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I'm the last person to defend corporations. That said, US corporations definitely don't avoid "paying taxes." The corporate income tax rate imposed by the feder

I'm the last person to defend corporations. That said, US corporations definitely don't avoid "paying taxes." The corporate income tax rate imposed by the federal government is 21%. Employees pay income and social security taxes on top of those earnings after. From the moment a company earns income until it lands in the hands of employees the government can take as much as HALF of it. This includes everyone on salary. Execs would be wise to issue themselves stock so they "ONLY" have to pay 15% or 20% (LTCG) as their "income tax." Companies can reduce their tax burden by engaging in behaviors which the federal government has deemed worthy or risky and incentivizes those behaviors with preferential tax treatment. For instance the R&D tax credit. It means that organizations that invest in qualified research and development activities to incentivize innovation and growth (as defined in Internal Revenue Code section 41) may be eligible for a general business tax credit.

projektfu 4y ago
No, wages, salaries, payroll taxes and contractor expenses, along with most other expenses, are subtracted from gross profit to make net profit, which may undergo further reduction in various charges (depreciation, etc) before being subject to tax, and then various tax credits may be applied that reduce the corporate liability further. Double taxation occurs when a corporation is subject to corporate tax and then pays a dividend, which is after tax, but counts as income to the investor. There are arguments to be made that this is fair or unfair.
- wolverine876 4y ago
  > Double taxation occurs when a corporation is subject to corporate tax and then pays a dividend, which is after tax, but counts as income to the investor. There are arguments to be made that this is fair or unfair. Even calling it double-taxation seems like BS. Generally, we tax at the point of exchange: income, sales, etc. Money moves around endlessly. It's taxed when the consumer pays the corporation (often twice! sales and income), when the corporation pays the shareholder, when the shareholder dies and gives it to their kids, when the kids buy a house, when the homebuilder pays their contractors, etc. etc. etc.
  - projektfu 4y ago
    I don't disagree, but S-corporation profits are only taxed once, regardless of distribution, and C-corporation profits are taxed on the corporate tax bill even if distributed in a dividend to shareholders. It's a little peculiar.
    - varispeed 4y ago
      Still. The corporate tax rate is way lower than personal tax. In my country some workers pay over 50% tax on their income, while corporation they work for pay 10% or less if they have good accountants.
      - nullc 4y ago
        In the US we've historically arranged thing so that the corporate tax rate + long term cap gains rate is approximately equal to the income tax rate. If the combined rates were much greater it would create an incentive against creating c-corps.
        wolverine876 4y ago
        > If the combined rates were much greater it would create an incentive against creating c-corps. Are you implying that sole proprieterships would be alternatives to C corps? Facebook would be a personal asset of Zuckerberg?
        varispeed 4y ago
        > If the combined rates were much greater it would create an incentive against creating c-corps. This argument isn't sound. If high tax doesn't create an incentive for creating corporations, then it also doesn't create an incentive for people to work and be productive. Now the taxes are pushed on the workers that have to pick up the corporations tab. It may have worked in the past where corporations had high head count and were not outsourcing, but now governments rather than working to correct that imbalance, they increase workers' taxes. We can see this system is slowly collapsing as your can tax the workers only so much before they feel like slaves and stop working.
wolverine876 4y ago
Yet the total tax burden of US corporations is low relative to similar countries (IIRC), and some corporations pay nothing.
hnlmorg 4y ago
> That said, US corporations definitely don't avoid "paying taxes." Multinational corporations definitely do. They'll register themselves in a country with a cheaper corporate tax burden then argue that their income / sales is generated from that country rather than their actual country of origin. Thus reducing the amount of tax they have to pay in the US (or UK, etc).
- orangepurple 4y ago
  Irrelevant due to Global Intangible Low-Taxed Income (GILTI)
  - varispeed 4y ago
    It is relevant since the tax is low, so it makes it worthwhile. Foreign big corporations that are not US controlled have even better situation. Countries like UK have for instance DPT (Diverted Profit Tax) but it is discretionary and our tax man tends to look away.

projektfu 4y ago

No, wages, salaries, payroll taxes and contractor expenses, along with most other expenses, are subtracted from gross profit to make net profit, which may undergo further reduction in various charges (depreciation, etc) before being subject to tax, and then various tax credits may be applied that reduce the corporate liability further. Double taxation occurs when a corporation is subject to corporate tax and then pays a dividend, which is after tax, but counts as income to the investor. There are arguments to be made that this is fair or unfair.

wolverine876 4y ago
> Double taxation occurs when a corporation is subject to corporate tax and then pays a dividend, which is after tax, but counts as income to the investor. There are arguments to be made that this is fair or unfair. Even calling it double-taxation seems like BS. Generally, we tax at the point of exchange: income, sales, etc. Money moves around endlessly. It's taxed when the consumer pays the corporation (often twice! sales and income), when the corporation pays the shareholder, when the shareholder dies and gives it to their kids, when the kids buy a house, when the homebuilder pays their contractors, etc. etc. etc.
- projektfu 4y ago
  I don't disagree, but S-corporation profits are only taxed once, regardless of distribution, and C-corporation profits are taxed on the corporate tax bill even if distributed in a dividend to shareholders. It's a little peculiar.
  - varispeed 4y ago
    Still. The corporate tax rate is way lower than personal tax. In my country some workers pay over 50% tax on their income, while corporation they work for pay 10% or less if they have good accountants.
    - nullc 4y ago
      In the US we've historically arranged thing so that the corporate tax rate + long term cap gains rate is approximately equal to the income tax rate. If the combined rates were much greater it would create an incentive against creating c-corps.
      - wolverine876 4y ago
        > If the combined rates were much greater it would create an incentive against creating c-corps. Are you implying that sole proprieterships would be alternatives to C corps? Facebook would be a personal asset of Zuckerberg?
      - varispeed 4y ago
        > If the combined rates were much greater it would create an incentive against creating c-corps. This argument isn't sound. If high tax doesn't create an incentive for creating corporations, then it also doesn't create an incentive for people to work and be productive. Now the taxes are pushed on the workers that have to pick up the corporations tab. It may have worked in the past where corporations had high head count and were not outsourcing, but now governments rather than working to correct that imbalance, they increase workers' taxes. We can see this system is slowly collapsing as your can tax the workers only so much before they feel like slaves and stop working.

wolverine876 4y ago

Yet the total tax burden of US corporations is low relative to similar countries (IIRC), and some corporations pay nothing.

hnlmorg 4y ago

> That said, US corporations definitely don't avoid "paying taxes." Multinational corporations definitely do. They'll register themselves in a country with a cheaper corporate tax burden then argue that their income / sales is generated from that country rather than their actual country of origin. Thus reducing the amount of tax they have to pay in the US (or UK, etc).

orangepurple 4y ago
Irrelevant due to Global Intangible Low-Taxed Income (GILTI)
- varispeed 4y ago
  It is relevant since the tax is low, so it makes it worthwhile. Foreign big corporations that are not US controlled have even better situation. Countries like UK have for instance DPT (Diverted Profit Tax) but it is discretionary and our tax man tends to look away.