Most companies in US avoid federal income taxes

Most companies in US avoid federal income taxes

www.sfgate.com

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.

(visit the link for the full news article)


Related News Links:
www.gao.gov

Something seems way out of whack here. According to the GAO,

Concerns about transfer pricing abuse have led researchers to compare the tax liabilities of foreign- and U.S.-controlled corporations. (Transfer prices are the prices related companies charge on intercompany transactions.)

it is inter-company transfers made for the sole purpose of avoiding tax liability that are at the root of the issue.

It doesn't seem right to me that the rank and file workers in America can't make ends meet anymore, but are footing the bill for all the corporate tax breaks and loopholes and shelters while CEO's take home millions. Furthermore, the revolving door, incestuous relationship between government and big business rewards politicians with high paying lobbyist jobs or seats on the board for screwing over their constituencies.

The system is broken, and the fix will be painful.



www.sfgate.com
(visit the link for the full news article)

Good thing we pay taxes on everything we do.. and what we work.. Eh...

No really it sucks.. as long as someone is getting our money besides us.. for we would spend it as foolishly as the government does.

First of all thanks for posting this. I lost the article earlier and was hoping someone would come across it! S&F'd

I never shy away from an opportunity to point out that our government has been creating a corporate heaven in our country, where the profiteers get to keep all they make, and the citizens get to pay the difference.

Legislation in this country since the mid 50's has been overwhelmingly to encourage, protect, and empower corporations, while relieving them of liability and responsibility for their actions; thus reducing the 'risk' they supposedly face when 'investing' in their businesses.

If you add up how much money the total tax liability avoided and applied it to a theoretical scenario of reversing history, you would find a well off middle class in the country who require virtually no government services and need no retirement or health care supplementation. You would find corporations that no longer indulge in $100 million dollar golden parachutes for inconsequential CEO leadership. And you would find more true to life American patriots running for, and being elected to public service.

Of course, this is fantasy.


[edit on 12-8-2008 by Maxmars]

This is the way it's been for years. The more money you have, the less taxes you pay. Friggin ridiculous.

Can we have another tea party already?

Corporations themselves normally do not pay taxes. Depending on the corporate structure, the shareholders each pay a share of the corporate tax liability ( C- Corp). Or the Owner usually pays in an S-corp as the income flows through to his/her 1040. The taxes get paid either way trust me. As a Corporate President, I am taxed every way I turn. In addition all my suppliers, customers, employees are also taxed on income my company produces. Nothing of newsworthy note here. Just another left wing blame the man article.

Originally posted by mizzu
Corporations themselves normally do not pay taxes. Depending on the corporate structure, the shareholders each pay a share of the corporate tax liability ( C- Corp). Or the Owner usually pays in an S-corp as the income flows through to his/her 1040. The taxes get paid either way trust me. As a Corporate President, I am taxed every way I turn. In addition all my suppliers, customers, employees are also taxed on income my company produces. Nothing of newsworthy note here. Just another left wing blame the man article.

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

Tell me, at what point did you decide that Congress was 'left-wing'?

Tax law is a quagmire of exceptions - each almost exclusively to the benefit of corporate entities. This statement was released by the Congressional committee with the intent to create a 'blame-the-man' mentality?

reply to post by mizzu


You have a point here.

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.

However, there is more to this than corporate income simply being claimed on individual 1040'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.

These individuals and corporations are taking advantage of a system of loopholes provided by bought and paid for politicians who have sacrificed their integrity and the best interests of their constituencies at the profane altar of greed and power.

reply to post by Maxmars


You're welcome. I agree with your analysis, as well. The middle class has been totally exploited for decades.

Can the people, short of outright rebellion, force the government to be accountable to them rather than the global fascist elite corporate puppet masters?

This is pretty simple folks......Business do NOT pay taxes!
They roll the tax on to their products. The consumer of the product pays
the tax......
With the Dems plan of a profit windfall tax on Oil comps, do you actually think gas prices will go down? no they will go up, the oil companies will roll it......

The first thing I noticed about the article was an obvious spin: "reported trillions of dollars in sales." No one pays taxes on sale prices; they pay taxes on profit.

No, wait. This needs some more explanation. Everyone bear with me here.

A corporation is a legal entity that can be created in order to do business. For instance, if you wanted to make something, say a new type of video game, you would have to buy equipment that costs millions of dollars. Now, not many people can do that alone. If you started a partnership with, say, 100 of your friends, each one putting up 15 of the money and doing 1% of the work, you could probably do it. But what if one of those friends wanted to put up 2% of the money? He would obviously expect 2% of the profit. But you simply can't do that with a partnership; each partner is equal by definition.

So you form a corporation. It's really nothing more than a contract with each other. Each 'partner' puts up however much they want, and they get part of the business, in the form of stock. if one guy puts up twice what another guy does, he gets twice as much stock, and therefore twice as much of the business.

There is also a legal matter here: if someone sues the corporation (the business), they are suing the combined business of whoever owns the stock. They can get anything the business has, but not what the stockholders have.

Now you have to run 'your' business. But wait, it's not yours really. It belongs to whoever has the stock. So, to make matters fair to everyone who has stock, they hold an election to elect boardmembers who make the decisions for everyone who owns part of the business. They then hire a professional business-runner, called a CEO, who handles things day-to-day. So the business owners who simply though you had a good idea and wanted to make a few bucks off it by helping you get started don't have to change their life, they simply set back and hold their stock.

There are plenty of laws about what a corporation can and can't do, to protect people who only have a little stock for, say, retirement and want to be sure someone isn't just taking their money. You see, stock can be bought and sold just like a used car. If you have stock, you can sell it for whatever someone will pay for it.

You also get a fringe benefit from owning stock: dividends. Since you own part of the business, you also own part of the profits. So, usually every quarter, four times a year, the business will 'disburse' profits to its stockholders. That means if you own part of the company, you get a check in the mail for your portion of those profits. Of course, come April 15, you get to pay taxes on that money you received in the mail. The business doesn't pay the taxes on it, you do.

The business isn't a person. It doesn't eat out at fancy restaurants, it doesn't need a boat, or a car, or anything that doesn't help it make money for you. It is a legal way for people to put their resources together into a business that is large enough to serve its need. That's all. And in today's world, a huge chunk of that stock in the various corporations are owned by mutual fund accounts. they buy stock with retirement money and manage it so the people whose money they are using get the most return on their money. So those windfall profits aren't just going into the pocket of some fat guy with an evil smirk sitting in his office looking down on you, they are also going to the old widow tending her flower box in her tiny apartment.

Now it is possible for companies to have to pay income tax, if they do not disburse those profits first. But that is not something that usually happens. A corporation will maintain a certain level of money for running itself and send the rest out to the shareholders. The larger a corporation gets, the more money is needed to run it, and therefore the more reserve it will keep, and that increase is taxed. But that's all.

Now back to sales issue. If a company buys something for $10 and sells it for $11, does that mean they should pay taxes on the $11? No, they pay taxes on what they made, which is $1. If they had to pay taxes on the $11, do you really think they would sell it for only a dollar more than they bought it for? No, because they would lose money and go out of business. They have to pass those taxes on to you when you buy from them, because they only exist to make money. No profit = no business = no product/service for you to buy.

So this is really a story about how people aren't taxed twice on what they make from stock, and how businesses only have to pay taxes on profit anyway. Sheesh. What a shocker.

TheRedneck

Ok, I understand your point. I disagree that a corporate entity is not a "person", though, per se. In the view of the government, a corporation can be seen as a type of entity very much like a living, breathing person. Except corporations have major legal advantages over individuals.

Now, let's apply that model you just described to an individual taxpayer. An individual taxpayer is taxed on income as well as profit (capital gains), if there is any. If an individual has more expenses than income, in other words, negative cash flow, they are still taxed on their income. They can't write off their losses and get a tax break or bailout or other incentive payment from the government to make up the difference.

Corporations have a huge advantage over individuals, provided by the government. There is no doubt about it.

reply to post by Icarus Rising
NOW you're getting into a good subject! I can see a (reasonable) profit on capital gains, because it is exactly what you called it: profit. But as for income, I don't think that's fair in any sense of the word.

I am warming up more and more to a flat national sales tax. I would like to see exceptions made for food, clothing (below a certain priice level, not designer stuff) and maybe fuel (individual use only) but just switching to the flat tax without all of those exemptions would be, IMO, fabulous.

We really just don't need the amount of cash the Federal government is getting to run this country. We simply need to live within our means. In any case, the problem is not with corporations, it's those blood-suckers in Washington DC.

TheRedneck

reply to post by TheRedneck


But wouldn't you agree that those bloodsuckers in DC are for the most part all corporate shills? I can't help but suspect them of being beholden to the corporations that enable them to carry on their television and media shadow puppetry.

Maybe I'm just too cynical. Frankly, the (tax) problem seems to come into play to a large extent with the acceptance of transnational corporate activity, tax-splitting, and other 'avoidance' and offsetting strategies that somehow never seem to equate the tax burden on profit-making activities with those who are simply trying to survive and 'pursue happiness.'

Yes they do.
Legally.
Why do not more people know about this?
Thanks for telling people.
But they wont listen.
Thanks for the truth thread.

What ever way you want to slice it the article clearly states that large percents of corporations are not paying taxes due to loopholes. While I do fault the government for allowing these to exist I also fault the corporations for wiggling out of their moral contract with a society they live in by choosing to use the loopholes to avoid paying the taxes they are suppose to be paying.

I find it hard to understand how someone would want to stick up for this sort of behavior.

Also Redneck the article is not about not paying taxes twice it is about paying federal taxes at all.

reply to post by Maxmars
I don't know if the term 'shill' is correct (it may be). What I do know is that through corrupt individuals in charge of these large corporations (like the CEO in my example), the politicians can make money through taking bribes to make the CEO look good (by passing legislation that makes the corporation have an unfair advantage).

That does happen, and it is illegal, immoral, and a violation of the trust society and the shareholders have put into both parties concerned.

My little rant was more about finding the target than stating that these types of corruption do not exist. Of course they do, on every level right down to the brown-noser at work. If we go after the corporations, though, we wind up paying more for the products and services they offer, we hurt those who depend on the stock market for retirement, and we worsen the situation as there is more to gain through these shady dealings.

If we go after the CEOs, we are doing next to nothing, save maybe lessening any resolve they have left to do good. The laws are the laws, and they favor corporate interests at this time.

If we go after the politicians, however, we have legal grounds to convict them of actual law violations. We have the power to 'fire' them from their positions of power. We can make a change through that venue, whereas the others will accomplish nothing productive.

The first rule of war: identify your target.

Animal, you still didn't get the point. The corporations are simply property of the shareholders and the shareholders do pay their taxes (at least most of them, I would hope). Taxing corporations for disbursed profit, then taxing those who got the profit would be like taxing your paycheck when the boss writes it out, then taxing it again when he hands it to you.

TheRedneck

Originally posted by TheRedneck

Animal, you still didn't get the point. The corporations are simply property of the shareholders and the shareholders do pay their taxes (at least most of them, I would hope). Taxing corporations for disbursed profit, then taxing those who got the profit would be like taxing your paycheck when the boss writes it out, then taxing it again when he hands it to you.

TheRedneck

??? So when I worked as a bar tender the Bar I worked in paid taxes, I can assure you. Then when they paid me I paid taxes. Explain to me how this is different with a corporation???

[edit on 12-8-2008 by Animal]

reply to post by TheRedneck


I think you're right, 'shill' isn't the proper term. 'Crony' doesn't work either, I'll come up with something. (Can you tell name-calling isn't my strong suit?)

reply to post by Animal

??? So when I worked as a bar tender the Bar I worked in paid taxes, I can assure you. Then when they paid me I paid taxes. Explain to me how this is different with a corporation???

If the bar was a sole proprietorship (personally owned by one person), then yes, the bar owner (and thusly the bar) paid income taxes on the money made. The owner simply filed a different form with the IRS for that money. I promise you, they did not pay taxes on the profits when they got them, and then again when they used them.

I'd really need to know how the bar was set up financially to be able to give you any more info.

TheRedneck