Remember Voodoo economics and Reaganomics? That's where this problem came from. The idea that cutting taxes to corporations would allow the wealth to trickle down do the ranks. Instead, all it's done is allow corporations to get richer while the middle class has nearly disappeared.

1.2 billion in taxes were paid by individual taxpayers last year. 300 million were paid by corporations. Before Reganomics it was the other way around.

Its extremely ignorant to hate corporations. Who's going to provide jobs and pay for your health care. Just because corporations can find ways to say on income taxes, it doesn mean that they aren't paying SDI and other social service providing taxes. I swear, you people would cut off your own head to cure a headache. Maybe you should do that. Just after you take your Prozac.

@cheviot: What taxes are you talking about? Do you even know? Income taxes? SDI? Real estate and property taxes? Sales tax?

Corporations will never pay taxes - I don't care what laws the idiots in Washington pass.

If you slap a 50% tax on a company, their products are going to go up by 50% - and the consumers end up paying the tax anyway. Basically, you end up turning the corporation into a tax collector for the government.

I highly suggest reading Neal Boortz and John Linder's book about the FairTax.

It's the taxpayers who bail out corporations when they fail. The latest example is the massive bailout of Bear Sterns.

If you are not happy with this, then you should elect politicians who are accountable to the people. No corporation has a vote. It's the American people who voted for representatives that support fascist corporations.

@TheUncleBob:

The FairTax book is fantastic.

Well, if by "fantastic" we mean "steaming pile of crap".

The funny part about that fact of passed-on taxation? It's not passed on. In fact, it can't be.

Corporate income taxation is based on net profits. Ergo, their raising the prices (and, within the elasticity for a given item) would either a.) increase their taxes given constant production and sales or b.) reduce their tax burden by virtue of reducing their profits when sales fall.

But the burden cannot be "passed on" as you say. The tax is levied on post-sale income once business costs are removed - including money from profits reinvested into the company's operations. Suppose that sales from a company's product equal one million dollars. Cost of operations equals $850,000. Net profit equals $150,000 and their effective tax rate is 20% - making their final tax payment $30,000. Even if this "lost" $30,000 is passed on to consumers (which it's not), that just increases the next year's tax burden. It makes absolutely no sense to "pass the burden on".

The FairTax is also a gigantic sham, but that's another topic altogether.

@TheUncleBob: I agree with this entire statement. Thanks for saving me the effort.

@MyCokesBiggerThanYours:

give it a rest. Corporations got away with murder by being able to expatriate their earnings and avoid paying anything.

I thought it was quite funny that Haliburton decided to open a new headquarters in Dubai...making it really easy to avoid paying any tax.

I'm not sure that hiking corporate taxation would produce the desired results. It would be awesome if big companies reduced their obscene executive compensation packages in order to pay more taxes, but we all know that will never happen. They will probably pull a "Circuit City" and get rid of everyone who provides quality products and services to consumers.
Second, taxes would impose an extra expense that could drive marginal companies out of business, increasing the market power of those remaining-- leading to higher prices and less quality.
Simplification of the tax code, which would reduce the potential for abuse, would probably provide better results. Getting more taxes from companies does not help us at all-- getting more from CEOs would.

omg....you people are idiots. Plain and simple. Halliburton remains a US C Corporation, its corp headquaters are in Dubai, genius. stop reading the Dem Underground and try Financial Times.

US Corporate tax rate is 35% for C Corps. We are 2nd highest of industrialized nations in the world (Japan is #1). What the hell are you people talking about?

BTW...80% of corporations are classified as "small business corps" or S-Corps which employ greater than 70% of the workforce in the United States. Are they "fat cats" too?

go read a book and turn of the TV you morons.

@krakbuste:

[www.marketwatch.com]

March 13, 2007 (CBS Marketwatch) Halliburton Co.'s decision to relocate its chief executive and corporate headquarters to Dubai has scratched one of Congress' most sensitive sore spots -- suspicion that U.S. corporations are restructuring their operations to shirk domestic taxes.

Why?...

Some tax shelters are questionable or even illegal:
Offshore companies. By transferring funds to a company in another country, one may claim the transfer as an expense, and thus lowering the taxable income. Difficulties in international tax treaties often make the income not legally taxable.

Financing arrangements. By paying unreasonably high interest rates to a related party, one may severely reduce the income of an investment (or even create a loss), but create a massive capital gain when one withdraws the investment. The tax benefit derives from the fact that capital gains are taxed at a lower rate than the normal investment income such as interest or dividend.

[en.wikipedia.org]

[www.csmonitor.com]

[www.csmonitor.com]

Dubai Tax Shelters

[www.shelteroffshore.com]

Ummm....to go offshore doesn't mean skirting taxes. Sorry guy, placing links to tax shelters next to an evil oil (services) company means nothing.

As long as income is being reported, then there is no issue, with regards to tax law.

And you examples are TAX AVOIDANCE or EVASION, which are punishable by law. One has nothing to do with the other.

I noticed how you skipped all that other info about the 35% rate?

Should I link to irs.gov ?

Nah, that would be a waste of time. I mean a Wiki link to tax shelters, wow, that's damning.

Hehe.

Where do you think that corporations get the money to pay their taxes??? From it's customers. So in the long run, corporate taxes are a burden on the little people anyway. They just pass that cost on to you.

And yet, some argue against capitol gains taxes as being "double" taxation since it was already taxes as corporate earnings.

Yeah, how is that working out again?

@krakbuste:
You seem to gloss over the fact on the article...

61% of American corporations, including 39% of large companies, paid no corporate income taxes between 1996 and 2000. Last year, corporations shouldered just 14.4% of the total U.S. tax burden, compared with about 50% in 1940.

Your 35% rate means jack squat. Clever accounting, tax shelters, and offshore headquarters aren't in the arsenal of the average american taxpayer. Why don't you try rooting for the working guy for once?

Close loopholes, lower the top rate to 25%. It just makes sense. But the Dems would never ever lower taxes, and the GOP woon't close loopholes.

@krakbuste: The effective tax rate is what matters. Halliburton's effective tax rate is in the low 20%s. From HB's Q4 2007 conference call: "Our fourth quarter rate was also favorably impacted by foreign tax credits that we had not previously thought could be fully utilized."

Oh, BTW, Financial Times had a piece within the last year, in which an observer predicted that Halliburton's Dubai moves would lead to its claiming the very foreign tax credits reflected in its Q4 results.

The foreign tax credits affect HB's US taxes because, in order to claim those tax credits, the income must be claimed in another country. This means the income is not claimed in the US. The reason the credits could not "previously [be] fully utilized," was because previously the same income would be US-reported.

There, I just responded to your "you people are idiots" comment with facts (oh, those stubborn things!) and backed up my points with Halliburton's own words and the very publication you demanded we read.

In other words, on behalf of ironchef and others ... Eat shit!

@nequam:

Good work. Well said!

@ironchef: Right back at ya!

@TheUncleBob: You are 100% correct. Businesses view taxes as another cost and one way or another, the individual is who ends up paying them. Either through higher prices, lower wages, fewer jobs (taxes are what most businesses cite as their #1 reason for offshoring jobs, food for thought) and/or inferior quality products.

So go ahead and put a Socialist-Democrat into office who will jack up taxes on 'evil' businesses and see what happens.

@barty: Read hegemonyhog's comment. It's succinct and explains why corporations cannot effectively pass on their taxes to their customers.

Corporate taxes are silly. At the end of the day, only people pay taxes. People own corporations. Under the current system, profit that is distributed to share holders should only be taxed as income to the shareholder. It also has the odd side-effect of encouraging corporations to issue debt instead of equity. See the Modigliana and Miller Theorem.

All the current corporate income tax system currently does is give corporate interest in sheltering their monies offshore. By eleminating corporate income taxes we could bring all of the "Switzerland" style banking (and dollars) right back to the good old USA.

@BStu: Capital gains are an indirect double-tax since the gain is in the perceived value of the investment.

If Exxon goes up $20 tomorrow, I made $20. Doesn't mean the company is going to earn more proportionally, it means that was the going rate for the share at the close that day. This is a simplistic example since the $20 gain could be due to a realistic expectation but it doesn't instantly mean the company is worth $20 * in a real value if liquidated/parted out.

Share prices, in this case, have little intrinsic value - a share is only worth what someone will pay for it and absolutely nothing more. Of course there is a company backing that share, but as we saw with Enron and Bear Stearns, doesn't matter how much the stock is worth.. it's instantly worthless w/o a buyer.

Thinking otherwise is a fallacy. Anyone trading a Wilshire 5000 stock should have no problem selling their shares on the open market with the internet and trading networks these days. Thinking that you can just as easily sell shares in a supermarket chain in Angola is unrealistic as well.

Love the wilted logic that some commentators get, presumably off the Freeper sites:

* You can't tax companies since they'll simply raise their prices, thus consumers end up paying.

* You can't tax individuals, since they'll demand higher wages to offset their income taxes, thus corporations end up paying.

-> Since you can't tax individuals or corporations, we'll fund public initiatives by taxing frolicking puppies and unicorns.

Geezus, guys. Take a freaken Economics course at your local community college. Or move to a cave on some island somewhere? Please?

My understanding is that some US companies are moving their headquarters overseas is because of the disparity of US tax law.

US based companies pay income taxes to the US government not just on the income generated in the US, but on the worldwide income generated by the company. The US is one of the few countries that do that.

Most other countries tax the companies based in their countries only on the income generated in their country. Companies based elsewhere pay US taxes only on the income they generate in the US.

The net here is to encourage corporations to move their headquarters and incorporation to elsewhere.

Please for the love of God, No more Cat pictures.

How about we raise the tax on the rich, because seriously, who needs 40 million dollars a year to live and it barely get taxed?

@z4ce: This is exactly the point that most careless corporation-bashers miss. A corporation isn't some nebulous entity that just exists out there with an independent existence (except nonprofits, which are another matter entirely). A corporation is a business that is owned by its shareholders--if not you and me directly through stock ownership, then indirectly through mutual funds or retirement plans.

This is the reason for the (completely legitimate) claim that taxing dividends is double taxation--the corporation pays income tax of 35% on its profits (again, obscenely high; in the EU it's about 12-15%), and then when the corporation sends that money to its shareholders, they have to turn around and pay taxes on it again. A business can alleviate this problem by becoming an "S" corporation (where the corporation doesn't pay any income tax itself, but the shareholders add their shares of the profits to their own tax returns as ordinary income), but since this means foreign stockholders would get away without paying tax, S corporations are limited to domestic shareholders.

@Suttin: FYI, from IRS statistics: For 2005 (the most recent year available), the top 1% of taxpayers collectively paid 40% of all personal income tax, and that share has been steadily increasing. These taxpayers aren't making $40 million each; the mean AGI here is $1.2 million.

Corporations are ultimately owned by people. If the corporations can't pass on the higher taxes (which they usually can since a corporate tax increase affects everyone the same way and increases costs across the board, despite the idiotic example above), the people who are hurt by the taxes are shareholders and bondholders. Shareholders and bondholders are not just rich people, but also poorer people who own pension funds, life insurance accumulated accounts, bank accounts (usually invested in corporate bonds), etc. They are school endowments, charitable endowments, and government funds.

And the reason some corporations pay no taxes is because they make no profits. Smaller corporations tend to lose money. For large profitable corporations, the usual way to lower profits is to reinvest in equipment and wages. If a corporation earns $10 million in profit but then spends that on a business expansion with equipment and wages for new employees, then they pay no tax because they have no net profit. This encourages investment and job creation, which is what everyone wants.

Nice, good to see that @chrylis had the same point. Jinx.

In 2007, according to the IRS the top 1% earned 21% of the nation's income but paid 39% of income taxes. This means that the top 1% paid more taxes than the bottom 90% of the population. That's the reality.

[taxprof.typepad.com]

@dabusdriver: Minor note to anyone who sees both our posts: dabusdriver's referring to the most recent preliminary results (which probably won't change substantially but may have some minor corrections); the link I posted is to the most recent final audited results.

I like the fat cat symbolism of the picture and the corporations.

On a different tact, the corporations will be taxed through the earnings of the shareholders.

Astos Green lasers rulz

@Astos: Ahh, yes, the shareholders pay taxes. At a rate far less than the workers pay.

But it's "fair" no?

no income tax for corporations? what a great idea! let me know when it happens - i'll file my corporation papers.

This is why I love America!

It still seems like a lot of people are missing the point here - most of these companies did not pay their taxes for a number of years. It doesn't matter if their effective tax rate is 20% or 35% or 1% or 100%, if they're paying $0.

That said, maybe this is just my evil socialist Canadian perspective, but 35% hardly seems like a raw deal to me. By comparison, the marginal tax rates in my province can hit as high as 46.5%, and the threshhold for that is far lower than the incomes we're talking about here - you hit that before making 7 figures, and you're already over 40% before you hit 6 figures.

It's also worth noting that the numbers being bandied abuot re: what percentage of the population pays what share of the taxes COMPLETELY IGNORE the effective burden. My boss, for example, is above the 40% mark. 60% of his income (approx. $72000) goes a hell of a lot further than 75% of mine (approx $23000). The effective burden of an extra few hundred dollars is wildly disproportionate - to me, that could be a month's rent; to him, it's a few extra frills. Arguments for "fairness" that assume a dollar is equal in the hands of the poor and rich are inherently flawed.

@nequam: Well damn. I guess my finance education was just totally worthless then.

Though it is true that corporations are taxed on net income, the look at the tax bill as a cost on next quarter or year's ledger. It gets rolled back into the price of the goods any way you look at it. His explanation exposes that he knows little to nothing about finance. If you look on an income statement for any publicly traded company, taxes from last year are subtracted from gross revenues immediately after EBIT (Earnings Before Interest and Taxes for the less informed) and only then is net income calculated. So with that in mind, don't you think that those analysts will take taxes into consideration when they're determining profit numbers for the year?

To all the "double tax" posters:
Everything is double taxed!!!!! Your earnings are taxed. You use that taxed income to buy goods and pay a sales tax on those goods. If you own a home, you're using taxed income to pay your mortgage AND you pay a property tax every year. For cars, it's even worse! You buy a car (with money that has already been taxed) then pay a sales tax followed by yearly property taxes for as long as you own the car. There may be different names for these taxes (income, sales, property) but they are still taxes all the same.

@RandomZero, nobody says the rich and the poor should pay the same dollar amount of taxes. But even with taxing the same percentage of income, the argument for taxing the rich more because they have less marginal utility for money is inherently flawed. Even assuming that you can truly measure marginal utility between people (impossible) and correctly get 15% as the optimal difference in tax rate (far fetched), different levels of income are not the only factor impacting tax burden.

The effective burden of taxes is higher when a person has less money saved. Your $72k boss might need the money more than you if he has no savings and you have $200k in home equity. So why don't we tax people more when they have savings, even if they earn the same amount as someone with no savings.

Young people could use money much more than old people. Young people have half a decade ahead of them and usually have greater utility for money as they can invest it longer and buy it on things that they use longer. So let's have different rates for age.

Not to mention cost of living differences. Let's have the top rate be 25% in New York and 40% in Iowa since money goes farther in Iowa.

What is funny is that marginal utility is exactly why CEO compensation is so high. If I am a CEO of a company doing fan-tastic and some company in the doldrums wants me to take over.. they are going to have to offer me a substantial amount of money to make that worth while.

@dabusdriver: I'm not saying you can effectively measure marginal utility. We'll figure that out right after ethical calculus becomes more thean a gedankenexperiment. I was merely saying that it exists as a variable; any argument that ignores it entirely (effectively setting it to 0) is just as flawed as any one that sets a specific value on it.

As for the numbers I was tossing out: That 15% difference isn't an ideal, it's an approximation of the actual income tax brackets we're in and our after-tax dollar amounts. He just recently hit about $120k a year, which places him at just over 41% income tax; I'm making $30k, placing me at a hair over 23%. This is why ten-figure incomes being taxed at 35% doesn't sound so harsh to me.

@dabusdriver: there are already many precedents of taxing "marginal utility" though, so what you are suggesting (or rather what randomzero is suggesting & you are debating) is not outlandish. luxury items are taxed at a different rate than necessities. retirement income is tax-deferred to be taxed a different (presumably lower) rate sometime in the future. properties are taxed based on their marginal utility (developed land is taxed higher than empty land, "living space" is taxed higher than, say, a basement, in commercial property, sales space is often the only square footage taxed or it is taxed higher than storage space, & in industry, manufacturing equipment is taxed at a higher rate than dead space).

also, tax deductions are based on this very premise. income spent on mortgage interest, charitable donations, education, medical expenses etc., etc. are all non-taxable b/c of their marginal utility.

using the framework of our current system of taxation, there's plenty to argue taxing the rich at a much higher rate & forcing them to prove their marginal utility.

or, let's eliminate marginal utility all together - how's that? seems much more outlandish to me.

I think the majority of corporations are titled "S corp" compared to "C corp". My company is an S corp which means any tax income after expenses goes to my personal SSN. So my corporation doesn't pay the taxes, I do. I wonder if this is the reason.

I'm just thinking out loud here, but did anyone else notice that the time period for the report ended eight years ago? And the study was published four years ago?

I'm suspicious of any article that has to quote a four-year-old GAO study to make its point.

Yeah, maybe the data is the same or worse now - so why don't they use a more current report? It seems like there's something hiding here.