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Biggest companies pay the least tax, shows new research

135 points by grecy 7y ago

erentz 7y ago
Consolidation of our economy has been disastrous. Is this a good argument for a straight revenue tax on companies over a certain market cap? Incentivize then to break themselves up? E.g. companies over $100b pay a 5% revenue tax. Over $500b pay a 10% revenue tax.
- Guest42 7y ago
  This structure seems to perpetuate the cycle.
  - erentz 7y ago
    True it does. Maybe it’s useful as a final tool to encourage break up such as now, when whatever tools were meant to be discouraging consolidation fails. Saves years of hearings and court battles trying to use legal means to do it. Still need to strong regulatory oversight to prevent anti competitive behavior and killer acquisitions etc.
- thaumasiotes 7y ago
  > Is this a good argument for a straight revenue tax on companies over a certain market cap? Incentivize then to break themselves up? This exists for many giant companies; it's called "sales tax". (Of course, sales taxes apply equally to small companies, so the incentive to break yourself up isn't there.)
  - klyrs 7y ago
    Sales tax is paid by the consumer.
    - thaumasiotes 7y ago
      As a matter of economics, that sentence is nonsense. Tax incidence is determined by elasticity of supply and demand, and has nothing to do with the logistics of which person gives money to which other person. This is the perspective that matters; you can easily observe for yourself that two taxes on gross revenue will have exactly the same effects if the only difference between them is that one is called "sales tax" and one is called "revenue tax". As a matter of logistics, your claim isn't nonsense. But it is quite obviously false. The consumer gives money to the merchant. The merchant gives money to the government. As a matter of legislation, it is, once again, plainly false. Here's the beginning of the California law imposing the state sales tax ( https://www.cdtfa.ca.gov/lawguides/vol1/sutl/6051.html https://www.cdtfa.ca.gov/lawguides/vol1/sutl/6051.html ): > For the privilege of selling tangible personal property at retail a tax is hereby imposed upon all retailers at the rate of 2½ percent of the gross receipts of any retailer (emphasis mine) And the law _must_ be stated that way, because if a vendor is selling something for $100 + sales tax, the customer pays $100 ("no tax"), and the vendor accepts it, the customer hasn't violated the law. The vendor is allowed to charge whatever price he wants. It's the vendor's responsibility to pay tax on the $100 of gross receipts he just received. There is no framework in which "sales tax is paid by the consumer" is true. What were you thinking?
      - SilasX 7y ago
        I read the parent as saying "sales tax is incident on the consumer" which is mostly true, and not refuted by anything you posted. Why do you think sales tax can't be incident on the consumer as you imply here: >There is no framework in which "sales tax is paid by the consumer" is true.
        thaumasiotes 7y ago
        I'm reading klyrs' comment that way because he responded to my comment. I pointed out that many giant companies already face a straight tax on their revenue, called "sales tax". In order to make klyrs' response relevant, I'm interpreting it as the nonsensical objection that sales tax is different because it is a tax on "consumers", while a revenue tax would be a tax on "companies". The objection is nonsensical because, as I point out in my reply, you're collecting the same money from the same people. If you want to interpret him as commenting that the ratio of elasticity of demand to elasticity of supply is very low, you then need to explain how that observation fit into the conversation. > Why do you think sales tax can't be incident on the consumer as you imply here: >> There is no framework in which "sales tax is paid by the consumer" is true. In the tax incidence framework, in order for the tax to fall entirely on the consumer, elasticity of demand would need to be 0. The easy point is that this is never the case. But the better point is that in this framework, you don't assign taxes to a single party, and therefore "sales tax is paid by the consumer" is a conceptual error.
  - deleted 7y ago
    [deleted]
- missedthecue 7y ago
  "Consolidation of our economy has been disastrous." Disastrous? Were we better off in the days of Sears and Barnes and Noble? Companies like Walmart with $500 billion in revenue have margins of about 3%. A 10% revenue tax must increase prices, or Walmart would lose money on each transaction. What you're promoting is a tariff on goods bought from big companies. Tariffs are bad. They are regressive and anti-consumer
  - deleted 7y ago
    [deleted]
  - Supermancho 7y ago
    > They are regressive and anti-consumer Thats a perspective, not a universal fact. They are effective and useful from a political perspective, which may be beneficial to consumers long term. Alternate levers being circumstantial.
    - missedthecue 7y ago
      It's a fact that they are regressive. That is in no way an opinion. Someone making $1 million per year and someone making $20,000 per year both pay the same tariff. There is no discrimination between earners like there is with progressive taxes. They are anti-consumer in the sense that they raise prices without offering more or better goods in return. Sure you may try to muscle in some roundabout logic that concludes that tariffs will punish the consumer into using their money the way you want them to, such as buying overpriced goods from domestic producers, but history has shown again and again that only free trade produces net benefits. Tariffs just obsfucate the damage. For instance, the EU guarantees European farmers a certain minimum price for agricultural goods. This price is 200% above market price. The effect is that every European consumer has reduced purchasing power because they must pay 200% more than they need to for food, African farmers are kept in poverty because they can't sell their goods to EU consumers, and the only people who win is the extremely small percentage of people in the EU who farm. In this way, they are factually anti consumer.
      - 7y ago
- twblalock 7y ago
  Large companies are handling the fallout from the pandemic better than most other American institutions, and we would be a lot worse off dealing with the coronavirus pandemic if they had been broken up. For example, most of the US population is currently under lockdown, most local businesses are closed, and households are dependent on delivery services for many products. A weak, broken-up set of former Amazon companies would have less capacity to provide such services, or even to survive.
  - Retric 7y ago
    It’s not size but industry that’s determining who’s hurt and who hardly notices. Starbucks and United Airlines have been hit much harder than many small tech companies that have seen minimal impact.
    - twblalock 7y ago
      No company of any size can do well when the government orders it to stop doing business. It doesn't tell us much about small versus big. Most Starbucks stores were ordered to close by the government, and the government has advised against (and in some cases banned) air travel. Of course those companies are suffering. Furthermore, I'd argue that Starbucks is more likely to survive this than local cafe chains, and United is more likely to survive than regional discount airlines. Smaller tech companies are already seeing the impact from the pandemic, and they will soon see more impact. Tech employees can work from home, so the companies are still producing things. However, most tech companies will have dramatic drops in revenue for the next few quarters and larger ones are more likely to be able to stick it out until the economy recovers.
      - Retric 7y ago
        To clarify, it’s not just government orders in play. Size can have some positive knock on effects, but it’s far less import than often portrayed. High end/home toilet paper is in increased demand because people are using fewer public toilets which use the cheaper bulk toilet paper. Inversely, Starbucks voluntarily closed many stores because they served areas like collages that where going to be devoid of people. So, while there is plenty of spin around both topics the reality is significantly different from how things things are being reported.
whatshisface 7y ago
Amazon pays little tax because of all the losses it posts. One potential explanation for this might be that small cap companies have higher profits than large caps. If that was true they would pay more tax collectively. I have heard before that small caps tend to grow more but are higher-risk, and since there is a selection bias against companies that collapsed last year, I imagine you would find that of the companies paying tax this season small caps would be showing more growth. So, the causal chain I'm proposing would be: Small caps have higher variance than large caps + Companies that go out of business aren't included in statistics -> Year-end statistics show small caps doing better than large caps. Then, Companies that do better on paper pay more tax + Small-caps do better on paper at year end -> small caps pay more tax than large caps.
aantix 7y ago
Big companies have more levers to pull. I’m not sure why everyone gets hung up on the tax number. Employing people, providing service, all contribute. And if a state sees a deal where they can keep X citizens busy, contributing and Y services for their people, that’s part of the aggregate result. “Taxes” is one of many chips on the table for the deal making. If there’s not a net gain, then don’t take the deal.
- thinkingkong 7y ago
  That's interesting logic. In aggregate small businesses employ more people, so why are they paying effective higher rates? Because the label of the employment is from the a larger entity? Why not all just band together and create an even larger company of every SMB and pay 0 taxes. Free money!
  - aantix 7y ago
    They could. But with such a large, diverse pool of companies, I highly doubt they could get their interests to align. But it’s not uncommon to see lobby groups for specific industries lobbying for favorable legislation.
    - mLuby 7y ago
      I bet they could get their interests to align behind zero taxes. So something else is at play.
      - kube-system 7y ago
        Yes, the fact that there's not much tax efficiencies to gain out of cramming Jim's Car Wash and Susan's Bakery into one legal entity, and a lot to lose out of it. Now, when the companies are such that it makes some amount of sense to merge them together, that often does happen, and it can lead to tax efficiencies. https://www.pwc.com/th/en/deals/transaction.html https://www.pwc.com/th/en/deals/transaction.html > M&A transactions provide unique opportunities to improve tax efficiency.
listenallyall 7y ago
Why is this a surprise to anyone? The bigger the company, the more incentive it has to create a tax-avoidance strategy, and the more resources it has to do so successfully. Avoiding taxes by legal means, is neither illegal nor immoral.
- grecy 7y ago
  It's a clear indicator we need to change the laws so it isn't legal.
  - unreal37 7y ago
    It's impossible. We live in a global world. How can the US enact a law that a company in Seychelles is forced to follow?
    - grecy 7y ago
      They could easily make laws about how much tax a company has to pay in the US if it wants to do business and earn revenue/profits in the US, regardless of where it's headquartered.
    - opless 7y ago
      Well I don't know about the US, but the UK enacted new legislation to stop a citizen doing certain (abhorrent) things in countries where it was quite legal to do so. This was after a huge media outrage about a certain pop star allegedly being a sexual predator in countries where it was legal. The EU also forced those cookie notices on pages and GPDR about movement of data globally. Being a holocaust denier will get you arrested in Germany, even if you broke that law in another country. That's just three examples off the top of my head.
- mLuby 7y ago
  Legality doesn't imply morality, as in this case where avoiding taxes is legal but immoral.
  - deleted 7y ago
projektfu 7y ago
The simple solution is presented here: https://cepr.net/book/rigged-how-globalization-and-the-rules-of-the-modern-economy-were-structured-to-make-the-rich-richer/ https://cepr.net/book/rigged-how-globalization-and-the-rules... Select a corporate tax rate and require nonvoting shares given to a government fund equivalent to the tax rate percentage of the company. If you buy back shares, you buy back the same percent in government shares. If you give a dividend, it goes to the government fund in the same proportion. If you issue new shares to your executives, the government participates at its rate. For companies like Abbott which return a lot of profits, the people benefit the same way. For companies like amazon, the people continue to own shares in a company that investors think will eventually return those profits. A large part of trying to hide profits will go away because the shareholders will be incentivized to have proper accounting and the public will benefit.
- jariel 7y ago
  I don't think that solves anything, it creates a whole host of problems, and of course, the notion of the government taking a % ownership of every business is a kind of ideology I don't need to describe. Governments don't want a stake in future profits, they want to tax income. Dividends payouts are taxed 'again' at the time of payout. Share buybacks are taxed 'again' as capital gains and FYI that has nothing to do with the corporate tax rate, that's part of personal income. Your Amazon example is flawed: If Amazon is worth $100B it's because people think they will eventually have $100B in the bank. Or a financial equivalent of cash flows. Either way, it means people assume profits. If that's true, then the taxable income will also be there, in which case they'll have to make $150B in income, then pay tax THEN have the $100B in the bank (or financial equivalent). So the government 'taking an equity stake' at formation, and sitting on the stock is moot: they already get a 'stake' of the income stream that forms the basis of that valuation. That Amazon pays no tax is not such a bad thing - it means they're making $0, which means the surpluses are going to their suppliers, customers or employees etc. All of whom are taxed for those surpluses (except for consumers).
  - projektfu 7y ago
    I have absolutely no reason to invest in Amazon if I think that there will never be a profit share in it for me. Amazon could sit on a lot of cash and then eventually spend it all down, go bankrupt, and leave the shareholder with nothing. If I figured that would be the case, then I would be only speculating that I could get out of it before that happened. Speculation is not an investment. On the other hand, if the share price has increased because the company is more valuable, then the government shares have also increased. If there is, in the future, a 1% quarterly dividend, then the government will partake in a 1% dividend on its higher-valued shares as well. The federal government doesn't need to pull in all the money now. It has a large ability to borrow where it needs and corporate taxes make only a fraction of tax revenue. The current problem is that, in theory, it is worth it for a company to pay accountants and lawyers $99M to reduce the tax bill $100M. Economists call that waste. I'm pretty sure just about everyone else thinks it's problematic to create industries that get rich off of nothing but moving money around to avoid paying taxes. The whole problem is that the public is not getting a "stake" of the income stream. The law says we do but in practice we do not because the money is being very cleverly moved around. Arguing that there should be no corporate income tax is a different thing. This discussion is about how to collect such a tax.
unreal37 7y ago
Perhaps the difference is not in the "donations to politicians" that the cynical like to say, but in the "ability to afford expensive tax consultants." Small companies pay what the government tells them to pay. Big companies hire someone who figures they can save 5% on their taxes by having their factory in Tennessee instead of Kentucky. It's just the ability (and scale) to afford to employ any advanced tax strategies. I have friends who live in Hawaii. A high tax state. Another friend moved to Puerto Rico, a low tax one. You don't have to be big to save on taxes.
- harimau777 7y ago
  I think that one issue is that there is a significant difference in the ability of a corporation to shop around for favorable differences compared to an individual or small business.
  - unreal37 7y ago
    Yeah absolutely. We rarely think that countries are "competitive" with each other when it comes to tax deals and tax rates. But they are. Just like people shopping around for the best deal on a car, why do we expect companies to NOT shop around for the best deal on taxes?
listsfrin 7y ago
The same is true for rich people: you can afford to buy in bulk, to take advantage of special promotions. And sometimes, even when spending more money on products one gets to have better quality on the long run.
- oneVoiceOnHN 7y ago
  These aren't remotely related. Bulk have risks like spoilage or require additional resources like real estate. Or that a quality product isn't really quality. Taxes are immaterial.
opless 7y ago
In other news, sky is blue, grass is green, and everything you do online is monitored.
Consultant32452 7y ago
It's getting tiresome how such seemingly banal headlines are pushing a narrative. Compare this alternative headline: "Small companies pay the most taxes, shows new research." See how that subtle change creates a whole different implication? Written this new way, the feeling is we need to solve the problem of high taxes on small business.
- Retric 7y ago
  That’s not nessisarily true from the headline. It could be midsized companies paying the most tax, or midsized and small companies paying the same rate.
  - Consultant32452 7y ago
    It's interesting that your takeaway is that my totally made up hypothetical alternative headline might not be factually correct.
    - Retric 7y ago
      Actually, my first thought was that I got the same response from reading both headlines. It’s only after thinking a bit that I realized they had different meanings. Though that’s just me, I think of the tax burden as a zero sum game. To get X revenue today from Y people it’s pure tradeoffs. Long term that’s slightly less true.
    - skinnymuch 7y ago
      No. Initially I too thought your made up headline and the actual were essentially the same to me. But parent has a point. They actually mean different things. Your headline wouldn’t mean Fortune 500/Inc 5000 etc companies pay the most. They aren’t the same.
- jlarocco 7y ago
  Any headline is going to be pushing some kind of narrative. Personally, I'd like if they highlighted the government's role, with something like, "Government taxes large companies less than small companies, shows new research."
dboreham 7y ago
Imho "companies" should not pay income tax (they can pay sales taxes, asset taxes like property tax, payroll taxes). Companies should be able to retain profits to either reinvest in their business or to save for a downturn. Taxes should be paid by the recipient (shareholders, management) on distributed profits. I suspect the only reason we have corporate income tax at all is because clever financial engineers find ways to make what is really personal income to shareholders and management look like retained corporate income. (I would add "windfall taxes" to the set of ok corporate taxes since those aim to redress a monopoly profit situation).
- nouveaux 7y ago
  "Companies should be able to retain profits to either reinvest in their business or to save for a downturn." Sure except profits end up as dividends or stock buy back. Companies end up with limited cash and will still need a bail out.
  - nightski 7y ago
    Sure, if you eliminate corporate income taxes you'd need to increase capital gains taxes as well. But I am having a hard time seeing the disadvantage of that (although I'm not an expert by any means).
- goldcd 7y ago
  Agreed What f&cks up the system is differentiating money you've made by buying shares, from money you've made by working. Owning shares isn't contributing to GDP - working is. For some horrifically f&cked up reason (lobbying) the former is taxed less than the latter.
- dennis_jeeves 7y ago
  I would go even further and say that any form of income tax including personal taxes is very regressive. One could make a case for some forms of taxation, example a a carbon tax if one pollutes. Taxes should be directly proportional to what one consumes, not what one earns.
ThomPete 7y ago
their employees are paying plenty though.
WalterBright 7y ago
This reminds me of the blaring headlines a few years ago that claimed 40% of US corporations paid no income tax. The headlines were true, but not mentioned was that 40% of US corporations lost money that year. Income tax is based on profits, not gross revenue, not market cap.
- erichocean 7y ago
  As a private citizen, I took would like to only pay "income tax" on my profits—the amount of cash I have left over at the end of the year. Corporations are people too! /sarc, but only slightly...
  - cheez 7y ago
    The secret is that you should incorporate yourself as a business.
  - afiori 7y ago
    The negative side of that would be to keep a 2-way accounting of all the expenses you made in the entire year.
- cornishpixels 7y ago
  "91 profitable Fortune 500 companies paid $0 in taxes in 2018 under Trump's tax law" https://finance.yahoo.com/news/trump-tax-law-fortune-500-companies-pay-0-taxes-2018-213157006.html https://finance.yahoo.com/news/trump-tax-law-fortune-500-com... "The 379 profitable members of the Fortune 500 paid an effective federal tax rate of 11.3% last year" https://www.axios.com/fortune-500-companies-corporate-income-tax-7a7d3d36-0c48-4098-b352-deb93be1e4c0.html https://www.axios.com/fortune-500-companies-corporate-income... Amazon, in particular, made over $10b in 2018, but the US government paid them over $100m. ETA: And for comparison, I made $36k last year (missed a lot of time for health reasons) with a family of 3 (= negative profit, I'm still in debt from it!), and my tax rate is ~8%.
  - WalterBright 7y ago
    The tax code allows for losses from previous years to offset taxable income in the current year. It's a form of income averaging (which is allowed for personal income tax computation in some cases). Income averaging is for companies that naturally have interspersed fat and lean years. For example, Boeing may invest enormous amounts of money in new aircraft development one year and make a bunch of money off of it the next year. > The 379 profitable members of the Fortune 500 paid an effective federal tax rate of 11.3% last year Since the tax rate is graduated, a technically "profitable" corporation who made only $10 in profit would pay 0% in income tax. This is why such statistics, while pedantically correct, are usually nonsense because they deliberately omit such information.
cornishpixels 7y ago
No, really? I would've never guessed.
mbar84 7y ago
Companies. Don't. Exist. We made these things up because they are a convenient and useful abstraction, but let's not forget that they are a legal fiction. So guess what you call a company that pays taxes? Fiction! Companies can't pay taxes because they don't exist, only people can pay taxes. So when you tax a company, it ultimately comes from the pocket either of an owner, an employee, a supplier or a customer. If we were honest about this and not just looking for a boogeyman that we can pretend to stick the bill to, then we'd switch to a conversation about capital gains, income and consumption taxes.
- badrabbit 7y ago
  A company is people, I was reading earlier how in some parts of australia the police are a company. When you have someone over to your place you say "I have company". It is a legal abstraction as much as marriage or employment is a legal abstraction. For publicly traded companies, the owners don't make executive decisions,the execs do and the owners range from random people on cash app to multi-billionaires. Perhaps instead of a tax, they should grant the government equity and pay dividends?
- Spivak 7y ago
  Which is all well and good but a group of people organized in a company create an entity that is separate from that of any member or subset of the group. It has its own finances, a collective will, assets, debts, income. I see no contradiction in taxing companies in a manner generally consistent with that of a person and treating employees of the company as a type of laborer paid by this entity. Families. Don't. Exist. apparently either. The only fiction is that we anthropomorphize the group like it's singular. That doesn't mean that the group isn't a thing unto itself. I would hope you don't think of yourself as just a mound of cells.
- afiori 7y ago
  Companies exists as legal entities. This is why corporate funds can be frozen/confiscated separately from personal funds. It is not just an abstraction, without the concept of companies a lot of financial concepts are simply impossible to express.
- 7y ago
ksec 7y ago
Aren't there different type of Tax-avoidance? I am not extremely familiar with Amazon, but AFAIK, Amazon invest most of their profits, if not more ( which can be deducted the following year ) into investment for the company. That could be R&D, benefits its employees, etc. And since they made little to no profits, they paid very little tax. That is perfectly fine to me, especially when Interest rate is ridiculously low it is simpler to borrow than to sit on cash. Buying Back Stock in order to avoid tax is wrong to me. Especially if they are borrowing money in doing so. Since its incentive is only to its shareholder ( and its executive ) at the expense of Tax. And as far as I know it was illegal pre 1982. Correct me if I am wrong, but it seems people often mixed up the two.

135 points by grecy 7y ago

Consolidation of our economy has been disastrous. Is this a good argument for a straight revenue tax on companies over a certain market cap? Incentivize then to break themselves up? E.g. companies over $100b pay a 5% revenue tax. Over $500b pay a 10% revenue tax.

Guest42 7y ago
This structure seems to perpetuate the cycle.
- erentz 7y ago
  True it does. Maybe it’s useful as a final tool to encourage break up such as now, when whatever tools were meant to be discouraging consolidation fails. Saves years of hearings and court battles trying to use legal means to do it. Still need to strong regulatory oversight to prevent anti competitive behavior and killer acquisitions etc.
thaumasiotes 7y ago
> Is this a good argument for a straight revenue tax on companies over a certain market cap? Incentivize then to break themselves up? This exists for many giant companies; it's called "sales tax". (Of course, sales taxes apply equally to small companies, so the incentive to break yourself up isn't there.)
- klyrs 7y ago
  Sales tax is paid by the consumer.
  - thaumasiotes 7y ago
    As a matter of economics, that sentence is nonsense. Tax incidence is determined by elasticity of supply and demand, and has nothing to do with the logistics of which person gives money to which other person. This is the perspective that matters; you can easily observe for yourself that two taxes on gross revenue will have exactly the same effects if the only difference between them is that one is called "sales tax" and one is called "revenue tax". As a matter of logistics, your claim isn't nonsense. But it is quite obviously false. The consumer gives money to the merchant. The merchant gives money to the government. As a matter of legislation, it is, once again, plainly false. Here's the beginning of the California law imposing the state sales tax ( https://www.cdtfa.ca.gov/lawguides/vol1/sutl/6051.html https://www.cdtfa.ca.gov/lawguides/vol1/sutl/6051.html ): > For the privilege of selling tangible personal property at retail a tax is hereby imposed upon all retailers at the rate of 2½ percent of the gross receipts of any retailer (emphasis mine) And the law _must_ be stated that way, because if a vendor is selling something for $100 + sales tax, the customer pays $100 ("no tax"), and the vendor accepts it, the customer hasn't violated the law. The vendor is allowed to charge whatever price he wants. It's the vendor's responsibility to pay tax on the $100 of gross receipts he just received. There is no framework in which "sales tax is paid by the consumer" is true. What were you thinking?
    - SilasX 7y ago
      I read the parent as saying "sales tax is incident on the consumer" which is mostly true, and not refuted by anything you posted. Why do you think sales tax can't be incident on the consumer as you imply here: >There is no framework in which "sales tax is paid by the consumer" is true.
      - thaumasiotes 7y ago
        I'm reading klyrs' comment that way because he responded to my comment. I pointed out that many giant companies already face a straight tax on their revenue, called "sales tax". In order to make klyrs' response relevant, I'm interpreting it as the nonsensical objection that sales tax is different because it is a tax on "consumers", while a revenue tax would be a tax on "companies". The objection is nonsensical because, as I point out in my reply, you're collecting the same money from the same people. If you want to interpret him as commenting that the ratio of elasticity of demand to elasticity of supply is very low, you then need to explain how that observation fit into the conversation. > Why do you think sales tax can't be incident on the consumer as you imply here: >> There is no framework in which "sales tax is paid by the consumer" is true. In the tax incidence framework, in order for the tax to fall entirely on the consumer, elasticity of demand would need to be 0. The easy point is that this is never the case. But the better point is that in this framework, you don't assign taxes to a single party, and therefore "sales tax is paid by the consumer" is a conceptual error.
- deleted 7y ago
  [deleted]
missedthecue 7y ago
"Consolidation of our economy has been disastrous." Disastrous? Were we better off in the days of Sears and Barnes and Noble? Companies like Walmart with $500 billion in revenue have margins of about 3%. A 10% revenue tax must increase prices, or Walmart would lose money on each transaction. What you're promoting is a tariff on goods bought from big companies. Tariffs are bad. They are regressive and anti-consumer
- deleted 7y ago
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- Supermancho 7y ago
  > They are regressive and anti-consumer Thats a perspective, not a universal fact. They are effective and useful from a political perspective, which may be beneficial to consumers long term. Alternate levers being circumstantial.
  - missedthecue 7y ago
    It's a fact that they are regressive. That is in no way an opinion. Someone making $1 million per year and someone making $20,000 per year both pay the same tariff. There is no discrimination between earners like there is with progressive taxes. They are anti-consumer in the sense that they raise prices without offering more or better goods in return. Sure you may try to muscle in some roundabout logic that concludes that tariffs will punish the consumer into using their money the way you want them to, such as buying overpriced goods from domestic producers, but history has shown again and again that only free trade produces net benefits. Tariffs just obsfucate the damage. For instance, the EU guarantees European farmers a certain minimum price for agricultural goods. This price is 200% above market price. The effect is that every European consumer has reduced purchasing power because they must pay 200% more than they need to for food, African farmers are kept in poverty because they can't sell their goods to EU consumers, and the only people who win is the extremely small percentage of people in the EU who farm. In this way, they are factually anti consumer.
    - 7y ago
twblalock 7y ago
Large companies are handling the fallout from the pandemic better than most other American institutions, and we would be a lot worse off dealing with the coronavirus pandemic if they had been broken up. For example, most of the US population is currently under lockdown, most local businesses are closed, and households are dependent on delivery services for many products. A weak, broken-up set of former Amazon companies would have less capacity to provide such services, or even to survive.
- Retric 7y ago
  It’s not size but industry that’s determining who’s hurt and who hardly notices. Starbucks and United Airlines have been hit much harder than many small tech companies that have seen minimal impact.
  - twblalock 7y ago
    No company of any size can do well when the government orders it to stop doing business. It doesn't tell us much about small versus big. Most Starbucks stores were ordered to close by the government, and the government has advised against (and in some cases banned) air travel. Of course those companies are suffering. Furthermore, I'd argue that Starbucks is more likely to survive this than local cafe chains, and United is more likely to survive than regional discount airlines. Smaller tech companies are already seeing the impact from the pandemic, and they will soon see more impact. Tech employees can work from home, so the companies are still producing things. However, most tech companies will have dramatic drops in revenue for the next few quarters and larger ones are more likely to be able to stick it out until the economy recovers.
    - Retric 7y ago
      To clarify, it’s not just government orders in play. Size can have some positive knock on effects, but it’s far less import than often portrayed. High end/home toilet paper is in increased demand because people are using fewer public toilets which use the cheaper bulk toilet paper. Inversely, Starbucks voluntarily closed many stores because they served areas like collages that where going to be devoid of people. So, while there is plenty of spin around both topics the reality is significantly different from how things things are being reported.

whatshisface 7y ago

Amazon pays little tax because of all the losses it posts. One potential explanation for this might be that small cap companies have higher profits than large caps. If that was true they would pay more tax collectively. I have heard before that small caps tend to grow more but are higher-risk, and since there is a selection bias against companies that collapsed last year, I imagine you would find that of the companies paying tax this season small caps would be showing more growth. So, the causal chain I'm proposing would be: Small caps have higher variance than large caps + Companies that go out of business aren't included in statistics -> Year-end statistics show small caps doing better than large caps. Then, Companies that do better on paper pay more tax + Small-caps do better on paper at year end -> small caps pay more tax than large caps.

aantix 7y ago

Big companies have more levers to pull. I’m not sure why everyone gets hung up on the tax number. Employing people, providing service, all contribute. And if a state sees a deal where they can keep X citizens busy, contributing and Y services for their people, that’s part of the aggregate result. “Taxes” is one of many chips on the table for the deal making. If there’s not a net gain, then don’t take the deal.

thinkingkong 7y ago
That's interesting logic. In aggregate small businesses employ more people, so why are they paying effective higher rates? Because the label of the employment is from the a larger entity? Why not all just band together and create an even larger company of every SMB and pay 0 taxes. Free money!
- aantix 7y ago
  They could. But with such a large, diverse pool of companies, I highly doubt they could get their interests to align. But it’s not uncommon to see lobby groups for specific industries lobbying for favorable legislation.
  - mLuby 7y ago
    I bet they could get their interests to align behind zero taxes. So something else is at play.
    - kube-system 7y ago
      Yes, the fact that there's not much tax efficiencies to gain out of cramming Jim's Car Wash and Susan's Bakery into one legal entity, and a lot to lose out of it. Now, when the companies are such that it makes some amount of sense to merge them together, that often does happen, and it can lead to tax efficiencies. https://www.pwc.com/th/en/deals/transaction.html https://www.pwc.com/th/en/deals/transaction.html > M&A transactions provide unique opportunities to improve tax efficiency.

listenallyall 7y ago

Why is this a surprise to anyone? The bigger the company, the more incentive it has to create a tax-avoidance strategy, and the more resources it has to do so successfully. Avoiding taxes by legal means, is neither illegal nor immoral.

grecy 7y ago
It's a clear indicator we need to change the laws so it isn't legal.
- unreal37 7y ago
  It's impossible. We live in a global world. How can the US enact a law that a company in Seychelles is forced to follow?
  - grecy 7y ago
    They could easily make laws about how much tax a company has to pay in the US if it wants to do business and earn revenue/profits in the US, regardless of where it's headquartered.
  - opless 7y ago
    Well I don't know about the US, but the UK enacted new legislation to stop a citizen doing certain (abhorrent) things in countries where it was quite legal to do so. This was after a huge media outrage about a certain pop star allegedly being a sexual predator in countries where it was legal. The EU also forced those cookie notices on pages and GPDR about movement of data globally. Being a holocaust denier will get you arrested in Germany, even if you broke that law in another country. That's just three examples off the top of my head.
mLuby 7y ago
Legality doesn't imply morality, as in this case where avoiding taxes is legal but immoral.
- deleted 7y ago

projektfu 7y ago

The simple solution is presented here: https://cepr.net/book/rigged-how-globalization-and-the-rules-of-the-modern-economy-were-structured-to-make-the-rich-richer/ https://cepr.net/book/rigged-how-globalization-and-the-rules... Select a corporate tax rate and require nonvoting shares given to a government fund equivalent to the tax rate percentage of the company. If you buy back shares, you buy back the same percent in government shares. If you give a dividend, it goes to the government fund in the same proportion. If you issue new shares to your executives, the government participates at its rate. For companies like Abbott which return a lot of profits, the people benefit the same way. For companies like amazon, the people continue to own shares in a company that investors think will eventually return those profits. A large part of trying to hide profits will go away because the shareholders will be incentivized to have proper accounting and the public will benefit.

jariel 7y ago
I don't think that solves anything, it creates a whole host of problems, and of course, the notion of the government taking a % ownership of every business is a kind of ideology I don't need to describe. Governments don't want a stake in future profits, they want to tax income. Dividends payouts are taxed 'again' at the time of payout. Share buybacks are taxed 'again' as capital gains and FYI that has nothing to do with the corporate tax rate, that's part of personal income. Your Amazon example is flawed: If Amazon is worth $100B it's because people think they will eventually have $100B in the bank. Or a financial equivalent of cash flows. Either way, it means people assume profits. If that's true, then the taxable income will also be there, in which case they'll have to make $150B in income, then pay tax THEN have the $100B in the bank (or financial equivalent). So the government 'taking an equity stake' at formation, and sitting on the stock is moot: they already get a 'stake' of the income stream that forms the basis of that valuation. That Amazon pays no tax is not such a bad thing - it means they're making $0, which means the surpluses are going to their suppliers, customers or employees etc. All of whom are taxed for those surpluses (except for consumers).
- projektfu 7y ago
  I have absolutely no reason to invest in Amazon if I think that there will never be a profit share in it for me. Amazon could sit on a lot of cash and then eventually spend it all down, go bankrupt, and leave the shareholder with nothing. If I figured that would be the case, then I would be only speculating that I could get out of it before that happened. Speculation is not an investment. On the other hand, if the share price has increased because the company is more valuable, then the government shares have also increased. If there is, in the future, a 1% quarterly dividend, then the government will partake in a 1% dividend on its higher-valued shares as well. The federal government doesn't need to pull in all the money now. It has a large ability to borrow where it needs and corporate taxes make only a fraction of tax revenue. The current problem is that, in theory, it is worth it for a company to pay accountants and lawyers $99M to reduce the tax bill $100M. Economists call that waste. I'm pretty sure just about everyone else thinks it's problematic to create industries that get rich off of nothing but moving money around to avoid paying taxes. The whole problem is that the public is not getting a "stake" of the income stream. The law says we do but in practice we do not because the money is being very cleverly moved around. Arguing that there should be no corporate income tax is a different thing. This discussion is about how to collect such a tax.

unreal37 7y ago

Perhaps the difference is not in the "donations to politicians" that the cynical like to say, but in the "ability to afford expensive tax consultants." Small companies pay what the government tells them to pay. Big companies hire someone who figures they can save 5% on their taxes by having their factory in Tennessee instead of Kentucky. It's just the ability (and scale) to afford to employ any advanced tax strategies. I have friends who live in Hawaii. A high tax state. Another friend moved to Puerto Rico, a low tax one. You don't have to be big to save on taxes.

harimau777 7y ago
I think that one issue is that there is a significant difference in the ability of a corporation to shop around for favorable differences compared to an individual or small business.
- unreal37 7y ago
  Yeah absolutely. We rarely think that countries are "competitive" with each other when it comes to tax deals and tax rates. But they are. Just like people shopping around for the best deal on a car, why do we expect companies to NOT shop around for the best deal on taxes?

listsfrin 7y ago

The same is true for rich people: you can afford to buy in bulk, to take advantage of special promotions. And sometimes, even when spending more money on products one gets to have better quality on the long run.

oneVoiceOnHN 7y ago
These aren't remotely related. Bulk have risks like spoilage or require additional resources like real estate. Or that a quality product isn't really quality. Taxes are immaterial.

opless 7y ago

In other news, sky is blue, grass is green, and everything you do online is monitored.

Consultant32452 7y ago

It's getting tiresome how such seemingly banal headlines are pushing a narrative. Compare this alternative headline: "Small companies pay the most taxes, shows new research." See how that subtle change creates a whole different implication? Written this new way, the feeling is we need to solve the problem of high taxes on small business.

Retric 7y ago
That’s not nessisarily true from the headline. It could be midsized companies paying the most tax, or midsized and small companies paying the same rate.
- Consultant32452 7y ago
  It's interesting that your takeaway is that my totally made up hypothetical alternative headline might not be factually correct.
  - Retric 7y ago
    Actually, my first thought was that I got the same response from reading both headlines. It’s only after thinking a bit that I realized they had different meanings. Though that’s just me, I think of the tax burden as a zero sum game. To get X revenue today from Y people it’s pure tradeoffs. Long term that’s slightly less true.
  - skinnymuch 7y ago
    No. Initially I too thought your made up headline and the actual were essentially the same to me. But parent has a point. They actually mean different things. Your headline wouldn’t mean Fortune 500/Inc 5000 etc companies pay the most. They aren’t the same.
jlarocco 7y ago
Any headline is going to be pushing some kind of narrative. Personally, I'd like if they highlighted the government's role, with something like, "Government taxes large companies less than small companies, shows new research."

dboreham 7y ago

Imho "companies" should not pay income tax (they can pay sales taxes, asset taxes like property tax, payroll taxes). Companies should be able to retain profits to either reinvest in their business or to save for a downturn. Taxes should be paid by the recipient (shareholders, management) on distributed profits. I suspect the only reason we have corporate income tax at all is because clever financial engineers find ways to make what is really personal income to shareholders and management look like retained corporate income. (I would add "windfall taxes" to the set of ok corporate taxes since those aim to redress a monopoly profit situation).

nouveaux 7y ago
"Companies should be able to retain profits to either reinvest in their business or to save for a downturn." Sure except profits end up as dividends or stock buy back. Companies end up with limited cash and will still need a bail out.
- nightski 7y ago
  Sure, if you eliminate corporate income taxes you'd need to increase capital gains taxes as well. But I am having a hard time seeing the disadvantage of that (although I'm not an expert by any means).
goldcd 7y ago
Agreed What f&cks up the system is differentiating money you've made by buying shares, from money you've made by working. Owning shares isn't contributing to GDP - working is. For some horrifically f&cked up reason (lobbying) the former is taxed less than the latter.
dennis_jeeves 7y ago
I would go even further and say that any form of income tax including personal taxes is very regressive. One could make a case for some forms of taxation, example a a carbon tax if one pollutes. Taxes should be directly proportional to what one consumes, not what one earns.

ThomPete 7y ago

their employees are paying plenty though.

WalterBright 7y ago

This reminds me of the blaring headlines a few years ago that claimed 40% of US corporations paid no income tax. The headlines were true, but not mentioned was that 40% of US corporations lost money that year. Income tax is based on profits, not gross revenue, not market cap.

erichocean 7y ago
As a private citizen, I took would like to only pay "income tax" on my profits—the amount of cash I have left over at the end of the year. Corporations are people too! /sarc, but only slightly...
- cheez 7y ago
  The secret is that you should incorporate yourself as a business.
- afiori 7y ago
  The negative side of that would be to keep a 2-way accounting of all the expenses you made in the entire year.
cornishpixels 7y ago
"91 profitable Fortune 500 companies paid $0 in taxes in 2018 under Trump's tax law" https://finance.yahoo.com/news/trump-tax-law-fortune-500-companies-pay-0-taxes-2018-213157006.html https://finance.yahoo.com/news/trump-tax-law-fortune-500-com... "The 379 profitable members of the Fortune 500 paid an effective federal tax rate of 11.3% last year" https://www.axios.com/fortune-500-companies-corporate-income-tax-7a7d3d36-0c48-4098-b352-deb93be1e4c0.html https://www.axios.com/fortune-500-companies-corporate-income... Amazon, in particular, made over $10b in 2018, but the US government paid them over $100m. ETA: And for comparison, I made $36k last year (missed a lot of time for health reasons) with a family of 3 (= negative profit, I'm still in debt from it!), and my tax rate is ~8%.
- WalterBright 7y ago
  The tax code allows for losses from previous years to offset taxable income in the current year. It's a form of income averaging (which is allowed for personal income tax computation in some cases). Income averaging is for companies that naturally have interspersed fat and lean years. For example, Boeing may invest enormous amounts of money in new aircraft development one year and make a bunch of money off of it the next year. > The 379 profitable members of the Fortune 500 paid an effective federal tax rate of 11.3% last year Since the tax rate is graduated, a technically "profitable" corporation who made only $10 in profit would pay 0% in income tax. This is why such statistics, while pedantically correct, are usually nonsense because they deliberately omit such information.

cornishpixels 7y ago

No, really? I would've never guessed.

mbar84 7y ago

Companies. Don't. Exist. We made these things up because they are a convenient and useful abstraction, but let's not forget that they are a legal fiction. So guess what you call a company that pays taxes? Fiction! Companies can't pay taxes because they don't exist, only people can pay taxes. So when you tax a company, it ultimately comes from the pocket either of an owner, an employee, a supplier or a customer. If we were honest about this and not just looking for a boogeyman that we can pretend to stick the bill to, then we'd switch to a conversation about capital gains, income and consumption taxes.

badrabbit 7y ago
A company is people, I was reading earlier how in some parts of australia the police are a company. When you have someone over to your place you say "I have company". It is a legal abstraction as much as marriage or employment is a legal abstraction. For publicly traded companies, the owners don't make executive decisions,the execs do and the owners range from random people on cash app to multi-billionaires. Perhaps instead of a tax, they should grant the government equity and pay dividends?
Spivak 7y ago
Which is all well and good but a group of people organized in a company create an entity that is separate from that of any member or subset of the group. It has its own finances, a collective will, assets, debts, income. I see no contradiction in taxing companies in a manner generally consistent with that of a person and treating employees of the company as a type of laborer paid by this entity. Families. Don't. Exist. apparently either. The only fiction is that we anthropomorphize the group like it's singular. That doesn't mean that the group isn't a thing unto itself. I would hope you don't think of yourself as just a mound of cells.
afiori 7y ago
Companies exists as legal entities. This is why corporate funds can be frozen/confiscated separately from personal funds. It is not just an abstraction, without the concept of companies a lot of financial concepts are simply impossible to express.
7y ago

ksec 7y ago

Aren't there different type of Tax-avoidance? I am not extremely familiar with Amazon, but AFAIK, Amazon invest most of their profits, if not more ( which can be deducted the following year ) into investment for the company. That could be R&D, benefits its employees, etc. And since they made little to no profits, they paid very little tax. That is perfectly fine to me, especially when Interest rate is ridiculously low it is simpler to borrow than to sit on cash. Buying Back Stock in order to avoid tax is wrong to me. Especially if they are borrowing money in doing so. Since its incentive is only to its shareholder ( and its executive ) at the expense of Tax. And as far as I know it was illegal pre 1982. Correct me if I am wrong, but it seems people often mixed up the two.