Largest US companies paying no taxes?

[Rapunzel]

http://hotair.com/archives/2013/10/26/largest-us-companies-paying-no-taxes/

Largest US companies paying no taxes?
posted at 4:01 pm on October 26, 2013 by Jazz Shaw

This is a story which seems to crop up every couple of years, and I never fail to be amazed at the wide range of frequently contradictory responses that it elicits on both sides of the political aisle. USA Today is out with yet another report on the number of large, profitable companies in the United States which wind up paying an effective tax rate of zero. (Yes… zero)

    Despite widespread groans about the recent disclosure that Apple is finding ways to cut its federal tax bill, an analysis shows the computer giant is one of scores of corporations largely dodging the taxman.

    A surprising number of companies in the Standard & Poor’s 500, 57, have found ways to pay effective tax rates of zero, according to a USA TODAY analysis of data from S&P Capital IQ.

    The effective tax rate is a popular measure used by investors to compare how much companies pay in tax relative to profit.

    The news comes months after after the Government Accountability Office released a report showing that companies in 2010 reported an average effective tax rate of 12.6%, well below the 35% federal corporate tax rate.

This is a topic which Ed and I have debated on these pages in years past, though it wasn’t that heated of an argument since we tend to agree on a number of relevant points. First of all, there is the question of whether or not some of these companies really pay no taxes. One of the first responses from the companies in question, frequently cited by conservative supporters, is that of course they pay taxes! And they provide documents proving they do. But what’s under discussion is the effective tax rate as measured against profits. If your profitable company sends in some tax payments, but later get refunds and adjustments equal or greater to the amount you paid in during final filing and revisions, you didn’t pay any taxes. It’s really that simple.

That makes some people pretty angry, but really it should make everyone angry… just not at the companies in question. They’re playing the game with the cards the government dealt them and they’re playing to win. The problem isn’t at Verizon – the top name on the list this year – but rather in Congress and in the massive, byzantine tax code.

One solution which I’ve suggested before could, I think, satisfy both the liberals who want to bleed “Big Fill In Industry Name Here” for some more cash as well as those who want to see a more fair, flat tax code which contributes some revenue while not squelching productivity. Let’s lower the corporate tax rate to 10% from its current levels, but essentially delete the rest of the tax code as it applies to corporations. Open your books at the end of the year. If you spent “X” dollars and you took in “Y” dollars, then you owe Uncle Sam 10% of the difference if Y is greater than X. No other deductions, sliding scales, devaluation tricks.. nothing.

For the aforementioned liberals, a plan like this has the effect of the tide going out and seeing who is or is not wearing a bathing suit. If you’re really paying a lot of taxes you’ll be happy to cut it down to 10% of your profits. If you’re using various dodges built into the system to effectively pay no taxes, you’ll oppose the plan. It’s pretty simple.

For conservatives, this takes a significant portion of the government boot off the throat of smaller to medium size businesses who are not fortunate enough to qualify for the big giveaways in the tax code. The ones paying the most are frequently those who aren’t big enough to afford the best lobbyists or the army of experts required to navigate their IRS paperwork every year. And on a related note, a lot of companies could probably save massive amounts of money up front by being able to do away with that army of accountants and tax attorneys. Who knows? Maybe they could even spend it on hiring a few more folks.

Here’s part of the list of S&P companies who fall into that category ranked by their total worth, just in case you’re interested.

    Verizon: $146.4
    MetLife: $53.9
    Eaton: $32.7
    Regeneron Pharmaceuticals: $29.6
    Public Storage: $29.5
    Ventas: $19.3
    Avalonbay Communities: $17.4
    Agilent Technologies: $16.9
    Vornado Realty Trust: $16.8
    Boston Properites: $16.7
    Seagate Technology: $15.9
    Broadcom: $15.7
    News Corp.: $9.8

Make what you will of the breakdown by industry, keeping in mind that these are limited to S&P listed entities.

[truth_seeker]

Much of what is bantied about called avoidance, is actually deferral.

Two such deferral situations:

--Completed contract method for taxes, percent complete for income and profit recognition.

--Foreign source profits not taxed until remitted to US.

[Oceander]

Much of what is bantied about called avoidance, is actually deferral.

Two such deferral situations:

--Completed contract method for taxes, percent complete for income and profit recognition.

--Foreign source profits not taxed until remitted to US.

And much of that is also thrown out there and impeached as some sort of tax evasion, some sort of illicit use of unintended loop-holes, when it's nothing more than standard, competent use of the tax rules Congress intentionally wrote into the tax code.

[truth_seeker]

And much of that is also thrown out there and impeached as some sort of tax evasion, some sort of illicit use of unintended loop-holes, when it's nothing more than standard, competent use of the tax rules Congress intentionally wrote into the tax code.

Deferring tax on unremitted foreign earnings was probably once enacted, to stimulate US companies to invest and become active internationally.

But much of the regulatory business is never "sunsetted." It becomes a permanent, "entitlement" to the benefits of a ton of money dumped into K-Street, and probably onward into the chambers of the US legislature.

Wall Street, and K Street accountants and lawyers can arrange things, such that a person comes into wealth.

Think Dick Cheney and his stint at Halliburton. I assure you he brought zero industry specific experience to the job. He was a crony-capitalist rainmaker, and nothing more.

And I say that, liking him.

[ABX]

And much of that is also thrown out there and impeached as some sort of tax evasion, some sort of illicit use of unintended loop-holes, when it's nothing more than standard, competent use of the tax rules Congress intentionally wrote into the tax code.

Absolutely.
We can't in one sentence decry the government's massive over-reach into business through regulation and taxes and in the next sentence, complain that businesses do everything in their power through legal means to avoid them.

[Oceander]

Deferring tax on unremitted foreign earnings was probably once enacted, to stimulate US companies to invest and become active internationally.

But much of the regulatory business is never "sunsetted." It becomes a permanent, "entitlement" to the benefits of a ton of money dumped into K-Street, and probably onward into the chambers of the US legislature.

Wall Street, and K Street accountants and lawyers can arrange things, such that a person comes into wealth.

Think Dick Cheney and his stint at Halliburton. I assure you he brought zero industry specific experience to the job. He was a crony-capitalist rainmaker, and nothing more.

And I say that, liking him.

That is, indeed, the other side of the coin.  However, much of the international tax provisions were enacted not to promote a rational, economically sound tax policy, but were enacted piecemeal in response to perceived "abuses" that really weren't.  If a US taxpayer is not taxable on the earnings of the corporations in which it owns stock until those earnings are distributed as a dividend, then there is no rational reason why that treatment should change simply because the corporation is a foreign corporation earning income in a foreign country.  And the result becomes even more perversely irrational when you put something like the CFC/subpart F rules into place.  Far from allowing companies to defer tax on foreign-earned income, the CFC/subpart F regime could just as easily have been aimed at forcing (or, as the government likes to think of it, "encouraging") companies to make their business investments in the US by allowing them to defer the second-level dividends tax on their investments in their nonconsolidated subsidiaries until those earnings are actually distributed while penalizing them for making their business investments through nonconsolidated foreign subsidiaries by extracting wealth from those companies in the form of taxes before they actually possess the cash necessary to fund those taxes.