"Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."
- Commissioner v. Newman, 159 F.2d 848, 851 (2d Cir. 1947)
Corporations have no moral right to claim that as 'tax paid' in these discussions.
A person earning $X for a company that pays corporate tax would have the same individual tax liability as an individual earning $X for a company that does not pay corporate tax.
If corporations are taxed then there is effectively double taxation. Corporations can only spend the money on business expenses, such as paying people. However when people are paid they are being taxed already.
So our current tax system taxes a corporation if they have excess money they sit on. If they spend the money on productive uses it doesn’t get taxed, but then the people who receive the money get taxed.
So the headline is extremely disingenuous because if Nike had $0 taxable income it’s only because they shifted the taxable income to the CEO’s pay.
That labor income is taxed particularly heavily (compared to generic income, which in turn is taxed extra compared to capital income) is another, and bigger, problem, yes.
It doesn’t mitigate the fact that effectively untaxed corporate returns amount to potentially infinite deferral of taxes on capital accumulation on top of the low rates paid when capital gains are realized.
Corporate retained profits that aren’t passed through to owners for tax purposes should be taxed, with no sheltering or protection, at the maximum marginal personal income tax rate, corporate distributions should be deductible expenses, and capital distributions and gains should be taxed as normal income to the recipient (but, to fairly treat long term gains—as well as irregular non-capital income—asset basis values should be adjusted for inflation and there should be provisions for optional advance recognition of income for tax purposes and optional deferred recognition over a period of years for windfalls. And “payroll taxes” shouldn’t be separate from personal inncome taxes; all incone regardless of source should be taxed for the programs they support and be counted for eligibility purposes (for social security specifically, additional bend points at and points beyond the current maximum should be adopted instead of the income and benefit caps.)
I'm not saying that's the only reason Amazon is successful, but it absolutely played a role. My early shopping with Amazon was always of two varieties - to purchase things I couldn't find elsewhere or to save money on more expensive purchases. Only relatively recently has Amazon become the most convenient way to shop.
Ultimately, though, I'm not sure taxing corporate profits is all that useful. Increasing income taxes for higher earners, giving the estate tax its teeth back, and possibly implementing a wealth tax, will likely give the same (or better) results, while eliminating so much of the waste that goes into creative accounting and keeping cash and income segregated in tax jurisdictions more favorable to the company.
On top of that, I would also be in favor of executive pay caps (expressed as a multiple of the average or median employee salary, or something), which could encourage companies to pay their employees better, or be stuck paying their executives worse. Incentives for reinvesting profits domestically could also help keep companies from hoarding cash.
* Tax avoidance by regular people is overwhelmingly accomplished by doing things that tax law subsidizes because we think they're good - home ownership, saving for retirement, etc. Wealthy people and megacorps tend to avoid tax by moving revenue between countries, leveraging campaign donations to effect beneficial changes to the law, and dragging out tax cases to reach settlements.
* Giant corporations can and do avoid the entirety of their tax burden, but this option is not open to regular wage-earners, because an ad campaign for shoes is considered to be an "investment" and a parent feeding their children is not. Even in the best case (if we pretend that all of the activities used by megacorps to avoid tax are "good" in the sense of contributing to GDP) this has the effect of increasing the tax burden on individuals, because no matter how much Nike contributes to GDP it will never fix a pothole or build a fire station.
* Your complaint about misdirected anger (people being mad at Nike rather than the legislature) is at best a nitpick (most people understand this and are just speaking lazily) and at worst outright false (in that the main reason megacorps pay so little tax is because of lobbying and aggressive legal action by those same megacorps).
Bottom line is that these (tax avoidance by regular wage-earners like the one in the case you cited, and tax avoidance by Nike, Amazon, et al) are not equivalent, and conflating them can serve no purpose other than to justify the sins of the latter with the virtues of the former.
So it's perfectly fine to hate those companies, just as it's perfectly fine to hate Intuit for lobbying to ensure we have a hard time filing our taxes.
Nike is a publicly traded company whose sole purpose of existence is to create profits for its shareholders.
The people who write the tax laws are democratically elected officials whose, at least on paper, sole purpose as an official is to create laws like tax laws that benefit their constituents.
And yet, people somehow see the problem here as Nike trying to do what's in their best interest and not the politician who made it totally legal for them to do what they are doing.
How can you tell what its "purpose" is? For example, Nike's marketing suggests its purpose is manufacturing athletic equipment or promoting youth sports.
That's how I can tell.
I'm angry at both too but it should be the inverse proportion
I think it's obvious that runaway capitalism does not work, and we need something different,but as always once something has been done once it quickly becomes the status quo
I elected my congressman. I expect him/her not to give in to the lobbying
If you really want a fair, progressive tax system, stop taxing corporations, and increase dividend and capital gains* tax rates back to ordinary income tax rates. Then for the first time the little old lady in retirement would pay low rates and the rich CEO would pay much higher rates.
Under the current system when the retiree in California living off $30k in annual retirement income gets a dividend a total of roughly 38% is lost to taxes (Federal Corporate Capital Gains, Federal Dividend tax, State Corporate Income Tax, & State Personal Income Tax). The CA CEO making a million dollars a year loses roughly 47% to taxes on that same dividend.
So that's what our progressive income tax system was intended for, to have the poorest paying 38% and the richest 47%? And all to discourage savings and investment?
* Now you'd have to index capital gains for inflation if you reverted them to ordinary income tax rates. That's the reason we have a separate capital gains rate. Taxing someone on a 100% gain in their stock value when inflation was 100% during the same period would be taxing imaginary gains.
No corporation pays (or has ever paid) a dollar of tax on money spent for investment in the business. Corporate taxes, by design, only affect those dollars the corporation has chosen NOT to invest in the business.
The taxed money does get invested, doesn't it? Just not by the company.
1) They can be reinvested back into the business. 2) They can be held by the business pending future investment opportunities. 3) They can be dividended back to the shareholders.
Taxing profits means less profits remain to reinvest (#1), and less remain to be held in (#2) bank accounts (which are lent out by banks for investments), and less can be dividended to investors (#3) which reduces investor returns and lower returns means less motivation to reinvest in businesses.
"Following the law" is something that's very fungible when you're rich.
Taxes are passed through to consumers anyway; Corporations don't pay taxes - they collect them from the customer.
However the new benefit for companies is that when the lose money, instead of having to use the loss to offset future profits, they can also use it to offset past profits. Offsetting past income taxed at 35% (from before the Trump tax cuts) is more valuable than offsetting future income which in theory will be taxed at 21%.
Let's think about taxes in other areas that companies like nike generates: 1. Sales tax on goods sold 2. Income taxes on employees pay 3. Capital gain taxes on stock sold... At ever increasing prices because their earnings are higher.
All I'm saying is it's complicated. It's not a simple math. Lowering corporate taxes might stimulate growth and taxes in other areas.
We should keep corporate income tax 0% forever, and take the tax revenue via capital gains (or dividends) instead. That's a lot simpler, fairer, and stops funneling money into the lawyers devising corporate taxation strategies that make the tax useless in the first place.
A combination of the Trump corporate tax cut and rebates on past losses in the CARES act, as well as other existing rebates, are reducing taxes that many companies have to pay this year, in some cases all the way to a negative effective rate.
Increases in share prices have also pushed up CEO pay, since CEOs receive a lot of stock as part of their total comp.
That'll for sure plug the trillions extra we spent in the past 12 months, the $2 trillion laughble infrastructure plan that does nothing, our forever trillion dollar entitlement deficits and hundreds of billions in unnecessary military spending. We better immediately get on raising corporate income taxes on every business - which is what this article is ideologically timed to argue in favor of.
And then a lot more of our major corporations will flee the US, as they were beginning to prior to bringing the corporate income tax down to a sane level that is competitive. They'll take jobs and R&D with them, while making the rest of the world even more competitive; see: Medtronic (and Pfizer nearly joined them). So then you'll have to strap another layer of authoritarianism onto the increasingly unfree US and say that companies are no longer allowed to leave (de facto building walls to keep resources from fleeing bad policy and decades of wildly irrational spending).
The only place the US is going to find a lot more income tax, is from the middle class tax bracket and those above it. And that still won't come close to dealing with the deficits. Those brackets are where every other welfare state on the planet finds their income tax revenue, the US is one of the few exceptions that doesn't drown its middle class in taxes, and if we're going to do that we better give those people healthcare in exchange among other things (like nice infrastructure, high-speed rail, and so on). But we won't do that, we'll drown everyone in taxes and give them nothing further in return, we'll just keep running our worst-in-the-world welfare state instead, as we have been.