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(Yahoo)   Think America gives too many breaks to big business? U.S. corporations pay 39% tax while the average for industrialized nations is only 25%   (finance.yahoo.com ) divider line
    More: Interesting, United States, developed country, fairs, technical analysis, corporate tax, tax rates  
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1150 clicks; posted to Business » on 10 Jul 2012 at 2:54 PM (4 years ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-07-11 10:42:21 AM  
That's a bit naive. The rate may be 40% but what is paid after loopholes, laundering offshore and tax breaks, credits, it's much less. Some like GE even were paid a refund by the govt.
 
2012-07-11 11:57:33 AM  

Flint Ironstag: dumbobruni:
this reminds me: companies should not be allowed to carry forward losses to offset future tax gains. this is a rule that leaves itself open to all sorts of abuse. it creates distortions in perceived values of publicly traded companies, giving them sometimes very large amounts of intangible assets which inflate their valuations (huge problem at Citigroup)

Paying off your debt is an expense. How could it not be?

Year 1:
Make a loss of $1m
Result: $1m overdraft.
No profit no tax.

Year 2:
(Trading) Profit of $1m
Pay off $1m overdraft.
Net Profit $0
39% of $0.00 is......

It works the same if you are GE or a mom and pop store. Same everywhere in the world AFAIK. Note during both years you will still be generating and paying sales taxes, payroll taxes, property taxes etc.


that not how loss carry forwards work. tax accounting is not the same as regular accounting.

lets go ahead to the next year shall we?

Year 3:
(Trading) Profit of $1m
Net Profit $1m
Loss carryforward Tax Credit of ($1m)
Taxable income = 0.00
39% of 0 = 0
 
2012-07-11 12:49:31 PM  

justsomeusername: Deferred taxes do not affect the company's effective tax rate.


Sorry, but I, and several Tax thinktanks disagree.

If you have deferred taxes from a previous year into the current year, you are including those taxes paid as part of your calculation to arrive at the effective tax rate for the current year. To say that deferred taxes have no effect on the effective tax rate of a company displays a certain lack of knowledge.

The fact that you borked up that simple facet of accounting, along with your assertion that a 10-K is a better indicator of tax liability than a tax return, gives me reason to question the remainder of your analysis.

From the NYT, as well as a generally accepted truth in taxation:

"Neither the government nor corporations make tax returns public, and a company's taxable income often differs from the profits disclosed in annual reports. Companies report their cash outlays for income taxes in their annual Form 10-K, but it is impossible from those numbers to determine precisely how much, in total, corporations pay to governments."

Sorry, but the very best indicator of a company's tax liability is, you know, the form that they submit to the IRS that shows their tax liability. Not the 10-K that uses a completely different set of incomes and expenses.
 
2012-07-11 01:18:59 PM  

The_Six_Fingered_Man: justsomeusername: Deferred taxes do not affect the company's effective tax rate.

Sorry, but I, and several Tax thinktanks disagree.

If you have deferred taxes from a previous year into the current year, you are including those taxes paid as part of your calculation to arrive at the effective tax rate for the current year. To say that deferred taxes have no effect on the effective tax rate of a company displays a certain lack of knowledge.

The fact that you borked up that simple facet of accounting, along with your assertion that a 10-K is a better indicator of tax liability than a tax return, gives me reason to question the remainder of your analysis.

From the NYT, as well as a generally accepted truth in taxation:

"Neither the government nor corporations make tax returns public, and a company's taxable income often differs from the profits disclosed in annual reports. Companies report their cash outlays for income taxes in their annual Form 10-K, but it is impossible from those numbers to determine precisely how much, in total, corporations pay to governments."

Sorry, but the very best indicator of a company's tax liability is, you know, the form that they submit to the IRS that shows their tax liability. Not the 10-K that uses a completely different set of incomes and expenses.


through the 10K, one can see the income taxes paid and/or owed.

but you don't see how they were calculated.
 
2012-07-11 01:22:20 PM  

Samalie: Sure. I'll be more than happy to change the statutory tax rate to 25% for American corporations.

We will just eliminate EVERY farkING LOOPHOLE YOU CORPORATE farkWADS USE TO RAPE THE WORKING CLASS.

I mean jesus...the rate may be 39%...but how many corporations pay that? How many corporations get a net gain from the government in rebates, incentives, etc?

You can have a lower rate....just expect that we'lll actually force you to farking pay it for once. See how you like them apples.


Providing a job and goods/services now equals raping. The more you know!


I was thinking today... instead of arresting OccupyWallStreet people, they should just take down everyone's names... and blacklist those people from ever getting a loan from any of the major banks. Suddenly they'd realize how much better their lives are because of these companies.
 
2012-07-11 01:22:57 PM  

Rincewind53: That's why companies like GE paid a grand total of 0% taxes last year!


"Green" rebates?

Yeah, we should probably get rid of those.
 
2012-07-11 01:26:57 PM  

demiurgex: I love how the article talks about getting businesses hiring again by cutting taxes.

The last two years were the most profitable net years ever for American corporations.

The tax rate has nothing to do with why they aren't hiring. America's corporations are literally doing better than they ever have. They don't want to hire, because they certainly have the capital to do it.


Citation and adjustment for inflation needed.
 
2012-07-11 01:33:18 PM  

The Homer Tax: Hypothetical situation: If we offered all corporations a flat rate tax on income of 15% with no deductions, no loopholes, no nothing or allowed them to keep the current tax system and its ominous "39% rate"...which do you think most would choose?


The 15%. Then they wouldn't have to waste money on all that "green" crap to qualify for a deduction.

Deductions come from the business undertaking an unprofitable activity because it supposedly benefits the people.
 
2012-07-11 06:40:08 PM  

The_Six_Fingered_Man: justsomeusername: Deferred taxes do not affect the company's effective tax rate.

Sorry, but I, and several Tax thinktanks disagree.

If you have deferred taxes from a previous year into the current year, you are including those taxes paid as part of your calculation to arrive at the effective tax rate for the current year. To say that deferred taxes have no effect on the effective tax rate of a company displays a certain lack of knowledge.

The fact that you borked up that simple facet of accounting, along with your assertion that a 10-K is a better indicator of tax liability than a tax return, gives me reason to question the remainder of your analysis.

From the NYT, as well as a generally accepted truth in taxation:

"Neither the government nor corporations make tax returns public, and a company's taxable income often differs from the profits disclosed in annual reports. Companies report their cash outlays for income taxes in their annual Form 10-K, but it is impossible from those numbers to determine precisely how much, in total, corporations pay to governments."

Sorry, but the very best indicator of a company's tax liability is, you know, the form that they submit to the IRS that shows their tax liability. Not the 10-K that uses a completely different set of incomes and expenses.


You do not understand the treatment of deferred taxes. The expense related to tax that will be paid in future years is recognized in the 10-K in the year that the transaction giving rise to such deferred taxes occurs. It does not get recognized as expense in the year that the actual cash is paid to the IRS.

I never said that the 10-K is a better indicator of tax liability; only of tax expense. Tax expense is what the company will eventually pay in taxes related to activity in the current year, to put it simply.
 
2012-07-12 02:23:15 AM  

MagnesDrachen: And I cry for them every night. Poor, poor million dollar corporations. Woe, the plight of the Walmart. Woe the burden of higher profits, lower regulations, and paying a little more taxes (maybe) than in other countries. Where's their telethon, St. Jude's?


A little more taxes translates into millions of dollars for some businesses but I doubt a hoe and rake hippy could fathom it.
 
2012-07-12 12:21:47 PM  

justsomeusername: You do not understand the treatment of deferred taxes.


And you are misunderstanding the original question as to how an effective rate can be higher than a marginal rate.

But please, continue to tell me how I, and several others, are wrong. Perhaps you'd like to tell NYU that they are wrong.

Money quote: "If firms defer taxes, the taxes paid in the current period will be at a rate lower than the marginal tax rate. In a later period, however, when the firm pays the deferred taxes, the effective tax rate will be higher than the marginal tax rate."

So please, tell me again how "deferred taxes do not affect the company's effective tax rate."
 
2012-07-12 04:59:13 PM  

The_Six_Fingered_Man: justsomeusername: You do not understand the treatment of deferred taxes.

And you are misunderstanding the original question as to how an effective rate can be higher than a marginal rate.

But please, continue to tell me how I, and several others, are wrong. Perhaps you'd like to tell NYU that they are wrong.

Money quote: "If firms defer taxes, the taxes paid in the current period will be at a rate lower than the marginal tax rate. In a later period, however, when the firm pays the deferred taxes, the effective tax rate will be higher than the marginal tax rate."

So please, tell me again how "deferred taxes do not affect the company's effective tax rate."


The NYU quote is referring to tax rate as calculated on the tax return. The CTJ study is based on 10-K filings. Income and expense will be different between the 10-K and what's on the tax return. The original question was how do companies report higher than the marginal rate in the 10-K. GAAP requires that deferred tax expense be recognized in the period in which it arises. For 10-K purposes, deferred taxes do not affect the effective tax rate.
 
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