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55 Corporations Paid $0 in Federal Taxes on 2020 Profits

39 points by gscott 5y ago

mehrdada 5y ago
Title is misleading... The original title is "55 Corporations paid $0 tax..." and who cares... sounds like a garbage report by a think tank to bolsters the policies they care about. Why is this on HN?
- jklinger410 5y ago
  I think a lot of people care that the poor and middle class are paying their fair share of taxes while millionaires and corporations are not. But I agree that this probably isn't a great topic for HN.
  - twofornone 5y ago
    >taxes while millionaires and corporations are not. This lazy myth needs to die. I don't remember the exact statistics but the top 10% pay a huge share of taxes, and something like the bottom 50% pay next to nothing.
  - mlindner 5y ago
    Corporations can pay 0$ for a lot or very legitimate reasons. For example no sale of assets or negative profit, among other reasons.
    - tejtm 5y ago
      Yet for corporeal entities such reasons are deemed very illegitimate ... funny that.
  - mehrdada 5y ago
    At any given year there will be N corporations whose tax bill will be zero. It's not even relevant as a policy matter that "55 corporations" are cherrypicked to have $0 tax bill for a certain year. It's not legitimate tax policy debate even, just clickbait.
  - marcusverus 5y ago
    Per the Tax Foundation, the bottom three quintiles by income are net recipients of federal tax money. See the third graphic: https://taxfoundation.org/average-federal-tax-rates-income-group/ https://taxfoundation.org/average-federal-tax-rates-income-g...
- dang 5y ago
  HN's software strips leading numbers in some cases. I've put the 55 back above.
- newbie789 5y ago
  I’d wager that a lot of people outside of think tanks have strong opinions about taxation. I’d even go so far as to suggest that if you were to ask some average Americans what they think about this topic, you’d see that a nontrivial amount of them would have an opinion one way or the other. I think this is on HN because taxation and social mores are relevant to entrepreneurship, which is a very big theme on a forum ran by a venture capital fund that operates in the United States.
mbesto 5y ago
Unpopular opinion - eliminate corporate taxes. Anyone big enough avoids them anyway so what's the point? Just put higher taxes on individuals based on consumption (a la VAT) and income actually derived for that tax year.
- sebmellen 5y ago
  While I sort of agree, I also think the reason this happens in the first place is because all US political entities play nice to the giants. There’s much talk about raising corporate tax, but that’s actually misplaced — if we fixed tax loopholes we could even go as far as to lower corporate tax for smaller corporations, which I think would be the proper approach. But of course the political class is disincentivized to admit this.
- chollida1 5y ago
  I used to think that but IMHO the biggest issue today is the growing wealth gap, and how did that gap get so big? Ownership of companies, and more specifically people not getting their wealth from income but from share price appreciation. Getting rid of corporat tax would only make this gap grown even wider and bring down the amount of tax that governments bring in. it would be the worst of both worlds, decreased government revenue and wider wealth gap.
  - mbesto 5y ago
    > Getting rid of corporat tax would only make this gap grown even wider and bring down the amount of tax that governments bring in. That's why this needs to be offset by higher individual taxes. illustrative math: company has $100M revenue, $50M paid in salaries+taxes, $5M "real profit", $0 paid in taxes today because they hide the $5M profit new proposal Company has $100M revenue, $55M paid in salaries+taxes, 0M "real profit", $0 paid in taxes Government now gets to collect $5M in taxes. The burden is higher on salaries+taxes now. This would temporarily push wages down to offset, BUT in the long run it would either (1) the company would have to readjust wages for high performers and (2) increased profits to companies would mean more jobs. Either way, it would simply correct itself.
aauchter 5y ago
The number one tax break they refer to is stock based comp. If companies paid their execs with cash (i.e. bonuses tied to share price or company performance) instead of shares, they'd have higher cash expense, and therefore wouldn't have those so called profits to tax in the first place. Such an obvious omission in this article indicates this is intentionally misleading. The next two tax breaks (research and experimentation) and renewable energy seem worthwhile, and I'd guess popular on both sides of the isle.
- hogFeast 5y ago
  But companies don't deduct stock-based comp from adjusted EPS? It is deducted for taxes, but not deducted when the board is setting targets...very selective definition of profit being used. Btw, I did make a quick examination and some information is not accurate. For example, I knew that NKE don't have huge stock-based comp. The reason they paid no tax in 2020 was tax benefit from stock-based comp AND "Foreign-derived intangible income benefit". In 2019, they took most of their income overseas. Sometime in 2020, they stopped doing this. And in 2021, they paid $500m in income tax. Interestingly, their effective tax rate actually fell even though they are now paying more income tax in the US (the tax-benefit from non-cash comp is now the more significant contributor to income-tax deductions, they are still gaining 370bps of effective income tax from IP shenanigans though...which is interesting given that this was supposed to have stopped from 2018).
rkagerer 5y ago
Some of the companies on their list with near-$0 pre-tax US income: AMD, Akamai, FedEx, HP, Nike, Salesforce, VeriSign.
WalterBright 5y ago
The article complains a lot about tax loss carry-forwards, characterizing that as a "loophole". It is not a loophole, it is a deliberate policy to accommodate business plans that simply do not fit in a single tax year. For example, building a chip fab, designing an airliner, creating rocket technology, is a multiyear process. There can be many years of expected losses before it is possible to start showing a profit. It is perfectly reasonable to offset those profits with the years of losses. It also applies to businesses that expect to have lean and fat years, like farming. It allows companies to rebuild their reserves after years of losses. BTW, individual taxpayers used to have this, too, it was called "income averaging".
- samspenc 5y ago
  > BTW, individual taxpayers used to have this, too, it was called "income averaging". TIL about income averaging, I've never heard of this before. Looks like it was phased out in 1986? https://www.phillipslawfirm.com/blog/2020/04/the-need-for-income-averaging-after-covid-19/ https://www.phillipslawfirm.com/blog/2020/04/the-need-for-in...
sebyx07 5y ago
they are smart
itake 5y ago
Are corporate taxes critical? Aren't most profits paid out (and taxed) as income to workers and dividends to shareholders or used for stock buy backs and taxed as capital gains?
- wanderingmind 5y ago
  Wages are part of expenses that are subtracted from revenue that determines profit.
  - itake 5y ago
    yep, so the extra cash goes to dividends (that are taxed as income to the investor) and buy backs that appear as capital gains taxes.
- missedthecue 5y ago
  All corporate taxes combined make up only 7% of the federal government's revenue, and an even smaller percentage of federal spending. We could end corporate taxes tomorrow and the treasury department would barely notice, but I can't help but imagine the efficiency gains that would ripple across the whole economy. There is so much productivity and human effort and brain power wasted that just goes into minimizing (and maximizing) the amount of tax paid by businesses. Not to mention the way it skews investment decisions.
- kristjansson 5y ago
  Nope, and yup respectively. All the discussion over corporate tax (and unrealized capital gains) seems rooted in pathos, not practical policy. It seems unfair that some corporation pays zero income tax while people pay xx%, so people write firebrand articles to argue that it's unfair. Nevermind that pathways from corporate income to income an actual natural person can enjoy are patrolled pretty carefully by the taxman. Total receipts might be less than if corporate managers picked a suboptimal strategy, but the operating assumption of tax policymakers _must_ be that actors are rational and wealth-maximizing. We can't write tax policy that admits certain strategy then complain that receipts are lower under that strategy than they might be, just like you can't lose a game, and complain that you would've won if only your opponent was worse.
scolson 5y ago
There seems to be an "expenses" column missing from this. I don't care what their gross is. What's their net? Edit: And carryover losses, etc
- qeternity 5y ago
  Pre-tax income is not gross. But this is ignoring a lot of stuff like tax loss carry forwards.
  - missedthecue 5y ago
    Another big one are R&D tax credits, passed under the Obama administration. The government told companies that they can save on tax if they pour money into research, so companies poured money into research and then (certain extremely vocal members of) the government got mad that they saved on tax.
    - qeternity 5y ago
      “We need to invest more in our country!” “Whoa whoa quit investing, we need your tax revenue!”
gjsman-1000 5y ago
Lies, damned lies, and statistics.
deepsun 5y ago
So many talk about taxes, but very little about their spending. In my experience, government really wastes huge amounts of money on subprime projects. Although that may be a good thing, redistributing wealth from rich to poor, same what allowed us to climb out of the Great Depression.

39 points by gscott 5y ago

Title is misleading... The original title is "55 Corporations paid $0 tax..." and who cares... sounds like a garbage report by a think tank to bolsters the policies they care about. Why is this on HN?

jklinger410 5y ago
I think a lot of people care that the poor and middle class are paying their fair share of taxes while millionaires and corporations are not. But I agree that this probably isn't a great topic for HN.
- twofornone 5y ago
  >taxes while millionaires and corporations are not. This lazy myth needs to die. I don't remember the exact statistics but the top 10% pay a huge share of taxes, and something like the bottom 50% pay next to nothing.
- mlindner 5y ago
  Corporations can pay 0$ for a lot or very legitimate reasons. For example no sale of assets or negative profit, among other reasons.
  - tejtm 5y ago
    Yet for corporeal entities such reasons are deemed very illegitimate ... funny that.
- mehrdada 5y ago
  At any given year there will be N corporations whose tax bill will be zero. It's not even relevant as a policy matter that "55 corporations" are cherrypicked to have $0 tax bill for a certain year. It's not legitimate tax policy debate even, just clickbait.
- marcusverus 5y ago
  Per the Tax Foundation, the bottom three quintiles by income are net recipients of federal tax money. See the third graphic: https://taxfoundation.org/average-federal-tax-rates-income-group/ https://taxfoundation.org/average-federal-tax-rates-income-g...
dang 5y ago
HN's software strips leading numbers in some cases. I've put the 55 back above.
newbie789 5y ago
I’d wager that a lot of people outside of think tanks have strong opinions about taxation. I’d even go so far as to suggest that if you were to ask some average Americans what they think about this topic, you’d see that a nontrivial amount of them would have an opinion one way or the other. I think this is on HN because taxation and social mores are relevant to entrepreneurship, which is a very big theme on a forum ran by a venture capital fund that operates in the United States.

mbesto 5y ago

Unpopular opinion - eliminate corporate taxes. Anyone big enough avoids them anyway so what's the point? Just put higher taxes on individuals based on consumption (a la VAT) and income actually derived for that tax year.

sebmellen 5y ago
While I sort of agree, I also think the reason this happens in the first place is because all US political entities play nice to the giants. There’s much talk about raising corporate tax, but that’s actually misplaced — if we fixed tax loopholes we could even go as far as to lower corporate tax for smaller corporations, which I think would be the proper approach. But of course the political class is disincentivized to admit this.
chollida1 5y ago
I used to think that but IMHO the biggest issue today is the growing wealth gap, and how did that gap get so big? Ownership of companies, and more specifically people not getting their wealth from income but from share price appreciation. Getting rid of corporat tax would only make this gap grown even wider and bring down the amount of tax that governments bring in. it would be the worst of both worlds, decreased government revenue and wider wealth gap.
- mbesto 5y ago
  > Getting rid of corporat tax would only make this gap grown even wider and bring down the amount of tax that governments bring in. That's why this needs to be offset by higher individual taxes. illustrative math: company has $100M revenue, $50M paid in salaries+taxes, $5M "real profit", $0 paid in taxes today because they hide the $5M profit new proposal Company has $100M revenue, $55M paid in salaries+taxes, 0M "real profit", $0 paid in taxes Government now gets to collect $5M in taxes. The burden is higher on salaries+taxes now. This would temporarily push wages down to offset, BUT in the long run it would either (1) the company would have to readjust wages for high performers and (2) increased profits to companies would mean more jobs. Either way, it would simply correct itself.

aauchter 5y ago

The number one tax break they refer to is stock based comp. If companies paid their execs with cash (i.e. bonuses tied to share price or company performance) instead of shares, they'd have higher cash expense, and therefore wouldn't have those so called profits to tax in the first place. Such an obvious omission in this article indicates this is intentionally misleading. The next two tax breaks (research and experimentation) and renewable energy seem worthwhile, and I'd guess popular on both sides of the isle.

hogFeast 5y ago
But companies don't deduct stock-based comp from adjusted EPS? It is deducted for taxes, but not deducted when the board is setting targets...very selective definition of profit being used. Btw, I did make a quick examination and some information is not accurate. For example, I knew that NKE don't have huge stock-based comp. The reason they paid no tax in 2020 was tax benefit from stock-based comp AND "Foreign-derived intangible income benefit". In 2019, they took most of their income overseas. Sometime in 2020, they stopped doing this. And in 2021, they paid $500m in income tax. Interestingly, their effective tax rate actually fell even though they are now paying more income tax in the US (the tax-benefit from non-cash comp is now the more significant contributor to income-tax deductions, they are still gaining 370bps of effective income tax from IP shenanigans though...which is interesting given that this was supposed to have stopped from 2018).

rkagerer 5y ago

Some of the companies on their list with near-$0 pre-tax US income: AMD, Akamai, FedEx, HP, Nike, Salesforce, VeriSign.

WalterBright 5y ago

The article complains a lot about tax loss carry-forwards, characterizing that as a "loophole". It is not a loophole, it is a deliberate policy to accommodate business plans that simply do not fit in a single tax year. For example, building a chip fab, designing an airliner, creating rocket technology, is a multiyear process. There can be many years of expected losses before it is possible to start showing a profit. It is perfectly reasonable to offset those profits with the years of losses. It also applies to businesses that expect to have lean and fat years, like farming. It allows companies to rebuild their reserves after years of losses. BTW, individual taxpayers used to have this, too, it was called "income averaging".

samspenc 5y ago
> BTW, individual taxpayers used to have this, too, it was called "income averaging". TIL about income averaging, I've never heard of this before. Looks like it was phased out in 1986? https://www.phillipslawfirm.com/blog/2020/04/the-need-for-income-averaging-after-covid-19/ https://www.phillipslawfirm.com/blog/2020/04/the-need-for-in...

sebyx07 5y ago

they are smart

itake 5y ago

Are corporate taxes critical? Aren't most profits paid out (and taxed) as income to workers and dividends to shareholders or used for stock buy backs and taxed as capital gains?

wanderingmind 5y ago
Wages are part of expenses that are subtracted from revenue that determines profit.
- itake 5y ago
  yep, so the extra cash goes to dividends (that are taxed as income to the investor) and buy backs that appear as capital gains taxes.
missedthecue 5y ago
All corporate taxes combined make up only 7% of the federal government's revenue, and an even smaller percentage of federal spending. We could end corporate taxes tomorrow and the treasury department would barely notice, but I can't help but imagine the efficiency gains that would ripple across the whole economy. There is so much productivity and human effort and brain power wasted that just goes into minimizing (and maximizing) the amount of tax paid by businesses. Not to mention the way it skews investment decisions.
kristjansson 5y ago
Nope, and yup respectively. All the discussion over corporate tax (and unrealized capital gains) seems rooted in pathos, not practical policy. It seems unfair that some corporation pays zero income tax while people pay xx%, so people write firebrand articles to argue that it's unfair. Nevermind that pathways from corporate income to income an actual natural person can enjoy are patrolled pretty carefully by the taxman. Total receipts might be less than if corporate managers picked a suboptimal strategy, but the operating assumption of tax policymakers _must_ be that actors are rational and wealth-maximizing. We can't write tax policy that admits certain strategy then complain that receipts are lower under that strategy than they might be, just like you can't lose a game, and complain that you would've won if only your opponent was worse.

scolson 5y ago

There seems to be an "expenses" column missing from this. I don't care what their gross is. What's their net? Edit: And carryover losses, etc

qeternity 5y ago
Pre-tax income is not gross. But this is ignoring a lot of stuff like tax loss carry forwards.
- missedthecue 5y ago
  Another big one are R&D tax credits, passed under the Obama administration. The government told companies that they can save on tax if they pour money into research, so companies poured money into research and then (certain extremely vocal members of) the government got mad that they saved on tax.
  - qeternity 5y ago
    “We need to invest more in our country!” “Whoa whoa quit investing, we need your tax revenue!”

gjsman-1000 5y ago

Lies, damned lies, and statistics.

deepsun 5y ago

So many talk about taxes, but very little about their spending. In my experience, government really wastes huge amounts of money on subprime projects. Although that may be a good thing, redistributing wealth from rich to poor, same what allowed us to climb out of the Great Depression.