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It is hard to get around the 35% US corporate tax rate. In my time as an investment banker, the only way I saw that companies could easily lower their taxes is

It is hard to get around the 35% US corporate tax rate. In my time as an investment banker, the only way I saw that companies could easily lower their taxes is by losing money (losing money one year gives you a carry-forward loss that you can use to get out of taxes the next, hardly free money). As far as I am aware, this kind of tax credit is common in the developed world and the US corporate taxes remain the highest. The impression that you get at reddit/ The Huffington Post/ Hollywood that you can open up a foreign bank account and bam no taxes is largely false. All the companies that I sold, capitalized, or researched paid taxes at close to the nominal rate of 35% (my specialty was firms $100 million to $1 billion in market cap). What are your credentials? Perhaps you are a corporate tax accountant and you know better than I do.

jbooth 16y ago
I almost certainly know less about corporate taxes than you do. But how do you explain the gap between stated and effective tax rate? Maybe I'm oversimplifying by blaming the Cayman Islands but obviously big corporations are doing something to pay significantly lower taxes than the advertised rate.
- jacoblyles 16y ago
  Usually companies with a low effective tax rate have lost money in recent years. This is especially true over the last 3 years (I believe 3 years is the limit on a carry-forward loss credit, and 2008-2011 has been bad for business). The net effect is that US companies pay 35% taxes on their 3-year trailing average income rather than income in a given year. Occasionally you will hear another breathless claim on places like reddit/The Huffington Post/The Daily Kos that some large percent of corporations pay no corporate taxes at all. They are usually counting the large number of small businesses organized as S-corps and LLCs which pay pass-through personal income taxes rather than corporate taxes, and counting all the C-corps that lost money and therefore paid no corporate taxes for the year. On its face it is a true statement that most corporations pay no taxes, but it is a very misleading statement. In my experience, it is very difficult for the shareholders of a C-corp in the United States to derive benefit from the entity's business activities without the benefits being taxed at the corporate level.
  - jbooth 16y ago
    Well, so here's a study by the congressional budget office: http://cbo.gov/ftpdocs/69xx/doc6902/11-28-CorporateTax.pdf http://cbo.gov/ftpdocs/69xx/doc6902/11-28-CorporateTax.pdf Puts the effective corporate tax rate a cool 10-15 points under the statutory one, depending on sector, and has some graphs illustrating that our statutory rate is one of the highest while our effective rate is one of the lowest. So it's not just the dirty hippies saying this. The dirty hippies tend to get angry about stuff like the fact that Exxon apparently pays little to no corporate taxes (citation needed), and whatever else they have going on they certainly haven't posted a loss recently.
    - jacoblyles 16y ago
      "The dirty hippies tend to get angry about stuff like the fact that Exxon apparently pays little to no corporate taxes (citation needed), and whatever else they have going on they certainly haven't posted a loss recently." Exxon Mobile paid $21 billion in corporate taxes on operating income of $53 billion in the fiscal year ended December 31, 2010 for an effective corporate tax rate of 40%. Do leftists not know where to look this stuff up? They are allowed to take finance and accounting classes, no?
      - deleted 16y ago
        [deleted]
    - anamax 16y ago
      If the dirty hippies had read the paper, they'd see that machinery depreciation is a huge part of that difference between the effective and statutory rates. The really clever hippies would notice that different industries have different machinery needs. The especially brilliant ones would understand that the value of an oil lease goes down as the amount of extractable oil goes down, such as happens when said oil is extracted. They'd see that said decrease is just like the expenses of other industries.
  - coolgeek 16y ago
    Google paid 2.4% last year http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-sho... "Google’s practices are very similar to those at countless other global companies operating across a wide range of industries," said Jane Penner, a spokeswoman for the Mountain View, California-based company.

jbooth 16y ago

I almost certainly know less about corporate taxes than you do. But how do you explain the gap between stated and effective tax rate? Maybe I'm oversimplifying by blaming the Cayman Islands but obviously big corporations are doing something to pay significantly lower taxes than the advertised rate.

jacoblyles 16y ago
Usually companies with a low effective tax rate have lost money in recent years. This is especially true over the last 3 years (I believe 3 years is the limit on a carry-forward loss credit, and 2008-2011 has been bad for business). The net effect is that US companies pay 35% taxes on their 3-year trailing average income rather than income in a given year. Occasionally you will hear another breathless claim on places like reddit/The Huffington Post/The Daily Kos that some large percent of corporations pay no corporate taxes at all. They are usually counting the large number of small businesses organized as S-corps and LLCs which pay pass-through personal income taxes rather than corporate taxes, and counting all the C-corps that lost money and therefore paid no corporate taxes for the year. On its face it is a true statement that most corporations pay no taxes, but it is a very misleading statement. In my experience, it is very difficult for the shareholders of a C-corp in the United States to derive benefit from the entity's business activities without the benefits being taxed at the corporate level.
- jbooth 16y ago
  Well, so here's a study by the congressional budget office: http://cbo.gov/ftpdocs/69xx/doc6902/11-28-CorporateTax.pdf http://cbo.gov/ftpdocs/69xx/doc6902/11-28-CorporateTax.pdf Puts the effective corporate tax rate a cool 10-15 points under the statutory one, depending on sector, and has some graphs illustrating that our statutory rate is one of the highest while our effective rate is one of the lowest. So it's not just the dirty hippies saying this. The dirty hippies tend to get angry about stuff like the fact that Exxon apparently pays little to no corporate taxes (citation needed), and whatever else they have going on they certainly haven't posted a loss recently.
  - jacoblyles 16y ago
    "The dirty hippies tend to get angry about stuff like the fact that Exxon apparently pays little to no corporate taxes (citation needed), and whatever else they have going on they certainly haven't posted a loss recently." Exxon Mobile paid $21 billion in corporate taxes on operating income of $53 billion in the fiscal year ended December 31, 2010 for an effective corporate tax rate of 40%. Do leftists not know where to look this stuff up? They are allowed to take finance and accounting classes, no?
    - deleted 16y ago
      [deleted]
  - anamax 16y ago
    If the dirty hippies had read the paper, they'd see that machinery depreciation is a huge part of that difference between the effective and statutory rates. The really clever hippies would notice that different industries have different machinery needs. The especially brilliant ones would understand that the value of an oil lease goes down as the amount of extractable oil goes down, such as happens when said oil is extracted. They'd see that said decrease is just like the expenses of other industries.
- coolgeek 16y ago
  Google paid 2.4% last year http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-sho... "Google’s practices are very similar to those at countless other global companies operating across a wide range of industries," said Jane Penner, a spokeswoman for the Mountain View, California-based company.