Effective Corporate Tax Rates in US

[Number Six]

A good provocative article in the NY Times today on actual corporate tax rates being much lower than usually presented by politicians: http://dealbook.nytimes.com/2014/08/18/ ... udy-finds/

If this is true then the US is at least competitive and probably better than most of the other countries in effective tax rates.

[JamesVincent]

Only one little problem with that article. It based it's findings off a GAO report, which was so flawed even the GAO amended it. Issues included the report not figuring in foreign corporate tax paid by american companies and the fact that the report did not take into account all the tax deferments used during the recession period, which the report is based on. Every single report I've seen about this report has an estimated corporate tax in the low to mid 20%, which is much more accurate and more widespread.

Also some of the more obvious inconsistencies in that article. Ireland has a 0% effective tax rate and 0% tax on imports, which is why Apple moved it's headquarters there years ago. There are several other countries with a 0% rate not even mentioned and even more countries with no import tax which would lower the effective tax rate that I didn't see brought up.

edit: I can't find the original article which included the link to the GAO's amended report but here is a good one. The amended report IIRC was included in an issue of either Tax News or Tax Analyst if anyone has copies of them or a subscription online, I don't.
http://taxfoundation.org/blog/gao-compa ... e-tax-rate

A new study by the Government Accountability Office (GAO) claims the corporate effective tax rate (ETR) was 12.6 percent in 2010, which is about half the standard estimate found in other studies cited by the GAO and summarized here, here, and here. Based on IRS data, the corporate effective tax rate is about 26 percent on average, though it dropped in the most recent year of data, 2009, to a little over 22 percent, due to the recession and temporary tax incentives meant to stimulate investment.

[Number Six]

If you look at the comments to the article you will find enough evidence to buttress the conclusion that US tax rates are some of the lowest, like this cite: http://economix.blogs.nytimes.com/2011/ ... gh-or-low/

[Duke2Earl]

Actually, if corporations want to be treated like people for purposes of free speech and religion perhaps they ought to be taxed like individuals as well. The concept that corporations are over taxed is a myth. If you don't believe me look at the effective tax rates in any SEC filing. Should the corporation tax be simplified, yes... but mostly to take away unwarranted benefits.

[LaVidaRoja]

During one of many, many classes when I was still working for Uncle, the comment was made that for many entities, the US is considered a tax-haven! Basically, the lure of relative low tax rates and the safety and security of investments bring a lot of foreign investors here.

[JamesVincent]

You can use whatever comments you want. The fact is that even the GAO report for 2013 said the effective corporate tax across all national and international companies in the US is 22.7% while still recovering from the recession. The fact is the GAO screwed up their initial report, has since amended it to cover that screwup yet people are still quoting that flawed report. As far as the US being one of the best countries there are 10 countries that have no corporate tax at all and several with lower then 10% effective. Among the OECD nations the US has the highest marginal rate and ranks third in the world counting all nations who report. The average marginal rate across the world is 22.6% while ours is 39.1%, if state tax is included, 35% without. As far as moving a company outside of the US just because their money is outside the US.... why do you think their money is there? Because it looks prettier outside the US?

[Duke2Earl]

I am having trouble playing my tiny little violin for the poor oppressed corporations. I never cited any GAO report. What I did say and you haven't contradicted is NOBODY pays the marginal rates and if you don't believe me look at some 10-K's. Corporations as well as individuals get enormous benefits from US citizenship. If you think you are better off elsewhere, don't let the door smack you on the butt on the way out. But don't cry later when you regret it. And don't cry if the US decides to punish your ingratitude. And if you make all your decisions based solely on tax rates you truly are foolish.

[JamesVincent]

Never said a word about you Duke, was referring to the article cited by Number Six. As far as addressing the different between marginal and effective tax rates I believe I did when I quoted both numbers. And addressed them as such. As far as paying for moving overseas companies do it everyday and still make quite a bit of money here.

[Number Six]

There are plenty of studies available that back-up the reality that most of the major corporations pay far less than their small business counterparts, in many cases nothing at all: http://www.ctj.org/corporatetaxdodgers/ ... ptaxes.php

On the other side most small businesses pay very hefty taxes on a lot of levels that they cannot dodge as the corporations can legally.

[JamesVincent]

There are plenty of studies available that back-up the reality that most of the major corporations pay far less than their small business counterparts, in many cases nothing at all: http://www.ctj.org/corporatetaxdodgers/ ... ptaxes.php

No doubt. Just as a person in the middle class ends up paying a larger tax % then a truly wealthy person does since many tax breaks, like capital gains, are beyond what they can afford to do. The last study I read said the effective tax rate overall was 22.7% while the effective tax rate for profitable business only was 17%. Either one is much higher then the 12.6% from the article and either one is a higher rate then most individuals. And the only way for a company to have an effective rate of 0% while doing business in the US is to have a foreign ownership and maneuver themselves away from US taxes. Even then they still have a liability, social security is still collected since they have US citizens working for them, sales tax, etc.

This whole thing kinda reminds me of the whole "ebil oil companiez" who charge an astronomical rate at the pump. You realize if you pay $4/ gallon at the pump the government (either/or state or federal) gets between $2.50-$3 of that in taxes and other fees. Same with cigarettes, alcohol, and a lot of other things out there. Cigarette taxes alone in some areas run up to $4/ pack for a $5 pack of cigarettes. Places like NY are even worse, with something like $6/ pack of taxes. MD, at one point, put a $1.25 tax on cigarettes to pay for "education to keep underage children from smoking". Then, after all those PoS (point of sale, not the other PoS) taxes, the company pays a tax on making a profit, so reduce what they get in even further.

Just as you think the companies aren't paying enough in taxes, the companies aren't actually making as much as you think to start with. There is a very valid reason for a lot of the writeoffs and deductions out there. And, quite frankly, if it is an individuals right to minimize their tax liability then the same goes for a corporation. You may not agree, and I don't agree with some of them either, it is their right, just like we've discussed time after time with the two threads dealing with Apple that I remember and probably numerous others that I don't.

[Number Six]

Many good reforms to corporate taxation to minimize their dodges have been recommended. David Cay Johnston in a number of books has both exposed the problems while suggesting remedies: http://www.alternet.org/books/outrageou ... s-and-then

Ralph Nader and many other progressive thinkers have asked specifically why so many corporations need such staggering subsidies, benefits and tax dodges in a supposedly competitive business environment? If they can't compete, but are like station wagon-sized carp without any natural predators why all the inducements to perpetuate their monopolistic practices? In an inverted economic system, imbalances lead inevitably to upheavals and collapse. Moochers on the corporate or individual levels are parasites who drain away limited resources from rightful owners. On the bottom you have the million dollar babies who drain health care and social resources from the larger society; on the top you have the billion dollar parasites and subsidy beneficiaries who undermine the economic justice that should require that businesses that cannot survive on their own and on a level playing field with all the others should fail. Neither should be supported.

[JamesVincent]

Ralph Nader and many other progressive thinkers have asked specifically why so many corporations need such staggering subsidies, benefits and tax dodges in a supposedly competitive business environment?

That's the whole problem in a nutshell, how does a company that pays taxes compete with a company that doesn't pay taxes? Answer, it doesn't, it is not competitive. And it can not be competitive. You can have all the theory in the world, will not change that simple fact. If you wish to punish every company that exercises its right to minimize its tax liability then you need to punish every person that does the same. So, instead, why don't you make the marketplace more even instead of trying to punish people doing the same thing as you or I. When my business was making good money do you think I wrote off mileage and other business expenses? Damn straight I did. Would you? You sure would. I'm sure when you do your taxes you use whatever available writeoff or deduction you can, so why shouldn't they? More importantly, why should we complain about something we also do?

And, Ralph Nader? Seriously? Never been a fan and I don't recall him saying much that made a bunch of sense either. If he did I didn't see it.

[LaVidaRoja]

More than one individual working in LMSB (FKA Large Case) used tp joke that the most efficient and effective way to tax major corporations in a "fair" manner would be to require them to pay taxes on the P&L they report to their shareholders. The tension between low income for low taxes and dividends to encourage investors would result in (likely) more revenue to the government, and less costs to all sides.

[Number Six]

There are many good and sound ideas to get the top income earners and corporations in line with the benefits they receive in the US, and Ralph Nader has been on the cutting edge of reform on that and so many other progressive ideas for the last half century: http://en.wikipedia.org/wiki/Ralph_Nader He may not be much liked or enough of a compromiser.

If my experience of accountants and taxes is any guide there are many ways to avoid some taxes if you work in all the deductions. With corporations, hedge funds, investment consortiums, etc., their tax lawyers have shown them how not to just take advantage of every loophole, shelter, subsidy or other legal ruse to essentially game the system, meanwhile having their lobbyists promoting their particular version of propaganda to increase their swag of money available in their field. Too bad the theoretical social scientists don't have more influence in creating a more just tax system. Their day will come, it's inevitable.

[JamesVincent]

More than one individual working in LMSB (FKA Large Case) used tp joke that the most efficient and effective way to tax major corporations in a "fair" manner would be to require them to pay taxes on the P&L they report to their shareholders. The tension between low income for low taxes and dividends to encourage investors would result in (likely) more revenue to the government, and less costs to all sides.

That would actually be, not only a good idea, but a fair idea. Like was said the higher the profit margin the more able a company is to use more deductions and historically profitable companies pay a lower effective rate. So, like you said, make them choose between paying more in taxes or making themselves more enticing to investors, which would bring in more revenue.

[JamesVincent]

Too bad the theoretical social scientists don't have more influence in creating a more just tax system.

Because a theoretical is just that, a theory. Most of them have no clue what happens in real life when you try to implement all those great, wonderful plans of theirs. Which is why they are still theory. Reminds me of the first time I got to my unit and a sergeant asked me how I would do something. I answered the process I was taught in AIT and he answered, that's nice but this is the real Army. The only answer to that is Yes Sergeant, how do you want me to do it. Theory, like a battle plan, falls to the wayside after the first contact in real life.

None of which answers the question, how does a company be competitive in an environment where it pays taxes and its competitor doesn't?

[Pottapaug1938]

Too bad the theoretical social scientists don't have more influence in creating a more just tax system.

Because a theoretical is just that, a theory. Most of them have no clue what happens in real life when you try to implement all those great, wonderful plans of theirs. Which is why they are still theory. Reminds me of the first time I got to my unit and a sergeant asked me how I would do something. I answered the process I was taught in AIT and he answered, that's nice but this is the real Army. The only answer to that is Yes Sergeant, how do you want me to do it. Theory, like a battle plan, falls to the wayside after the first contact in real life.

None of which answers the question, how does a company be competitive in an environment where it pays taxes and its competitor doesn't?

Two things come to mind. When I was in my Military Science I class, 45 years ago this fall, one of the first things I was taught was on the order of "when you get your first platoon, the first thing you want to do is talk to your platoon sergeant and find out how things are REALLY done, not how you learned to do them in school."

The other thing has to do with the nature of a "theory". Many people think that it means the same as "hypothetical"; but it doesn't. A theory is, in reality, an attempt to explain what the verified facts have shown, most often in the realm of science.

[Burnaby49]

A good provocative article in the NY Times today on actual corporate tax rates being much lower than usually presented by politicians: http://dealbook.nytimes.com/2014/08/18/ ... udy-finds/

If this is true then the US is at least competitive and probably better than most of the other countries in effective tax rates.

And a couple of Canadian articles refuting that argument. For reasons that elude me it is a big deal up here that Burger king has bought out Tim Hortons. Tim Hortons is just a coffee shop with a lot of not particularly great donuts but it seems to hit home with some people. The part of the takeover that relates to this discussion is the pending move of Burger King to Canada to save on the tax rates, Big surprise to me that we were competitive on tax. First this article;

http://fullcomment.nationalpost.com/201 ... -an-issue/

Still, the tax issue looms large, in part because Burger King has a lot of company. According to the Miami Herald, at least 21 U.S. corporations have announced or completed tax inversion deals since 2012 — “almost half the total of 51 such transactions in the past three decades.” These deals allow them to pay lower corporate taxes by relocating their headquarters to more favourable jurisdictions, such as Canada. The American corporate tax rate sits at 40%, while Canada’s is 26%. But moving to Canada won’t necessarily yield dramatic savings for Burger King: Last year, the company paid an effective U.S. tax rate of 27.5%, due to the fact that it already operates in multiple jurisdictions.

Then this American article published in my morning's paper;

http://fullcomment.nationalpost.com/201 ... g-problem/

[Pottapaug1938]

And a couple of Canadian articles refuting that argument. For reasons that elude me it is a big deal up here that Burger king has bought out Tim Hortons. Tim Hortons is just a coffee shop with a lot of not particularly great donuts but it seems to hit home with some people.

I've been to Tim's when I am north of the border; but I would rank their donuts behind those from Dunkin Donuts. I don't drink coffee unless I am camping, so I can't compare the stores that way; but my daughter LOVES the iced coffee coollattas from Tim's. It all probably comes down to what you are used to having.

[Burnaby49]

For a place that is famous for its donuts and coffee I'm not impressed by either. I'm a relatively heavy coffee drinker but just your run-of-the-mill standard java, nothing fancy. Tims has that but not even as good as McDonalds. One advantage of Tims. If you are driving across eastern Ontario (which we were) there are Tims everywhere. So it became our general stop.