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Corporate tax is quite misunderstood in my opinion. Tesla makes revenue, and they have costs. Their revenues are offset by their costs. Any profit Tesla makes

Corporate tax is quite misunderstood in my opinion. Tesla makes revenue, and they have costs. Their revenues are offset by their costs. Any profit Tesla makes is eventually taxed -- either when Tesla shareholders sell appreciated stock, when the company makes distributions or when they liquidate. Corporate tax only applies to un-distributed profits carried forward from year to year instead of invested into the business or distributed to shareholders.

aqme28 2y ago
Yes, but that’s not the whole picture. If the value of the company goes up, shareholders capture value as capital gains which has a very low tax rate.
- arcticbull 2y ago
  Low... ish... depending on where you are. Short term gains are taxed as ordinary income, long-term gains are taxed up to 20% (already the corporate rate) and states like California treat it as ordinary income exposing you to another up to 13.3%
  - aqme28 2y ago
    It's still never higher than income tax, which is what the parent comment was comparing to.
notTooFarGone 2y ago
Oh yea share buybacks are very nice costs for a lot of companies. Then you can also take loans based off of that to make sure you never have to pay taxes again.
- arcticbull 2y ago
  Those are taxable events for the people who sell the shares Tesla is buying back. > Then you can also take loans based off of that to make sure you never have to pay taxes again. You can borrow against the after tax amount yes, you'll pay interest on it and when you die, you will pay the capital gains. On your final tax return, you are required to pay taxes on all of the capital gains you up to your departure. This resets the tax basis for your heirs.
  - flipbrad 2y ago
    "Those are taxable events for the people who sell the shares Tesla is buying back." But in which jurisdictions is that tax payable, and at what rates?
    - arcticbull 2y ago
      There's no general answer to that question. It depends on how long you held it for, where you're resident, and your specific circumstances.
throwaway2037 2y ago
My sense about Tesla: They have nearly all of their R&D in the United States, but they have large global footprint with very large factories in Germany and China. I think a lot of the US-based R&D costs can by used to offset US-based income. Also, does "income" mean "profits" in this context? It is unclear to me. They did not clearly define the term.
- JumpCrisscross 2y ago
  > does "income" mean "profits" in this context? Net income. The article's $2.3bn 2024 "U.S. income" lines up with Tesla's (global) $2.32bn net income (on $1.6bn operating income) [1]. [1] https://www.cnbc.com/2025/01/29/tesla-tsla-2024-q4-earnings.html https://www.cnbc.com/2025/01/29/tesla-tsla-2024-q4-earnings....
nicce 2y ago
> either when Tesla shareholders sell appreciated stock, when the company makes distributions or when they liquidate. Feels like a fatal flaw in the law if you can bypass paying the corporate taxes in that way. That is individual tax - not the tax payed by the corporation. Normally the tax is payed twice. Tax from the corporation profits and then the individual employee/shareholder tax based on their income.
- JumpCrisscross 2y ago
  > Normally the tax is payed twice. Tax from the corporation profits and then the individual employee tax based on their income. Payroll tax is the second check you're looking for. Tesla is almost certainly fucking around. But the concept of taxing corporate profits--versus earnings--is solid. You massively favour high-margin (tech) over low-margin (manufacturing, service, anything with physical assets) and incumbents over new entrants if you tax the top line.
  - Ekaros 2y ago
    It really comes to simple process lot of companies operate. They buy some materials, they spend some labour to refine it, sell it, ship it. And what is above all these costs is profit. Taxing them on what they sold for, is not really sensible say with fuel, a low margin product. Now what can be called cost is very reasonable question. Clearly dividends or stock buybacks should not be costs. And thus such spending should only come from post tax money...
    - JumpCrisscross 2y ago
      > Clearly dividends or stock buybacks should not be costs. And thus such spending should only come from post tax money It does. Dividends and stock buybacks are not tax deductiable [1][2]. [1] https://www.thetaxadviser.com/issues/2022/sep/paying-dividends-tax-planning-strategy.html https://www.thetaxadviser.com/issues/2022/sep/paying-dividen... [2] https://www.grantthornton.com/insights/alerts/tax/2024/flash/irs-issues-robust-guidance-on-stock-buyback-tax https://www.grantthornton.com/insights/alerts/tax/2024/flash...
croes 2y ago
So in politics companies are people but in taxes they are not? Or why do I have to pay taxes instead of nothing because I invest in my company aka me?
- jpc0 2y ago
  To be fair you are welcome to incorporate and follow all the rules regarding what is actually business expenses vs private and most of your expenses can also be tax free. But I doubt your employer will be too happily to now pay your salary as an invoice to a subcontractor... You may find it's easier to just pay tax... Also look up effective tax rate vs actual tax rate... I know many people who despite having a significant portion of their salary being taxes, when you look at their Revenue and Expenses for a given 12 month period they in fact paid no tax. Your specific situation may be different, but you aren't a corporation.
dxuh 2y ago
I have income and I have costs. Why is my income not completely offset by my costs? I'd love to spend more money to pay fewer taxes. My labor is turned into profits for my employer and similarly their profit is eventually taxed. In that sense my labor doesn't have to be taxed directly either. Why is it? I think it's absurd that one the hand they are reporting revenue to shareholders and on the other hand they are reporting no profits to tax authorities. Am I misunderstanding something here? I think it's an arbitrary choice that people are supposed to pay for the expenses of the state and corporations are not. I don't think that's a good choice, but that's partially subjective.
- JumpCrisscross 2y ago
  > it's absurd that one the hand they are reporting revenue to shareholders and on the other hand they are reporting no profits to tax authorities. Am I misunderstanding something here? Yes and no. It's clearly an abuse of the tax code. But the idea that a company would have different books for the IRS and itself is no different than you probably having a different set of "books" for your household budget and tax filings. They're held to different standards of precision and serve different purposes.
- ksec 2y ago
  Because part of their cost is to pay for your income. You also get Tax deduction on certain "cost" as well. Just not everything. > My labor is turned into profits for my employer and similarly their profit is eventually taxed. Your labour is tuned into revenue first. There are plenty of companies burning through cash for 10 years before making a single cent of profits.
deleted 2y ago
[deleted]
Terr_ 2y ago
> Corporate tax is quite misunderstood in my opinion. Yeah, it's mechanically different from individual income taxes, but in general Americans don't know how taxes work. I've had coworkers in the past who believed that if you made juuust enough money to enter a new income tax bracket, you'd actually have less take-home than before. They thought that the entire income was taxed at a new rate, instead of just the marginal dollars that spilled into the new bracket.
BlackFly 2y ago
It's not misunderstood. People also have costs some of which are tax deductible, yet their income is seen to be completely taxed before costs are deducted. In both personal and corporate taxes, some costs are deductible and others not. People understand this. The point is that people find it a violation of norms how a company can arrange its taxes in a way that a salaried individual basically never can: to basically not pay any taxes while enriching some specific people more than others.

aqme28 2y ago

Yes, but that’s not the whole picture. If the value of the company goes up, shareholders capture value as capital gains which has a very low tax rate.

arcticbull 2y ago
Low... ish... depending on where you are. Short term gains are taxed as ordinary income, long-term gains are taxed up to 20% (already the corporate rate) and states like California treat it as ordinary income exposing you to another up to 13.3%
- aqme28 2y ago
  It's still never higher than income tax, which is what the parent comment was comparing to.

notTooFarGone 2y ago

Oh yea share buybacks are very nice costs for a lot of companies. Then you can also take loans based off of that to make sure you never have to pay taxes again.

arcticbull 2y ago
Those are taxable events for the people who sell the shares Tesla is buying back. > Then you can also take loans based off of that to make sure you never have to pay taxes again. You can borrow against the after tax amount yes, you'll pay interest on it and when you die, you will pay the capital gains. On your final tax return, you are required to pay taxes on all of the capital gains you up to your departure. This resets the tax basis for your heirs.
- flipbrad 2y ago
  "Those are taxable events for the people who sell the shares Tesla is buying back." But in which jurisdictions is that tax payable, and at what rates?
  - arcticbull 2y ago
    There's no general answer to that question. It depends on how long you held it for, where you're resident, and your specific circumstances.

throwaway2037 2y ago

My sense about Tesla: They have nearly all of their R&D in the United States, but they have large global footprint with very large factories in Germany and China. I think a lot of the US-based R&D costs can by used to offset US-based income. Also, does "income" mean "profits" in this context? It is unclear to me. They did not clearly define the term.

JumpCrisscross 2y ago
> does "income" mean "profits" in this context? Net income. The article's $2.3bn 2024 "U.S. income" lines up with Tesla's (global) $2.32bn net income (on $1.6bn operating income) [1]. [1] https://www.cnbc.com/2025/01/29/tesla-tsla-2024-q4-earnings.html https://www.cnbc.com/2025/01/29/tesla-tsla-2024-q4-earnings....

nicce 2y ago

> either when Tesla shareholders sell appreciated stock, when the company makes distributions or when they liquidate. Feels like a fatal flaw in the law if you can bypass paying the corporate taxes in that way. That is individual tax - not the tax payed by the corporation. Normally the tax is payed twice. Tax from the corporation profits and then the individual employee/shareholder tax based on their income.

JumpCrisscross 2y ago
> Normally the tax is payed twice. Tax from the corporation profits and then the individual employee tax based on their income. Payroll tax is the second check you're looking for. Tesla is almost certainly fucking around. But the concept of taxing corporate profits--versus earnings--is solid. You massively favour high-margin (tech) over low-margin (manufacturing, service, anything with physical assets) and incumbents over new entrants if you tax the top line.
- Ekaros 2y ago
  It really comes to simple process lot of companies operate. They buy some materials, they spend some labour to refine it, sell it, ship it. And what is above all these costs is profit. Taxing them on what they sold for, is not really sensible say with fuel, a low margin product. Now what can be called cost is very reasonable question. Clearly dividends or stock buybacks should not be costs. And thus such spending should only come from post tax money...
  - JumpCrisscross 2y ago
    > Clearly dividends or stock buybacks should not be costs. And thus such spending should only come from post tax money It does. Dividends and stock buybacks are not tax deductiable [1][2]. [1] https://www.thetaxadviser.com/issues/2022/sep/paying-dividends-tax-planning-strategy.html https://www.thetaxadviser.com/issues/2022/sep/paying-dividen... [2] https://www.grantthornton.com/insights/alerts/tax/2024/flash/irs-issues-robust-guidance-on-stock-buyback-tax https://www.grantthornton.com/insights/alerts/tax/2024/flash...

croes 2y ago

So in politics companies are people but in taxes they are not? Or why do I have to pay taxes instead of nothing because I invest in my company aka me?

jpc0 2y ago
To be fair you are welcome to incorporate and follow all the rules regarding what is actually business expenses vs private and most of your expenses can also be tax free. But I doubt your employer will be too happily to now pay your salary as an invoice to a subcontractor... You may find it's easier to just pay tax... Also look up effective tax rate vs actual tax rate... I know many people who despite having a significant portion of their salary being taxes, when you look at their Revenue and Expenses for a given 12 month period they in fact paid no tax. Your specific situation may be different, but you aren't a corporation.

dxuh 2y ago

I have income and I have costs. Why is my income not completely offset by my costs? I'd love to spend more money to pay fewer taxes. My labor is turned into profits for my employer and similarly their profit is eventually taxed. In that sense my labor doesn't have to be taxed directly either. Why is it? I think it's absurd that one the hand they are reporting revenue to shareholders and on the other hand they are reporting no profits to tax authorities. Am I misunderstanding something here? I think it's an arbitrary choice that people are supposed to pay for the expenses of the state and corporations are not. I don't think that's a good choice, but that's partially subjective.

JumpCrisscross 2y ago
> it's absurd that one the hand they are reporting revenue to shareholders and on the other hand they are reporting no profits to tax authorities. Am I misunderstanding something here? Yes and no. It's clearly an abuse of the tax code. But the idea that a company would have different books for the IRS and itself is no different than you probably having a different set of "books" for your household budget and tax filings. They're held to different standards of precision and serve different purposes.
ksec 2y ago
Because part of their cost is to pay for your income. You also get Tax deduction on certain "cost" as well. Just not everything. > My labor is turned into profits for my employer and similarly their profit is eventually taxed. Your labour is tuned into revenue first. There are plenty of companies burning through cash for 10 years before making a single cent of profits.

deleted 2y ago

[deleted]

Terr_ 2y ago

> Corporate tax is quite misunderstood in my opinion. Yeah, it's mechanically different from individual income taxes, but in general Americans don't know how taxes work. I've had coworkers in the past who believed that if you made juuust enough money to enter a new income tax bracket, you'd actually have less take-home than before. They thought that the entire income was taxed at a new rate, instead of just the marginal dollars that spilled into the new bracket.

BlackFly 2y ago

It's not misunderstood. People also have costs some of which are tax deductible, yet their income is seen to be completely taxed before costs are deducted. In both personal and corporate taxes, some costs are deductible and others not. People understand this. The point is that people find it a violation of norms how a company can arrange its taxes in a way that a salaried individual basically never can: to basically not pay any taxes while enriching some specific people more than others.