Posted on 12/09/2006 5:26:19 AM PST by DredTennis
It said ***income*** taxes with the emphasis added. You are probably confusing such taxes with sales taxes.
Ask any accountant. There is no ***expense*** line item for corporate ***income*** taxes before profits. There are reserves for such taxes but no ***expense*** items for such taxes. If a corporation did otherwise they would be guilty of income tax evasion.
Look up EBITDA.
Better yet you show the link to GAAP procedures that clearly describe how corporations embed their income taxes on profits into their pricing before they write the check to the government. You can't because such a procedure doesn't exist.
When a corporation makes a profit they must pay tax on that profit period. Those taxes are the corporate income taxes.
So, in your mind, if no GAAP approved procedure for embedding them exists they cannot be embedded.
LOL!!!
They'll give bigger bonuses to their Execs....and still send jobs overseas.
Earth to Democrats....One of the main reasons US companies move jobs overseas is the tax code.
Not legally, no.
So where is your reference?
The REAL world! Necessity!
Where, pray tell, do the funds come from to pay these taxes if NOT from sales reciepts?
I don't like the IRS either but I will never look stupid when arguing about the insane tax structure of this country.
Sales receipts generate ***revenues*** not income taxes. Income taxes come from taxable income, or in the case of corporations, ***profits***.
No profit --> no corporate income tax.
Sales receipts can be whatever they will be, but if there is no profit then...
Now go back and read this article. The idea came from where one country decided to give a tax ***credit*** to corporations who used it to raise wages.
That's a direct tax break to workers through their employers. It puts more money in the pockets of wage earners and it takes that same money out of the government revenue. That is a wonderful development and absolutely conservative in principle.
"Corporations will charge what their markets will bear.
"
True, but don't misconstrue that to mean it is up to the company and its customers alone. Their competitors will bid down the price. Depending on how much competition there is for the product or service, this can lead to a minimum acceptable profit to yield the ROI that investors are looking for. ROI is not just important to initial investors as you seem to think. The stock market factors the current earnings and earnings potential into the stock prices every minute of every day. So new investors are expecting growth, dividends, or both and if they don't get it then they abandon the stock. That cripples the borrowing power and value of any treasury stock the company has retained. So ROI is always a concern to all investors, not just the initial investors.
(cont later)
The issue of whether income taxes are built into prices is not answered by whether you find a line-item for an actual expense in the company's books. The point is that an estimate of the income tax burden will be a consideration in planning and setting prices. Obviously, it is, and so it is treated exactly like any other expense for planning prices -- even though it is only an estimate.
The calculation of estimated taxes is really not that complicated, and it is included before the exact taxes are known. It is done t determine what revenue targets the company needs to meet to satisfy all needs -- non-income-tax expenses, net profit, and tax expenses.
Non-tax expenses : 900
Net Profit : 65
Taxable profit : 65/0.65 = 100
Revenue Target: 1000
If pressured to achieve Net Profit of 150, the calc would change to:
Non-tax expenses : 900
Net Profit : 150
Taxable profit : 150/0.65 = 231
Revenue Target: 1131
If the tax rate is lowered to 15%, then a company would immediately know that it could adjust its revenue target to 1076 (900+(150/0.85)) and still satisfy expenses and desired net profit.
Sorry to say you wouldn't pass an accounting class.
Profit is always the target, not revenue. A corporation can easily attain revenue goals by cutting prices and increasing sales volume.
Or they can let revenue fall and simultaneously cut costs, and achieve the same profit.
And since corporate income taxes are a fixed percentage of profit, it is a quantity that is known ahead of time. That's why corporations focus on EBIT and EBITDA.
So you should now understand that corporate ***income*** taxes are not 'passed on' in the prices to the consumer. They are taken from the ***profit***, the difference between revenues and expenses.
The business in your example could slash their revenue by slashing their prices and as long as they also slash costs by an equal amount, then the profit is the same.
Profit is a difference, independent of prices alone, and independent of costs alone, but dependent on the two together.
And finally accept that corporate income taxes are entirely dependent on ***profit***, and not prices alone.
This should be more than sufficient for explanation but if you insist on continuing to argue "revenue" targets, then I'm sorry but I can't help you. IOW I won't be responding.
You are being incredibly obtuse. You regurgitate what I've said and don't even realize it. You've wasted enough of my time.
Or a mule in this case.
Corporate Income Tax = f(Profit)
Profit = f(Revenue,Expenses)
In your example:
Non-tax expenses : 900
Net Profit : 65
Taxable profit : 65/0.65 = 100
Revenue Target: 1000
I can reduce prices of a product and increase costs of advertising to boost volume and hence revenues and still make the same profit while achieving a targeted market share.
Non-tax expenses : 9000
Net Profit : 65
Taxable profit : 65/0.65 = 100
Revenue Target: 9100
In post #17 you stated:
The stupid people don't understand that corporate taxes are passed onto them via higher prices for the things they buy, so they pay more corporate taxes...
Yet my last example has the "stupid people" paying a lower price while less of their payment per unit product is applied to the corporate income tax because volume is greater and the profit is the same.
Your post #17 is nonsense.
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