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Unlike small businesses and individuals, most S&P 500 companies, like Facebook, pay less in income taxes than the official corporate income tax rate of approxim
by cs702 10y ago
Unlike small businesses and individuals, most S&P 500 companies, like Facebook, pay less in income taxes than the official corporate income tax rate of approximately 35% implies, by doing things like booking profits abroad in specially created subsidiaries domiciled in jurisdictions like Ireland and Singapore, and never repatriating those profits, thereby deferring tax payments forever.
A couple of years ago the NY Times published an eye-opening interactive chart showing the actual tax rates paid by S&P 500 companies: http://www.nytimes.com/interactive/2013/05/25/sunday-review/corporate-taxes.html?_r=0 http://www.nytimes.com/interactive/2013/05/25/sunday-review/... (Related article: http://www.nytimes.com/2013/05/26/opinion/sunday/who-will-crack-the-code.html http://www.nytimes.com/2013/05/26/opinion/sunday/who-will-cr... )
Regardless of whether you think corporate income taxes should be higher or lower, it's dysfunctional to have a system in which large companies and super-wealthy individuals can avoid paying headline tax rates but small companies and individuals don't have a choice.
The IRS, understandably, wants to stop this charade.
- 3327 10y agoSP500 companies don't pay anything while Joe in montana whom gets by with his family on 40K a year pay 35% or whatever the bracket is. law is the law and they are not breaking it but its time the IRS crackdown on this practice.
- tedunangst 10y ago40K pays an effective rate of 11%, in case you were wondering.
- jessaustin 10y agoDoes that vary by e.g. family size?
- tedunangst 10y agoSomewhat. Dependency deduction is relatively small.
- nightski 10y ago11% effective federal, some state taxes, some property taxes, some sales taxes, etc... I'm not saying it is by any means 35% but just quoting 11% is not entirely true.
- eru 10y agoI've read that similarly for individuals American real income tax rates are roughly flat, since richer people tend to make use of more exemptions.
- erdevs 10y agoGreat links and good perspective here. I agree completely that it is unfair that big companies can perform these maneuvers while small-businesses (and even profitable start-ups) would struggle to. There are so many scale-asymmetries in business, but this is a particular egregious modern example.
- adventured 10y agoFacebook paid a 36% income tax rate for Q2 2015 to Q1 2016 (I didn't look up the most recent quarter). $7.31b in income before tax, and $2.64b in income tax. That's very high compared to most of the world. The only other corporations I'm aware of that pay such a high rate, are oil companies like Exxon and Chevron.