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"Our third quarter 2020 effective tax rate was 4%" [down from 17% YoY]. Numbers like this sure support the "rich corporations don't pay taxes" narrative with av

"Our third quarter 2020 effective tax rate was 4%" [down from 17% YoY]. Numbers like this sure support the "rich corporations don't pay taxes" narrative with average Americans paying a 24% effective tax rates.

kortilla 6y ago
Effective tax rate in a single year isn’t too meaningful when they might be carrying over losses from previous years.
- xmprt 6y ago
  You're saying Facebook - a company that has been profitable for many years - is still carrying over losses from previous years?
  - RobRivera 6y ago
    I think yes, there is no ambiguity that is being communicated. Furthermore, it is common knowledge that sufficient corporate structuring efforts can permit this despite a track record for profits. Where is your confusion?
  - vmception 6y ago
    Super easy to do when you invest into growth and borrow against that future growth. When borrowing, like in the bond market, it is always easy to spend more of other people’s money than the amount you made that year. The market only looks at revenues and hope they increase so you can always keep borrowing greater amounts if they do increase. The government looks at net income and also extends credits for certains ways that the revenue was generated. The government incentivizes transactions, when you don't conduct enough transactions you pay the government instead. The people decided that taxes were too hard to comprehend, which isnt true for all of us, and vilify anyone who does comprehend. The collective understanding and reading comprehension is so low that they cant even effectively change the law, getting their representatives to just tax people that earn the same way they do more. Congratulations you taxed the most effective wage workers more you did it! Its just another perspective on reality that also happens to be more accurate and effective.
    - bonestormii_ 6y ago
      I mean, there is a growing consensus that corporations need to pay more taxes, yes. I don't know if the public generally "vilifies anyone who understands taxes". Some certainly do. But I would point out that those two things are separate and distinct from one another. I think there are greater obstacles for the collective of ordinary people being able to effectively change the law than reading comprehension, and one of those things is the nearly limitless capacity of large corporations to lobby government. The more they lobby, the less they pay, the more they earn, the more they lobby, the less they pay, the more they earn, the more they lobby, the less they pay, the more they earn. You could add into that cycle "...the less money is available to fund the government, the less money is available for education, the dumber the people get, the less capable they become at managing their own government, etc...". Never minding of course that schools are largely funded by property taxes (stupid IMO), it still affects the overall availability of public funding. Corporations should pay more because the tax code should be written to require it, not out of dumbness or virtuousness. The cycle of wealth inequality must be broken, and it's not a simple thing to actually implement a solution.
      - vmception 6y ago
        Eh 21% corporate tax vs 35% vs more doesn’t really make a difference when still tapping into the credit markets and spending bond holder money, the expenses will still outpace the net income - and nothing about that should change it doesnt make sense to The things you said also happen Governments also need a new revenue source. 100 years of passive income taxation while they too borrow against future revenue growth and we are to act like it’s their only option?
        bonestormii_ 6y ago
        What would an appropriate revenue source be? I don't really think generating revenue should be the focus of the government as much as facilitating the growth of private industry through smart regulation, and then taxing them. The government is not a company. It shouldn't generally compete with private industry where it can be avoided. It's a meta organization that should focus on gluing the country together. It represents the people; the people should fund it; and it should support the people in doing so. It is an ancient model, and being a facilitator of private growth is not really all that passive.
  - ghouse 6y ago
    It's important to distinguish between operating profits, and taxable profits. They can have positive operating profits, but tax losses. For example, Congress recently (3-4 years ago?) changed the tax code to allow companies to expense, instead of amortize, capital equipment.
- seancoleman 6y ago
  For sure, and FB notes amortized investments bringing this figure down. The tax code rewards corporations for R&D investments. I think it's working. The optics are terrible though.
  - ghouse 6y ago
    > The tax code rewards corporations for R&D investments. I think it's working. I'm fairly confident FB would be making R&D investments regardless of the reward from the tax code. But for change in behavior due to the tax code, the tax credit is a windfall.
    - azinman2 6y ago
      Except the tax code isn’t written for Fb, it’s written for everyone. And R&D generally speaking has been underinvested for a long time in the US (for short term financial reasons), ultimately making it less competitive in the long term. If there are ways to incentivize companies for doing more R&D it seems like tax code is one of many levers to use.
    - seanmcdirmid 6y ago
      I'm not sure companies like FB or Google would be viable at all if R&D investments weren't tax deductible. If employee salaries weren't tax deductible either (which is the main expense for R&D at these companies), it would create a lot of incentive not to hire people and not to do R&D. Additionally, that money is being taxed in the end via income tax at a comparable rate.
calvinmorrison 6y ago
We don't typically tax Democratic Party SuperPAC's posing as social media platforms.
- djeiasbsbo 6y ago
  What is a SuperPAC? And would mind explaining what you're talking about?
  - kennywinker 6y ago
    not OP, but a superpac is a US political group separate from a candidate. They collect money from random sources in a very unaccountable way, and spend money to get candidates elected or promote specific ideas. The "Super" comes from the fact that after the "citizens united" supreme court ruling these groups have basically no restrictions on the amount of money they can raise or tracking of how they spend it - essentially allowing billionaires and the super rich to buy as much influence as they want.
    - djeiasbsbo 6y ago
      Thank you for explaining and sorry for the typo in my comment you replied to (which I can no longer correct). I had never heard of that before, perhaps because these types of groups only seem to pop up in larger countries like the U.S.
- aplummer 6y ago
  Is there really a place on hacker news for accounts that constantly interject inane politics?
- hobs 6y ago
  We have active reporting that facebook undermined liberal media orgs. Is that what the wing of the Democratic party does? https://www.washingtonpost.com/lifestyle/media/facebook-news-zuckerberg-conservative-liberal/2020/10/26/04722572-1464-11eb-bc10-40b25382f1be_story.html https://www.washingtonpost.com/lifestyle/media/facebook-news...
leetcrew 6y ago
maybe so, but it's kind of silly to compare corporate taxes with taxes paid by individuals. capital gains vs. income tax would be at least a little better.
rhacker 6y ago
Well, most of the expenditures are going to pay employees that pay 24% (or probably 34% with state taxes added).
- huntermonk 6y ago
  Very true. The engineers in California (most of us) pay 40%.
granzymes 6y ago
But why tax corporations on income at all? All of that money will eventually be income for an actual person (employees, shareholders) who will be taxed on it, most likely at a rate above 24%. And don't forget that sales taxes and VATs exist. Corporations don't exist, so they can't "pay" for the tax. With a corporate income tax, the incidence is out of policymakers' control and some percentage will fall on consumers. Just tax who you want to tax.
- spiderfarmer 6y ago
  Why wait for an “eventual” trickle down effect?
  - granzymes 6y ago
    Because you can better control the tax incidence. https://www.milkenreview.org/articles/the-progressive-case-for-abolishing-the-corporate-income-tax-2 https://www.milkenreview.org/articles/the-progressive-case-f... https://www.theatlantic.com/business/archive/2010/10/why-we-should-eliminate-the-corporate-income-tax/65351/ https://www.theatlantic.com/business/archive/2010/10/why-we-...
    - MrPowers 6y ago
      Yes, and the deadweight loss of taxation. Taxing income is economically inefficient (because huge resource investments are needed for compliance). It's more efficient to tax land, gas, and soda. See Pigovian taxation for more details: https://en.wikipedia.org/wiki/Pigovian_tax https://en.wikipedia.org/wiki/Pigovian_tax
      - triceratops 6y ago
        Why not both?
- mushufasa 6y ago
  Imagine the process of assessing and collecting a tax from a single entity. Now imagine the process of assessing and collecting taxes from 93,000 entities, including enforcing penalties for people who inadequately report or pay.
bhaile 6y ago
Per the PDF. "Our third quarter 2020 effective tax rate was 4%, which reflects a one-time income tax benefit of $913 million related to the effects of a tax election to capitalize and amortize certain research and development expenses for U.S. income tax purposes.Excluding this tax benefit, our effective tax rate would have been 11 percentage points higher and our diluted EPS would havebeen $0.31 lower."
- deleted 6y ago
  [deleted]
willcipriano 6y ago
24% seems to be the top 0.01% of taxpayers federal tax burden, not the average and it does not include state and local taxes or property taxes. > According to this data, in 2017, the top 1 percent of taxpayers paid an average federal income tax rate of 26.76 percent. The bottom 99 percent, or all the rest of the taxpayers, paid an average rate of 11.4 percent. If we look at just the bottom 50 percent, the average rate paid by these taxpayers is even lower, at 4 percent. > At the very top end of the AGI distribution, we see average rates decrease slightly, but remain significantly higher than the average rates paid by those lower on the income distribution: 25 percent for the top 0.01 percent and 24 percent for the top 0.001 percent. https://taxfoundation.org/average-federal-income-tax-rates-2017/#:~:text=According%20to%20this%20data%2C%20in,average%20rate%20of%2011.4%20percent https://taxfoundation.org/average-federal-income-tax-rates-2....
- skinnymuch 6y ago
  I could be wrong but that blame will still be partially on this vague and seemingly bias non-profit. Does federal income tax include or not include FICA? Presumably not. In which case the bottom 90%+ are paying some number of 10-15% more per year. Then the top few percent are paying less extra until you get to the top 1% and beyond where they are paying a fraction extra. That tax alone completely invalidates the article and makes it seem incredibly biased.
  - willcipriano 6y ago
    If you have better numbers I'd like to see them. 24% didn't seem right to me so I wanted to see where that figure came from. Low income households pay negative federal income tax rates (7.65% for FICA included) after the earned income credit is applied. You can make a case that the 7.65% paid by the employer also lowers wages, but if you want to discuss second order effects like that you have to also get into the weeds that taxes on corporations increase the costs of goods and and are a indirect tax on consumers. Calculating the actual rate is almost impossible as you'd need to factor in property taxes, gasoline taxes, sales taxes, costs involved in vehicle registration and other permits and so on. Even then people disagree on what a is a tax and what isn't and argue that some of those things shouldn't be included. For example, the individual mandate in the affordable care act levied what was called a fine to people who did not have health insurance the previous year (Individual Shared Responsibility Payment) but in real terms this wasn't very different than a tax and was collected by the IRS. Similarly, some would claim Social Security and Medicare payments are not taxes due to the fact that those programs directly provide services to the party who paid into them. This is also the justification for phasing them out over certain income thresholds as after you have contributed a certain amount to the program you are "paid up" as it were. My point is in order to discuss this first we must agree on what constitutes a tax in the first place and that is much easier said than done. If we take the all non voluntary payments to any government and their second order effects route we are probably talking about a rate of over 50% on average, however under that same definition Facebook is paying much more than 4%.

kortilla 6y ago

Effective tax rate in a single year isn’t too meaningful when they might be carrying over losses from previous years.

xmprt 6y ago
You're saying Facebook - a company that has been profitable for many years - is still carrying over losses from previous years?
- RobRivera 6y ago
  I think yes, there is no ambiguity that is being communicated. Furthermore, it is common knowledge that sufficient corporate structuring efforts can permit this despite a track record for profits. Where is your confusion?
- vmception 6y ago
  Super easy to do when you invest into growth and borrow against that future growth. When borrowing, like in the bond market, it is always easy to spend more of other people’s money than the amount you made that year. The market only looks at revenues and hope they increase so you can always keep borrowing greater amounts if they do increase. The government looks at net income and also extends credits for certains ways that the revenue was generated. The government incentivizes transactions, when you don't conduct enough transactions you pay the government instead. The people decided that taxes were too hard to comprehend, which isnt true for all of us, and vilify anyone who does comprehend. The collective understanding and reading comprehension is so low that they cant even effectively change the law, getting their representatives to just tax people that earn the same way they do more. Congratulations you taxed the most effective wage workers more you did it! Its just another perspective on reality that also happens to be more accurate and effective.
  - bonestormii_ 6y ago
    I mean, there is a growing consensus that corporations need to pay more taxes, yes. I don't know if the public generally "vilifies anyone who understands taxes". Some certainly do. But I would point out that those two things are separate and distinct from one another. I think there are greater obstacles for the collective of ordinary people being able to effectively change the law than reading comprehension, and one of those things is the nearly limitless capacity of large corporations to lobby government. The more they lobby, the less they pay, the more they earn, the more they lobby, the less they pay, the more they earn, the more they lobby, the less they pay, the more they earn. You could add into that cycle "...the less money is available to fund the government, the less money is available for education, the dumber the people get, the less capable they become at managing their own government, etc...". Never minding of course that schools are largely funded by property taxes (stupid IMO), it still affects the overall availability of public funding. Corporations should pay more because the tax code should be written to require it, not out of dumbness or virtuousness. The cycle of wealth inequality must be broken, and it's not a simple thing to actually implement a solution.
    - vmception 6y ago
      Eh 21% corporate tax vs 35% vs more doesn’t really make a difference when still tapping into the credit markets and spending bond holder money, the expenses will still outpace the net income - and nothing about that should change it doesnt make sense to The things you said also happen Governments also need a new revenue source. 100 years of passive income taxation while they too borrow against future revenue growth and we are to act like it’s their only option?
      - bonestormii_ 6y ago
        What would an appropriate revenue source be? I don't really think generating revenue should be the focus of the government as much as facilitating the growth of private industry through smart regulation, and then taxing them. The government is not a company. It shouldn't generally compete with private industry where it can be avoided. It's a meta organization that should focus on gluing the country together. It represents the people; the people should fund it; and it should support the people in doing so. It is an ancient model, and being a facilitator of private growth is not really all that passive.
- ghouse 6y ago
  It's important to distinguish between operating profits, and taxable profits. They can have positive operating profits, but tax losses. For example, Congress recently (3-4 years ago?) changed the tax code to allow companies to expense, instead of amortize, capital equipment.
seancoleman 6y ago
For sure, and FB notes amortized investments bringing this figure down. The tax code rewards corporations for R&D investments. I think it's working. The optics are terrible though.
- ghouse 6y ago
  > The tax code rewards corporations for R&D investments. I think it's working. I'm fairly confident FB would be making R&D investments regardless of the reward from the tax code. But for change in behavior due to the tax code, the tax credit is a windfall.
  - azinman2 6y ago
    Except the tax code isn’t written for Fb, it’s written for everyone. And R&D generally speaking has been underinvested for a long time in the US (for short term financial reasons), ultimately making it less competitive in the long term. If there are ways to incentivize companies for doing more R&D it seems like tax code is one of many levers to use.
  - seanmcdirmid 6y ago
    I'm not sure companies like FB or Google would be viable at all if R&D investments weren't tax deductible. If employee salaries weren't tax deductible either (which is the main expense for R&D at these companies), it would create a lot of incentive not to hire people and not to do R&D. Additionally, that money is being taxed in the end via income tax at a comparable rate.

calvinmorrison 6y ago

We don't typically tax Democratic Party SuperPAC's posing as social media platforms.

djeiasbsbo 6y ago
What is a SuperPAC? And would mind explaining what you're talking about?
- kennywinker 6y ago
  not OP, but a superpac is a US political group separate from a candidate. They collect money from random sources in a very unaccountable way, and spend money to get candidates elected or promote specific ideas. The "Super" comes from the fact that after the "citizens united" supreme court ruling these groups have basically no restrictions on the amount of money they can raise or tracking of how they spend it - essentially allowing billionaires and the super rich to buy as much influence as they want.
  - djeiasbsbo 6y ago
    Thank you for explaining and sorry for the typo in my comment you replied to (which I can no longer correct). I had never heard of that before, perhaps because these types of groups only seem to pop up in larger countries like the U.S.
aplummer 6y ago
Is there really a place on hacker news for accounts that constantly interject inane politics?
hobs 6y ago
We have active reporting that facebook undermined liberal media orgs. Is that what the wing of the Democratic party does? https://www.washingtonpost.com/lifestyle/media/facebook-news-zuckerberg-conservative-liberal/2020/10/26/04722572-1464-11eb-bc10-40b25382f1be_story.html https://www.washingtonpost.com/lifestyle/media/facebook-news...

leetcrew 6y ago

maybe so, but it's kind of silly to compare corporate taxes with taxes paid by individuals. capital gains vs. income tax would be at least a little better.

rhacker 6y ago

Well, most of the expenditures are going to pay employees that pay 24% (or probably 34% with state taxes added).

huntermonk 6y ago
Very true. The engineers in California (most of us) pay 40%.

granzymes 6y ago

But why tax corporations on income at all? All of that money will eventually be income for an actual person (employees, shareholders) who will be taxed on it, most likely at a rate above 24%. And don't forget that sales taxes and VATs exist. Corporations don't exist, so they can't "pay" for the tax. With a corporate income tax, the incidence is out of policymakers' control and some percentage will fall on consumers. Just tax who you want to tax.

spiderfarmer 6y ago
Why wait for an “eventual” trickle down effect?
- granzymes 6y ago
  Because you can better control the tax incidence. https://www.milkenreview.org/articles/the-progressive-case-for-abolishing-the-corporate-income-tax-2 https://www.milkenreview.org/articles/the-progressive-case-f... https://www.theatlantic.com/business/archive/2010/10/why-we-should-eliminate-the-corporate-income-tax/65351/ https://www.theatlantic.com/business/archive/2010/10/why-we-...
  - MrPowers 6y ago
    Yes, and the deadweight loss of taxation. Taxing income is economically inefficient (because huge resource investments are needed for compliance). It's more efficient to tax land, gas, and soda. See Pigovian taxation for more details: https://en.wikipedia.org/wiki/Pigovian_tax https://en.wikipedia.org/wiki/Pigovian_tax
    - triceratops 6y ago
      Why not both?
mushufasa 6y ago
Imagine the process of assessing and collecting a tax from a single entity. Now imagine the process of assessing and collecting taxes from 93,000 entities, including enforcing penalties for people who inadequately report or pay.

bhaile 6y ago

Per the PDF. "Our third quarter 2020 effective tax rate was 4%, which reflects a one-time income tax benefit of $913 million related to the effects of a tax election to capitalize and amortize certain research and development expenses for U.S. income tax purposes.Excluding this tax benefit, our effective tax rate would have been 11 percentage points higher and our diluted EPS would havebeen $0.31 lower."

deleted 6y ago
[deleted]

willcipriano 6y ago

24% seems to be the top 0.01% of taxpayers federal tax burden, not the average and it does not include state and local taxes or property taxes. > According to this data, in 2017, the top 1 percent of taxpayers paid an average federal income tax rate of 26.76 percent. The bottom 99 percent, or all the rest of the taxpayers, paid an average rate of 11.4 percent. If we look at just the bottom 50 percent, the average rate paid by these taxpayers is even lower, at 4 percent. > At the very top end of the AGI distribution, we see average rates decrease slightly, but remain significantly higher than the average rates paid by those lower on the income distribution: 25 percent for the top 0.01 percent and 24 percent for the top 0.001 percent. https://taxfoundation.org/average-federal-income-tax-rates-2017/#:~:text=According%20to%20this%20data%2C%20in,average%20rate%20of%2011.4%20percent https://taxfoundation.org/average-federal-income-tax-rates-2....

skinnymuch 6y ago
I could be wrong but that blame will still be partially on this vague and seemingly bias non-profit. Does federal income tax include or not include FICA? Presumably not. In which case the bottom 90%+ are paying some number of 10-15% more per year. Then the top few percent are paying less extra until you get to the top 1% and beyond where they are paying a fraction extra. That tax alone completely invalidates the article and makes it seem incredibly biased.
- willcipriano 6y ago
  If you have better numbers I'd like to see them. 24% didn't seem right to me so I wanted to see where that figure came from. Low income households pay negative federal income tax rates (7.65% for FICA included) after the earned income credit is applied. You can make a case that the 7.65% paid by the employer also lowers wages, but if you want to discuss second order effects like that you have to also get into the weeds that taxes on corporations increase the costs of goods and and are a indirect tax on consumers. Calculating the actual rate is almost impossible as you'd need to factor in property taxes, gasoline taxes, sales taxes, costs involved in vehicle registration and other permits and so on. Even then people disagree on what a is a tax and what isn't and argue that some of those things shouldn't be included. For example, the individual mandate in the affordable care act levied what was called a fine to people who did not have health insurance the previous year (Individual Shared Responsibility Payment) but in real terms this wasn't very different than a tax and was collected by the IRS. Similarly, some would claim Social Security and Medicare payments are not taxes due to the fact that those programs directly provide services to the party who paid into them. This is also the justification for phasing them out over certain income thresholds as after you have contributed a certain amount to the program you are "paid up" as it were. My point is in order to discuss this first we must agree on what constitutes a tax in the first place and that is much easier said than done. If we take the all non voluntary payments to any government and their second order effects route we are probably talking about a rate of over 50% on average, however under that same definition Facebook is paying much more than 4%.