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Corporations Like Nike Paid $0 Federal Tax in 2020 While CEO Pay Soared
- WalterBright 6y agoI'm sure the CEO paid taxes on his pay. 38.5% of federal tax revenue comes from the top 1%.
- sesuximo 6y agoI agree with the first sentence, but I don’t think the second sentence is good evidence. Most people in the top 1% of incomes are not CEOs of large corporations.
- izacus 6y agoIf you'll look even remotely close to how CEO comp works, you'll see that it's not paid out as a wage at all and that those people don't pay even remotely close to tax rate of an average employed person.
- pge 6y agoThis is probably naive (and feel free to tell me why it is), but why have corporate tax at all? Why not only tax individual income? It seems much easier for corporations to dodge taxes by moving their domicile and such things. Much harder (or at least a lot more inconvenient)for individuals to move jurisdictions to dodge taxes or to have other complex avoidance strategies (particularly if the tax code were simplified).
- anonu 6y agoMakes sense. And incentive companies to keep employees and manufacturing in USA as well...
- tick_tock_tick 6y agoIt's not a uncommon school of thought that the corporate tax rate should be 0% the biggest issue is the concern that without taxes the hording of money inside the corporation would get crazy but Apple already does that so it might not be as big of an issue as people think.
- kelnos 6y agoRight, but isn't most of Apple's cash hoard held outside of the US's tax jurisdiction, under much more favorable tax regimes? Seems like that might be an argument for a 0% tax; at least if the US didn't tax corporate profits, more of that money might be kept in the US. It's not guaranteed that it would be spent (thus injecting money into the US economy), but at least it would be possible for that to happen.
- tonfa 6y agoI don't think there's any benefit from keeping cash abroad for us corps, that was removed with trump's tax changes. (And even before it was delayed taxation, not tax free)
- valuearb 6y agoI believe the Trump tax cuts only provided a temporary benefit for repatriation of foreign earnings.
- tonfa 6y agoThere was a one time repatriation mechanism, but it also removed the deferred taxation of foreign earnings. https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-a-comparison-for-large-businesses-and-international-taxpayers https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-a-compari...
- didgeoridoo 6y agoThis isn’t a naïve question at all. My suspicion is that corporate taxes exist because they are the only politically-palatable way to impose taxes on the middle class (also known as “where the money is”). However, legal avoidance has gotten so prevalent among larger corporations that the futility of taxing them is becoming more obvious. How that translates into “raise the corporate tax rate”, I couldn’t tell you.
- Drunk_Engineer 6y agoIf a corporation doesn't want to pay corporate taxes, it always has the option of going private.
- didgeoridoo 6y agoOn the off chance that you don’t understand the downvotes: all corporations, public and private, pay taxes on recognized income.
- Drunk_Engineer 6y agoPrivate companies don't have to be corporations at all. If investors don't like the "double-taxation" problem, then drop the incorporation and use a different entity. Of course, they would loose the benefits of incorporation (i.e. limited liability) -- clearly many investors find that benefit worth the tax cost.
- tedunangst 6y agoThe corporate tax exists as a policy lever to get companies to do things. It's unpalatable to actually spend money on solar power, but tax credits kinda work the same way. Lower risk in a sense, since there's no outlay if nobody does anything, at the cost of stupidly complex laws and exceptions.
- ada1981 6y agoIsn’t this just a function of not having any profits?
- neolog 6y agoThe article shows that's not it.
- Rebelgecko 6y agoAre you sure? When I read the article it seemed to make a big deal about how part of the reason the companies got tax rebates is that the CARES act let companies apply their negative profits retroactively for a tax rebate instead of having to carry them forward.
- kelnos 6y agoEven if so, I don't get all the outrage directed toward Nike. They're merely doing exactly what the US government told them they could do.
- neolog 6y agoAre you saying it's good for companies to behave as badly as they possibly can? Maximizing shareholder money is not the only way of life.
- thrill 6y agoNo, it's a function of companies following the law instead of doing what the article writer thinks is "fair".
- izacus 6y agoAssuming that they're following the law assumes that they'll also stand through a proper IRS audit without any questionable financials. If you'd ever been close to any corporation, you'd know that that's a hellova assumption to make. "Following the law" is something that's very fungible when you're rich.
- snicksnak 6y agobut at least they're woke while doing it.
- ISL 6y agoCompanies did what we collectively asked them to do through national governance?
- tfehring 6y agoThe cited report is probably a better link. Posted article doesn’t add much value IMO, and it omits valuable information about the specific tactics these companies used for tax avoidance. https://itep.org/55-profitable-corporations-zero-corporate-tax/ https://itep.org/55-profitable-corporations-zero-corporate-t...
- madrox 6y ago"Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant." - Commissioner v. Newman, 159 F.2d 848, 851 (2d Cir. 1947) I don't hate Nike or Amazon for paying no tax. I hate our tax laws for making it possible to do so legally. The previous administration spent tremendous energy cutting taxes for corporations and when they actually take advantage of that fact it's a bunch of shocked pikachus.
- pyrophane 6y agoSure, but I also don’t imagine these companies are standing on the sidelines while tax laws are written, pleasantly surprised to see things working out in their favor once again.
- parineum 6y agoAll of the wages that Nike and Amazon pay are taxed though. They create commerce that is taxed at just about every turn.
- chrischen 6y agoI feel like there is too much outrage fueled by a complete misunderstanding of how our tax system works right now. If corporations are taxed then there is effectively double taxation. Corporations can only spend the money on business expenses, such as paying people. However when people are paid they are being taxed already. So our current tax system taxes a corporation if they have excess money they sit on. If they spend the money on productive uses it doesn’t get taxed, but then the people who receive the money get taxed. So the headline is extremely disingenuous because if Nike had $0 taxable income it’s only because they shifted the taxable income to the CEO’s pay.
- kelnos 6y ago> If corporations are taxed then there is effectively double taxation. Not really. Corporate profits are taxed, not revenue. Taxes aren't figured until salaries are already paid. > ... if Nike had $0 taxable income it’s only because they shifted the taxable income to the CEO’s pay. I'm sure it's a lot more complicated than that. Companies aren't avoiding tax by giving all excess revenue to their CEO as compensation. That wouldn't really make sense at all.
- bryan0 6y agoWhen a similar story came out about Amazon last year, it seemed that the main explanation is that this was due to increased employee compensation which in turn increased employee income tax (which is at a higher rate than corporate income tax). In theory this is better for all parties involved since employees are getting more income and govt gets more tax income, but the article was a bit short on details so I couldn’t tell if that was also happening here.
- redorb 6y agoArticle is missing a lot of information - Like why with a 21% rate companies didn't pay taxes, or , what was the 'tax rebate' for? Also it shows the stock price change as if the company get's that money. Companies only get the initial IPO money for shares sold. Taxes are passed through to consumers anyway; Corporations don't pay taxes - they collect them from the customer.
- Rebelgecko 6y agoBy itself, it seems like a nonsequitor for the article to mention that the tax rate changed from 35% to 21%, since if 35% of X is $0, then 21% of X is still gonna be $0. However the new benefit for companies is that when the lose money, instead of having to use the loss to offset future profits, they can also use it to offset past profits. Offsetting past income taxed at 35% (from before the Trump tax cuts) is more valuable than offsetting future income which in theory will be taxed at 21%.
- pyrophane 6y agoSo, if I am reading this correctly: A combination of the Trump corporate tax cut and rebates on past losses in the CARES act, as well as other existing rebates, are reducing taxes that many companies have to pay this year, in some cases all the way to a negative effective rate. Increases in share prices have also pushed up CEO pay, since CEOs receive a lot of stock as part of their total comp.
- adventured 6y agoOh man, they would have paid $8.5 billion in corporate income taxes. That'll for sure plug the trillions extra we spent in the past 12 months, the $2 trillion laughble infrastructure plan that does nothing, our forever trillion dollar entitlement deficits and hundreds of billions in unnecessary military spending. We better immediately get on raising corporate income taxes on every business - which is what this article is ideologically timed to argue in favor of. And then a lot more of our major corporations will flee the US, as they were beginning to prior to bringing the corporate income tax down to a sane level that is competitive. They'll take jobs and R&D with them, while making the rest of the world even more competitive; see: Medtronic (and Pfizer nearly joined them). So then you'll have to strap another layer of authoritarianism onto the increasingly unfree US and say that companies are no longer allowed to leave (de facto building walls to keep resources from fleeing bad policy and decades of wildly irrational spending). The only place the US is going to find a lot more income tax, is from the middle class tax bracket and those above it. And that still won't come close to dealing with the deficits. Those brackets are where every other welfare state on the planet finds their income tax revenue, the US is one of the few exceptions that doesn't drown its middle class in taxes, and if we're going to do that we better give those people healthcare in exchange among other things (like nice infrastructure, high-speed rail, and so on). But we won't do that, we'll drown everyone in taxes and give them nothing further in return, we'll just keep running our worst-in-the-world welfare state instead, as we have been.
- anonu 6y agoWhile I think our tax laws for corporations need adjustment I always take these headlines with a grain of salt. Let's think about taxes in other areas that companies like nike generates: 1. Sales tax on goods sold 2. Income taxes on employees pay 3. Capital gain taxes on stock sold... At ever increasing prices because their earnings are higher. All I'm saying is it's complicated. It's not a simple math. Lowering corporate taxes might stimulate growth and taxes in other areas.
- anm89 6y agoIt's always weird to me that people see this and get angry at Nike and not the politicians who made the laws. Nike is a publicly traded company whose sole purpose of existence is to create profits for its shareholders. The people who write the tax laws are democratically elected officials whose, at least on paper, sole purpose as an official is to create laws like tax laws that benefit their constituents. And yet, people somehow see the problem here as Nike trying to do what's in their best interest and not the politician who made it totally legal for them to do what they are doing.
- effingwewt 6y agoBecause it's companies like Nike that lobby our politicians to create power/regulatory capture moats of laws. I think it's obvious that runaway capitalism does not work, and we need something different,but as always once something has been done once it quickly becomes the status quo
- anm89 6y agoI didn't elect Nike. They have a right to lobby. I elected my congressman. I expect him/her not to give in to the lobbying
- neolog 6y ago> whose sole purpose of existence is to create profits for its shareholders How can you tell what its "purpose" is? For example, Nike's marketing suggests its purpose is manufacturing athletic equipment or promoting youth sports.
- anm89 6y agoNike isn't a person. It doesn't have feelings or opinions or thoughts . Its existence is summed up by legal contracts which are obligations between the shareholders and the corporation and those legal contracts obligate the corporation to act in a fiduciary manner to create returns on the investments. That's how I can tell.
- valuearb 6y agoCorporations should not pay income tax at all. It's a direct tax on savings and investment, which leads to slower growth and lower incomes for the country as a whole. S Corps and some other legally structured corporations (such as some LLCs, all "non-profits" and religious businesses) don't pay income taxes by design. Why should C corps be singled out to pay taxes on capital that could be reinvested? If you really want a fair, progressive tax system, stop taxing corporations, and increase dividend and capital gains* tax rates back to ordinary income tax rates. Then for the first time the little old lady in retirement would pay low rates and the rich CEO would pay much higher rates. Under the current system when the retiree in California living off $30k in annual retirement income gets a dividend a total of roughly 38% is lost to taxes (Federal Corporate Capital Gains, Federal Dividend tax, State Corporate Income Tax, & State Personal Income Tax). The CA CEO making a million dollars a year loses roughly 47% to taxes on that same dividend. So that's what our progressive income tax system was intended for, to have the poorest paying 38% and the richest 47%? And all to discourage savings and investment? * Now you'd have to index capital gains for inflation if you reverted them to ordinary income tax rates. That's the reason we have a separate capital gains rate. Taxing someone on a 100% gain in their stock value when inflation was 100% during the same period would be taxing imaginary gains.
- neolog 6y ago> to pay taxes on capital that could be reinvested The taxed money does get invested, doesn't it? Just not by the company.
- datavirtue 6y agoTherein lies the problem. You get less of what you tax.
- jellicle 6y ago> Corporations should not pay income tax at all. It's a direct tax on savings and investment No corporation pays (or has ever paid) a dollar of tax on money spent for investment in the business. Corporate taxes, by design, only affect those dollars the corporation has chosen NOT to invest in the business.
- bpodgursky 6y agoGood. We should keep corporate income tax 0% forever, and take the tax revenue via capital gains (or dividends) instead. That's a lot simpler, fairer, and stops funneling money into the lawyers devising corporate taxation strategies that make the tax useless in the first place.