The 1% - Corporate Taxation Myth

[nation-x]

Below is a study of 280 of Fortune's list of the 500 largest American companies. Many people will be appalled to learn that a quarter of the companies in this study paid effective federal tax rates of less than 10 percent. Others may be surprised to learn that an almost equal number of US companies paid close to the full 35 percent official corporate tax rate - about 25%. While the federal corporate tax code ostensibly requires big corporations to pay a 35 percent corporate income tax rate, on average, the 280 corporations in the study paid only about half that amount - average 18.5%.

Over the 2008-10 period, these 280 companies earned almost $1.4 trillion in pretax profits in the United States. Had all of those profits been reported to the IRS and taxed at the statutory 35 percent corporate tax rate, they would have paid $473 billion in income taxes over the three years. But instead, the companies as a group paid only about half that amount. The enormous amount they did not pay was due to the hundreds of billions of dollars in tax subsidies that they enjoyed.

More than half of the total tax- subsidy dollars over the three years — $114.8 billion — went to just 25 companies, with more than $1.9 billion in tax subsidies average.

Notably, 56 percent of the total tax subsidies went to just four industries: financial, utilities, tele-communications, and oil, gas & pipelines.

Most big corporations give their executives (and sometimes other employees) options to buy the company’s stock at a favorable price in the future. When those options are exercised, companies can take a tax deduction for the difference between what the employees paid for the stock and what it’s worth. These same 25 companies, mentioned above, enjoyed almost two-thirds of the total excess tax benefits from stock options received by all of the 280 companies, getting $8.1 billion of the $12.3 billion total.

http://www.ctj.org/corporatetaxdodge...gersReport.pdf

30 of these companies paid ZERO income taxes between 2008-2010 and many received a refund in the billions.

[Fletch XXX]

funny thing is companies like Dupont have polluted so much of America with byproducts from its chemicals that they should pay much more tax than they do, the damage is forever.

[raymor]

There are certainly way too many tax credits and special deals whereby politicians reward their friends. A far simpler and more fair tax structure is needed. We're still giving people and corporations tax credits to not produce crops in an effort to keep food prices higher. That may have made sense in the first year of the great depression, but these days it's ridiculous to pay people tax credits to not produce.

Two things about the numbers really jumped out at me. Yes, there's a little math here, but also a very interesting point. According to that source, getting rid of all of the credits and tax deductions that politicians have given corporations would double their taxes to about $473 billion over three years. That's a difference of $230 billion over three years, or $76 billion per year.

$76 billion by doubling business taxes. Obama's deficit is $1,000 billion. If we're overspending by $1,000 billion, and doubling their taxes would bring in only $76 billion, someone is barking up the wrong tree.


It's also worth noting that all of that income is actually double taxed. The 18.5% is only tne first tax. It's taxed again at an additional 15% - 39% as it's distributed to the owners of the business, the stockholders.

[nation-x]

Originally Posted by raymor

There are certainly way too many tax credits and special deals whereby politicians reward their friends. A far simpler and more fair tax structure is needed. We're still giving people and corporations tax credits to not produce crops in an effort to keep food prices higher. That may have made since in tbe first year or two of the great depression, but these days it's ridiculous to pay people tax credits to not produce.

Two things about the numbers really jumped out at me. Yes, there's a little math here, but also a very interesting point. According to that source, getting rid of all of the credits and tax deductions that politicians have given corporations would double their taxes to about $473 billion over three years. That's a difference of $230 billion over three years, or $76 billion per year.

$76 billion by doubling business taxes. Obama's deficit is $1,000 billion. If we're overspending by $1,000 billion, and doubling their taxes would bring in only $76 billion, someone is barking up the wrong tree.

EDIT: As far as double taxation... don't you think that applies to employee income as well? The logical fallacy in that argument is that monies paid to shareholders and employees are business costs. Those dollars don't get taxed because they are deducted.
It's also worth noting that all of that income is actually double taxed. The 18.5% is only tne first tax. It's taxed again at an additional 15% - 39% as it's distributed to the owners of the business, the stockholders.

The problem with your math is that we only talking about 280 companies total in that report. The Bowles-Simpson report says that we give out $1.2 Trillion per year in tax subsidies to corporations.

[glamourmodels]

Hey man, lay off the "job creators" LOL

All kidding aside, while disgusting, these vampire squid companies don't get us all the way there even if you taxed them as they should be, there still need to be massive cuts to the behemoth federal government succubus-

Ron Paul 2012

[bignasty]

Originally Posted by nation-x

The problem with your math is that we only talking about 280 companies total in that report. The Bowles-Simpson report says that we give out $1.2 Trillion per year in tax subsidies to corporations.

If you go look up BEA statistics, in 2009 aggregate corporate profits were a little over $5.2 trillion. Federal corporate income taxes collected that year were ~$254 billion. That's just over 5%, and just over the $1.2 trillion amount from the report.

[nation-x]

I tried to edit my last post, Ray. I wanted to point out to you that there is more to that double taxation argument than meets the eye. Dividends paid by corporations to their stockholders are not a deductible expense, however, what they do from an accounting perspective is to reduce Retained Earnings. Retained Earnings are defined as accumulated profits and losses since the company became incorporated minus dividends that have been paid.

[nation-x]

Originally Posted by glamourmodels

Hey man, lay off the "job creators" LOL

All kidding aside, while disgusting, these vampire squid companies don't get us all the way there even if you taxed them as they should be, there still need to be massive cuts to the behemoth federal government succubus-

Ron Paul 2012

Where Ron Paul and liberals agree is that we need to look at ALL spending... especially the $700+ Billion we spend on defense.

[raymor]

Originally Posted by nation-x

The problem with your math is that we only talking about 280 companies total in that report. The Bowles-Simpson report says that we give out $1.2 Trillion per year in tax subsidies to corporations.

Specifically the 280 LARGEST corporations, right?
The lefties always say that when they seek to raise taxes and create new regulations on corporations they are not taking about the millions of little guys like RMEE Inc (me), Bob Jones Plumbing Inc, etc. They are talking about the largest corporations, they say. The article shows that even DOUBLING taxes on the largest corporations wouldn't come any where near making a dent in our problems.

Don't get me wrong, I agree that a lot of tax credits and deductions should go away and everyone should pay their fair share. I just think it's worth noting that focusing on taxes from the largest corporations right now is a little like focusing on adjusting the AC while your house is on fire - it's not going to cool things down any.

If you wanted to actually affect the fiscal and economic problems, you'd have to go after a tax credit that adds up to real money, like deciding that the 45% of people who pay no net income tax no longer get the earned income credit. That's a tax credit that matters to the budget. A couple of billion in tax credits for turning perfectly good food into expensive fuel is dumb, but it doesn't really matter in a $4,000 billion spending plan.

[raymor]

Originally Posted by nation-x

I tried to edit my last post, Ray. I wanted to point out to you that there is more to that double taxation argument than meets the eye. Dividends paid by corporations to their stockholders are not a deductible expense, however, what they do from an accounting perspective is to reduce Retained Earnings. Retained Earnings are defined as accumulated profits and losses since the company became incorporated minus dividends that have been paid.

Educate me and explain how that matters.
It's taxed once when it's earned and taxed again when someone actually gets their hands on it, whether that's immediately or whether it's retained for a few periods first, right?

I'm the sole stockholder in RMEE Inc, so if there's something I'm missing here that affects the taxes that have to be paid (eventually) I'd appreciate the education.

[tony286]

Originally Posted by raymor

Specifically the 280 LARGEST corporations, right?
The lefties always say that when they seek to raise taxes and create new regulations on corporations they are not taking about the millions of little guys like RMEE Inc (me), Bob Jones Plumbing Inc, etc. They are talking about the largest corporations, they say. The article shows that even DOUBLING taxes on the largest corporations wouldn't come any where near making a dent in our problems.

every little bit helps. Hate to break it to you welfare is a very little piece of the big pie. Funny didnt see you yelling when bush was going to war and lowering taxes at the same time or the unfunded drug benefit. So is the rule yell about cutting spending when a democrat is in office? Just would like to know.Cheney said on fox deficits dont matter if obama said it they would be calling for his head.

[nation-x]

Originally Posted by raymor

Specifically the 280 LARGEST corporations, right?
The lefties always say that when they seek to raise taxes and create new regulations on corporations they are not taking about the millions of little guys like RMEE Inc (me), Bob Jones Plumbing Inc, etc. They are talking about the largest corporations, they say. The article shows that even DOUBLING taxes on the largest corporations wouldn't come any where near making a dent in our problems.

Don't get me wrong, I agree that a lot of tax credits and deductions should go away and everyone should pay their fair share. I just think it's worth noting that focusing on taxes from the largest corporations right now is a little like focusing on adjusting the AC while your house is on fire - it's not going to cool things down any.

If you wanted to actually affect the fiscal and economic problems, you'd have to go after a tax credit that adds up to real money, like deciding that the 45% of people who pay no net income tax no longer get the earned income credit. That's a tax credit that matters to the budget. A couple of billion in tax credits for turning perfectly good food into expensive fuel is dumb, but it doesn't really matter in a $4,000 billion spending plan.

So let me get this straight now... $76 Billion (by your math) isn't shit... but somehow Earned Income Credit which cost literally about half that amount would be substantial... Here is an inconvenient fact for conservatives... Gerald Ford actually introduced the IETC and Reagan expanded it in 1986. So don't give me that "lefties" bullshit.

[arock10]

Reagan would never get the republican nomination if he ran today. People just like to conveniently quote some of the stuff he did

[nation-x]

Republican Presidents created 65-70% of our current debt... and George Bush created 45% of that with the support and votes of the Republican controlled Congress... while they simultaneously cut taxes to the tune of almost $3 Trillion to date... They created new welfare programs (Bush's "Ownership Society" initiative and the Medicare Prescription Drug Program) without paying for them... and now, when Democrats attempt to pay for all of this spending by undoing the tax cuts, Republicans raise holy hell and say Democrats are tax and spenders... BULLSHIT.

[Rochard]

This is the beautiful thing about our tax system! You can write off anything and fix it so that on paper it looks like not making any money at all. I do it myself - I work from home, write off a portion of my house, my power bill, my internet bill, even my car.

This is why we need to go to a flat tax.

[raymor]

Originally Posted by nation-x

Republican Presidents created 65-70% of our current debt...

Look it up. Nearly half the debt is just since Obama has been in office. For most of that time, the dems also controlled the house and senate.

[_Richard_]

Originally Posted by Fletch XXX

funny thing is companies like Dupont have polluted so much of America with byproducts from its chemicals that they should pay much more tax than they do, the damage is forever.

is that like cannibalizing their own country and calling the byproduct 'success'?

[raymor]

Originally Posted by nation-x

So let me get this straight now... $76 Billion (by your math) isn't shit... but somehow Earned Income Credit which cost literally about half that amount would be substantial...

According to the IRS, IEC is a little over $60 billion, nearly equal to ALL of the tax credits and special deductions that the biggest corporations take all put together.
So yes, DOUBLING taxes on large corporations would be roughly equal to just IEC alone (for example). About $10 billion of IEC is fraudulent, people who don't actually qualify. Therefore, a "significant" tax increase on the largest corporations, say
15% ($30 billion) isn't going to come close to solving a $1,000 billion deficit.

We're in deep shit, all of us, and to get all of us out of this hole will require we all deal with some stuff we're not going to like. Getting mad at a few successful people isn't going to help.

Here is an inconvenient fact for conservatives... Gerald Ford actually introduced the IETC and Reagan expanded it in 1986. So don't give me that "lefties" bullshit.

Your point? That republicans came up with smarter welfare programs than democrats do? I didn't say EIC should be eliminated. I said that to solve a huge problem you have to look at the big programs, not focus for months on some $500 million credit that affects only a few people. You can't solve a 99% problem with a 1% solution is all.

[Robbie]

I can speak from what I saw with my own two eyes regarding tax breaks.

In the 1990's BMW built a plant in the upstate of South Carolina where I lived at the time. The state gave them unprecedented tax breaks, relaxation of regulations to build the plant, etc. (South Carolina was in competition with several other states to get it)

It resulted in thousands of jobs at the plant and many, many more in the surrounding area, and an economic upswing that the area had NEVER seen before and when I left South Carolina in 2008 it was still THE engine that made Spartanburg, Greer, Greenville, Easley and every other town within 50 miles tick.

Created billions of dollars in the local economy.

And if you don't think that is real and corporations shouldn't get tax breaks...then doesn't that sort of say that a FLAT tax should be implemented so everybody pays the same percentage and get rid of all the write offs and exemptions?