You'd never want other companies paying as much tax if they didn't have the profit to back it up. It would bankrupt them.
They do have the profit in that the money they make doing things exceeds the money they spend to do the thing, but though a series of tricks of varying legality and ethics they make it so on paper they do not have "profit" and therefore successfully avoid taxes.
Amazon reported losses for the first 10 years while growing to billions in yearly revenue.
>It would bankrupt them.
It really wouldn't have. While Amazon was growing to dominate retail and putting very many competitors out of business, they were paying 0 corporate taxes. Many companies play these tricks and many people want them to pay fair taxes. If you need to be tax free to break even, you should go bankrupt. Especially in the Fortune 500 region.
IMO corporate tax should be zero, and we tax individual people instead.
Money is taxed (generally) whenever it moves between parties. You paid tax on your income; you give (some of) it to someone else for goods or services - they pay taxes on it again. That's not double taxation, that's how tax works.
Money flows to the corporation. They pay some to employees, who pay tax on their income. They (might) pay some to shareholders, who (might) pay tax on dividends or capital gains. What is left (very simply speaking), the corporation pays tax on as its income.
If the goal of the USA is to force companies to re-shore, wouldn't this be a better way [0] to proceed than inflating the costs of many goods for the consumer? Large corporations appear to have record cash on hand in recent decades, where as consumers hold record debt.
[0] By better, I mean more much likely to achieve the stated goal.
They are taxes on revenue, but with a set of allowed deductions (e.g. labor costs, R&D, capital expenditure, etc. etc.)
Whether you call that a tax on profit or a tax on revenue with business related deductions is really just a matter of perspective.
In reality, there is no objective definition of "a fair share", there is only the intent expressed in the tax code (and people of course argue over what the intent "really is"). If people and/or corps. are paying taxes following that intent, then for all practical purposes, they are paying their "fair share".
https://economicsobservatory.com/which-taxes-are-best-and-wo...
> "Raising the income tax rate has by far the least negative effect on GDP. In the long run, the simulation shows that the economy pretty much returns to baseline levels, with a slight increase in potential output.
The opposite is true for corporation taxes. A rise in the corporation tax rate leads to a severe and negative initial fall in GDP. Potential output also decreases. This leads to lower productivity, higher inflationary pressures and deteriorating economic circumstances in the long run.
A rise in indirect taxes (such as VAT) does not affect GDP quite as badly as a rise in corporation taxes, but it does affect GDP more substantially than a rise in income taxes. Indirect taxes operate largely through the price channel, increasing the prices of goods. By artificially raising prices, demand is curtailed."
And those effects are unpleasant and make the country more impractical to live in.
Regardless, we got rid of almost all corporate tax, and did that really trickle down to average laborers? Er, no, I think decidedly so.
So when you take cash away from companies and allocate it to the government, you're reducing the overall capital efficiency of the economy a lot.
If you set corporate taxes to 0%, you can still keep the same size government budget if you then tax dividends and executive salaries, except you'll take the money away from less efficient entities (individuals). By the way, this also removes the incentive to deduct all sorts of personal expenses from your business tax, because there isn't any.
And if the government wants to reign in this or that monopoly or incentivize certain activities, it can do so via regulation rather than tax breaks / increases.
Same level of government budget & control, higher economic growth.
It also doesn't mean that 0% is the correct tax rate. This gives pretty strong evidence that during boom (bull) years you should increase the corporate tax rate to prevent the formation of bubbles and then during bane (bear) years you should decrease it to stimulate growth.
I think the easy way to think about this is that individuals tend not to spend all of their income especially at the higher income brackets. While companies are not as severe in that effect. So if you increase taxes on a business in order for the government to pay back debt to an individual who then saves the money instead of consumes it, you're going to decrease overall consumption.
Corporations have many tax avoidance strategies available, and the incentives to activate them based on tax changes, so basically because capital is much freer to move than labour (in most places) one would see the effects suggested in the linked article.
That being said I'm sceptical of this research, does anyone have more detailed links to the simulations on which the analysis is based?
In any case, corporations benefit from airports / roads / ports / law enforcement / defense / education / etc... which are funded by local / federal governments. So corporations have a moral duty for to contribute to these expenses by paying taxes.
(But it is only a moral duty, and not a legal obligation. So corporations end up paying nothing, or next to nothing.)
Why doesn’t the moral obligation rest with the owners of the company, rather than this legal construct that was created on paper?
Corporations aren’t rich people - they are machines that allocate capital and eventually return the money with profit to the owners. They can be owned by rich people, and we can tax them.
When we add taxes on corporations, we introduce compliance issues, accounting and forecasting requirements - all complications that take away money from the actual good things we can get from corporations - jobs in the community, better product development, etc.
Hypothetically with zero corporate tax, if the corporation paid zero salary, zero dividends, and shareholders never sold anything, the corporation could amass ridiculous amounts of untaxed wealth. But this never seems to happen.
I mean personal income taxes, plus capital gains taxes, taxes on the individual -- I am in favor of; not on the corporate entity.
And I really don’t think the EU is a model for tax sanity. Look at eliminating loopholes, not squeezing the average Joe even more than they already are. Their shit salary isn’t even keeping up with inflation. But their taxes sure do.
Publicly saying "we paid lots of tax" would be career suicide for a tech CEO.
e.g. They could be highly concentrated in industries where tax accounting tricks are too hard to do effectively.
Berkshire hathaway is famous for not paying dividends and keeping profits and never selling shares, so this makes sense.
Most companies withdraw or reinvest as much profit as possible to reduce this tax.
The 5% is a relative measure against all other corporations in the USA.
Perhaps we need window dressing to make people happy. Stop doing "income" tax and convert it to "payroll" tax. Gov gets the same amount, people can stop complaining about companies not paying tax. But at the end of the day, it's all window dressing.
> On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article.
Hard to imagine someone who invests would have no indirect positions in BRK. Any broad-market ETF would have substantial exposure.
> Amazon annual income taxes for 2024 were $9.265B, a 30.13% increase from 2023. > > https://m.macrotrends.net/stocks/charts/AMZN/amazon/total-pr...
Also, Apple reports paying more than this for the 12 months ending in September 2024: $29.749 billion.
https://www.apple.com/newsroom/pdfs/fy2024-q4/FY24_Q4_Consol...
Direct taxes and indirect taxes.
Indirect taxes.
These are paid by customers on purchase of goods or services. Vat and gst or hst are examples.
For a service provider, or a seller, there is no way to avoid this tax. If you sell something, you HAVE TO COLLECT THIS TAX AND REMIT TO GOVERNMENT.
Direct taxes.
This is whats "income tax".
You sell something, you buy goods to sell, you earn a markup, you subtract expenses and your PBT (profit before tax) is subject to 15-25-30% income tax and you are left with Pat (profit after tax).
Now, usually this Pat is exempt from subsequent tax because the owner gets this money but many jurisdictions now charge taxes on this "income" as well for individuals or other owners
There are creative accounting ways to reduce this PBT but you cant just show $X on your financials and then say I dont owe any income tax..
Income tax is usually calculated on PBT
