Study: 30 top firms paid no federal income taxes (Could 9-9-9 have remedied that?)

Politico ^ | 11/03/2011 | Tim Mak

[SeekAndFind]

Thirty large and profitable Fortune 500 corporations paid no federal income taxes between 2008 and 2010, according to a new study Thursday on corporate loopholes.

In fact, the 30 companies enjoyed a negative effective income tax rate over the three-year period, even as they earned pre-tax profits of $160 billion, according to two think tanks, Citizens for Tax Justice and the Institute on Taxation and Economic Policy. A negative tax rate represents a tax benefit like a credit, not necessarily direct funds from the government.

Pepco Holdings, a Washington, D.C.-area power company, had the lowest effective tax rate at negative 57.6 percent and 78 of the 280 Fortune 500 corporations studied enjoyed at least one year in which they paid an effective tax rate of zero or less.

In addition, the average effective tax rate for the entire group of corporations studied over three years was only 18.5 percent, compared to the statutory rate of 35 percent.

The total amount of tax subsidies given to the 280 Fortune 500 firms was $222.7 billion from 2008-2010. Wells Fargo got the largest tax breaks, receiving $18 billion in breaks from 2008-2010.

[Uncle Miltie]

All corporations should pay 0% in taxes.

Let their distributed income as dividends be taxes at the shareholder level. Then, profits are only taxed once. If profits are retained to grow the company, then capital gains taxes on the sale of shares held captures that value in taxes still at the individual level.

Why must corporate profitability be taxed over and over and over again?

[VeniVidiVici]

A negative tax rate represents a tax benefit like a credit,

Sort of like the billions of EITC money that gets sent to illegal aliens every year.

[truthguy]

All corporations should pay 0% in taxes.

No, all corporation do pay 0% taxes. They don't pay taxes, they collect taxes. They pass on the taxes in the form of prices to their customers.

[NC28203]

>>>Could 9-9-9 have remedied that?

Probably. The current corprate tax is based on profits and the 9-9-9 plan is based off of gross receipts less investment expenses. While firms do not always make a profit, there base under the 9-9-9 plan would in most cases be positive. Also, it appears that under the 9-9-9 plan, businesses will be paying a larger share of total revenue. Some of that is likely to come from firms not currently payng taxes.

According to the Laffer article in the WSJ a couple of weeks ago:

“Thus, Mr. Cain’s 9-9-9 tax base for his business tax is $9.5 trillion, for his income tax $7.7 trillion, and for his sales tax $8.3 trillion. And there you have it! Three federal taxes at 9% that would raise roughly $2.3 trillion and replace the current income tax, corporate tax, payroll tax (employer and employee), capital gains tax and estate tax.”

It would appear that about 38% of the revenue from the 9-9-9 plan would be derived from the corporate tax. Looking at the current Monthly Treasury reports, corporate income tax accounts for about 8% of revenues under the 35% rate. Assigining half the payroll tax receipts brings the corporate share to 26% of revenue.

[God luvs America]

lol at the source they use to arrive at the conclusions...the Citizens for “Tax Justice” certainly have no agenda....read their mission:

http://www.ctj.org/about/background.php

and who sits on their board:

http://www.ctj.org/about/board.php

[ex-snook]

“In addition, the average effective tax rate for the entire group of corporations studied over three years was only 18.5 percent, compared to the statutory rate of 35 percent. “

---

18.5% leaves room for a lot more loopholes. But since it is all being passed to the consumer, corporations shouldn’t care what it is.

[Nervous Tick]

>> Also, it appears that under the 9-9-9 plan, businesses will be paying a larger share of total revenue.

Since the plan is revenue neutral, that is “total revenue” remains equal, that necessarily means that the taxes paid by businesses will increase.

But when the point is raised that the federal sales tax will be a significant new tax bite on the populus, supporters of the 9-9-9 plan claim that business taxes will *decrease* significantly, which will allow businesses to reduce prices, thereby offsetting the effective price increase of goods due to the 9% federal sales tax.

Which is it? Will business taxes go up? Or down? It’s tough to understand how you can have it both ways with 9-9-9.

[NC28203]

>>>Which is it? Will business taxes go up? Or down? It’s tough to understand how you can have it both ways with 9-9-9.

Again, I refer to my example. Current corporate income taxes and employer share of SSI and Medicare total about 26% of federal revenue. Under the 9-9-9 plan, as shown by Laffer, the business share of revenue is 38%. It looks to me like business taxes will increase.

[Nervous Tick]

>> It looks to me like business taxes will increase.

Fair enough. Then I suppose the corollary is that we the people will NOT be able to count on a decrease in prices to offset the 9% fed sales tax bite on our incomes, generally speaking.

Thanks and FRegards

[monkeyshine]

Cain’s proposal inverses your proposal. Under 999 the corporation is taxed at 9% but then dividends are distributed tax free to the shareholders. I like that better because it encourages investment and you as a citizen don’t have to report your particulars to the IRS. I agree that the money should not be taxed twice, that discourages growth and investment.

I do have some issues with 999 but just saying, the principle is the same it just taxes at the point of origin, not distribution.

[TheOldLady]

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[Little Ray]

Corporations don’t pay taxes.
They collect taxes from their customers.

Now, the real question is “How much did these corporations donate to Obama and DNC, and what sort of sweet heart deals did they get out it?”

[Dutchboy88]

"No, all corporation do pay 0% taxes. They don't pay taxes, they collect taxes. They pass on the taxes in the form of prices to their customers."

Your logic demands us to conclude you pay no taxes, either. You simply pass the cost on to your employer?

[government is the beast]

Why can’t people get it through their thick skulls that corporations NEVER pay taxes. They just pass the costs of these “taxes” on to their consumers in the price of their services and/or products. They always have and they always will, so when someone calls for higher corporate taxes, they really are calling for tax increases on the People.

[lewislynn]

They pass on the taxes in the form of prices to their customers.

Apparently the opposite is NOT true. Not for any 9-9-9, nor any Fairtax plan. GE had no taxes. Is that why their products are priced so much lower than their competitors? < /sarcasm >

PG&E (Pacific Gas & Electric), a California utility paid no taxes...their rates are among the highest in the state.

Price reductions as a result of business tax reductions is misinformation and wishful thinking.

[americanbychoice3]

What these articles never do... is accurately describing the entire situation.
I worked for 16 years as European Manager in Europe and had to file my American Taxes each tear. ( By the way we are the only country that demands Tax returns from it’s citizens maintaining a permanent residence outside the country)
Most American Companies doing substantial business overseas start companies in those countries because bit is more efficient and cheaper than exporting from here. No import duties, shipping marketing,etc,etc. Just like even more foreign companies manufacture here, see the Auto Industry.
As far as taxes are concerned, the primary tax obligation is to the country of manufacture,not of ownership. Example: If I manufacture a product in Germany, my primary obligation is to adhere to the German law as well as their Tax laws. Under international Treaty, which we are signatory to, I will (have to) file my American Taxes and I am given a Tax credit of German Taxes paid directly against my American Taxes. IT IS NOT A WRITE OFF,BUT A CREDIT.
That’s the Law.
It amuses me all the time is that many want to have everything manufactured in this country by American companies. However, they would be the fist ones to complain about the high prices. Forget the fact that our American companies could not market (sell)their products overseas for the same reason. Most of those companie’s profits come via foreign business. I could go on and on ..................

[truthguy]

PG&E (Pacific Gas & Electric), a California utility paid no taxes...their rates are among the highest in the state.

Price reductions as a result of business tax reductions is misinformation and wishful thinking.

You just flunked Econ 101. Taxes are but one piece of the cost of doing business. There are many other factors involved. All other things being equal AND with the pressure of competition, price reductions or price stability will result as of a result of lower business taxes. PG&E is a government monolopy (highly regulated) so they are different. Again only the final consumer of a product or service can pay a tax. Go and read some Milton Friedman.