unemployment rate fell to a two-year low of 8.8 percent in March, capping the strongest two months of hiring since before the recession began. "The economy added 216,000 jobs last month, the Labor Department said Friday. Factories, retailers, the education and health care sectors and professional and financial services all expanded payrolls. Those job gains offset layoffs by local governments."

http://news.yahoo.com/s/ap/20110401/ap_on_bi_go_ec_fi/us_economy_12

notajayhawk 3 years, 8 months ago

Well, after 2 years of full Democratic control with virtually no improvement (actually quite a bit of worsening), there's real improvement happening just two months into the Republicans' partial control.

Rigtht back atcha'.

llama726 3 years, 8 months ago

And we both know that you can't give any one party total credit for anything. It's pointless. It's basically the same as going back and forth and arguing about which sports team matters the most. There are other teams, and they do things that matter, too. Ideas are ideas and we have to balance them - not approach one side as infallible.

notajayhawk 3 years, 8 months ago

On the other hand, if you run the restaurant, and you know Dahmer is a murderer but don't turn him in because he spends a lot of money when he comes in ...

llama726 3 years, 8 months ago

Thanks for describing the problem of corporate influence on American politics.

notajayhawk 3 years, 8 months ago

Yeah, blah blah blah, nobody could possibly get rich unless they were breaking laws, blah, blah, blah ...

llama726 3 years, 8 months ago

Does the President write the tax code?

notajayhawk 3 years, 8 months ago

The IRS, as part of the Treasury Department, is under the administrative branch of the government (the president's body guards are actually treasury department employees, remember?).

And whether or not presidents write any actual legislation, why do you think they call it the Reagan tax cuts, the Clinton tax increases, the Bush tax cuts, etc.?

llama726 3 years, 8 months ago

To answer your question: It's because we cannot bear to have them be described in rational terms. We have to have them in emotional terms, so we can argue about whose team is the best. That's why we call it Obamacare, despite the fact that the President cannot actually author a piece of legislation - only recommend it, but someone in Congress has to take it up, and Congress has to pass it. http://usinfo.org/enus/government/branches/ben_president2.html

notajayhawk 3 years, 8 months ago

So, then, why does Obama get the credit? Are you saying he actually did nothing to affect health care in this country?

llama726 3 years, 8 months ago

Other than recommend and sign the legislation? I mean, he had an impact. But it wasn't his doing. To put all the credit (and/or all the fault) on him for it is disingenuous.

notajayhawk 3 years, 8 months ago

So the president does nothing. Good to know. I wish you could convince the rest of the Baracolytes of that.

llama726 3 years, 8 months ago

You make a lot of irrational conclusions. The President doesn't write legislation. Does nothing? Nope. You're getting lazy.

independant1 3 years, 8 months ago

we've come a long way baby!

the 1872 Congress abolished the federal income tax because it was no longer needed

Read more at Suite101: A Brief History of Federal Income Tax: From the First Tax Act to Taxation Today http://www.suite101.com/content/a-brief-history-of-federal-income-tax-a189425#ixzz1IM9kW7V9

notajayhawk 3 years, 8 months ago

"What actually happened? Well, according to the New York Times, US corporate profits in 2010 were the highest ever at $1.659 trillion(2). To make it simple, I'll convert the billions to trillions. $191.4 billion actually paid= 0.1914 trillion. 0.1914 / 1.659 (actually made) = about 11.5%, which means effectively, the US has one of the LOWEST tax rates in the world for corporate entities(3)."

Don't know how I let THAT one get by before.

Um, Dave? That would be based on the rather mistaken assumption that other countries collect taxes at their full listed rate.

notajayhawk 3 years, 8 months ago

Sorry, blogs mixed up (not that it seems to matter, they're pretty much interchangeable), shoulda' said "Um, llama?"

llama726 3 years, 8 months ago

I'll forgive you, but just this once. PS - congrats to your Huskies on the title.

You're right. I'm saying it more to point out, though, that 11.5% isn't that high of a rate. In a huge deficit, we don't need to be lowering taxes. We need to be ironing out the tax code, closing loopholes, making the tax code VERY straightforward and simple (makes the IRS spend less to audit and private businesses less to interpret), and cutting spending... by a lot. Everyone will have to chip in, but everyone thinks businesses in America have a hard time with our current tax rate. I just don't think the bigger firms do. The smaller ones - probably, but that's because our system is oriented toward the bigger ones.

notajayhawk 3 years, 8 months ago

Okay, first of all: That 11.5% isn't a valid number. There's a slight problem with your calculations. You took total corporate tax revenues collected divided by total corporate income. As I mentioned previously, more than half those corporations are actually very small companies, and they don't pay the top marginal rate, do they? If you used the same method to calculate the effective tax rate for all individual filers, it wouldn't be anything remotely close to 35%, when you consider that the top marginal rate applies to a relative handful of filers, that the bottom half pays NO income taxes, and the bottom two quintiles actually have a negative effective tax rate. There's also the problem of whether the total revenues collected was figured based on a cash basis or accrual basis. Again, GE paid nothing last year, but they still OWE over three quarters of a billion dollars for that tax year.

Next, I believe one of the major points of this blog was whether our tax rates were high in comparison to other countries. You can't compare the effective rate here to the 'book' rate there. They don't collect at an effective rate anything close to what their top marginal rate is, either.

Let's say you live in a state where your income is taxed at a marginal rate of 8%, but after credits and exemptions and adjustments, you pay just 4%. You could say that it would be pointless to lower the state rates, because nobody is going to move to that neighboring state where the tax rate is 6% when they're only paying an effective rate of 4% here. But in the other state, they wouldn't be paying the full 6% either - after credits, exemptions, and adjustments, they'd be paying 3%.

THAT is the point. Our rates are higher than in other countries, both in the full and the effective rates. It makes financial sense to move our corporations overseas. Isn't avoiding that one of the major concerns here?

llama726 3 years, 8 months ago

I fully acknowledge that number isn't scientific, exact, or perfect, or even really necessarily as accurate as I'd like. I looked it up and compiled that in about three and a half minutes. This is a blog on a local newspaper website. Not an economics dissertation. OK? Glad we're done with that.

The point was that the accuracy of the tax rate is subject to speculation and those who profess that it is far too high fail to understand that it simply isn't overbearing for many firms (but it is for some).

Let's get to the nuts and bolts of this thing, and that is the convoluted nature of the corporate tax structure. It's disadvantageous to some businesses and advantageous to others. Wouldn't it be sensible, efficient, and practical to reform the tax code so it is straightforward, simple, and doesn't have a ton of wiggle room?

I don't think we'll be able to compete with Grand Cayman. But our corporations don't use any of their services other than renting a mailbox. I wouldn't be opposed to lowering the rate and making it profoundly simple, with no loopholes and well-defined exemptions, etc.

notajayhawk 3 years, 8 months ago

I didn't expect you to be a tax accountant or corporate comptroller.

But isn't the title of your blog "MATH and corporate taxes"? If your math is wrong ...

The point is that our rates are higher, whether we're talking about the statutory rate or the effective rate. Lowering the rate and doing away with all the exemptions sounds good, but that's tantamount to a flat tax - propose that for individuals and see what you get. There are reasons - valid ones - why some companies get some credits and others don't. On the whole it makes it more complicated, but each company only has to worry about the provisions that effect THEM.

camper 3 years, 8 months ago

I know a friend who has a friend who knows a friend who has a brother in law who works for a large corporation. They have a nice way of getting out of taxes. Simply take your corporation and split it up into multiple "tax entities". This way you get all the deductions many times over and technically you still report to the SEC as one corporation. Nice. This is another reason why people don't like tax experts, because tho they think of all kinds of loopholes and schemes to dodge taxes, they make work harder and even more complicated for people in other departments because of all these multiple tax entities.

notajayhawk 3 years, 8 months ago

llama726 (anonymous) replies… "CEOs are often not in the office."

[sigh]

Jury duty. National Guard callups. Doctors' appointments. Traffic court appearances. Flu season. Maternity leave. Off-site trainings. Not to mention the rather mundane things like vacations, or hospitalizations. I didn't say "often". Do you really think that the vast majority of businesses don't have 0.3% of its employees absent - every - single - day?

And yes, CEO's are often out of the office. Not that it matters one wit, and that has nothing to do with board members, who, you don't seem to realize, don't work regular 40 hour weeks - the board meets irregularly, that's why they HAVE a CEO to make the day-to-day decisions. And guess what - that CEO can review reports and other documents that are faxed to him, or downloaded to his laptop or smart phone. He can interact with his subordinates, with his customers, with his suppliers, with local through federal regulators not only by telephone or e-mail, but by videoconferencing. In short, the CEO can do his job while home in bed with the flu, from the corporate jet while en route to one of their other facilities overseas, from his hotel room, and yes, even from the golf course or the beach in Maui. Can a factory worker operate his machine from home? Can a server wait tables from the doctor's office? Can a nurse take a patient's temperature from the beach? Other than certain technology heavy fields where telecommuting is feasible, can you think of ANY jobs that can be done by the 'average employee' when they're not at work?

"Some would consider a 1000-5000 employee firm a large corporation, and a 100k plus corporation essentially a megacorporation."

Regardless of whether or not that's true, it simply doesn't apply. It's not the companies with 500-1000 employees or 100K in earnings that are making 100-500 times what their employees make, it's only the GE's and GM's and other multi-billion dollar concerns in the S&P and Fortune 500's.

And again, seriously, llama - the level of responsibility is not even in the same solar system, even if we're talking about the concerted efforts of a single block of 500 workers. The impact of, say, a wildcat strike by all 500 employees at one of a megacorporation's subdivisions simply can not be compared to the potential consequences of a CEO's decisions (the elimination of that entire subdivision and those 500 jobs being just one of the day-in-and-day-out decisions he or she might make), who literally can affect the economy of the entire planet. Both the power and responsibility of the CEO is separated from that of the average employee by orders of magnitude.

You seem like a fairly intelligent and sensible person. I really can not understand why you're being so intransigent against accepting what should be as glaringly obvious as that the distance to the moon is greater than the distance from Lawrence to Topeka.

notajayhawk 3 years, 8 months ago

Sorry, after re-reading, I realized you were talking about 100K employees, but my point still stands.

llama726 3 years, 8 months ago

It's fine. I'm not trying to be obstinate, I just want to make the point that in a technology company (such as where I work), if 500 of us walked out for two weeks (out of the 6000 or 7000 total employed) from my department, it would hamstring the company severely. From our engineering department, it would devastate our company. If our CEO decided to walk out, the President and various VPs could combine to make the day to day decisions until he could be replaced. The power and responsibility of the CEO are indeed considerable, but the CEO doesn't operate the nuts and bolts of the business, either.

I will concede that the CEO has more impact on the global economy.

notajayhawk 3 years, 8 months ago

I don't disagree with anything you said. Let me ask you two questions, though:

Does your CEO make 500 times the average of what you and your 6 or 7 thousand employees make? But in some ways it's not. When they talk about 'he average CE' making that much, it isn't 'the average CEO' in all corporations, we're talking about the top of the Fortune 500 list. And, believe it or not, it makes sense. It has something to do with that relativity you referred to before.

It's not likely a company with 10 employees making $30K is going to have a CEO making $15M. Let's say he makes $150K. Is that reasonable?

So now we have a company with one hundred thousand employees, making an average of $30K, and the CEO makes $15M. If all you're doing is comparing what he makes in relation to the average employee, of course it's a lot. But he's managing a company that's 10,000 times the size of the other one, and only making 100 times the other CEO's income.

Sounds to me like the larger company is getting quite a bargain.

Now the other question - if your CEO walked out, even if it took some time to find a replacement, do you really think the company would be run by committee until then? You don't think that someone would be put in the big office on an interim basis? Somebody has to have the ultimate authority. Somebody that can, say, make the decision as to whether to fire the 500 of you that walked out for two weeks.

notajayhawk 3 years, 8 months ago

llama726 (anonymous) replies…

"All of those things belong to all of us. I know you aren't going to advocate for them to be able to use all of that for no cost."

Um, sorry, but the rails don't belong to all of us, they're owned by private companies, not the government. Same with the electric grid. Pretty sure the government doesn't own the internet, either. Just as I'm pretty sure that a railroad won't transport their goods, the electric company won't keep their lights on, and their ISP won't continue providing access unless they pay their bills.

It's not unusual for facilities of large companies to have security and firefighting forces of their own, and to build their own access roads. But even if they don't, most of the things on your list are paid for through property taxes. (How much property tax do you think a megacorporation pays on an office tower in lower Manhattan?) Oh, and user fees - or did you think that when a megacorporation sues another megacorporation for billions of dollars in damages for a patent infringement, one side or the other or both are not assessed court costs? And they pay for roads and the rest of the transportation infrastructure the same way you do - through motor fuel and other fees for their own vehicles, and through the portion of the price of the products and services they purchase which is attributable to the cost of transporting those goods and services to them.

For the most part, regulatory bodies are funded by federal taxes, yes. But that's not always to a company's benefit, is it? Compliance with regulations and legislation can costs these corporations millions or billions of dollars. Not to mention that legislation and regulations often include provisions for the companies themselves to pay for enforcement of those provisions (e.g., in principle if not scale, charging a restaurant a fee for their health inspection).

Direct government contracts? Yes, the taxpayers pay for those. The taxpayers also receive something of value for their money, the same as you receive something of value for your dollars spent when you purchase a product at the store. And doesn't it seem just a little bit silly to say the company should pay more in taxes to cover the cost of purchasing the products it's selling? Imagine you're a supplier, maybe selling office goods or cleaning services to City Hall, and the city says 'We're going to raise your taxes - to pay for our office supplies or cleaning bills'!

Yes, they get tax breaks. So do you, but the reasoning behind most business tax breaks is that the business has a net positive financial impact on the area covered by the taxing authority, which for the most part can not be said about tax breaks, exemptions, deductions, credits, and loopholes for individuals.

So, um - who's using those things at "no cost"?

notajayhawk 3 years, 8 months ago

You know, I just love the people talking about 'taking advantage' of the 'loopholes' in the tax code. Is a homeowner 'taking advantage' of the 'loophole' for mortgage interest? Is a college student 'taking advantage' of the 'loophole' for education related expenses? Is a sick person 'taking advantage' of the 'loophole' for medical expenses? There is nothing illegal or inappropriate about minimizing your tax liability, whether you're an individual or a megacorporation. That's what the credits and exemptions are there for. How many of YOU tell your tax preparer you don't want a credit that's available to YOU?

llama726 3 years, 8 months ago

http://www.cbpp.org/cms/index.cfm?fa=view&id=1868

I think this is a good example also:

http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html

I'm not saying it's illegal... but it is somewhat inappropriate to pretend that your business actually does anything meaningful in the Cayman Islands. If the corporate tax rate was dropped, maybe they'd be more likely to move their headquarters here. As a compromise, though, perhaps we should (in addition to dropping the tax rate), prevent our corporations from using legal methods to obscure their profits and expenditures internationally in an effort to pay a 2.4% effective tax rate. If all of the corporations who did that would actually pay a 15, or 20% tax rate, it would help with the massive deficit we have.

jafs 3 years, 8 months ago

The problem is with the tax codes.

You can't blame the corporations for using them for their advantage, just as we all take deductions that are allowed to lower our tax burdens.

"Offshoring" your headquarters or profits should not be a way to avoid paying taxes - that would solve the problem.

tbaker 3 years, 8 months ago

Llama726 appears to be one of those folks who believe the evil, filthy, rich people are not paying their fair share of taxes. Well lets just look at the facts:

Less than half of all Americans pay income taxes, and that percentage is shrinking.

Of those who do pay income taxes, the top 50% of that group pays 90% of the income tax collected by the treasury. Sound fair to you? Squeeze harder you say?

In 2008 (latest data the treasury has) the highest marginal tax rate of 35% applied to all AGI above $357,700.00. In that year the total amount of AGI subject to the highest rate was $622.8 Billion. The government collected in taxes $218.0 Billion (35%).

The 2011 annual budget deficit will be nearly $1.665 trillion and in 2012 it will be $1.1 trillion. Now if the wealth envy crowd of liberals / socialists who believe we should turn America into a giant assisted living facility were to succeed in raising the highest marginal tax rate, how much more would the looters in Washington D.C. receive? Lets assume there is no change in government behavior and the population will make the same kind of money they earned in 2008, and has a general eagerness to pay more in taxes.

Raise the highest rate of 35% by a factor of 20% to 42%, then the additional tax revenue would be $43.5 Billion, which doesn't begin to close the deficit of $1.665 trillion. So, let's raise the rate by a factor of 50% to 52.5%; the additional revenue would be $108.9 Billion. Still nowhere near enough, so let's just tax the evil rich at a rate of 100% and confiscate everything they make! This brings in an additional $404.8 Billion. This still leaves the country $1.26 trillion in the hole for the 2011 year and adds to the national debt.

Face it: Our federal government has a very serious spending problem. It is much too large and involved in far too many things. It needs to shrink or there will be very serious problems in the very near future.

llama726 3 years, 8 months ago

Tbaker appears to be one of those narrow-minded right wing fascists that insists everyone unlike him or her must fit a convenient, easily demonized label. Gosh, that is fun, but totally unproductive and pointless at the same time. Thanks for opening on that note!

http://www.nytimes.com/2010/04/14/business/economy/14leonhardt.html?_r=1

"But the modifiers here — federal and income — are important. Income taxes aren’t the only kind of federal taxes that people pay. There are also payroll taxes and investment taxes, among others. And, of course, people pay state and local taxes, too.

Even if the discussion is restricted to federal taxes (for which the statistics are better), a vast majority of households end up paying federal taxes. Congressional Budget Office data suggests that, at most, about 10 percent of all households pay no net federal taxes. The number 10 is obviously a lot smaller than 47. "

Now: In no way do I think the rich are "evil." I don't talk about things that are "evil," and I think even the conservative commenters on this board would agree with that. Taxes have to increase, and spending has to decrease. One solution isn't sufficient if you're after solvency.

You're not helping (at all) by attempting to demonize liberals as socialists. I'd describe myself as left of center, sure, but I'm practical and I also realize that the best ideas usually come about when you consider both sides of a story and go forward.

If we want our government to resolve the deficit, taking a simple hatchet to spending isn't going to be enough, nor is raising taxes. It's probably going to take both.

notajayhawk 3 years, 8 months ago

"Llama726 appears to be one of those folks who believe the evil, filthy, rich people are not paying their fair share of taxes."

I don't get that impression. I might have suspected it at first (hey, that's not exactly uncommon in these parts), but after going back and forth with him for the past several days, I know he is at least open-minded, that he looks into the data which, after all, is often distorted and extremely difficult to sort out, and that he's consistent in his application of his logic. Don't misunderstand me, I don't agree with him and I think hat logic has some faults (and mine likely does, too), but I don't see his posts as being the typical 'get-the-rich' rants that we've all come to know and love on these message boards.

Hey, if you read Cal's column this week, even HE fell for a lot of misinformation that's floating around out there.

tbaker 3 years, 8 months ago

Llama726 says "both." Who thinks they are under-taxed? Who thinks the federal government can spend the money they work for and earn far more effectively than they ever could? Llama726 thinks I'm a facist but offers no basis for this judgement. I'm a libertarian, for what thats worth.

Taxes do not "have to" increase. If there is an absolute in this argument it is the need to drastically cut spending. If you had taken the time to study my example, you would see that even increasing taxes to 100% on the top bracket earners doesn't even begin to address the record-setting deficit spending. The only logic to support your argument has to be assuming the people of this country believe the deficit spending is buying us things we should rightfully be paying higher taxes for, instead of borrowing more money. I've yet to see a poll that indicates people believe they are under-taxed. How many people send extra money to the IRS?

We're running a $1.65 trillion deficit this year alone. I've demonstrated that even increasing taxation to the point 100% of wealth generated in the US is confiscated doesn't even begin to raise the money we need to address this level of spending. How you or anyone else can say tax increases are some crucial component to some solution to this problem - it simply defies all logic and is the clearest indication there is the propoent of such thought is either out of touch, or so blinded by liberal ideology they cannot grasp the fact our federal government is far, far too large and must be drastically reduced in size and scope. Reducing the size and scope of government is in direct conflict with core liberal / progressive principals.

notajayhawk 3 years, 8 months ago

"Taxes do not "have to" increase."

Don't know if I entirely agree with that. Not that I think they have to increase NOW, I agree that we need to cut spending first. But it's silly to think the government could function providing necessary and, for the most part, desired services for today's population if it was still collecting the same amount of tax dollars it did in 1920.

BUT: That does not mean that tax rates have to stay as high as they are. Tax revenues correlate with tax base, not rate. With more people and companies making more money, the government doesn't need the same tax rate to provide the same level of services.

One thing has proved to be a certainty over time, however: The more we give to the government, the more they will spend.

llama726 3 years, 8 months ago

I don't actually think you're a fascist. The point (which you've proven for me - thanks) is that snapping to a conclusion in order to marginalize someone's views is a pointless way to engage in a discussion. You have no real basis for posting a summary of my personal feelings one way or another, but you felt free to do so. You've stated increasing current revenues which I've mentioned above are affected by numerous exemptions, etc. is illogical because it is unpopular. Ok. So what?

Of course no one wants to pay more taxes... Why would they? However, if you polled the masses, they'd vote yes to both new federal programs and decreasing taxes.

You say that increasing revenues is not a solution to a debt problem. I'll give you an anecdote. Let's say I sat down at the end of the month, realizing I had to tap into my savings by $500 despite having no overwhelmingly new cost.

I could look at a number of factors, but ultimately, I'm going to look at revenue and expenditures. Certainly, I am going to try to cut my spending to an extent. For fun, let's say I made $1500 in take home pay and spent $2000 that month.

For next month, I might be able to pare my budget down $400 or so, but I discover that between all of my bills, gas, groceries, rent, etc., I'm still going to spend $1600. What are my choices then?

-Drive less, and lose my job, costing me my income? -Don't eat? -Move out of my house, voiding my lease?

All of those things won't work. I have to find another $100. I can try to figure out if I just didn't work enough, if I could get more hours, or I could go donate plasma, I can get a second job, I can beg, I can cut grass on the side, whatever - but I have to find a way to increase revenue, too.

Our "bills" amount to about $14.2 trillion right now, not counting for adding to the deficit annually. We have to cut spending, certainly, by a lot. But we need to increase revenues as well, at least a somewhat, if we are serious about resolving the debt issue. Do we have to like it? Do you think anyone likes that idea? Nope. But, reality is what it is.

We'd have to cut $1.2 trillion from our budget to break even. Or, if revenue increase to, say, $2.75 trillion (from $2.381 trillion), we'd only have to cut about $750 billion from our budget to break even.

This is an old puzzle but this is an example: http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=zvttq5m3

About 41% of the gap is made up by tax increases, with 59% coming from spending cuts.

At some point, we need to reach a compromise and come up with a solution that will work for more than a year. We need surgery, not a bandage, but we also don't need amputation.

tbaker 3 years, 8 months ago

What strikes me JayHawk is the number of people who think our country is in a place where our politicians can talk about what government "should" do and utterly fail to grasp the gravity of the situation. They won't except the idea we no longer have the luxury of talking about what should be done. Our government has no choice but to focus on what "must" be done. I'm stunned by the number of otherwise intelligent people who simply will not accept the fact that time has run out. The government MUST act to drastically cut spending. Arguing about things that "should" happen presupposes that different options are realistically available. They are not. The government has run out of money. No amount of taxation can sustain current spending levels. It must substantially change or a series of very serious consequences awaits. No matter how obvious it is, people still refuse to accept this reality.

llama726 3 years, 8 months ago

It's really disingenuous to say that no amount of taxes could conceivably repair the deficit. The US GDP is about $14 trillion - same as the total federal debt. It would be folly to use taxes as the exclusive means to repair the deficit, or even as the majority of the means to repair the deficit - spending cuts have to compose the majority of that.

George Lippencott 3 years, 8 months ago

LLama 726

"That's the top marginal rate you're talking about. The federal government doesn't collect anything near 35% of individual income in taxes, either. The amount of individual income tax collected is more like 10% of individual income."

Which is relatively insignificant, and proves that taxes aren't making the dramatic impact that some would have you believe. Thank you"

Ah, statistics distort reality again. Well, I suspect that depends if you pay federal income tax at all. About half the popurlation does not - drives down the avaerage quite a bit. Those who pay do so progressively until they make $350K then it is flat. The actual tax (not marginal) on a two wage earner couple making $130K is in excess of 20% depending on deductions. That when combined with property tax, sales tax, state income tax and some cats and dogs can yield a pretty significant contribution. I would consider such a tax rate dramatic given that those people have to pay for eveything else (no government help).

notajayhawk 3 years, 8 months ago

"About half the popurlation does not - drives down the avaerage quite a bit."

And more than half of corporations are actually very small concerns that have $250K in revenues or less. That brings the average on the corporate side down a tad, too.

"Those who pay do so progressively until they make $350K then it is flat."

With one slight difference. Those in the lower brackets pay the marginal rate only on the relatively small portion of their income that falls into that bracket (by definition). The farther above the top margin your income is, the greater percentage of it that's taxed at the top rate.

"That when combined with property tax, sales tax, state income tax and some cats and dogs can yield a pretty significant contribution."

Just curious, but which one(s) of those do you think corporations DON'T pay?

George Lippencott 3 years, 8 months ago

Don't confuse me with LLAMA. I think a lot of people on here confuse perceived excessive corporate salaries with the corporations that pay them. From what I have read few seem to understand a wit how business makes money or why they need to

notajayhawk 3 years, 8 months ago

I don't think llama really believes those salaries are excessive, if you read his posts, just that it would benefit the economy if there wasn't such a disparity. I might be wrong, but that's the sense I get from his posts.

George Lippencott 3 years, 8 months ago

Can't tell. Certainly there are those on here that do.

llama726 3 years, 8 months ago

Correct. Knowing the economy is how it is, and being a bleeding heart (I guess), individually, I don't feel like I could feel connected to humanity if I took a massive, massive salary while outsourcing labor, laying people off, etc. I think it'd be better for the economy if the handful of corporate executives that are particularly benefiting from these structures toned that down a touch. I also recognize that this isn't the case at a majority of firms.

George Lippencott 3 years, 8 months ago

Group,

If corporations pay no taxes, it is because Congress wrote the tax code that way. If the rich pay inadequate taxes, it is because the Congress allowed it. If the tax code requires a small tractor trailer to haul around it is because the Congress wrote it that way.

We elect the Congress. Eight years ago, we gave the Republicans sufficient control to change it - they did not. Two years ago, we gave the Democrats sufficient control to fix it - they did not.

Harping on corporate taxes given the lack of any realistic probability that Congress will change things is stupid.

Recent tax increases have focused on sales (regressive) and property (proportional). There have been only tax cuts for corporations usually presented as job creation actions.

Reality is that we either tax the middle or cut a lot. Middle is getting tired of being taxed - see tea party.

notajayhawk 3 years, 8 months ago

As I stated elsewhere on this thread, the tax code is not so complicated as you think. Yes, it's huge - it covers an awful lot of different types of taxes on different kinds of taxpaying entities under a whole lot of situations and circumstances. But every one of those entities doesn't need to know about all the provisions for all circumstances any more than a college basketball player has to know the part of the NCAA rule book that applies to water polo. They only need to know the parts that apply to them. Examples from the individual side: Not every individual filer needs to know anything about deducting mortgage interest, or medical expenses, or tax benefits for student loan and other educational expenses, child care credits, retirement benefits, exemptions for blindness, credits for energy efficiency, etc. So, should we take all those things out in order to have a simplified tax code that applies to everyone equally?

George Lippencott 3 years, 8 months ago

NOTA,

Absolutely right. Might note series on FOX this AM.. There are many sections of the tax code that apply to what amounts to one entity. That section offers a benefit to that one entity. Noone else need apply.

camper 3 years, 8 months ago

At best federal Corporate taxation is very fair. In particular, current net operating losses can be carried back 2 years if you had income in those years. You can waive this and carry these NOL losses forward five years (aginst future net income) if you resume profitabilty. To my knowledge, these rules do not apply to S corporations, partnerships and sole proprietorships. Treatment of investment is also favorable because of bonus depreciation rules for equipment acquisitions, thus allowing corporations to expense large percentages of these investments up front. Federal equipment lives are generally 7-years which is often shorter than the expected useful life most large equipment expenditures. Many corps also incorporate in Delaware, because the legal system (and legal costs I might) are much more favorable in that State. In my mind this is all good for multiple reasons.

On the downside, corporations also take advantage of loopholes by spinning off operations into subsidiaries which are very confusing and essentially just a paper change that allows corporations a loophole to multiply the advantages listed above....several times over. For example corp zzz shipping can deduct transportion charges to it's own company corporate zzz sales...which is essentially the same company, and the exact same corporation filed with the SEC and traded on the stock market. In essence, this is an artificial way to lower tax liability because a company can essentially report an accurate profit to Wall Street, while reporting lower income numbers to the FEDS. I might add this is also good for pricey tax consultants who clear these schemes with auditors. And a personal gripe of mine because it triples the work of staff who often see their work (and headaces) tripled to sort out these expenditures/revenues.

Furthermore, corprate executive and board salaries (not to mention stock incentives) make me feel on whole, that the benefits describe in the 1st paragraph are being abused. And as far as skill and talent, I've seen a lot of these big dogs come and go, take there parachute. Funny how when they leave, nothing really changes. Nobody notices (or cares) when they go. Things go on just as before. But when someone who knows how to fix a truck, run a factory line, generate sales, or by god fix the copy machine goes, chaos can ensue.

But believe me this is not always true. There are good and excellent executives.....but they are hard to find.

notajayhawk 3 years, 8 months ago

"For example corp zzz shipping can deduct transportion charges to it's own company corporate zzz sales...which is essentially the same company, and the exact same corporation filed with the SEC and traded on the stock market."

Those transportation expenses would have been deductible anyway as costs of doing business.

"There are good and excellent executives.....but they are hard to find."

We tend to find what we're looking for. It's a heck of a lot easier for the driver of a fire truck to follow the plume of smoke than it is to find the particular address of house that's not burning.

camper 3 years, 8 months ago

"Those transportation expenses would have been deductible anyway as costs of doing business"

Not necesarilly because you can deduct state expenses against federal income taxes.Intra state taxes I'm willing to debate you on this because I have first-hand knowledge on how this works, Double dipping is what they call it in our profession.

"We tend to find what we're looking for. It's a heck of a lot easier for the driver of a fire truck to follow the plume of smoke than it is to find the particular address of house that's not burning"

I'm not sure what you mean by this, but I'm prepared to counter.

notajayhawk 3 years, 8 months ago

"Not necesarilly because you can deduct state expenses against federal income taxes.Intra state taxes I'm willing to debate you on this because I have first-hand knowledge on how this works, Double dipping is what they call it in our profession."

Then, first of all, you should know "deduct" isn't technically the right word. It's a cost-of-goods-sold item, the same as raw materials, labor, etc.

If you manufacture a widget in New England for sale in California (or in Lawrence for sale in Wichita, it doesn't make any difference), and it cost you $50 to make, and $10 to ship, and you sell it for $100, neither the federal government nor the state government(s) is taxing you on the $100, they're taxing you on the $40 earnings. It doesn't matter if you're an independent manufacturer and/or wholesaler shipping it to a California Wal-mart, or if you send it to one of the Widget Outlet Stores that you own and operate. The cost of transporting an item from the point of manufacture to the point of sale (as long as you're the party that paid for it of course) is a straight dollar-for-dollar reduction in your taxable earnings.

"I'm not sure what you mean by this, but I'm prepared to counter."

The dog that keeps you awake all night by barking is noticeable - you don't notice all the other neighbors' dogs who don't. A police officer notices a car that's speeding and swerving in and out of traffic; ask him to describe one of the ones that was driving along the way they're supposed to. If you walked down a school hallway and were drawn to the sound of a disruption from a classroom, what you'd notice is the kids who are acting out, not the ones sitting quietly in their seats doing their work (and not the ones in all the quiet classrooms you passed on the way to the disruption). A city not too far away on the Missouri side is often referred to as our nation's meth capital, when in reality there are well over 100,000 people there who wouldn't know what meth was if you sprinkled it on their corn flakes.

The squeaky wheel gets the grease. You don't see a television news report or read a newspaper story about a corporate CEO who had just another day at the office.

Feel free to counter.

camper 3 years, 8 months ago

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jafs 3 years, 8 months ago

According to a little research I did, the NYT statement was based on a statement from GE that they didn't pay any taxes because they didn't owe any.

Later on, GE changed that to they paid some and will owe some.

The flaw in the Times article was that they didn't specify federal corporate income taxes.

notajayhawk 3 years, 8 months ago

"the NYT statement was based on a statement from GE that they didn't pay any taxes because they didn't owe any"

And it being prior to the due date, that was a true statement. The NYT article was actually based on a rather clueless reporter who mistook the words "net tax benefit" as a credit or rebate.

camper 3 years, 8 months ago

I am so sorry about the tone of my comments yesterday. I was being a royal jack ___. I meant no disrespect. I was having a bad day.

camper 3 years, 8 months ago

Oh boy. I especially owe one to Nota who is so good and adds a lot of great commentary that is accurate and correct.

notajayhawk 3 years, 8 months ago

"Nota who is so good and adds a lot of great commentary that is accurate and correct."

Not that it would have mattered in any way. Worth repeating:

"I'm not sure what you mean by this, but I'm prepared to counter." - camper

In other words, you're going to disagree regardless of whether or not you know what I said. Now that's great commentary.

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