4 ms·

Every time I see a headline about outrage over corporations not paying taxes, my first thought is, "How much taxes did employees pay?" It's not clear to me why

by cle 8y ago

Every time I see a headline about outrage over corporations not paying taxes, my first thought is, "How much taxes did employees pay?" It's not clear to me why a non-human should be paying taxes, when all of the humans working at that company pay a ton of taxes (especially the tech side of Amazon, where employees pay taxes on their high salaries and on their RSUs). I'm definitely not an expert in corporate finance or taxes, so I would be grateful if somebody could explain to me why I should be outraged by this.

fizx 8y ago
Economics 101 says that governments can discourage activities through taxing them. Most people would argue that society should rather give people more income than corporations larger profits. Therefore, corporations should be taxed more, and income taxed less.
- esoterica 8y ago
  Corporate profits get redistributed to individuals through dividends and buybacks, so taxing corporations is just taxing the income of individuals indirectly.
  - chii 8y ago
    Those individuals who gain income from investments ought to be wealthier, and therefore, more able to handle the higher taxation. Income deriving from wages are currently taxed at a rate that's higher than income from investments, and most people would agree that this is an injustice. Of course, those who make and pass laws are heavily connected with those who make their income via investments, and therefore, change is unlikely to happen.
    - conanbatt 8y ago
      Economics is not accounting: who signs the check is not who pays for it. The concept is called "economic incidence" and its why corp taxes have consensus to be reduced in the economist community.
  - everdev 8y ago
    > taxing corporations is just taxing the income of individuals indirectly Or taxing their income twice
  - smt88 8y ago
    > * taxing corporations is just taxing the income of individuals indirectly* Yes, but it matters which individuals you end up taxing and what they did to earn that income. Amazon's employees, who earned their income by going to work and creating value, should bear less of the tax burden than people who are receiving money from dividends and buybacks because all they did was have enough money to invest it.
  - pmiller2 8y ago
    Replace “individuals” by “shareholders,” or even “capitalists,” if you want to be more accurate. Most “individuals” in the US are wage slaves with little or no savings, much less investments. Those people benefit not a whit by Amazon passing on tax savings to shareholders.
  - sundaeofshock 8y ago
    Dividends and buybacks go to people who did not do the work that generated the original revenue. The actual workers of the company should derive the benefit of their own labor, not some random shareholder.
- ianai 8y ago
  Or tax people and corporations the same way. Tax on the left overs after the costs are met...
- conanbatt 8y ago
  Corporations are not people. The tax is paid by investors, workers or consumers.
- panarky 8y ago
  The article is not about whether corporate taxation in general is good or bad. It's about Amazon paying $0 taxes on $11B in profits while other corporations continue to pay taxes.
buzzdenver 8y ago
In many regards corporations are people, so you could extend your logic and ask why should I pay taxes, when almost everything I spend money on has a sales tax, I pay real estate tax, etc...
JamesBarney 8y ago
One reason is inventivize certain corporate behavior and punish others.
jpgvm 8y ago
0 corporate tax rate means you have to generate the income in other ways, correct. Taxing corporations is effectively a way of taxing shareholders so if you want to remove the corporate tax rate you need to tax capital gains better. If you want to make it "fair" then treat capital gains as income. That will never happen in the US though.
- conanbatt 8y ago
  > Taxing corporations is effectively a way of taxing shareholders so if you want to remove the corporate tax rate you need to tax capital gains better I disagree with this statement. It is NOT an effective way to tax shareholders. It depends on the economic incidence of the tax on the specific company. For example, companies that can outsource (like tech) have a huge competitive leg over companies that are localized and cant do the same shennanigans. Investors can shield themselves from the cost of the corpo tax buy buying low corp tax holdings. Now workers and consumers of high-corp taxes dont have the same flexibility. You are correct in saying it would be better to get capital gains tax. Its ridicolous fundamentally that income tax is so much higher at any level than capital tax: it should have same brackets, for the mere distorsion of masking one as the other.
bengotow 8y ago
I think this is a fine point, but the issue here is separate from whether you agree with the underlying idea of corporate taxes. They exist, and Amazon is exploiting the rules to circumvent the intention of the laws authors. There are many more honest companies out there that pay BOTH corporate taxes and personal income taxes as the system intends, and having the star corporations of the USA undermining the law like this makes it hard to justify everyone else playing their part.
everdev 8y ago
Yeah, it's called double taxation: https://www.investopedia.com/terms/d/double_taxation.asp https://www.investopedia.com/terms/d/double_taxation.asp If you own a C-Corp, you pay taxes on the profits of the business, plus whatever you pay yourself. Not too surprising that businesses use every loophole to not pay taxes. Individuals have fewer loopholes but they still do exist.
tfehring 8y ago
Employees' taxes pay for government services that they use. Separately from that, Amazon as an entity [0] is dependent on government services - it ships goods using public roads and airports, its data centers rely on the public electricity grid, its buildings and shipping routes are protected by the $600 bn/year US military, etc. Amazon's shareholders - some of whom aren't US citizens and don't individually pay tax to the US government - shouldn't be able to take advantage of those resources to generate profit without helping to pay for them. [0] Replace "Amazon as an entity" with "Amazon's shareholders" or "the resources that Amazon's shareholders own and use to generate profit" if you prefer.
incadenza 8y ago
You can come down on this either way, but part of the outrage is smaller businesses without access to the same resources most likely did pay taxes.
- analog31 8y ago
  Indeed. Corporate tax is paid by the shareholders, as it comes out of the value of the business. So, why do the shareholders of Amazon deserve to pay less tax than the shareholder of my small business?
  - someguydave 8y ago
    Indeed the recent corporate tax cuts didn't go nearly far enough. Cutting them to zero is pretty close to a free lunch in terms of economic growth, from what I've read.
- conanbatt 8y ago
  Yes, and I believe that to resolve that morally and efficiently, the government should lower taxes on all. Its not amazon thats getting the advantage, its the government that can't excercise its power over it.
packet_nerd 8y ago
From a division of labor perspective, it seems like it'd be better to tax the corporation, and not the individual employees. I spent most of today working on my taxes, and will need to do the same tomorrow to get it all done. Not sure how many hours the average person spends, but I imagine I'm typical. Multiply that time by every single employee, and that's a huge amount of time! A specialist in the company's tax department can probably accomplish the same amount of work as many people like me. (Yes, I know they already hire tax specialists, and I know I have to do my taxes after hours, so it's "free" from the company's perspective, but at the level of society as a whole, it seems like it'd be more efficient to tax the money just once).

by cle 8y ago

fizx 8y ago

Economics 101 says that governments can discourage activities through taxing them. Most people would argue that society should rather give people more income than corporations larger profits. Therefore, corporations should be taxed more, and income taxed less.

esoterica 8y ago
Corporate profits get redistributed to individuals through dividends and buybacks, so taxing corporations is just taxing the income of individuals indirectly.
- chii 8y ago
  Those individuals who gain income from investments ought to be wealthier, and therefore, more able to handle the higher taxation. Income deriving from wages are currently taxed at a rate that's higher than income from investments, and most people would agree that this is an injustice. Of course, those who make and pass laws are heavily connected with those who make their income via investments, and therefore, change is unlikely to happen.
  - conanbatt 8y ago
    Economics is not accounting: who signs the check is not who pays for it. The concept is called "economic incidence" and its why corp taxes have consensus to be reduced in the economist community.
- everdev 8y ago
  > taxing corporations is just taxing the income of individuals indirectly Or taxing their income twice
- smt88 8y ago
  > * taxing corporations is just taxing the income of individuals indirectly* Yes, but it matters which individuals you end up taxing and what they did to earn that income. Amazon's employees, who earned their income by going to work and creating value, should bear less of the tax burden than people who are receiving money from dividends and buybacks because all they did was have enough money to invest it.
- pmiller2 8y ago
  Replace “individuals” by “shareholders,” or even “capitalists,” if you want to be more accurate. Most “individuals” in the US are wage slaves with little or no savings, much less investments. Those people benefit not a whit by Amazon passing on tax savings to shareholders.
- sundaeofshock 8y ago
  Dividends and buybacks go to people who did not do the work that generated the original revenue. The actual workers of the company should derive the benefit of their own labor, not some random shareholder.
ianai 8y ago
Or tax people and corporations the same way. Tax on the left overs after the costs are met...
conanbatt 8y ago
Corporations are not people. The tax is paid by investors, workers or consumers.
panarky 8y ago
The article is not about whether corporate taxation in general is good or bad. It's about Amazon paying $0 taxes on $11B in profits while other corporations continue to pay taxes.

buzzdenver 8y ago

In many regards corporations are people, so you could extend your logic and ask why should I pay taxes, when almost everything I spend money on has a sales tax, I pay real estate tax, etc...

JamesBarney 8y ago

One reason is inventivize certain corporate behavior and punish others.

jpgvm 8y ago

0 corporate tax rate means you have to generate the income in other ways, correct. Taxing corporations is effectively a way of taxing shareholders so if you want to remove the corporate tax rate you need to tax capital gains better. If you want to make it "fair" then treat capital gains as income. That will never happen in the US though.

conanbatt 8y ago
> Taxing corporations is effectively a way of taxing shareholders so if you want to remove the corporate tax rate you need to tax capital gains better I disagree with this statement. It is NOT an effective way to tax shareholders. It depends on the economic incidence of the tax on the specific company. For example, companies that can outsource (like tech) have a huge competitive leg over companies that are localized and cant do the same shennanigans. Investors can shield themselves from the cost of the corpo tax buy buying low corp tax holdings. Now workers and consumers of high-corp taxes dont have the same flexibility. You are correct in saying it would be better to get capital gains tax. Its ridicolous fundamentally that income tax is so much higher at any level than capital tax: it should have same brackets, for the mere distorsion of masking one as the other.

bengotow 8y ago

I think this is a fine point, but the issue here is separate from whether you agree with the underlying idea of corporate taxes. They exist, and Amazon is exploiting the rules to circumvent the intention of the laws authors. There are many more honest companies out there that pay BOTH corporate taxes and personal income taxes as the system intends, and having the star corporations of the USA undermining the law like this makes it hard to justify everyone else playing their part.

everdev 8y ago

Yeah, it's called double taxation: https://www.investopedia.com/terms/d/double_taxation.asp https://www.investopedia.com/terms/d/double_taxation.asp If you own a C-Corp, you pay taxes on the profits of the business, plus whatever you pay yourself. Not too surprising that businesses use every loophole to not pay taxes. Individuals have fewer loopholes but they still do exist.

tfehring 8y ago

Employees' taxes pay for government services that they use. Separately from that, Amazon as an entity [0] is dependent on government services - it ships goods using public roads and airports, its data centers rely on the public electricity grid, its buildings and shipping routes are protected by the $600 bn/year US military, etc. Amazon's shareholders - some of whom aren't US citizens and don't individually pay tax to the US government - shouldn't be able to take advantage of those resources to generate profit without helping to pay for them. [0] Replace "Amazon as an entity" with "Amazon's shareholders" or "the resources that Amazon's shareholders own and use to generate profit" if you prefer.

incadenza 8y ago

You can come down on this either way, but part of the outrage is smaller businesses without access to the same resources most likely did pay taxes.

analog31 8y ago
Indeed. Corporate tax is paid by the shareholders, as it comes out of the value of the business. So, why do the shareholders of Amazon deserve to pay less tax than the shareholder of my small business?
- someguydave 8y ago
  Indeed the recent corporate tax cuts didn't go nearly far enough. Cutting them to zero is pretty close to a free lunch in terms of economic growth, from what I've read.
conanbatt 8y ago
Yes, and I believe that to resolve that morally and efficiently, the government should lower taxes on all. Its not amazon thats getting the advantage, its the government that can't excercise its power over it.

packet_nerd 8y ago

From a division of labor perspective, it seems like it'd be better to tax the corporation, and not the individual employees. I spent most of today working on my taxes, and will need to do the same tomorrow to get it all done. Not sure how many hours the average person spends, but I imagine I'm typical. Multiply that time by every single employee, and that's a huge amount of time! A specialist in the company's tax department can probably accomplish the same amount of work as many people like me. (Yes, I know they already hire tax specialists, and I know I have to do my taxes after hours, so it's "free" from the company's perspective, but at the level of society as a whole, it seems like it'd be more efficient to tax the money just once).