As much as it grates on us to hear it, Leona Helmsley was right. “Only the little people pay taxes.” In the news today, we learn that that goes for corporations as well:
At least 23% of large U.S. corporations don’t pay federal income taxes in any given year, according to a report by the investigative arm of Congress.
The Government Accountability Office also found that in a given year at least 60% of all U.S. corporations studied — which also includes many smaller companies — reported no federal income-tax liability during the period studied, 1998 to 2005.
The article goes on to say that companies will report big earnings to their shareholders and then plead poverty on their tax returns. The report doesn’t mention any companies by name, but it makes you wonder, doesn’t it? Unfair though it may be, it sort of puts all large companies under a cloud of suspicion. Are the large companies located in Peoria in the 77% that are paying their fair share of federal taxes?
Taxing entities that provide jobs and sales tax mechanisms on their income is just not a very sound economic idea in the first place.
And according to this it appears it only hurts small business more.
corporations are fictitious entities.
Only PEOPLE pay taxes.
the double taxation of corporate dividends has resulted in a scewed corporate financial structure – companies
overburdened with debt and all the problems associated with that situation.
I read that, surprise surprise, there might be some gamesmanship going on in the highlighted report. Basically it was that the GAO included all sorts of businesses like LLCs, partnerships, and whatnot which have never paid corporate taxes. Instead the profits are directly paid out as dividends and then are taxed when the capital gains hits. The article gives he impression that maybe through clever accounting and special interest dealings, that corporations are weaseling out of paying taxes entirely. While that may well be going on, that didn’t account for such a large percentage.
I haven’t read the gao report. Clearly its being exploited irregardless of what it says and does not say. It would be doubtful that anything comes of it.
A corporation has the same goal as you or I when it comes to taxes – to reduce the tax liability as much as possible. This isn’t surprising. At the end of the year a company which is showing a large profit will take that profit and purchase equipment, hand out bonuses, etc to reduce their liability. The federal government still receives taxes, but from a purchase, personal income taxes, or taxable dividends instead of corporate income taxes.
Who makes up a corporation? Shareholders. Do shareholders pay taxes on corporate dividends? Yes they do. Do Management and employees pay taxes on employment income? Yes they do.
Everyone here has made a valid point. As far as I see, and I plan to keep it simple; everyone DOES pay taxes.
My problem is not who pays taxes, but how much they pay in relation to their income. This is where things get a little fuzzy. Patricians and Plebeians anyone?
Has anyoneone checked out credit unions paying taxes? CEFCU, the largest local “bank” pays no taxes. They are exempted. Morton Community Bank and South Side Bank, numbers 2 and 3 local banks do pay taxes.
You know what is really scary? Diane really believes that the reason corporations exist is for the shareholders.
The frightening reality is that corporations are the only legal “persons” left in our legal system. You and I are employees, motor vehicle operators, citizens, debtors, or whatever else legal definition is used to strip us of our liberties.
Corporations have more rights than individuals in this country.
This whole thing got me thinking [scary]. A few posts ago we were all ‘discussing’ the Constitution, Federal Govt, loss of civil liberties, etc. When you stop and think about it, are your ‘civil liberties’ threatened more by Big Govt. or Big Business? Are these two entities the same? I am about to cry conspiracy!
Diane and PI are arguing that the big corporations shouldn’t really have to pay taxes on their profits because that money gets turned into bonuses and paychecks, and it eventually comes out of personal taxes.
But, then those people at the top of the food chain in ANY corporation hire accountants to find them their own tax loopholes and shelters, and since they have a lot of money with high salaries and bonuses and such (bonuses the average working is probably NOT getting), they build stock portfolios where they take some losses to claim this as tax exemption as well. The people who run the corporations that aren’t paying any taxes are not paying any taxes either – so in REALITY, the taxes that corporations are supposedly paying through those personal income taxes are ONLY coming out of the pockets of people like YOU AND ME!
Trickle down economic theory needs to die. The idea that the wealthiest among us going out to spend and invest and make money however they choose, that the money they make and spend somehow bleeds down to the average person is completely negated and disproved by the army of lawyers and accountants that stand in the way and reverse the flow of all that money, so it goes back up.
John33 — CEFCU is a not-for-profit cooperative. Not-for-profits (which includes hospitals and churches as well as credit unions) do not pay federal income tax.
Trickledown economics works folks. Take for example myself, a Federal employee. When Ronald Reagan died, we all got a paid day off work on his funeral. So it did trickle down. Unfortunately, it was taxed.
Really, anyone who thinks Corps doesn’t need to pay because their employees pay taxes are in La-La Land. Did it occur that as an employee of a corporation, that they take your money, as taxes out of your paycheck each pay?
The company I work for is not a charity and legally does what it can to reduce its tax burden. It would be foolish to do it any other way.
Corporations should look to reduce tax burdens, however loopholes which allow full relief of tax burdens must be closed.
As was stated above, Corporations are distinguished as persons and carry all right associated with being a person in the eyes of the Federal Government. Therefore, the person is obligated to file a tax return on all income.
The loopholes are too big. @PeoriaIllinoisian, corporations benefit from tax credit to make computer/equipment purchases. Those were expanded in the recent economic stimulus bill.
Don’t I deserve a tax credit for spending money on replacing equipment in my home? By spending money, I am stimulating the economy. I can do that better with tax credits.
OK I’m no CFO, but aren’t corporate profits paid out to shareholders as dividends, which get TAXED as ordinary income? So it would seem that Gisselle is advocating for double taxation… first you tax the corporate profits, then you tax them again after they get distributed to shareholders. Seriously, Giselle, what do you think a corporation is? It’s not some guy named Mr. Corporation with a wife and kids. And Emtronics, can the Lala label will ya? It reminds me of the 3rd grade.
CJ – if you get a chance will you fix my Html. Em will say I’ve been in Lala land.
Thanks!
lala lala lala lala lala lala lala
Threats now?
As an employee of a small(er) business, I have to agree 100% with Diane on this one. The size of my year end bonus is directly tied to the approach my firm takes in handling taxes.
The following example may help understand the situation. Let’s assume the firm earned $100,000 in profit. If the Firm decided to “retain” this profit (and not issue bonuses), it will be taxed by the federal government at corporate tax rates.
If the company decides to distribute it all in bonuses to its employees, the company declares “no profit” at the end of the year and pays no corporate tax on the amount. The $100,000 is distributed to employees as bonuses and each pays federal income tax on it at their respective individual rates. I have to say, I personally like this second approach much better.
Clearly, there is an impact on the feds – they probably get fewer taxes based upon my rate than the corporate rate. However, the employees also benefit from greater take home pay and are paying taxes on it.
Peo Proud,
Is your Firm hiring?!?!?!? Do you think this is common practice among corporations everywhere…big and small?
Lastly,
“BONUS” is a word I hear only from the white-collar/management side of the floor.
It is not often I hear a blue-collar employee speak of bonuses….10 cents an hour increase after first year, etc…..maybe.
Like I wrote earlier, my problem is not who pays taxes, but how much they pay in relation to their income.
And to expand on my earlier post, who are shareholders? They are teachers, policemen and firefighters with pensions, retirees on fixed income, self-employed people with Keoghs & IRA’s… they are everyday people who realize that you cannot build a retirement nest egg by investing your money in 4.2%APR CD’s. In fact, the majority of the people reading this are most likely a shareholder in something. They are me and you!
Diane… don’t lay out that tired old myth. The same small elite group that owned America 100 years does so at an even greater percentage today. The minuscule amount of stock and real estate owned by anyone outside that private little circle is irrelevant.
Sure you may own a .00001% share of some company…whoopdeedo! Does that make you feel like Rockefeller?
Did you know there are people out there at as individuals actually own “rational numbers” of percentages? 20%, 40% 60% of companies… and they are GIVEN larger and larger shares every year.
What part of what I said was incorrect?
You implied that shareholders are everyday people like you and me, when in reality the “share” these people hold is minuscule and has no effect on the value of the stock market. You implied that corporation’s share holder interests are about “the people” when in reality it is and always has been for the elite with few, if any, trickle down effects. The only winners in the stock market are at the expense of losers. Unlike “real” economies, the stock market is a Zero (Negative, if you include the brokers and inflation)) Sum Gain phenomenon.
cgiselle12 wrote: Trickle down economic theory needs to die. The idea that the wealthiest among us going out to spend and invest and make money however they choose, that the money they make and spend somehow bleeds down to the average person is completely negated and disproved by the army of lawyers and accountants that stand in the way and reverse the flow of all that money, so it goes back up.
The Luxury Tax from 1990 proved that “trickle down economics” is simply “economics.” At the time, I believe, a 50% tax was imposed on “luxury” items such as yachts, private aircraft, etc. Suddenly, the well-to-do decided to not buy these items. Now who do you think got hurt? The rich? No…they just kept their older aircraft, yachts, etc. or didn’t do any recreational flying or boating. Those that got hurt were people working for Beechcraft, Cessna, Piper, etc. and numerous domestic power boat manufacturers who lost their jobs due to the sudden decline in sales due to this ridiculous tax. The disasterous luxury tax was repealed in 1993.
Consider also the first passengers on scheduled airline service in the 1920’s. Who were they? The rich. Eventually, economies of scale allowed more fuel efficient and faster (read: more productive) aircraft to be placed into service, reducing cost and enabling the masses to fly.
Who were the first to buy automobiles? The rich. Economies of scale (not Henry Ford raising his employee’s wages – success required far more sales than to his autoworkers) eventually reduced costs to allow the masses to afford automobiles.
It trickles down. It works. It’s simple economics.
But providing the wealthy and well-lawyered with more and more loopholes and tax breaks is not.
I don’t think we need to advocate for that 50% luxury tax – plain old 7 or 8% tax on a million dollar yacht is plenty! I’m happy to pay my 7-8% on the plastic boats I buy for my kids just as well.
I don’t even advocate for higher taxes for the wealthy. I think it’s Steve Forbes who was/is advocating a flat 18% tax (save for those below the poverty line). Hell, that works for me. Economy of scale is fine.
My problem is the rich and well lawyered. This includes the top earners in the US and corporations. They have the money to hire experts (lawyers, accountants) to figure out how not to pay anything in taxes. So they can buy their million dollar yachts, and airplanes, paying plain old taxes – but then the lawyers and accountants make sure that their stock portfolios have enough “losses” to make sure that the taxes paid on said luxury items produce a “break even” in the end.
Same goes for corporations. Yes, they may have that $100,000 in profit, and yes, they will pay it out to their employees – but from my own research that I have done on Cat execs, as an example – the VPs and directors and managers and above get the bonuses, and trust me, they’re making enough (in those bonuses alone) to make sure that their taxes are as small as possible, if not non-existent, or they may even get a return check. No, this doesn’t happen in every case, but it does in quite a few of them. Even if they do pay something in taxes – they have money sitting around making more money, just by the fact of interest and dividends, etc. SO they’re making money even when they aren’t working.
I think it is a crime that the estate tax is being messed with. I am all for raising the threshold – say for states with a value of $2.5 million or more, even $5 or 7.5 million is arguable, that are not made up of farming property. Below that, no estate tax. But above that, you’ve gotta be kidding me that they can’t afford to pay a chunk of it out in taxes. Heirs still end up with plenty. This is simple math.
I’m not a shareholder in anything Diane, at any level that I am aware of. I don’t think I know anyone who is, at the level that they are benefitting from said profits. Sure, I suppose you could say I’m a shareholder at Bradley, and that my hard work and our increased “profits” (it’s a non-profit) give me my annual raise. But it certainly doesn’t allow me to have enough money to put into some kind of stock portfolio that then sits around making enough money on it’s own that I’m somehow benefitting in some great way. I can just barely afford to put my 5% into my IRA, to make sure that I don’t spend my retirement 1. working until I’m 85 and/or 2. depending on whatever is left of social security after the baby boomers/whatever I have left after I pay the baby boomers their social security and/or 3. relying on meds from Canada and my children and /or 4. eating cat food. The dry kind.
I read somewhere that the CIA puts together statistics on the gap between rich and average/poor in various countries, and that the US gap is growing fast, and is bigger than that of most other civilized nations, equaling those of third world nations with kingly ruling classes and mud hut masses. I’ll go look for this info and repost if I find a link.
Okay, yes, the “trickle down” economic theory was basically just “economics” but our economics of scale is totally out of balance. Getting ahead at all is getting harder and harder. This I think actually gets into an argument about the heavy consumerism that our economy is currently so heavily dependent on – which is also not working for us. so I’ll end here and start searching for that CIA info – hope Bush’s minions don’t catch and arrest me for it!
New Voice – possibly we are….but you have to willing to work your backside off. And I agree with your point regarding the percentage paid in taxes relative to total earnings. I’d support a flat tax in a heartbeat (even if it were an increasing flat tax – i.e. – those earning more pay a slightly larger percentage. As long as everyone in the same pay bracket is paying relatively the same amount – I can live without the hassle of gaming the system by deducting my mortgage interest, property taxes, etc.
And “bonuses” are for all employees in our company based upon individual contribution to the success of the company over the past year. They go to everyone from the receptionist to the President.
I wanna work for your company too, PI! That is an unusual thing, though. So not the case for so many corporations. There are the exceptions to every rule – I always find them in life. Corporations are not “the big evil” for me. Some of them do great stuff, and I certainly don’t begrudge anyone or any org their profits – it is a right, if you work hard to earn good money. I don’t advocate for welfare and total sharing systems either.
Overall, it is a complicated system and there are thousands of different examples of all sorts of things. There is no silver bullet answer, that’s for sure. A combination of the liberal and the conservative, even I believe, is the solution. Something of a “middle road” “balance in all things” Buddhist kinda theory is probably what would be best for us all.
Here is a link I found on the economic gap.
http://query.nytimes.com/gst/fullpage.html?res=990CEED61430F934A25757C0A963958260&n=Top/Reference/Times%20Topics/Subjects/S/Social%20Conditions%20and%20Trends
It’s a pretty balanced article, scholarly. It’s old, but if you think of how our economy has fared since 1995, I figure the gap probably shrank for a while, until 2001 or so and stuff started going downhill. My reckoning that the gap is probably at its widest today, what with the recession and all.
here’s an excellent link, source The Nation:
http://www.visualizingeconomics.com/2008/07/13/income-gap-and-marginal-tax-rate-1917-2006/
another
http://query.nytimes.com/gst/fullpage.html?res=990CEED61430F934A25757C0A963958260&n=Top/Reference/Times%20Topics/Subjects/S/Social%20Conditions%20and%20Trends
I am not so bleeding heart or socialist that I think profits are for the people or anything. If you work hard, and your company does well, you have every right to be wealthy and successful, individual or corporation. There is nothing unfair about it. I’m not a huge fan of welfare, but it is an important and necessary social safety net, just like social security. There was a great post on DailyKos yesterday, wishing social security a happy 73rd, I think, birthday. Prior to it, 60some% of seniors lived in poverty. Even those who’d done pretty well in life were subject to this poverty. That’s just not cool, you have to admit.
My biggest problem with today’s economy is that once you get to a rich place, it’s way easy to stay there. But for the middle classes – it’s so easy to be bordering on being in poverty. Or to have something happen that wrecks it all (a death, major illness, one bad financial move or the like) and you will never, ever recover. Or, to do so, you’re gonna have to ask your parents for money. Or take out a few of those payday loans. etc, etc, etc. The economic deck is stacked pretty heavily against you if you have one failure – from the poor all the way up to even the low end of upper middle class. It’s that gap that keeps widening. Bully for you if you’re on the top side. Be proud of yourself. It’s just that more and more and more people who are just average folks, working hard, seem to end up on the bottom side, wondering how the fuck it all happened.
Giselle, If you have an IRA, you are most likely a shareholder. KcDad, of course your shareholding interest in a corporation is miniscule. You are one person in a country with a GNP of 13 trillion dollars.
“but then the lawyers and accountants make sure that their stock portfolios have enough “losses” to make sure that the taxes paid on said luxury items produce a “break even” in the end.”
Giselle, you show me a person who would deliberately buy a stock to lose money to offset gains and I will show you a person who needs to fire their financial advisor.
Very few corporations pay dividends to stockholders.
Profit is immoral.
The idea of a fair exchange in the marketplace precludes the idea of profit. When you purchase the materials to make something for $5 and sell it for $10, you have concluded that your skill, time and labor are worth $5, and so does the person who buys the product. Profit does not consist of being paid in exchange for your time, labor and expenses. Profit is the stuff you create over and above that for no other reason than you can manipulate demand and supply.
When you sell that same product for $100 so that investors speculating on your skills, labor and time can make money, and then create a false demand for your profit by shorting production or hyping demand through advertising gimmickry, you have become an immoral, unethical Capitalist.
There is nothing free about our free market system. A truly free market system is demand driven, not supply driven. But that would be smaller… smaller is bad in Capitalism.
CJ:
Sorry I did not make the point re CEFCU. They [credit unions] began as not for profits. We could start a credit union, call it the Peoria Chronical Readers CU. Not pay taxes. The concept was that it was a group of “users” who had a common thread: Employer, Church, etc.
Now CEFCU has expanded from the Caterpiller Employees Credit Union to Everybody’s “credit union” [read “bank”]. They compete far beyond the credit union concept and have an unfair advantage over banks.
It would be the same as you and I decided to make earth moving equipment and did it in a “not for profit way” and later began to out produce Cat.We could do it since we did not have the tax “burden”.
The problem with straightening this inequity out is that there are too many people harvesting the benefits of CEFCU, benefits CEFCU offers not because of sound practices, but because they do not pay for the street, police, schools, like other businesses.
John33 — Yes CEFCU has grown to include not just Caterpillar employees, but also the employees of what’s known as “select employee groups” and residents of a particular geographical area (last I checked, something like 14 counties in central Illinois). But despite this growth, the credit union is still limited to a specifically-defined filed of membership. If you don’t belong to a select employee group or live within the 14-county area, sorry, you can’t join. Banks, on the other hand, do not have this restriction. Big banks like National City and Chase can and do have branches and customers nationwide. They can leverage their rates in one region of the state or nation to stay competitive with CEFCU. Community banks could always switch to a credit union charter if they wanted to, and submit to the same restrictions as credit unions. Why don’t they, if it’s so advantageous?
Maybe it’s because in a credit union, as a cooperative, the share holders are the customers, rather than a small group of investors. And maybe it’s because the profits are given back to the credit union’s members instead of a small group of stockholders.
Can we go back to making fun of Aaron Schock now?
Speakin of Aaron Schock visit:
http://pundit.blogpeoria.com/2008/08/17/politics-schock-calls-obama-a-socialist-but-hes-a-little-fuzzy-on-the-details/#comment-2892
And help draft Billy Dennis for IL-18 !!!
Re: CJ & John33 discussion on taxation. One other thing to consider is that not even all corporations pay corporate taxes, either. Many are organized as “S Corporations”, which means their income is not taxed until it is distributed to the stockholders of the company. (more here on Wikipedia.
Just food for thought.
11Bravo: Oh, stop it.
New Voice: It isn’t funny anymore, he’s going to be a US Congressman. Oh wait, that IS funny!
>>>>>>>>Profit is immoral.
The idea of a fair exchange in the marketplace precludes the idea of profit. When you purchase the materials to make something for $5 and sell it for $10, you have concluded that your skill, time and labor are worth $5, and so does the person who buys the product. Profit does not consist of being paid in exchange for your time, labor and expenses. Profit is the stuff you create over and above that for no other reason than you can manipulate demand and supply.
When you sell that same product for $100 so that investors speculating on your skills, labor and time can make money, and then create a false demand for your profit by shorting production or hyping demand through advertising gimmickry, you have become an immoral, unethical Capitalist.
There is nothing free about our free market system. A truly free market system is demand driven, not supply driven. But that would be smaller… smaller is bad in Capitalism.
Left by kcdad on August 15th, 2008<<<<<<
That is the most ignorant writing I have ever read concerning economics.