Most companies in US avoid federal income taxes

[soonersn20xx]

I hope I have found an issue that we all can agree on despite our political leanings.


By JENNIFER C. KERR, Associated Press Writer
Tue Aug 12, 6:31 AM ET

WASHINGTON - Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.

The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.

Collectively, the companies reported trillions of dollars in sales, according to GAO's estimate.

"It's shameful that so many corporations make big profits and pay nothing to support our country," said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich.

An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.

"Half of all business income in the United States now ends up going through the individual tax code," Edwards said.

The GAO study did not investigate why corporations weren't paying federal income taxes or corporate taxes and it did not identify any corporations by name. It said companies may escape paying such taxes due to operating losses or because of tax credits.

More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.

The GAO said it analyzed data from the Internal Revenue Service, examining samples of corporate returns for the years 1998 through 2005. For 2005, for example, it reviewed 110,003 tax returns from among more than 1.2 million corporations doing business in the U.S.

Dorgan and Levin have complained about companies abusing transfer prices — amounts charged on transactions between companies in a group, such as a parent and subsidiary. In some cases, multinational companies can manipulate transfer prices to shift income from higher to lower tax jurisdictions, cutting their tax liabilities. The GAO did not suggest which companies might be doing this.

"It's time for the big corporations to pay their fair share," Dorgan said.


http://news.yahoo.com/s/ap/20080812/ap_on_bi_ge/corporations_income_tax_8

[sooner_born_1960]

"It's time for the big corporations to pay their fair share," Dorgan said.
Which would simply cut into the portion that shareholders, partners, and proprietors pay. Someone educate me if I've got it wrong.

[RUSH LIMBAUGH is my clone!]

Her's your answer, public sector fella, right from your own quoted article:

An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.

"Half of all business income in the United States now ends up going through the individual tax code," Edwards said.

It's enough to get you all bent outa shape, no?

[soonersn20xx]

Which would simply cut into the portion that shareholders, partners, and proprietors pay. Someone educate me if I've got it wrong.
Lemme see if I get your drift here, you are concerned that if these companies actually started paying their fair share based on the current tax code that they would shift the loss of this revenue to other operating aspects of their company?


Her's your answer, public sector fella, right from your own quoted article:

An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.

"Half of all business income in the United States now ends up going through the individual tax code," Edwards said.

It's enough to get you all bent outa shape, no?I'm not sure what your point is here, when I read that it says they are using a loophole in the tax code to avoid paying the full taxable amount.

[LesNessman]

If anyone here actually thinks corporations pay any taxes, you are ignorant. They merely collect taxes that individuals are forced to pay.

Read the Fair Tax book.

[RUSH LIMBAUGH is my clone!]

I read it to mean the individuals involved in those corporations are claiming more personal income, which is being taxed , instead of as corporate income.

[sooner_born_1960]

Exactly.

[soonerscuba]

If anyone here actually thinks corporations pay any taxes, you are ignorant. They merely collect taxes that individuals are forced to pay.

Read the Fair Tax book.
Oh boy, another fantasy believer, the Fair Tax is as untenable as it is stupid.

The original article is misleading, what defines a corporation? Do you count pass-through as income? What about franchise and margin tax? It seems a bit intellectually lazy.

Also, a traditional shareholder of a public company should have zero bearing on federal tax policy toward corporate income tax, socialized risk might be the downfall of this country's economy some day.

[soonerscuba]

If you are going to bitch about structure, take a look at transfer pricing.

[tommieharris91]

If anyone here actually thinks corporations pay any taxes, you are ignorant. They merely collect taxes that individuals are forced to pay.

Read the Fair Tax book.

ROFL corporation income gets taxed twice before that income gets to shareholders.

[85Sooner]

If anyone here actually thinks corporations pay any taxes, you are ignorant. They merely collect taxes that individuals are forced to pay.

Read the Fair Tax book.

DING DING DING We have a winner!!!!!!!!!!!!!!!!!!!!!!

Corporations are owned by people. People pay taxes. businesses don't.

[tommieharris91]

I hope I have found an issue that we all can agree on despite our political leanings.


http://news.yahoo.com/s/ap/20080812/ap_on_bi_ge/corporations_income_tax_8

I find it funny that these Democrats are basically attacking small businesses, now that i think about it.

[sooneron]

As an LLC, I plan to avoid any taxes that I can. :D

[Chuck Bao]

I've said it before and I'll say it again: it should be about promoting savings rather than spending on the consumer level.

On the corporate level, it should be about promoting new investment and hiring.

See the difference.

Tax rebates back to consumers is the stupidest idea ever.

In my humble opinion, those numbers are bogus because small incorporated businesses way outnumber the large corporations like Exxon. Get the large US corporations investing in the US again and the economic outlook will turn around.

[soonersn20xx]

I find it funny that these Democrats are basically attacking small businesses, now that i think about it.
"About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts."

I find it funny that some Republicans are basically twisting information to suit their needs, now that i think about it. :D

[tommieharris91]

"About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts."

I find it funny that some Republicans are basically twisting information to suit their needs, now that i think about it. :D

You should check some income statements. ExxonMobil paid 44% tax on their income in 2007, for example. A 44% income tax is actually the highest marginal income tax rate right now. Shareholders also get taxed on dividends created after the corporations pay their taxes, as well. Also, those limited liabilities and "S" corporations are small corporations and proprietorships which file as such to receive tax breaks and also shield the proprietors from large lawsuit payments, to an extent. 75% of the corporations not paying taxes during the period were LLCs and "S" corporations.

[Harry Beanbag]

So this article is saying the tax code is a steaming pile of **** that needs to be overhauled and simplified? Is this supposed to be news?

[Sooner_Havok]

You should check some income statements. ExxonMobil paid 44% tax on their income in 2007, for example. A 44% income tax is actually the highest marginal income tax rate right now. Shareholders also get taxed on dividends created after the corporations pay their taxes, as well. Also, those limited liabilities and "S" corporations are small corporations and proprietorships which file as such to receive tax breaks and also shield the proprietors from large lawsuit payments, to an extent. 75% of the corporations not paying taxes during the period were LLCs and "S" corporations.

I am not 100% sure on this, and I may need to reread this whole long *** thread, but...

Did you just pull ExonMobile out of your ***, or did someone here say that oil companies are the ones not paying taxes? I really am curious, I thought I came into the "A lot of big companies get away with pay 0 taxes" thread, not a "Half of us attack big oil for making money while the other half drinks some seriously oily kool-aide" thread:confused: :confused: :confused:

[soonersn20xx]

I am not 100% sure on this, and I may need to reread this whole long *** thread, but...

Did you just pull ExonMobile out of your ***, or did someone here say that oil companies are the ones not paying taxes? I really am curious, I thought I came into the "A lot of big companies get away with pay 0 taxes" thread, not a "Half of us attack big oil for making money while the other half drinks some seriously oily kool-aide" thread:confused: :confused: :confused:

You too Havok? Thank you for your assistance. :)

This is about corporations not paying any taxes, I have no clue where he is going.

[Sooner_Havok]

You too Havok? Thank you for your assistance. :)

This is about corporations not paying any taxes, I have no clue where he is going.

I think I have solved everyones problem!

(Puts on Republican Hat)
Poor ExonMobile is paying a tax rate of 44%, that is well over 50% of what they make! :eek: Damn Democrats what with their deficit spending, they tax big corporations too much, and the lower income individuals not nearly enough! We have to stop this!

(Puts on Democrat Hat)
ExonMobile only pays a 44% tax rate, that means less than 30% of what this evil oil company makes goes into the government! :mad: This is an outrage, we must tax this company more, especially now that it is turning in record profits!


What if, stay with me guys, we actually tax everyone! If the gub'ment needs X amount of cash to fund its next war on some random country, or to feed the lazy baby momma, they could just tax these companies evading paying taxes now! Then, the could maybe lower the tax rates for companies that are actually paying taxes!

On second thought, scratch that idea, the would just use the money to blow up more countries and dole out more government cheese. ****, I thought I had something there for a while :(

[Hamhock]

if you've ever wondered what propaganda looks like, this article is a great example.

this report is totally worthless.

saying that corporations don't pay taxes without identifying them as flow through entities (llcs, s-corps, p-ships, etc) is like complaining that 100% of giraffes don't fly.

the vast majority of companies that are publicly traded are c-corps (not flow through entities) and pay a butt load of tax. their financials are public record. look for yourself.

flow through entities are designed to shield liability while the income characteristics flow through to the owners.

i'm sure they are saying that a large % of registered corporations don't pay tax. keep in mind this would include the 3 LLCs my neighbor uses to operate his 3 rent houses. it would also include a p'ship formed by IBM and Cisco because the new p'ship would not pay tax (although it flows through to the mother corporations).

the notion that major corporations some how receive and distribute money to their owners tax free is total BS, that prays on the ignorance (not a derogatory ignorance, just lack of knowledge ignorance) of it's audience.

this is a diversionary tactic by the government. the issue is not that people aren't paying tax, the real issue is that the government already collects more than enough and pisses it away.

[arcman46]

If all these companies are not paying income taxes, that makes me happy. They will make their profit, which is what they are in the business to do, and I won't have to pay nearly the amount for their product when I buy it. One of many reasons that businesses leave states and the U.S. for that matter, is because of high taxation, or over regulation by government.

[tommieharris91]

"About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts."

I find it funny that some Republicans are basically twisting information to suit their needs, now that i think about it. :D


You should check some income statements. ExxonMobil paid 44% tax on their income in 2007, for example. A 44% income tax is actually the highest marginal income tax rate right now. Shareholders also get taxed on dividends created after the corporations pay their taxes, as well. Also, those limited liabilities and "S" corporations are small corporations and proprietorships which file as such to receive tax breaks and also shield the proprietors from large lawsuit payments, to an extent. 75% of the corporations not paying taxes during the period were LLCs and "S" corporations.


I am not 100% sure on this, and I may need to reread this whole long *** thread, but...

Did you just pull ExonMobile out of your ***, or did someone here say that oil companies are the ones not paying taxes? I really am curious, I thought I came into the "A lot of big companies get away with pay 0 taxes" thread, not a "Half of us attack big oil for making money while the other half drinks some seriously oily kool-aide" thread:confused: :confused: :confused:


You too Havok? Thank you for your assistance. :)

This is about corporations not paying any taxes, I have no clue where he is going.

First of all, I quoted all of these posts to show the straw man you created and attacked here. ExxonMobil certainly falls within the "large" corporation basket. I did use ExxonMobil as an example because I recently checked their financial statements to disprove another argument. (ExxonMobil Income Statement (http://finance.google.com/finance?fstype=ii&q=NYSE:XOM))

Anyway, I'll go ahead and post a few income statements of other random large corporations from a few different sectors.

Google (http://finance.google.com/finance?fstype=ii&q=NASDAQ:GOOG) taxed at 24%
JP Morgan Chase (http://finance.google.com/finance?fstype=ii&q=NYSE:JPM) taxed at 33%
Coca-Cola (http://finance.google.com/finance?fstype=ii&q=NASDAQ:COKE) taxed at 38%
FedEx (http://finance.google.com/finance?fstype=ii&q=NYSE:FDX) taxed at 46% (maybe 44% isn't the highest)

And while we're talking about taxes from S corp and LLCs, you should know that those types of corporations have the option of being taxed as corporations or partnerships. Your article states that these type of corporations are electing to be taxed on the individual level, so as to avoid incomes being taxed twice like a normal corporation. Since S corps and LLCs have special rules about taxes that change as those companies grow (meaning that these are small, private companies), I found it strange that Democratic senators were attacking small businesses.

So, like Hamhock said, this article is worthless. It's also pretty misleading.

[soonersn20xx]

I agree the article isn't as sharp and refined as it should be, but you lose me when you bring up corporations that are paying taxes when that is not the topic of discussion.

There are those who are pro-corporate and think they shouldn't have to pay any taxes of any sort...........then there is the other side who think any company that shows profits should have to give all their money back to the "state". I am personally in neither of those camps, I would like to see loopholes closed so at least they are honoring their taxes. Whether they are fair or not is another discussion.

[sooneron]

if you've ever wondered what propaganda looks like, this article is a great example.

this report is totally worthless.

saying that corporations don't pay taxes without identifying them as flow through entities (llcs, s-corps, p-ships, etc) is like complaining that 100% of giraffes don't fly.

the vast majority of companies that are publicly traded are c-corps (not flow through entities) and pay a butt load of tax. their financials are public record. look for yourself.

flow through entities are designed to shield liability while the income characteristics flow through to the owners.

i'm sure they are saying that a large % of registered corporations don't pay tax. keep in mind this would include the 3 LLCs my neighbor uses to operate his 3 rent houses. it would also include a p'ship formed by IBM and Cisco because the new p'ship would not pay tax (although it flows through to the mother corporations).

the notion that major corporations some how receive and distribute money to their owners tax free is total BS, that prays on the ignorance (not a derogatory ignorance, just lack of knowledge ignorance) of it's audience.

this is a diversionary tactic by the government. the issue is not that people aren't paying tax, the real issue is that the government already collects more than enough and pisses it away.
THIS, I agree with. It seems that the author decided to write a totally slanted article. Will my little LLC pay taxes? Prolly not, but I will and that LLC is just a "flow through" as Hamhock says. If this guy wants the gubment to go after all the LLCs and S corps that are "not paying their share". Which most if not all are through the proprietors income tax, I want the **** out of this country.

[Frozen Sooner]

Here's my thought:

Allow C Corps to write dividends off as an expense. Some of the people who have posted in this thread are correct-they're going to get taxed on the returns of the shareholder. No reason to tax an expense of raising capital. The US is one of the few countries that doesn't allow a writeoff of dividends.

Disallow writeoff of reserves. Actual expenses should be an allowable writeoff.

[Hamhock]

I, I would like to see loopholes closed so at least they are honoring their taxes. .

please give me an example of a corporation not "honoring their taxes".

this is a pretty personal topic for me. as a cpa for a big 4 firm, i've done the tax work for some of the wealthiest individuals and largest corporations in the country.

the checks that these people and corporations write are mind boggling. i don't have the energy to google the stats that show what % of people pay the vast majority of taxes.

i'm not well studied on the fair tax, but one excellent point the book brings up is the insidious tactic the government uses known as payroll withholding.

if i'm elected president i'll make sure that the withholding system is abolished and every individual must write a check for their entire tax liability on April 15. remember when you participate in the revolution that will follow that I'm pretty handy with a bow and arrow.

[soonersn20xx]

please give me an example of a corporation not "honoring their taxes".To be honest, I am probably over my head at this point in the discussion. So I am left at the mercy of this article's charge that it doesn't sufficiently elaborate on.

[Hamhock]

Disallow writeoff of reserves. Actual expenses should be an allowable writeoff.

what jew talkin' 'bout Willis?

[Hamhock]

To be honest, I am probably over my head at this point in the discussion. So I am left at the mercy of this article's charge that it doesn't sufficiently elaborate on.

you're a perfect example of what makes me so mad. some gubmit idjit writes an article about how the wealthy and corporations don't pay taxes (leaving out that most of the corps are prohibited by statute from paying taxes) and people get up in arms.

again, don't take your eye off the fact that the federal government is taking billions of Americans dollars and redistributing them, creating a disincentive to industry. if you wanna bitch about something at the water cooler, bitch about the size of the government, not that they don't have enough people feeding the beast.

besides, most wealthy people I know are great for the economy. the more money they keep, the more money the spend. but instead of getting to keep the money they've earned and help grow some guys pool building business or some guy's RV dealership, he has to give more of his hard earned income to the government who spends it on debit cards and fema trailers or health care on demand for every schmuck who thinks it is endowed by their Creator.

[soonersn20xx]

Well I didn't want this to boil down into conservative/liberal warfare..............I don't see gubmit as a problem as compared to badly run gubmit.

[soonerscuba]

Well I didn't want this to boil down into conservative/liberal warfare..............I don't see gubmit as a problem as compared to badly run gubmit.
Here's the rub, smart guys like Hamhock are paid serious money by wealthy individuals and corporations to figure out a) consultive methods for accurately determining the worth of an organization or individuals and b) create value by using the current system to minimize tax burden upon said corporations and individuals. They are pretty good, but at the end of the day people are cutting checks that I could only hope to sign someday.

I don't think it's liberal/conservative arguments about where the money comes from, I can assure you the government has that well under wraps. The argument really stems with what we do with it.

[Frozen Sooner]

what jew talkin' 'bout Willis?

Am I incorrect in that reserve deposits can be written off in the current year?

i.e. a bank can write off against current earnings expected loan losses for the next year?

[Hamhock]

Am I incorrect in that reserve deposits can be written off in the current year?

i.e. a bank can write off against current earnings expected loan losses for the next year?

the concept has more to do with GAAP than taxes and is not unique to banks. anyone with accounts receivable will deduct allowance for bad debt based on estimates sorta, but it's just a timing issue. reserves are trued up based on actual results.

this, and many other issues, create a catch 22 for business. do they decrease taxes (by increasing allowances) or increase EPS, by decreasing estimates.

don't get me started on the mental masturbation the IRS creates by spending so much time & energy on issues that only relate to timing (deprecation for example)

as you know, reserve losses being less than actual losses hasn't been a problem for banks recently :D

[Frozen Sooner]

Right, but the concept isn't solely related to bad debt. Corporations will frequently reserve for lawsuits in progress, etc, yes?

And I'm sure that at some point the reserves are reconciled to actual expenses, but is there an adjustment for present value of the money that would have been collected?

[royalfan5]

I think the more important question is will you be able to write off all arrows shot into a bobcat or only ones that cause a bobcat to become deceased and stuffed.

[Hamhock]

Right, but the concept isn't solely related to bad debt. Corporations will frequently reserve for lawsuits in progress, etc, yes?


sure, but the evil corporations are worried about earnings more than taxes, so they are reluctant to do so and only do so because the auditors/investors sue their pants off if they dont' disclose.



And I'm sure that at some point the reserves are reconciled to actual expenses, but is there an adjustment for present value of the money that would have been collected?

again, you're assuming they guess high. these types of companies are more worred about credit ratings and earnings than taxes.

[Frozen Sooner]

Fair enough, then.

[soonerscuba]

don't get me started on the mental masturbation the IRS creates by spending so much time & energy on issues that only relate to timing (deprecation for example)
Heh. Seriously, if you ever want a good time, I suggest looking through a depreciation guide, the section on fake tits is bar none the best section of code in existence.

[Sooner_Havok]

So, like Hamhock said, this article is worthless. It's also pretty misleading.

So it is no different than a lot of things around here then?

[StoopTroup]

I was thinking about all of this today and a thought arose....

I'm not going to point blame here but I think I'm right about this....

The Republicans ran their 1st Bush Campaign on the idea of helping the economy by giving the Risk Taking Small Business Types fiscal and tax break assistance. People from many States flocked to the idea.

Have the Corporations just taken advantage of what the original intent of helping small business in America?

America's Strength is it's Middle Class IMO and so many people seem to build up their business and sell off to Corporate money or the fear of having to compete with them down the road.

The Board of Directors of these Corporations put thieves in charge and the Dream of building a successful business in this Country seems to have slipped to near Junk Bond-like status.

I don't know...maybe It's just me and having worked for a Corporation for 20 years. Even if it is me...I still don't feel inspired to risk my Life Savings at nearly 50 years of age and go out there and try to start my own business.