Negative effective tax rate for many companies

Discussion in 'General Discussion' started by Alfalfa, Apr 16, 2019.

  1. Archie Moses

    Archie Moses Well-Known Member

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    While these companies celebrate I'm sitting here thinking how much Trump impacted my company.

    I work for a manufacturer and we import steel and aluminum. Nothing like having your prices go up 25% overnight.
     

  2. JAZZGASM

    JAZZGASM Guest

    These articles are purposefully written to inflame their readers, many whom are unaware of how corporate tax law works. If you look at the U.S. corporate tax rate vs our similarly situated countries, and outside of France, which has a ridiculous 33% corporate tax rate, our corporate tax rates are at or higher than most (much higher that Switzerland and Germany, which was surprising when I researched some of this for a client a couple years ago), and that is without taking into account the 3.8% medicare surcharge tax on C-Corps dividends. So if we raise corporate taxes, it will act as a quasi-tariff against our own companies that want to export sales, which will make such items even more expensive when we have an issue with that already.


    One could question why we have corporate tax at all. Most C-Corp profits are paid in wages to avoid double tax anyway. S-Corp owners pay tax on all net income. There are a lot of games that can be played through the corporate structure to avoid paying taxes. Some are logical (offsetting losses from a limited range of years makes sense, as most businesses are cyclical), some are not, like transfer price abuse. One of the most logical tax planning tools available to company owners is the Employee Stock Ownership Plan, which provides a number of tax deferring options. First, a 100% S-Corp ESOP pays zero tax on income. Second, an owner selling his shares to an ESOP can purchase replacement property (similar to a 1031 like-kind exchange in real estate) and not pay a penny on the sale of his stock. If the selling shareholder holds the replacement property until death, his/her heirs get a step-up in basis to the value of the replacement property on death, and no taxes are every paid on the sale of the business. Why does Congress allow such a large tax break? Because the ESOP transfers ownership to the employees through the ESOP retirement plan, which provides broad based ownership and retirement benefits to employees when, as a country, the average person has far too little put away for retirement.

    I think we need a more transparent tax system, not all these different levels and types of tax. A one time tax on income, with few if any deductions outside of those at low income level, and stop all the games. It would put me out of a job, but I'd still vote for it. Many residents of coastal states have a total tax burden of greater than 50% of their income, which puts them in line with very socialist countries like Germany, but without all the great benefits citizens in those countries receive.

    I'm surprised, based on the many movements against the very rich, that there isn't more of a push to get rid of sales tax, which has a much larger overall impact on the poor. I wonder what would happen if we aggregated every tax you pay and just took it out of your income. I think many people would not be happy when they see the overall impact on their pocketbook that taxes cause, and some you don't even know you pay. For example, some states have a gross receipts sales tax (not an income tax) between business before it even gets to a store. Delaware, Nevada, Ohio, Texas, and Washington have these taxes, and Oregon likely will soon. So a supplier of seed pays tax on sale to a farmer. Farmer pays a tax on sale to distributor, distributor pays sales tax on sale to grocery store, and then grocery store charges you a tax if the state has a sales tax. The result is higher prices at each level the item changes hands, which all get passed on to you.
     
    Last edited by a moderator: Apr 17, 2019
  3. idestroyedthetoilet

    idestroyedthetoilet Well-Known Member

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    Sure but my memory isn't exact, and there's a wealth of data so I encourage everyone to look at the trends on all sorts of things like education spending and what have you.

    Whitehouse.gov/OMB/historic-tables/

    IIRC, corporate tax receipts are down from something like 3.7-3.8% of GDP to 1.7 or 1.8. They used to make up about a third of federal receipts (this was before FICA was a huge source, so their are some logical adjustments to make the comparison more apples to apples) and now account for under 1/10th. Basically, about 300 billion less per year now than in 1950.

    Excise taxes are the other big declining revenue source, but we all pay those so I'm sure nobody wants to complain about them when it comes to discussing debt.
     
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  4. idestroyedthetoilet

    idestroyedthetoilet Well-Known Member

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  5. Joe Bagadonuts

    Joe Bagadonuts Well-Known Member

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    This is such an awesome argument... provided that you ignore that the wealth in all working classes is growing.
     
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  6. AlaskanAssassin

    AlaskanAssassin Well-Known Member

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    Agreed. The biggest thing that bothers me is how easily the government can control our behavior just based off of tax law. Think of common deductions that are written into the tax code, such as deductions for medical expenses. Why on earth would this be something that can be deducted from your taxable income? Deductions for mortgage interest........why? All these deductions do is allow for the government to control supply and demand (and your behavior). I understand that people are going to have health problems, and they are going to want to buy houses, but giving tax breaks to people that participate in specific behaviors such as these just bothers me. These are clearly the result of lobbyists. Crony Capitalism is the worst.
     
  7. Saint Cy of JFC

    Saint Cy of JFC Well-Known Member

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    Unionize!
     
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  8. candrew

    candrew Well-Known Member

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    Actually they're taking that money and investing in AI and automation - so they won't be providing jobs much longer (far fewer anyway)
     
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  9. JAZZGASM

    JAZZGASM Guest

    Exactly. If it weren't for industry lobbyists (think, lawyers, accountants, special interest groups etc.) and special interest groups/companies (you can Google to see the type of subsidies Boeing gets for example) we'd have a much simpler and fair tax system). But as a country, we are too entrenched. I don't see anything changing.
     
  10. idestroyedthetoilet

    idestroyedthetoilet Well-Known Member

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    Don't know what you're responding to but why waste your breath? There's a certain segment of the population that will never be satisfied and permanently engaged in class warfare. Hell, Obama just put in massive wealth taxes that were a huge transfer to the poor through Obamacare. They weren't just paper tax rate increases either. It was something like a massive 20-25% effective increase the rich paid in just one year. He hit dividends and cap gains with a 58.7%, which was long overdue. That's a huge, steep, shocking increase. It was such a big change that some of the more astute liberal writers were complaining that Obama's credit was virtually non-existant because celebrating it would have meant weakening the class warfare rhetoric.

    Another good example is Bernie's crying about Amazon. As @JAZZGASM explained the code, a huge part of Amazon's tax avoidance was by giving ownership to the working class. Do they care to explain how that is detrimental to society?

    Most people see through the plebian outrage full of cherry picked examples, and those outraged are clueless as to why the reaction they often get is Oh STFU child.
     
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  11. The Thriller

    The Thriller Well-Known Member

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    Socialize the costs.
    Privatize the profits.

    I’ve learned over the years that one party claims that financial aid to students, old people, and the unemployed will always be referred to as “socialism”, “welfare,” “entitlements”, and “handouts.”

    While their socialism, welfare, entitlements, and handouts to the rich will always be referred to as “incentives.”

    It’s probably the distinguishing factor of the two political parties because it accomplishes two main goals: (1) Demonizes financial aid to those who most need it (the poor, old, and colored) and (2) bribes the rich to continue to donate to this political party.

    It’s hard to compete against this political party since they don’t need to come up with an agenda for the 99 percent to stay in power. They just need to serve the interests of the 1 percent donating class.

    What many Americans miss is that we are all subsidizing these companies further via health care and food expenses. When these companies pay their workers so poorly that they cannot afford health care and food, government must then step in to pick up the slack.

    The rich right now have a pretty good deal.

    They own the courts.
    They own the White House and senate.
    They own an entire media propaganda apparatus that does nothing but demonize the most in need. Rupert knows exactly what he’s doing. But the rubes watching think they’re actually the ones “stickin it to the rich elite.”
    They’re the greatest beneficiaries of the tax cut.
    They’re enabled to subsidize their paltry salaries and benefits through your taxpayer funded health care and food stamps (which are then used to buy groceries in their stores).

    Fascism is in the rise. Wealth inequality through deregulation, political corruption, and regressive taxation is growing. Race tensions igniting.
    It’s almost like we learned nothing from the 1920s and 1930s.

    All well. Ignore history and you’ll be doomed to repeat it. Quite fitting for a country that cares far more about what Kim K tweeted than attending their school board meeting or knowing who represents them in congress.
     
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  12. fishonjazz

    fishonjazz Well-Known Member Contributor 2019 Award Winner 2018 Award Winner

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    Faster than the cost of living/inflation?

    I lose money every year. My budget gets hurt every year. I also get a raise every year.
    I could give a **** if my wealth grows if it grows slower than my expenses.

    Sent from my ONEPLUS A6013 using JazzFanz mobile app
     
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  13. Alfalfa

    Alfalfa Well-Known Member

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    Wealth for everyone except the very top has not kept up with GDP for a few decades now. So your definition of growing wealth is absurd when the average person's purchasing power has declined. Can someone on an entry level salary even buy house in the city anymore? No.
     
  14. Alfalfa

    Alfalfa Well-Known Member

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    Our resident fake intellectual wants to let me know I'm on ignore, despite the fact he's in the thread I started, and that he wouldn't have seen had I been on ignore. Cute.
     
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  15. Alfalfa

    Alfalfa Well-Known Member

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    It hasn't. Executive pay has grown by 600-900% since 70s, while average pay has grown between 0-30% depending on how you measure inflation.
     
  16. JAZZGASM

    JAZZGASM Guest

    Just to clarify, Amazon had paid no federal tax the last couple years for a few reasons, R&D expenses, growth (business, equipment, etc.) and stock compensation for employees (not to be confused with an Employee Stock Ownership Plan or ESOP, which is a completely different animal and most often result in employees owning 100% of the company as an additional benefit that they don't pay for). Still, what Amazon is doing is nothing novel. Amazon provides stock compensation to employees that are valuable/help grow the business, and they get good deductions by doing this. Deductions for stock based compensation, retirement plan contributions, etc., are they type of deductions that are good for employees and society in general.

    Now the tax breaks Amazon gets from state and local governments is a different discussion altogether.
     
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  17. idestroyedthetoilet

    idestroyedthetoilet Well-Known Member

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    Thanks for the clarification and correction.

    I'd love to see a federal law outlawing state and local tax break privileges to special interests but we know that wouldnt go over well.
     
  18. Alfalfa

    Alfalfa Well-Known Member

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    I'm sorry, I just can't get over what an awful person you are. Any complaints about the economic situation is class warfare. Any complaints about prejudice is race baiting. Just an awful human being. Awful.

    You should be called out as much as Dutch. But you're not, and I can't stand it. So you win.
     
  19. The Thriller

    The Thriller Well-Known Member

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    Most Americans are feeling this pinch and they are left with taking one and sometimes both choices:

    1) Taking out more credit to make up for their loss in purchasing power due to stagnant wages and increasing costs of living.
    2) Become frustrated at living a lower standard of living than before.

    Fox News and a certain political party have honed in on this frustration. Rather than using this frustration to create a type of "New Deal" to help advance the American society for the 21st century economy, they are redirecting this frustration at brown Spanish speaking people, Muslims, and blacks.

    So while the robber barons make off with billions, the losers in this economy are struggling to put up an organized resistance largely because so many working class Americans are pointing their guns at each other.

    At some point, you'd think people would get wise to this? But I'm not so certain anymore. Fox News and the 1 percent have really perfected their art of disinformation to exploit on the cultural and intellectual biases of working class Americans. Never before has disinformation been able to spread to so many people in such little time (social media). And due to the American congressional structure, all the 1 percent need to control is 1 of the 3:

    * The House
    * The White House
    * Enough of the Senate to filibuster and kill any legislation (2/3rds majority is required)

    The 2/3rd majority is the real kicker. Even if the progressive left's wet dream were to come true, AOC becomes speaker (I'm sort of joking here), Bernie wins the WH, the senate will be an issue for decades.

    So those creaming themselves over the thought of single payer systems and free college education, keep dreaming. As long as republicans hold at least 1/3rd of the senate, none of your **** will be passed, no matter how many people "feel the bern."
     
  20. TroutBum

    TroutBum My Member's Premium Contributor

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    Haha, Alfalfa is super dumb.


    Carry on.
     
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