What do these companies have in common? They paid no federal taxes last year.

Old_Joe

The following are unedited excerpts from a New York Times Op-Ed:

Amazon. Delta Air Lines. Chevron. IBM. General Motors. Molson Coors. Eli Lilly.
What do these companies have in common? They paid no federal taxes last year.

Thanks to President Trump’s 2017 tax law, the number of Fortune 500 companies that pay no federal taxes roughly doubled last year, to 60, according to an analysis by the Institute on Taxation and Economic Policy, a research group. Some of them effectively paid negative taxes, because they received a refund.

The number of companies paying no taxes has risen for two main reasons. First, the Trump tax law expanded some corporate tax breaks, such as the one for the purchase of machinery and vehicles. Second, the law reduced the top-line corporate tax rate, which means that some companies now have a low enough tax bill that they can wipe it out entirely with tax breaks.

Altogether, the law led to a 31 percent decline in corporate-tax revenue last year. That decline has helped cause an increase in the deficit. As the law professors Rebecca Kysar and Linda Sugin have written, the Trump tax cut is financed “on the backs of future generations.”

“At a time when the public’s confidence in our elected officials and our institutions is especially low, the specter of big corporations avoiding all income taxes on billions in profits sends a strong and corrosive signal to Americans: that the tax system is stacked against them, in favor of corporations and the wealthiest Americans,” writes Matthew Gardner, the lead author of the Institute on Taxation report.



(Bold and Italic emphasis added.)

Ted

@MFO Members: I'm not sure what the poster's point is, but is he aware that more than 44% of Americans pay no federal income tax.
Regards,
Ted
https://www.marketwatch.com/story/81-million-americans-wont-pay-any-federal-income-taxes-this-year-heres-why-2018-04-16/print

davidrmoran

I am quite sure what the poster's point is.

RisklessInSeattle

Thanks for the list of smart companies to invest in.

msf

Putting the two together, perhaps the point is that Leona Helmsley was wrong.

It's not that only the little people pay taxes, it's that only some of the little people pay taxes. (Remember, corporations are people, my friend, and the ones mentioned here are clearly not little.)

Or perhaps the point is that "real" people should simply get the same tax treatment as those corporate "people". Aren't we all created equal?

WaPo; Corporations are people. So what if people were corporations?
https://www.washingtonpost.com/opinions/catherine-rampell-people-should-claim-the-same-rights-as-companies/2014/07/24/460aea0c-135b-11e4-9285-4243a40ddc97_story.html

"People, for example, pay taxes on their worldwide incomes. Corporations do not ...

"[I]ndividuals can deduct either ... sales taxes.. or their state income taxes; [companies can deduct both].

"[I]f individuals were treated like corporations, [they could set up a Bermuda shell company, pay their college tuition, say that the Bermuda affiliate owned the degree, so it would also get all the incremental income from having earned that college degree. There the earnings would sit, tax deferred like an IRA, until repatriated.]

"[Individuals could] start deducting the first dollar we spend on health care [rather than having a 10% floor]."

LewisBraham

It's funny a poster named RisklessinSeattle would think that a company that has dodged its taxes in the past would be risk free. Seems more like a company with a target on its back if you ask me.

PatShuff

Corporations are tax collectors as well as tax payers. Taxes are imposed along points of the pricing chain as is the collection, often at point of sale, passed along and embedded in the price.

Crash

PatShuff said:

Corporations are tax collectors as well as tax payers. Taxes are imposed along points of the pricing chain as is the collection, often at point of sale, passed along and embedded in the price.

...And that ought not to be assumed or taken for granted. It's a "business decision" to pass along to consumers what the company owes in taxes but is not paying--- even when they DO pay. Because the tax bill is being subsidized for the corporation via the price tag on any given item by the buying public. Unethical.

Crash

44% pay no income taxes? Yes, I've heard that before. Why? Duh. WAGES and SALARIES ARE TOO LOW to make a decent living, thus taxable income doesn't meet the threshold which makes it incumbent upon people to pay taxes.

msf

Crash said:

PatShuff said:

Corporations are tax collectors as well as tax payers. Taxes are imposed along points of the pricing chain as is the collection, often at point of sale, passed along and embedded in the price.

...And that ought not to be assumed or taken for granted. It's a "business decision" to pass along to consumers what the company owes in taxes but is not paying--- even when they DO pay. Because the tax bill is being subsidized for the corporation via the price tag on any given item by the buying public. Unethical.

Taxes are no different from any other business expense. Companies are always deciding how much to charge customers, and that is often at best only loosely connected to costs. Rather, companies tend to charge what the market will bear. That is why, for example, the price of generic drugs seems to keep rising decades after patents have expired and manufacturing costs have declined.

Customers "subsidize" all the costs of business, whether they are taxes or the price of materials.

What I do find unethical is misrepresenting the practice. For example, if you look at your trade confirmations for ETFs or stocks, you'll see a little number labeled something like transaction fee or SEC fee

TDAmeritrade spends a paragraph explaining the fee and then acknowledges that "Any excess (above what it is required to pay the SEC may be retained by TD Ameritrade." It's not "passing through" a tax; it's misrepresenting the amount of its trading commission by breaking it into separate line items and making it look like it's required to pass through a tax (it's not).

Likely you see a Universal Service Fund fee line item on your phone bill. The FCC says that:

This line item appears when a company chooses to recover its USF contributions directly from its customers by billing them this charge. The FCC does not require this charge to be passed on to customers. Each company makes a business decision about whether and how to assess charges to recover its Universal Service costs. These charges usually appear as a percentage of the consumer’s phone bill. Companies that choose to collect Universal Service fees from their customers cannot collect an amount that exceeds their contribution to the USF.

This practice of making it appear that their hands are tied, that companies must pass these fees on to you is unethical. It may also be part of what gives people the impression that there's a 1-1 relationship between the taxes companies pay and the prices they charge consumers.

Crash

Taxes are different. Taxes go to the Common Pot. To pay for all kinds of necessary shit. If decisions are made by Congress and The Executive which result is that money being wasted or frittered away, it doesn't negate the principle. And divorcing ethics from the way business is done is the initial problem, from the get-go.

davidrmoran

+1

johnN

Lots companies also do not pay taxes during the 2009 until 2015 not just last yr... The whole system is scam in general

https://itep.org/3-percent-and-dropping-state-corporate-tax-avoidance-in-the-fortune-500-2008-to-2015/

rono

Howdy,

The incidence of taxation is, and has been, essentially a flat line sinking to about zero at BOTH the high and low ends. At the very low end people pay zero taxes while at the upper end it's the same thing.

I am not, however, in favor of penalizing the high income peeps. I'd just like them to pay their fair share which they are not doing right now. How about imposing a 15% tax on all income above $1M with zero deductions? Above $1M, just pay 15% at the window.

That said, I'd like to have a flat tax of 15% on all forms of income and gain with no deductions at all and a personal exemption of $25K. That way a family of four wouldn't start paying 15% until they surpassed $100K.

Works for me.

And so it goes,

peace,

rono

InformalEconomist

Just to be clear about the red herring -- 44% of Americans paid no federal taxes -- that figure (I looked it up, after Romney made his campaign remark) applies to all Americans: babes in arms, retirees, students with no income whatsoever, servicemen and women who were too injured in the line of duty to take on remunerated work, in addition to wage and salary earners.

davidrmoran

I am shocked that Mittens would state something misleading. Shocked.

Old_Joe

@InformalEconomist- Thanks for that info- I was wondering about the "44%" myself.

Ted

@MFO Members: The facts are that facts !

“The large percentage of people who don’t owe federal income tax is a feature, not a bug, of the revenue code,” according to the Tax Policy Center. “By design, the federal income tax always has excluded a significant fraction of households through a combination of personal exemptions, the standard deduction, zero bracket amounts, and more recently, tax credits.”

These workers who won’t owe any federal income tax include single people, married couples filing jointly and married individuals not filing jointly, said Gary Burtless, a senior fellow at the Brookings Institution. For the most part, they don’t earn enough money. However, many people who work and who don’t owe any federal income taxes still give money to Uncle Sam, because money comes out of their paychecks for Social Security and Medicare, he said.
Regards,
Ted
https://www.marketwatch.com/story/81-million-americans-wont-pay-any-federal-income-taxes-this-year-heres-why-2018-04-16/print

msf

InformalEconomist said:

Just to be clear about the red herring -- 44% of Americans paid no federal taxes -- that figure (I looked it up, after Romney made his campaign remark) applies to all Americans: babes in arms, retirees, students with no income whatsoever, servicemen and women who were too injured in the line of duty to take on remunerated work, in addition to wage and salary earners.

davidrmoran said:

I am shocked that Mittens would state something misleading. Shocked.

Just to be clearer, Romney's figure from years ago was 47%, not 44%. Regardless, these figures pertain to federal income taxes, not federal taxes generally. Only 15.6% pay neither federal income tax nor federal payroll tax.

The 44% (a TY 2018 estimate) that @Crash quoted comes from "the Tax Policy Center, a nonprofit joint venture by the Urban Institute and Brookings Institution."

“The large percentage of people who don’t owe federal income tax is a feature, not a bug, of the revenue code,” according to the Tax Policy Center. “By design, the federal income tax always has excluded a significant fraction of households through a combination of personal exemptions, the standard deduction, zero bracket amounts, and more recently, tax credits.”

These workers who won’t owe any federal income tax include single people, married couples filing jointly and married individuals not filing jointly, said Gary Burtless, a senior fellow at the Brookings Institution.

https://www.marketwatch.com/story/81-million-americans-wont-pay-any-federal-income-taxes-this-year-heres-why-2018-04-16
https://www.taxpolicycenter.org/model-estimates/tax-units-zero-or-negative-income-tax-liability-september-2018/t18-0128-tax-units

That is 44% of "tax units" (roughly, households). So it generally doesn't count "babes in arms", as they're part of a household which is already counted. Likewise, it doesn't include the many students who are part of their parents' households.

Retirees? 56% of are taxed on their social security benefits. That's exactly in line with the general populace; they don't skew the numbers either.
https://www.fidelity.com/viewpoints/retirement/taxes-on-social-security

I've presented my sources. @InformalEconomist where did you look up the figure and its interpretation?

@davidrmoran since you find this data (Brookings/Urban Institute) misleading, I'm open to suggestions for a less biased data source.

Politifact: "As for his claim that 47 percent of Americans pay no income tax at all: Guess what? He’s right. ... We rate Romney’s statement True."

msf

@Ted -thank for quoting the whole paragraph (as I did simultaneously), as it presents the view that this is a feature, not a bug. Consistent with rono's spitballing suggestion that $100K families pay no income tax either.

davidrmoran

@msf,

Did I say it was not true? Context is crucial, as always. Did you / do you think Mittens was pointing out the feature-not-bug angle of tax code? Here is the Politifact writeup, bf mine:

In his remarks, Romney used broad strokes to characterize millions of people who he said solidly support President Barack Obama.
"There are 47 percent of the people who will vote for the president no matter what," Romney said in the video. "All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that's an entitlement. And the government should give it to them. And they will vote for this president no matter what.
"And I mean the president starts out with 48, 49 percent … he starts off with a huge number," Romney continued. "These are people who pay no income tax. Forty-seven percent of Americans pay no income tax. So our message of low taxes doesn’t connect. So he’ll be out there talking about tax cuts for the rich. I mean, that’s what they sell every four years. And so my job is is not to worry about those people. I’ll never convince them that they should take personal responsibility and care for their lives."

msf

That was the expected response. You can quote Romney, you can even highlight sections, but if you're going to reference Politifact, you need to identify the flaw in Politifact's reasoning, i.e. what was wrong with how it came to the conclusion that Romney was correct.

It's not enough to say context matters. Politifact considered the assertion in its original context and found it to be accurate.

The assertion in this thread (context) was that this 44% was (a) presented by Romney (Romney said 47%), and (b) Romney misrepresented the figure, i.e. the numerator included babes, students, etc. (it didn't). You affirmed with a remark to the effect that you expect Romney to mislead.

Did Romney mislead about the numerator of the 44 (or 47) percent? That's the supposed deception that you affirmed. Did he use the figure to inflate (or deflate) a percentage of voters? That was the context for the figure - he equated 47% of taxpayers (more precisely, tax units) with 47% of voters.

davidrmoran

Such chastisement, for pointing out that MR was being misleading in impugning retirees as believing they're victims and moreover irresponsible about their own lives. Eventually he himself tried to walk it back:

https://www.usatoday.com/story/news/politics/2012/10/05/romney-47-percent-i-was-wrong/1614703/

https://www.washingtonpost.com/news/the-fix/wp/2015/10/07/mitt-romneys-47-percent-is-shrinking-and-is-still-misleading

Searching shows further that there are even more interesting nuanced analyses, from a CBS granular breakdown of the group, to a Forbes conservative take, to the Guardian's ''a breathtaking statement: a fundamental misunderstanding of the American social contract."

msf

Instead of trying to "out-Ted" Ted, by providing links without any comment (at least he provides quotes to give a sense of the pages), consider putting pen to paper and explaining what you think these pages show.

The USA Today column doesn't say that the figure overcounted anything. It just quotes Romney as saying he was wrong. Which is a curious thing to hang your hat on, since you said that his original statement was correct, just misleading. "Did I say it was not true?"

You're all over the map. Romney spoke the truth, Romney said the right numbers but in a different context, Romney was 100% wrong. I don't play that game. What I do is cite figures with sources (see my 15.6% above, in my own words.)

It gets back to your implying that the accurate 44% figure, accurately stated by Ted was misleading (because Romney supposedly said it). Hence my request for a better source. I prefer to live in a fact-based world, and that 44% is a simple statement of fact. Of course, one should be clear that this represents federal income tax payments only.

Romney was clear about this; unlike some posters here, he didn't say this was about not paying any federal taxes. That's more than you can say about David Leonhardt in the originally cited op-ed piece. He misleadingly wrote that some corporations paid no federal taxes, period.

I'm confident that they paid payroll taxes, just as many of the tax units that paid no personal federal income taxes still paid payroll tax. Though if you've got data that says otherwise, I'd be very interested in reading how corporations circumvent payroll taxes.

davidrmoran

This is wild patter. We're not talking about the same thing wrt 'misleading'. I am to feel like the retirees impugned by Romney, whose characterizations were misleading (as very many thought, including Romney himself). You're on about something else. The fingerwagging and hairsplitting are invariably instructive, of something, but life is too short.

Edmond

Joe, thank you for starting this thread.

It's frustrated me for years, that while the tax code mandates an alternative minimum tax (AMT) for natural persons (i.e. individuals), no AMT exists for artificial persons (i.e. corporations).

I would propose that AMTs should apply to all "tax paying units" (i.e. households, corps) who have reported gross revenues over some figure. Perhaps for corps it would be $2MM, with a low AMT rate levied on revenues rather than any income metric, as revenues will be less prone to management "massaging".

I often hear pols talk about "corruption" in Putin's Russia and in Latin America. But the tax code allowing giant profitable firms to "skate" in paying into the public til --- while deriving enormous benefits for our system of laws -- is shameful corruption. That its legal, doesn't make it less corrupt.

Old_Joe

Yep.

Crash

@Edmond Legal, but corrupt. Yes, indeed.