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Back to the tax debate...did anyone see the latest GAO report?
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MattinSF
Aug 13, 08 12:12
Post #1 of 65 (437 views)
Back to the tax debate...did anyone see the latest GAO report?
Can't Post
http://www.gao.gov/new.items/d08957.pdf
According to the GAO about two thirds of US and foreign companies doing business here paid ZERO dollars in taxes between 1998 and 2005. Nada not a dime, nothing. Our economy was doing pretty well during those years so how come two thirds of businesses here paid no taxes for seven straight years?
The US has a pretty high nominal corporate tax rate...about 40% all told when state taxes are added. This is higher than most industrialized nations, yet we are 4th from bottom in a ranking of all industrialized nations in the collection of tax revenue as compared to GDP....in other words we generate a lot of wealth that is not taxed. Can you say loophole or corporate welfare???
Who makes up the difference? well that would be you and me folks. Someone has to pay for our wars and Dubya's trip to the Olympics, it just isn't the corporate class, its the working class. I don't think two thirds of
us
pay zero in taxes.
Tell me again how the rich pay all the taxes.
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HOPE is a plan that worked. CHANGE is a plan that worked. BELIEVE is a plan that worked.
(This post was
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by MattinSF on Aug 13, 08 12:16)
HUB
Aug 13, 08 12:25
Post #2 of 65 (416 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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If you are a corporation and pay corporate you are doing something wrong. : )
Taxes are collected on the indivduals income.
MJuric
Aug 13, 08 12:31
Post #3 of 65 (410 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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OK let's look at the first page.
First according to the chart your 2/3 number applies to ALL USCC's and FCDC's. If you look at the lines for LARGE corporations, those nasty rich guy's you're worried about, you get a statement more like this "20% of corporations with receipts of 50 million dollars or more paid no taxes".
My corporation would be included in your 2/3 number, and no my corporation has paid taxes only once or twice in the last...well 10-12 years or so. Why you might ask? Because I'd say 2/3 of the corporations out there are small operations like mine and DON'T make any money.
OTOH your large "Rich people" corps seem to be paying at a rate of close to 4 out of 5 or best/worst case scenario of 2 out of 3. The other 20% or 30%...well they're probably loosing money.
Now as far as this goes...
Tell me again how the rich pay all the taxes.
What does this have to do with that? About the only way their would be ANY correlation would be if you assume that all corporations are owned by "The rich", which I can attest to as being incorrect :-). Next the number of corporations that pay taxes has to do not with "The rich" but with "The profit" if a corporation shows a profit it pays takes.
The question you SHOULD be asking is "Why is 20% of USCC's in the US NOT making a profit?". I'll answer that for you. Because being in business is a risk. Sometimes you make money sometimes you don't. It's not a job where you go and get a pay check for what you do. Every day you take a chance of LOOSING money and sometimes a lot of it.
If you're risk pays off and you make money...well then you get to pay taxes on it.
~Matt
~Matt
MJuric
Aug 13, 08 12:35
Post #4 of 65 (404 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [HUB]
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Doesn't that depend on the size of the corporation and "income" of the "Owners" or "Share holders"?
I've only had the luxury once or twice but "Not making a corporate profit" is usually based on how much we've been paying ourselves versus how much money the corporation will be taxed. If the corporation is going to be taxed at 15% but the extra individual income will push us into a higher bracket, then it makes sense for the money to stay in the corporation.
A few other times we ended up just spending the money on equipment or something...most of the time we just don't make enough money to worry about it though :-)
~Matt
Haim
Aug 13, 08 12:54
Post #5 of 65 (381 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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"I don't think two thirds of us pay zero in taxes."
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Combining returns filed with zero or negative tax liability with households that do not file a return at all, it's estimated that 41% of the U.S. population pay zero taxes.
Haim
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"Sometimes you need to think INSIDE the box!" -- ME
(This post was
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MattinSF
Aug 13, 08 12:55
Post #6 of 65 (381 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MJuric]
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How do you explain our ranking as 4th from bottom in the world at collecting taxes compared to our GDP, especially since our base tax rate of 40% is so high compared to other nations?
There are a lot of people out there making a lot of money and paying zero taxes. if two thirds of companies are paying zero taxes you'd have to guess that the other third are paying as damn close to zero as they can and if there's a sinlge company in the country paying 40% or anywhere near it they have a buffoon for a CFO.
Leona Helmsley was right, taxes are for the little people.
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HOPE is a plan that worked. CHANGE is a plan that worked. BELIEVE is a plan that worked.
Haim
Aug 13, 08 12:59
Post #7 of 65 (373 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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"How do you explain our ranking as 4th from bottom in the world at collecting taxes compared to our GDP, especially since our base tax rate of 40% is so high compared to other nations?"
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Are you making the Laffer Curve case for lowering the U.S. corporate tax rate?
Haim
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"Sometimes you need to think INSIDE the box!" -- ME
vitus979
Aug 13, 08 12:59
Post #8 of 65 (372 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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You have a knack for abusing statistics.
"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."
MJuric
Aug 13, 08 13:09
Post #9 of 65 (365 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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How do you explain our ranking as 4th from bottom in the world at collecting taxes compared to our GDP, especially since our base tax rate of 40% is so high compared to other nations?
Can't really answer that because I have no idea where you got the information. It doesn't appear to be in the link you posted, or I'm just missing it.
The link you posted is pretty filled with information including percentage in actual tax returns amounts paid etc. I'm sure you could find your answer in there if you looked.
~Matt
MattinSF
Aug 13, 08 13:13
Post #10 of 65 (359 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [vitus979]
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They are the GAOs stats not mine.
25% of large corporations with assets over $250 million and gross receipts over $50 million paid zero in taxes...in 2005 over 3500 US companies fitting that description paid zero in taxes.
Its very easy to do as well. You just break up your company into a bunch of subsidiaries and you have subsidiary A (which is offshore in a tax haven) charge subsidiary B $5000 a unit for a 25 cent widget or as is more common, millions of dollars for copyright priviliges, and hey presto subsidiary B loses hundreds of millions of dollars on paper and has no tax liability for years.
Even the Cato Institute's Director of Tax Policy, Chris Edwards admitted when he saw the report admitted that, and I quote, "there probably is large tax avoidance by U.S. multi national corporations".
Does Cato have a knack for abusing statistics too?....wait, don't answer that, I might agree with you.
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HOPE is a plan that worked. CHANGE is a plan that worked. BELIEVE is a plan that worked.
ajfranke
Aug 13, 08 13:19
Post #11 of 65 (349 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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You number about the total number of corporations paying no tax just shows you don't know what you are talking about. I have never had any corporation of mine pay taxes. I set them up that way. All the income is realized by me individually. I am surprised your number is only 2/3. I would have thought it would be higher.
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This forum is going to be a place of civil discourse, and those who wish to foment hate and discord are no longer welcome here. -- slowman 11/8/04
Art Franke
last tri in 83
Aug 13, 08 13:23
Post #12 of 65 (338 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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Imagine that, you raise the taxes on rich people and the find crafty ways to reduce it back down.
_____________________________________________
Conservative in exile.
MattinSF
Aug 13, 08 13:29
Post #13 of 65 (331 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [ajfranke]
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In Reply To
You number about the total number of corporations paying no tax just shows you don't know what you are talking about. I have never had any corporation of mine pay taxes. I set them up that way. All the income is realized by me individually. I am surprised your number is only 2/3. I would have thought it would be higher.
this guy is obviously clueless too.
Peter R. Merrill, a principal at PricewaterhouseCoopers, wrote an article in the publication Tax Analysts, underscoring this paradox.
"Data on corporate tax as a percentage of GDP "present a conundrum," he wrote. "The United States has the second highest combined statutory corporate tax rate among (the Organization for Economic Cooperation and Development) countries, yet is tied with Hungary in raising the fourth lowest amount of combined corporate income tax revenue relative to GDP in 2004."
A conundrum? I'd call it a huge rip off of the tax paying American public...call me a socialist if you want.
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HOPE is a plan that worked. CHANGE is a plan that worked. BELIEVE is a plan that worked.
ajfranke
Aug 13, 08 13:37
Post #14 of 65 (323 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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Really good post again, except for the detail in that the quote has nothing whatever to do with percentage of corporations in America that pay no tax. You don't understand that statistic, presumably because you have never been part of for profit America, or at least not a part that had a clue about the big picture.
Our corporate taxes are way too high, so they bring in very little revenue. This is a surprise to you exactly why? The situation Merrill describes is not a conundrum at all, but exactly what one should expect.
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This forum is going to be a place of civil discourse, and those who wish to foment hate and discord are no longer welcome here. -- slowman 11/8/04
Art Franke
Cavechild
Aug 13, 08 13:39
Post #15 of 65 (318 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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Wow, I'm shocked.
You gotta love the governments definition of no-taxes.
If the company owns property. The property taxes you pay doesn't count.
If the company buys something. The taxes you pay on the purchase doesn't count.
If the company employs someone. The SS taxes you match doesn't count.
I'm very happy I read this. My taxes just got cut!
MattinSF
Aug 13, 08 13:39
Post #16 of 65 (315 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [ajfranke]
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You keep ducking and weaving there Art. bless your heart.
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HOPE is a plan that worked. CHANGE is a plan that worked. BELIEVE is a plan that worked.
MattinSF
Aug 13, 08 13:53
Post #17 of 65 (304 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [Cavechild]
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Wow, I'm shocked.
You gotta love the governments definition of no-taxes.
If the company owns property. The property taxes you pay doesn't count.
Which is why lots of companies rent from their own subsidiaries and write the rent of as a business expense!!
If the company buys something. The taxes you pay on the purchase doesn't count.
And the company buys from its own subsidiary at a huge write up and gets a huge write off!!
If the company employs someone. The SS taxes you match doesn't count.
They just roll that into operating losses.
I'm very happy I read this. My taxes just got cut!
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HOPE is a plan that worked. CHANGE is a plan that worked. BELIEVE is a plan that worked.
MJuric
Aug 13, 08 13:57
Post #18 of 65 (299 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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Why should he duck and weave, it's pretty simple and you don't seem to grasp it.
If company "A" makes 250 billion dollars they are taxed at 40%. If they instead pass that money to their employee's, Officers and share holders it's taxed at a lower percent. The highest individual tax bracket it 35% and the majority of shareholders are probably below that.
Most corporations work to not have to pay taxes for this very reason.
So a company that makes 100K profit and is owned by 3 people would end up paying 40% on that money. If they had paid themselves 100K each through the year and give themselves bonus of 33K each the corporation pays nothing. Individually they were in the 25% bracket before and 28% bracket at 133K income. Since SS pay in stops around 97K the effective tax rate on the income is dropped from around 40% to 28%.
I'm guessing all those "Rich" corporations are screwing everyone by paying the same rate for income as everyone else though. They should just buck up and pay the 40% rate for their measly 100K income I guess.
~Matt
Cavechild
Aug 13, 08 14:04
Post #19 of 65 (296 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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Matt,
I can't figure if you are playing dumb, or need to work in the real world.
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Which is why lots of companies rent from their own subsidiaries and write the rent of as a business expense!!
Then the subsidiary pays the property tax. i.e. A company pays the taxes. Business expense, um the government gets the money right?
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And the company buys from its own subsidiary at a huge write up and gets a huge write off!!
Unless you are a subsidiary of Dell, When you buy a computer you are paying taxes on it. Unless you are a subsidiary of Office Max, when you buy a notebook you pay taxes on it..........
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The SS taxes you match doesn't count.
They just roll that into operating losses.
Since it's an operating loss, does the government tear-up the check or cash it?
MJuric
Aug 13, 08 14:04
Post #20 of 65 (295 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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If it's so easy what are 2/3's to 4/5's of large corporation PAYING taxes and 2/3 of smaller ones are not? Only VERY large corps would have the resources to do what you suggest and yet they more often pay taxes than the smaller ones.
I've never run a "Large" corporation but I have a "Small" one and I can say from experience other than lower the effective rate most of what you suggest doesn't work. Moving money from one company to another does next to nothing for you. The money has to be accounted for and what is a "Sale" for one company is an "Expense" for the other. You simply can't "Show a loss" unless you have a loss and a huge loss in a subsidiary has to be offset by a gain elsewhere or the company IS really IS losing money.
Yes there are a few "Shell games" you can do to get a better rate but not much to simply "Show a loss" when you really made money.
~Matt
MattinSF
Aug 13, 08 14:08
Post #21 of 65 (291 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MJuric]
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You're not getting it Matt.
lets take Microsoft as an example. They copyright billions of dollars with of software in a tax haven called Ireland. None of that software was actually written there or developed there, it was all made here in the US. But Microsoft says it belongs to their Irish subsidiary which charges their US arm billions of dollars to use it. They avoid paying taxes on products invented, developed and eventually sold here in the US by offshoring to a subsidiary....in fact they probablt take a loss on the deal and get to write off other stuff too.
Company A is making a lot more than $250 million they just tell the IRS a different story.
It ain't right.
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HOPE is a plan that worked. CHANGE is a plan that worked. BELIEVE is a plan that worked.
edwinj
Aug 13, 08 14:10
Post #22 of 65 (287 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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Matt you left out some key things from the Merrill paper:
"A second explanation is that high statutory tax rates encourage U.S. corporations to structure their investments with an eye to tax efficiency. For example, high corporate tax rates encourage increased usage of debt finance and discourage sale of appreciated corporate assets and repatriation of foreign subsidiary profits. As a result of these types of behavioral responses, the experience in OECD countries is that corporate income tax revenue does
not
rise in proportion to increases in the statutory tax rate. Using data on corporate tax rates and collections over the 1980-2005 period, a recent study by Alex Brill and Kevin Hassett finds that the revenue- maximizing central government corporate tax rate in the OECD is now about 26 percent. In other words, an increase in the average OECD corporate tax rate above 26 percent would be expected to reduce, rather than increase, total OECD member corporate tax revenue." - looks like what some others have guessed at previously.
"In summary, the U.S. corporate tax conundrum of high rates combined with relatively low revenue is explained by the unusually high share of U.S. business income earned through passthrough entities,
rather than the frequently alleged use of inappropriate corporate tax shelters or tax havens
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Usage of passthrough forms of business organization can be viewed as a form of "self-help" corporate tax integration, that is, avoiding the double tax on corporate income by choosing passthrough forms of organization. The reduction in the top individual income tax rate on corporate dividends to 15 percent in 2003 has, temporarily, reduced the incentive to avoid use of C corporations and may slow the shift away from use of corporate entities. If so, this will result in higher corporate income tax revenue. " - Merrill didn't even consider the abuse of subsidiary transfer payments as a reason for the low tax collection.
Nice job cherry-picking though.
MattinSF
Aug 13, 08 14:11
Post #23 of 65 (285 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [Cavechild]
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In Reply To
Matt,
I can't figure if you are playing dumb, or need to work in the real world.
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Which is why lots of companies rent from their own subsidiaries and write the rent of as a business expense!!
Then the subsidiary pays the property tax. i.e. A company pays the taxes. Business expense, um the government gets the money right?
Not if the subsidiary is domiciled in Grand Cayman.
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And the company buys from its own subsidiary at a huge write up and gets a huge write off!!
Unless you are a subsidiary of Dell, When you buy a computer you are paying taxes on it. Unless you are a subsidiary of Office Max, when you buy a notebook you pay taxes on it..........
See Grand Cayman comment above.
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The SS taxes you match doesn't count.
They just roll that into operating losses.
Since it's an operating loss, does the government tear-up the check or cash it?
They send you a rebate usually in the form of a tax credit.
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HOPE is a plan that worked. CHANGE is a plan that worked. BELIEVE is a plan that worked.
IAMike
Aug 13, 08 14:13
Post #24 of 65 (285 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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Its very easy to do as well. You just break up your company into a bunch of subsidiaries and you have subsidiary A (which is offshore in a tax haven) charge subsidiary B $5000 a unit for a 25 cent widget or as is more common, millions of dollars for copyright priviliges, and hey presto subsidiary B loses hundreds of millions of dollars on paper and has no tax liability for years.
It is not that easy to do all of that. It sounds great in principle, but you obviously have never worked in a corporate tax department. There is a thing called "transfer pricing" and the IRS is all over that stuff like stink on shit.
I will agree with you that it does not take a lot of planning, however, to reduce your overall tax rate from 40% to something less than that. Assuming you are doing some international sales. If you're in the US only, you're pretty much stuck. There are some opportunities on the state tax side that may help, but even that is getting more difficult.
Cavechild
Aug 13, 08 14:15
Post #25 of 65 (280 views)
Re: Back to the tax debate...did anyone see the latest GAO report? [MattinSF]
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So your whole theory is that if a company is from the Cayman islands and owns property in the US or buys something in the US they don't pay property taxes?
I stand corrected. You are not
playing
dumb.
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