Skip to comments.Shocking news! Firms without taxable profits don't pay income taxes!
Posted on 08/13/2008 10:53:57 AM PDT by newbie2008
At least one liberal reports this as proof we need to keep corporate taxes high:
The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.
More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.
During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.
The report did not name any companies. The GAO said corporations escaped paying federal income taxes for a variety of reasons including operating losses, tax credits and an ability to use transactions within the company to shift income to low tax countries.
It might be worth noting, though, that a majority of these firms had no taxable income. For U.S. corporations, 9% had no gross profits (sales minus cost of goods sold), another 7% had no total income (gross profit plus dividend, interest, rent, royalties and capital gains or losses, and other losses.), and a clear 58% more had no taxable income before any net operating loss deductions or special deductions. 69% of that last number comes from deducting things like salaries, interest, depreciation, advertising and the like. (Source: GAO study.)
The Tax Foundation notes that 99.7% of the corporations in the study that paid no income tax in 2005 were large. Why did they not pay taxes?
For example, in a "clever tax dodge", American Airlines avoided income tax for 2005 by losing $862 million. General Motors lost $10.5 billion in 2005; I bet those greedy fat cats didn't pay any corporate income tax, either.
Losing that sort of money is simply creative accounting. If you or I form a corporation, how long can we lose money and not pay taxes before the tax nazis come snooping around?
They paid out 7.65% on payroll taxes for every person employed there. Profits or not.
They paid sales taxes on anything that they bought or sold.
Just as lots of people have no taxable income, either.
You have to ask yourself one question. Just how stupid are the voters of Michigan and North Dakota?
(hint: VERY STUPID!)
We need a WINDFALL LOSSES tax!!!
Demonstrating the value of a competent accountant.
What is net profit after all? We are assured by pretty much everyone in the movie business that the term "net profits" has little or no meaning and is always driven down toward zero by CPA chicanery. That is why every big star demands a percentage of gross rather than net.
If this nonsense is going on in the movie business, then why shouldn't we expect it to be going on in every business?
I personally would prefer that corporate income taxes be eliminated entirely so that companies have no need to hire tax accountants and tax attorneys and lobbyists to deal with issues that don't directly relate to bringing better products and services to market.
But if we must have corporate taxes then they should be simple and straight forward so that companies are forced to focus on their core business rather than on tax evasion.
Instead of 35% of net, why not tax companies 5% of gross?
Why not eliminate the carryover of losses from one year to the next to balance out profits? Why should we reward companies that perform poorly by giving them tax breaks?
Why not eliminate all tax breaks? Why should the government encourage or discourage corporate behavior? Get rid of enterprise zones, and solar power incentives, and all of the other social engineering nonsense.
What a beautiful world it would be if the term "tax attorney" no longer had any meaning!
Throw thousands of those into a statistic with the big boys and it looks like few corporations pay taxes.
I haven’t had taxable income for about 4 years now....but I ended up paying more in social security and other items than I ever did in taxes.
Revenues minus Expenses equals Income.
Always has: that is how accounting works.
If Expenses exceed Revenues then there is no Income. No Income equals no Income Tax. That is how it should be.
The only reason why individuals pay Income Tax is because they are not permitted to deduct all of their expenses from their “Revenues” (payroll): tax is deducted off the gross amount, with one-or-two exceptions.
If this is true, we should triple corporate income taxes on Exxon and other American oil companies.
Not necessarily. Corporations don't pay sales tax on goods used in producing their product. For example, Dell doesn't pay sales tax on the computer memory chips that go into the computers they sell to the consumers. And nobody pays sales tax on what they sell, only what they buy.
Businesses take in money and pay out expenses.
When one is not greater than the other then there is no tax.
The expense side, however, included payroll, tax on goods purchased, stock dividends to investors, ... all of which are tax to the individual
it is good business not to pay corporate tax
I sometimes wonder whether it would be better to eliminate ALL the income tax and just fund the government by taxing ONLY those ‘eeeeeeeeevil corporations’
Most people would be too stupid to realize that the cost of good sold has tax costs included so EVERYONE would pay taxes on anything they purchased, not just the 97% taxes that the upper half of society pays, versus the 3% the lower half pays.
they would just gleefully rub their hands and say OOOOh those EVIL corporations will pay!!!
Yeah, unlike self-employed people who pay tax even if their company has a losing year.
Good distinction. We purchase equipment, supplies and other items for operations and pay taxes on what we buy. If I sell product then I have to collect the taxes.
I am a small business owner (Subchapter S) that pays no corporate income tax because 100% of the corporate earnings go to my personel return and is taxed at the hishest rate plus FICA. I read somewhere that over 70% of the corporations are subcapter S corps
Good theory, but in some states like West Virginia there
is a thing called a business and occupation tax.
A business is taxed on its gross revenue rather than its
income after expenses. Of course WV is not really a state but rather it is a condition!
[Losing that sort of money is simply creative accounting. ]
Corporations pay NO taxes, EVER. Their customers do! Learn it...live it...love it!
I understand business quite well thank you. You are preaching to the choir, in case you didnt read my tagline.
I love it. I have been told that we cant keep this up forever, but as good as it feels I think I’ll keep it up till I need glasses.
It is all in how you structure, S-Corp, C-Corp or LLC, and just how good your accountant is. Definitions are everything. Everything is a business expense. Even the new guns and ammo are pest control. They then become a part of cost of goods sold.
Anyone who has an accountant that believes you should pay taxes needs to find a new one.
Corporations never pay income taxes. They pass the cost of those taxes onto the consumer in the form of higher prices.