According to CNBC, “Amazon's low tax bill mainly stemmed from the Republican tax cuts of 2017, carryforward losses from years when the company was not profitable, tax credits for massive investments in R&D and stock-based employee compensation.” https://www.cnbc.com/amp/2019/04/03/why-amazon-paid-no-feder...
These are the actual things we should be talking about.
yes, this definitely should be talked about. Why can't people's income be carried forward like this as well?
If i made a lot of money one year, why can't i claim away taxes from years that i didn't make income (such that my tax bracket is lower)?
There are also a lot of other ways companies get much more favorable tax treatment than people — for one thing just very fundamentally, they are taxed on profits but people are taxed on revenues, with no ability to deduct most major costs like paying rent or healthcare bills below a very high cutoff.
Kind of a tangent here but I can’t help thinking about this discrepancy when I hear about ISAs, and how people should be able to use the funding methods that companies do like selling shares in themselves. You can be a company but without any of the favorable treatment!
I earned €1600 in 2016 as a student and then €50k in 2017 and 2018 as I started working fulltime. So now I can make a request for 'averaging' my taxes and I now get a some money back.
Theoretically, this is appealing - practically, I see a lot of problems
That's the first step in democracy, no? Engagement?
And I'm not saying that there aren't changes that could and should be made. Just that this particular article doesn't have the feel of a fair debate aiming to inform people, but more of an outrage-inducing propaganda.
The only thing worse than a fool is an engaged fool.
First educate the people, then crank up the engagement. Doing it in the opposite order is a recipe for disaster.
I (hesitantly) disagree. That specific tax policy change is a tree in a vast forest. It happens to be relevant here, but without it... It's not like Amazon, Google, apple, etc would have paid anywhere near the simple tax rate had that legislation not been enacted. Amazon had a different loophole/strategy in 2016 and will have another one for whenever the 2017 one expires whatnot.
Ultimately, corporate income tax has been broken for over 50 years, and it's been brought ken internationally, not just in the US.
...broken in the sense that the "rate" can be 35%, 23% or whatever and the total tax raised in an economy some number unrelated to that.
Reporting the way you suggest implies that in 2016 things were different, or that canceling that policy will yield a meaningfully different result. That's not the case.
Then it should be discussed. Along with the policies already mentioned in the article and it's disingenuous not to do so. How can we expect to make informed decisions if we selectively choose what information to expose or hide for discussion?
Do we have any more information on this line item? I'm in a position where over 1/2 of my income is via RSU grants from my employer. If those are deductible from corporate taxes, that seems to make sense since they are treated as regular income to the recipients, just like salaries (other payroll taxes, etc. are another story). I know there are other forms of equity-based compensation as well. I'm curious to see how these things work.
Republicans and Democrats have let that one go; blaming political parties is a straw-man argument. They expect to utter the words and hope you believe it and not fight what they're doing.
In 2008 after the crash the retail industry switched to hiring part-time jobs only; Wal-mart, Meijer, Kroger, almost everyone and a lot of that was due to pricing pressure from online retail namely E-bay and to a larger extent Amazon. People began working 3 or 4 unstable part time jobs to piece together 60+hr weeks in order to make ends meet and still living in destitution (not having savings for a car or house repair). Many turned to drugs and alcohol to deal with the trauma of being in a sitaution where that looked to be a permanent state of affairs. Today, Wal-mart has stopped drug testing new hires, they've implimented a drug rehab program for new hires because they drug test 100 people and literally 99 fail. Other retailers and employers are doing the same.
Any company that views it's customers as the product ultimately is looking to do what anyone does with a product once they are done with it; throw it into the garbage. CNBC is filling your head with garbage and turning you into garbage just like Amazon and the retail industry did to those retail workers I just mentioned; now they get to clean up their mess. Those people get to lose a good 15-20 years of productive live due to this. You have literally nothing to gain by listening to them whatsoever; take a news literacy course and invest a little bit of money on real journalism.
You're thinking of an antitrust violation, not racketeering. The Sherman Antitrust Act prohibits any "attempt to monopolize" which includes predatory pricing. Racketeering is running a criminal organization for-profit (a Ponzi scheme, dealing dreams, illegal gambling, loan sharks, prostitution, etc.).
Also, all the taxes that they don't pay needs to be paid by others. For each optimizations done by those companies, it's as much money that needs to be paid by others as each country runs on a budget that is mainly based on taxes. Them not paying taxes as a direct impact on taxes that needs to be paid by the one who pay taxes as well as the quality of service and infrastructure of a country. Infrastructure they uses a lot by the way, like roads to deliver their goods for example.
Not wanting to contribute to that is the epitome of free-riding.
Nobody is saying otherwise. They are saying these legal loopholes are the problem that need changing.
If the only issue were loopholes, the fixes are outside of Amazon/Google/other companies hands and in the hands of the legislatures of the various companies.
It was the other way around until XIX century. People had been moving around Europe or emigrating to America in search of lower taxation while moving physical business (like local brewery) was next to impossible.
The idea of carrying forward losses in general is sound, but I'm beginning to wonder if there should be an exception. If the loss is intentional, using investment instead of profit to drive growth, I'm not so sure those losses deserve to be carried forward. Probably an unpopular opinion here on HN, but I think denying reductions in those cases would be beneficial not only in terms of tax revenue from the larger companies but also in terms of reducing the VC-fueled ""unicorn or bust" mentality among the smaller ones.
On paper, it is a fantastic tax. Google, Apple, FB, Amazon... all the new economy winners are very profitable, 20% - 30% margins & fast growth are expected (and priced into market caps).
They're so profitable that money is just piling up, atm. They can't usefully invest it all. This means you can tax their profits without affecting the real economy. There's nothing google is doing that it couldn't do if they had to pay $10bn (25%-30%) as a tax on profits.
OTOH, unprofitable companies (eg Tesla), would have trouble paying extra taxes. It'd need to come out of investments in production capacity, R&D, etc. They wouldn't have to pay.
Corporate income tax is just a sensible idea, on the face of it. Unprofitable? Don't pay. Profitable? Pay. Minimum economic disruption.
But in practice... across many times and places... it's proved very hard to make a corporate tax scheme work.
Tax policy complexity. Accounting complexity. Multiple jurisdictions. The looping cascade of company ownership, partial ownership, contractual relationships, making up the legal "structure" of a google or amazon.
It all adds up to a reality wherein politicans cannot make a law that says 25% tax.. and have that mean something similar to what it sounds like.
This is a pill very few politicans or voters can swallow. Of course we can! We're legislators. We make laws. We have police, and tax authorities. Google finance said google made $40.42bn. The rate is 25%. Gives us $10.1bn.
Empirically, they generally can't. Changing things to enable corporate tax would require massive, difficult legal/bureaucratic reforms. You would need to consider insanely difficult changes, like heavy handed restrictions on a company's ability to own other companies, and the types of legal entities that can own legal entities. You'd need new accounting standards. The bureaucratic guts of the economic machine.
Your post is very insightful. The only thing I’d add is that when you have a $10 billion tax bill that you can afford to pay $5 billion to attorneys and accountants to avoid it.
That’s the crux of the problem to me. No matter what scheme the government can come up with to tax it, the numbers are so large that it is in the company’s interest and ability to find loopholes. That’s why we end up with sophisticated shell companies shuffling money around in tax havens that are perfectly legal but don’t make sense outside of tax avoidance schemes.
I personally think this is overstated as a root cause. Giant corporations have the same lawyer budget to spend avoiding payroll taxes or GSTs/VATs, but it doesn't make that kind of difference. That's because salaries, sales and value adds are, in practical terms, objective truths. The law & accounting standards define them, locate them to a jurisdiction and that definition is defensible. A transaction either is or isn't a salary, or a sale.
Profit otoh, is subjective. Expenses can be expressed as investments, retained earnings can be expressed as growth. Most importantly, profit doesn't have an objective location.
But it's not a tax on profits. It's more like a sales tax.
The difference is market distortion. A VAT has more consequences. Higher prices, possibly some impact on employment and/or GDP.
So, in practice it's preferable because it's possible. In theory it's worse because corporate income is more efficient.
As far as my understanding goes, the bulk of taxes are paid on profit (to be more precise, operating income), and not revenue. As far as I understand, big companies do everything possible to make it seem like they are not profitable from an accounting perspective. As an example, this might mean that they'd pay some subsidiary in Ireland, where corporation taxes are smaller. What am I missing?
Because even if the corporate tax rate is 30%, but we only collect it on profit, which ends up being only 5%-10% of revenue. So in actual fact, if the corporation was honest, we're really only collecting 30% of 5% or so, which is about 1-2% of revenue.
The thing which I think works with this "revenue tax" is that it removes the ability of the corporation to do clever accounting tricks to reduce the amount of profit. For example moving the IP offshore to a lower taxed country. It is something that could work for a lot of countries and would satisfy a lot of people.
The one place where it might not work is where margins are already razor thin and the business makes up on volume. But then again the business would have to charge more to cover the extra expense.
If you have a retailer buying from a distributor buying from manufacturer buying from a raw material producer, the revenue flowing from each to the next would be taxed again and again, but a single company doing everything would only pay once.
Is that something you want to encourage?
A VAT might make more sense, since you can deduct the VAT you paid to your supplier from the amount charged to your customers.
I think this is a better tax than income taxes because it taxes consumption, not labor (although if you do work to add value this does get taxed).
Which is true no matter if the tax rate is 1% or 75%
> He could be taxed at 99.9 percent and still have millions left over
I realize this is hyperbole but do realize that no 99.9% tax would be complied with
> tax on every dollar over $100 million in profits they earn anywhere in the world
oh the American hubris, so lost in the goal of catering to their constituents that they think this institution has a valid claim on assets, and income. Lets take a cut of everyone's productivity IN A MORE FAIR WAY crowd cheers.
But alas, the US rule of law makes it secure for you to do business and these corporations benefit from this society and use its services - but thats also true whether the tax is 1% of 75%, so it isn't really an argument
> article shows graphs about tax rebates
Article doesn't talk about how the corporations used tax rebates at all. It talks about the outcome of paying no tax, talks about all these proposals, and none of the proposals talk about tax rebates. Even the most ambitious proposal here would probably not effect how these corporations operate. Are people - I dare say - stupid? Is this a mass reading comprehension issue?
It is interesting that people who can simply read can play tax games like this for another 100 years before anyone catches on.
It is probably the case that profitable companies pay too little in tax, but articles like this are misleading as hell.
Corporations ultimately distribute their profits to actual people. Those people will pay tax on that income.
It isnt automatically obvious that corporations should pay any taxes on income (or revenue) until it is distributed to actual people (shareholders and employees). We tax the profit of larger corporations because we can and because we need the tax dollars, not because there is some moral imperative to do it.
BUT there's more to the story.
Not only do they not pay taxes, they also enjoy absurd political power through lobbyists and through being able to pump huge sums of money into politics thanks to the Citizen's United decision.
There is simply too much power in the hands of the corporations. I mean, Amazon literally had dozens of city governments falling over themselves to give up enormous tax goodies and red carpet roll out all for the weak promise of 50000 jobs and an HQ2.
We can means test access to tax loopholes as well.
A flat tax is an idea. It has come up from time to time and failed. There are lobbyists on both sides and both are evil in their own ways.
In the end the elected officials pass laws. Companies pay tax under those laws. The laws have loopholes and those same companies use them.
The. Companies. Are. Not. To. Blame. For. Saving. On. Their. Taxes. Legally. Even if it is a bit unethical while being profitable.
I'd call that a success.
The gripes seem to largely a political issue which I guess is down to the voters as to who they vote in.
Who cares about what Colin Robertson thinks?
Reading these comments, it's apparent most people have no idea how this shit works. I thought here of all places, I wouldn't see people falling into the "I don't understand how progressive tax brackets work" trap.
