Corporate Freeloaders
By Barry Ritholtz - April 19th, 2011, 1:30PM
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Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
April 19th, 2011 at 1:52 pm
How on earth did we get here?
Oh yea, page by additional page of the tax code, almost all of them having a corresponding campaign donation to Sanders’ colleagues.
Don’t you forfeit the right to complain about the rules when you make them?
April 19th, 2011 at 1:55 pm
“How on earth did we get here?”
We set up our political system so it could be purchased by big money. They did so and they get their payday.
April 19th, 2011 at 2:13 pm
I wish I had their tax attorneys filing my tax return …
April 19th, 2011 at 2:17 pm
The only real surprise is that no big pharma company is on the list and that Bernie Saunders is considered a socialist. Corporate socialism is a much bigger threat than any ‘social’ program funded by the government.
April 19th, 2011 at 2:31 pm
Shouldn’t there be an alternative minimum tax on corporations? Give the republicans a bone and lower the max rate by 5-10%, but put in an minimum of 15% so these companies can’t loophole their way out of paying taxes.
April 19th, 2011 at 2:36 pm
1. Corporations are people (so says the Supreme Court).
2. People’s rights are guaranteed in the Bill of Rights such as freedom of speech.
3. Freedom of speech is the same as giving money to political campaigns (so says the Supreme Court).
4. Corporations have almost unlimited power and funds.
5. Corporations give massive amounts to politicians and they control most of the media, Fox etc
So you have this great situation where corporations have almost unlimited resources, they are the same as people with all the people’s rights. They can give unlimited amounts to political campaigns and they write the laws. Remember the old saying he who has the gold makes the rules.
I too wondered how we got here. There is a good read on this question.
UNEQUAL PROTECTION how corporations became people by Hartman
April 19th, 2011 at 2:37 pm
Ed: not when you filibuster against the taxcode for 8? 10? i forget what it was but it was an awesome amount of hours.
I disagree with Bernie on much, and find him tiresome at times (ie: I take the position that Steve Jobs shouldn’t pay 50-60% in taxes just because he’s created more value than you or I each year), and even this chart is disingenous, but he has been consistent against corporate welfare, which deserves some admiration.
So i think he does decisively get the right to complain.
There is of course no easy fix bar a VAT or some sort of exit tax for corporations, because there are too many incentives and easy ways to move your operations offshore.
April 19th, 2011 at 2:37 pm
Let’s do something. Boycott products and services from these companies!
Can we get a list of consumer products/services from these companies that we might avoid?
April 19th, 2011 at 2:44 pm
Um…why is Boeing on the list? They’re selling tankers to the Air Force. Unless the person who designed the graphic has reason to believe that the goods won’t be delivered, since when is it a bailout to provide goods and services in exchange for money?
April 19th, 2011 at 3:13 pm
I like Bernie (but as TheUnrepentantGunner points out, he can get tiresome… but can’t they all?).
I wish there were more like him in the sense that he starts with certain moral positions and then actually thinks from there rather than parrot some absurd fiction that is more faith-based than fact-based.
We are now coming to the butt-end of a 30 year folly wherein we thought we could continue to run our government with little change in spending and pay for it by not collecting taxes from people who have money. This is breeding an increasing distemper that will either change this policy or end in violence.
To change, however, means we have to admit to the obvious facts and reason forward from there… and that is something that is simply not done in US politics today.
April 19th, 2011 at 3:27 pm
i get what he is trying to do, and see the value of making the public aware of this issue, but i am little confused on his terminology. when he says that ‘xyz’ comapny got a refund, does that mean that they paid zero taxes, and got tax dollars back? or is it more like my tax return, where i got a refund, but only because i paid in too much during the year and they gave me some of my money back? i would prefer to see something more consistent, like the #10 carnival example of 1.1%…..similar to what was posted on this site last week.
April 19th, 2011 at 3:33 pm
franklin411, because Boeing bid for the contract 3 times in a decade, lost it twice and ended up selling the planes for a loss, but no worries, when you don’t pay taxes and you grease the right hands in Congress you always fall back on your feet. That’s being competitive these days, corrupt style.
April 19th, 2011 at 3:34 pm
Re: Farmera1,
Yes corporations are people because the supreme court ruled it be so. However they are under no mandate to be citizens. There is nothing that would cause them to be loyal for example. Take Haliburton (ruled a “people”.)- They leave the U.S. and move to another country yet dID not have to renounce their citizenship. Try that yourself and see how it works.
This is what happens when trash appoints trash to the supreme court. The whole notion that corporations are people is utter nonesense.
April 19th, 2011 at 4:15 pm
Theunrepentatngunner: “There is of course no easy fix bar a VAT or some sort of exit tax for corporations, because there are too many incentives and easy ways to move your operations offshore.”
Just remember…any VAT tax on corporations is an indirect tax on us. That is not the answer.
FAIR TAX……that is the only fix for all of this BULLSHIT.
April 19th, 2011 at 4:22 pm
@curbyourrisk – See this link on “FairTax” problems:
http://www.businessweek.com/magazine/content/11_16/b4224B10298875.htm
April 19th, 2011 at 4:39 pm
End corporate personhood. Federally financed campaigns. Make campaign contributions illegal, call them bribery instead. End the Drug War. Legalize and tax marijuana. An AMT for corporations sounds good. Cutting social programs should be the last thing to look at, demand in this country has already been damaged enough. Also, move Atlas Shrugged from ‘Literature’ to ‘Comedy’.
April 19th, 2011 at 4:39 pm
Look at the total taxes paid world wide not US taxes alone. A number of these companies do business mostly not in the US. Pushing hard would result in them decamping to Bermuda for their legal HQ and then taxes would only be due on US income. Recall that for individual taxpayers if you pay foreign income taxes you get a credit for them up to the equivalent rate in the US. (No double taxation). This more stresses IMHO the need to abolish the Corporate tax and then 1 remove the dividend and capital gains rate back to the regular rate, 2 put in a VAT and 3 if you want to work on global warming a carbon tax, not cap and pay Goldman Sachs et, all which cap and trade really is.
April 19th, 2011 at 5:10 pm
Read the responses and the issue is *not* whether you *like* Bernie Sanders or not, but the real issue of *Corporate Welfare* that constantly fail to pay their fair share *especially* things the government does that profits them immensely. I mean should I even have to bring up the corporate largesse of this wasteful 1$ Trillion war and the obscene degree to which it has ballooned the national debt & deficit during an all-GOP all the time Congress & White House whom , BTW , with all of their phony complaining about Fanny & Freddie could’ve *uncreated* both institutions with the stroke of a Bush-Wah pen without *any* party resistance whatsoever and utterly *failed* to do so while being so concerned being oh so *ideologically correct* along with Alan Greenspan’s as utterly Ayn Rand cult-blinded devotion to as little Gov’t regulation of Wall St. and Derivatives that they took the cops off the Wall St. beat and allowed this economic debacle to take the U.S. economy to the brink of then begging that same Gov’t ,with the help of Goldman-Sach’sman Paulson to bail its collective arses out at the tax-payers expense creating more fiat dollars by the Fed thus adding to the less worth of more dollars that could’ve been preventd in the 1st place had the regulators be allowede to *do their jobs*
Wall St. police itself? Is that flagrant idiocy still even a defenseable position?
If this national debt is to *ever* get paid down then the GOP mantra of *Borrow & Spend* ( as they have proven themselves to be worse with handling our money when they are in power ) has to be put in check at last and this corporate welfare state closed down before it rents our middle class fabric to shreds while the phony renting of ideological garments of the worse than tiresome Sanhedrins of Wall St. hypocrites.
Remember Ritholtz’s featured political cartoon by Sherrifus depictng the tycoon character from the game “Monopoly” wearing a Che Guevera beret with the banner reading ” Socialism for the Rich , Capitalism for Everyone Else”. Priceless.
April 19th, 2011 at 5:24 pm
I could be indignant about these corporations, but they don’t pay taxes, they simply collect them from their customers. If their corporate tax rate is too high to be competitive, they relocate or go out of business. The discussion is not about tax fairness, just taxes. In the ideal world, there would be no business tax because they hide the actual tax costs from the tax payers.
April 19th, 2011 at 6:17 pm
You cannot solve the problem by abolishing the corporate tax rate and increasing the rate for dividends and capital gains. Corporations would simply become a huge tax shelter and few, if any, distributions would ever be paid out. A more reasonable solution is to treat all corporations as pass-throughs. Many corporations would absolutely hate this arrangement, because it would require that they make sufficient distributions to shareholders to allow those shareholders to pay income taxes.
It is also silly to argue, as many do, that the incidence of corporate tax falls entirely on the consumer and simultaneously argue that corporations will move overseas if taxes are too high. If capital does not bear the cost of taxes, why would corporations care about the amount of taxes they “collect” from consumers?
As it happens, some proportion of corporate taxes falls on the consumer (sometimes estimated to be about 2/3) and some falls on capital (the remaining 1/3). Given this, lowering the corporate tax rate will probably not spur investment. Evidence of this can be seen in the fact that few, if any, tax havens have been able to stimulate real production in their economies. The only good example, Ireland, is now in a shambles. Although a lot of people will blame the banking crises for Ireland’s recent economic struggles, many of the jobs Ireland gained in the late 1990s and 2000s began to be moved to cheaper labor markets in Eastern Europe. It seems highly likely that, even absent the banking crises, Ireland would have high unemployment due to corporations’ appetite for low labor costs that Ireland no longer offers.
April 19th, 2011 at 7:02 pm
In order to judge if a “refund” is out-of-line, don’t I also need to know how much tax they may have already paid? I got a refund this year too… it doesn’t mean I didn’t pay my share of taxes. It means I made a generous loan to the US government at 0% interest. Perhaps we should be thanking Boeing for letting us borrow their $124m for free.
April 19th, 2011 at 7:30 pm
Re: KLO, assuming companies just hold money in their bank accounts, does not that increase the value of the company? You would pay more for a company with lots of money in the bank than one that had less. So when someone sells the company they would get a higher price and thus the capital gains. After all dividends and capital gains are why people invest in the first place. In addition in todays environment if you have a lot of money laying around the KKR and the like folks will pull a takeover, pay the existing stockholders a premium (thus capital gains) and kick the existing management out. So explain how sitting on a large cash hoard does not increase the value of a company. Note that also the corporate tax provides less and less of the revenue, as well. Companies when the reach a point in their evolution start paying dividends (witness Microsoft and Cisco), essentially the point where the investment opportunities for the company are less than the cash on hand. Hopefully the company is investing to deliver more profits and thus a higher stock price. (Otherwise the corp raiders would come and get them, the market for corporate control is active).
The corp tax falls on the shareholders and the customer in varing degrees. The shareholder gets lower returns, and the customer pays more. So in the end its individuals (perhaps thru pension and mutual funds) or as customers who pay the taxes (who else is left to pay them) Abolishing the corp tax would also make borrowing money more expensive relative to issuing equity. Today if you borrow the money its a tax deductable expense while if you pay dividends its taxed as well.
Of course this would make wall street poorer because the big money is in fixed income with its much looser rules than equity.
April 19th, 2011 at 7:31 pm
When corporations were declared to be people, “all people are created equal” and “equal protection before the law were further undermined” were further demonstrated to be a sham.
April 19th, 2011 at 7:41 pm
Greece’s corporate tax rate stands at 24 percent, just slightly above the median for all 27 Eurozone nations, yet their unemployment rate is among the highest. Ireland has among the lowest corporate tax rates, yet their unemployment is also among the highest. While there are other factors at work in the Greek and Irish economies, low corporate tax rates are definitely not proof that “if you lower corporate taxes, the jobs will come”, a lesson that the Obama Administration should learn.
Here is a look at the corporate tax rates and unemployment levels for the EU showing the relationship between the two:
April 19th, 2011 at 7:42 pm
First we kill all the lobbyists….
April 19th, 2011 at 8:00 pm
@curbyourrisk
“Just remember…any VAT tax on corporations is an indirect tax on us. That is not the answer.”
I don’t really understand this argument. I often hear people say that making corporations pay taxes is unfair because they pass these taxes on to their customers or shareholders or employers or … whoever. But not making them pay taxes is equivalent to making *everybody* pay the tax, isn’t it? These corporations get the benefits of having a criminal justice system, national defense, and the environment here in the USA that everyone says makes the USA exceptional. If they get those benefits, shouldn’t they pay something? Isn’t it more fair for a corporation’s customer/shareholder to pay that corporation’s tax than those of us who aren’t that corporation’s customer/shareholder?
April 19th, 2011 at 9:01 pm
Any revisions to the tax code will lead to new loopholes being identified and employed immediately Far better to use all that money and brainpower to fiddle taxes than performing any socially useful purpose with the same resources).
I would suggest a Flat tax for Corporations based on Revenues not profits. Revenues are harder to hide and they can then go play with all the accounting tricks they need to reduce profits, without having any impact on how much tax they pay.
April 19th, 2011 at 9:31 pm
I think people should check Bernie Sanders’ numbers and put them in context:
Exxon paid $89 Billion (yes Billion) in taxes in 2010, and had a 45% tax rate. What more do you want? I recommend people look at the Exxon 10-K: “2010 Income, sales-based and all other taxes and duties totaled $89.2 billion in 2010, an increase of $10.6 billion or 13 percent from 2009. Income tax expense, both current and deferred, was $21.6 billion, $6.4 billion higher than 2009, reflecting higher pre-tax income in 2010. A lower share of pre-tax income from the Upstream segment in 2010 decreased the effective tax rate to 45 percent compared to 47 percent in 2009. Sales-based and all other taxes and duties of $67.7 billion in 2010 increased $4.2 billion, reflecting higher prices.”
~~~
BR: This discussion is on what they paid in corporate taxes in the United States. Not what they paid in overseas taxes, not what they collected in sales tax or other duties.
For example, in 2009, ExxonMobil, recorded a total U.S. income tax benefit (i.e., a refund) of $46 million, according to Forbes. It also shows total non-U.S. income taxes of $15.165 billion.
In 2010, XOM had $343 billion in revenue, and earned $30.46 in profits. And exactly what did they pay in US corporate taxes . . . ? Exxon Mobil claimed a tax benefit of $838 million — thats a refund — while it paid $15.8 billion in income taxes to other countries (Philly.com)
FAIL
April 19th, 2011 at 9:33 pm
Its over. Lets give up. They win. Taxing corporations just breeds corrupt taxation. Lets stop taxing corporations at all, and tax the shareholders. No more pre-tax corporate economy. Force the bastards back into the economy and tax all benefits to people as payments in kind.
April 20th, 2011 at 12:32 am
I’m with SM Peterson. Until we see these entities’ estimated tax payments for the same period, the amount of their refunds is meaningless (except, as he says, an indication of the size of their interest-free loan to the government). Sanders should clarify the meaning of the figures he is reporting and Ritholtz should obtain this clarification before passing these along as meaningful quantities.
April 20th, 2011 at 1:32 am
BR: here’s the Forbes link I have for corporate taxes of multinationals, see for yourself:
http://finance.yahoo.com/taxes/article/112560/what-top-companies-pay-taxes-forbes
Same link lists XOM’s income taxes for 2010 as:
ExxonMobil
Pretax income: $52 billion
Provision for income taxes (worldwide): $21.6 billion
Net income: $30.5 billion
Income tax rate: 45%
Exxon estimates its total worldwide tax bill for 2010 at $89 billion, including the provision for income taxes noted above. Most of that $89 billion total is sales and excise taxes. Of $10 billion in total taxes paid in the U.S., $3 billion is income tax. BR Do you have CREDIBLE sources to dispute this? Here in California the various Gov. entities clean out at the pump as follows: $0.18/gal Fed Excise tax plus $0.189/gal State excise tax plus 6.50% state sales tax plus 1.25% county tax plus $0.012/gal UST; not bad for taking zero risk in the business cycle….
~~~
BR: I will type slowly for those of you who cannot read very fast: US CORPORATE INCOME TAXES. Capiche? Not taxes paid overseas; not sales tax. US CORPORATE INCOME TAXES
Get with the program people
April 20th, 2011 at 7:35 am
If XOM can’t generate a taxable profit in the US with gas prices at these levels, I’d take the business off their hands for, say, $1, just as a kind gesture to relieve them of their losses.
April 20th, 2011 at 7:56 am
[...] 10 giant corporations paying little or no taxes. (TBP) [...]
April 20th, 2011 at 9:20 am
As for Senator Sanders, he calls himself a Socialist, living in Vermont. Well, I lived for 29 years in a real Socialist Republic (workers” paradise from which I escaped in 1969). There Socialism was defined as the bridge between the wretched Capitalist system and the Glorious communism. In Socialism all means of production belong to the State, no more profits and no more exploitation of the working people by the rapacious capitalists. And there is ONLY one political Party, you guessed: The Communist Party; it always wins elections by a landslide, unopposed, just dare oppose! I presume Sanders would nationalize all, say , energy companies, make all employees work for the State (what will be Sanders’ job here? ) and solve the freeloading problem.
But back to XOM’s income taxes: again BR were you aware of above numbers? By the way, here in California when you stop at the gas pump, as soon as you finished filling up: $0.18 goes to Federal Excise tax, $0.19 goes to Calif excise tax and then a 6% state sales tax and 1.25% county, plus additional local sales taxes and 1.2 cents per gallon state UST fee. Go figure who makes out here? Practically the gas pump owner is a tax collector for the Government; of every ONE dollar you spend, on the average (repeat: on the average): $0.17 is tax, $0.09 is profits at ALL stages of production from exploration/production, to shipping, to refining, to marketing/retailing to your gas tank and the rest is COST, pure cost, mostly crude oil, most of it imported. Any questions?
About Valero; refinery margins have been traditionally LOW due to competition; refining IS manufacturing, all manufacturers get a tax break in the US, would you like to EXCLUDE oil refineries? The labor is all unionized and we already IMPORT 1.5 million barrels/day of gasoline besides the 12 million/day plus crude oil. Chavez’s Citgo refines more oil here than Shell who has decided to curtail operations here due to the unfriendly business environment and razor thin margins. Have a nice day. Lyle and Jchilton seem to have a clear understanding. The rest in this discussion appear to be stupefied by the image of the big, nasty corporations sucking the blood out of us with valiant Sanders trying to fight them off….
April 20th, 2011 at 10:13 am
can someone call this with a better word than fascism?
April 20th, 2011 at 10:54 am
BR: I also will type slowly for those who didn’t take the time to read the excerpt from the link I provided, from Forbes/Yahoo that sates CLEARLY about XOM:
“Of $10 billion in total taxes paid in the U.S., $3 billion is income tax”, PAID IN THE US, IN THE US comprendes? please!!!!!!
here’s the whole link, AGAIN, by Christopher Helman ,Friday, April 15, 2011
http://finance.yahoo.com/taxes/article/112560/what-top-companies-pay-taxes-forbes
Either read it and comment on it or go on with Sanders’ numbers,the aging Senator from green…Vermont loves this kind of stuff!!! He’s no longer bashing Detroit’s BIG THREE or the Airlines, they’re either half broke or already partly owned by the State, which is what his econ. model is???
~~~
BR: Here is the quote: “Exxon, with a 45% rate, tallied $21.6 billion in worldwide income taxes for 2010. “
April 20th, 2011 at 10:56 am
I think we should forget about Altria and Philip Morris, and use this as the new list of SIN stocks.
April 20th, 2011 at 1:29 pm
Very good, BR, great start, you’re actually reading now. PLEASE, just to get closure here: “of the $21.6 billion provision in worldwide income taxes for 2010, HERE WE GO, HOLD ON: ” $10 billion [is] total taxes paid in the U.S., [and] $3 billion is income tax”. Does that settle it?
And NO, I’m not and advocate for XOM, I did work with and for them many years back and while they consistently brag that above all they are a company of engineers, I was never too impressed…They did do a great job setting up Aramco for the Saudis only to be nationalized (with compensation) just like these days they’ll force socialist par excellence Hugo Chavez to fork out a few billions for his grab of a few years ago.
By the way, Hugo’s production has nosedived eversince he decided to nationalize his oil industry, Sanders are you listening?. If it weren’t for our imports from him (rather than opening up our own prospects such as ANWR, horror!!! poor caribou!) Hugo would be homeless by now, but that’s another story, sorry for the rant.
~~~
BR: $3B in corporate taxes paid on $30B in profits is a 10%
April 20th, 2011 at 2:10 pm
Almost there BR: the $30.5 billion is in profits WORLDWIDE, after all, most of XOM business is worldwide. XOM provisions for income tax WORLDWIDE is $21.6 billion on pretax WORLDWIDE income of $52 billion, thus worldwide income tax rate is 45%.
How about XOM’s US income tax rate? can anyone find XOM’s pretax income attributable ONLY to US operations? I’ll try, stay tuned, but they DID pay $3 billion in US income tax in 2010 unless the Forbes/Yahoo article is wrong and Bernie Sanders and all bashers are right, just prove it please. There is a difference between what a company records as taxes and what it actually pays, you know, accounting lingo. But would old Bernie miss on a juicy Senate hearing on XOM NOT paying US taxes although they do (still) some business here? I think not…
April 20th, 2011 at 4:05 pm
Shill much vic??
It’s obvious you are missing the point….I suspect rather intentionally.
K Street owns our political process.
The takeover is complete.
If anything is ever going to change….K Street must die.
April 20th, 2011 at 4:14 pm
I never thought I’d have to defend XOM!!!!
Got it!! 2010 XOM’s income pretax in the US: $8.26 billion (this is a generous figure, see XOM’s annual reports); income tax paid in US on this: $3 billion, US income tax rate: 36.3% . XOM US oil production: 213,000 barrels/day or 4% of total US production. XOM’s oil ,production outside US: 2.2 million barrels/day or 2.7% of world production.
ALL, and I mean ALL non Government worldwide crude oil reserves: 9% of total. 91% in non private hands such as: Saudi Arabia, Iran, Iraq, Venezuela should I go on??? Still mad at the US multinationals?
Refining: XOM does 1.7 million barrels/day or 11% of US refining; Citgo (all profits go go uncle Hugo Chavez) refines 820,000 barrels/day to Shell’s (all profits go to this bad Dutch-Anglo monster) 440,000 bpd. Remember over the years, refining in the US has been a lousy business (due to competition and strict environmental rules and litigation) unlike crude production which is controlled by OPEC (you know who they are) and the non-OPEC (Russia, Mexico, Norway, Canada, yes, Canada) producers.
April 20th, 2011 at 9:06 pm
The bottom line here is, well, zero. And that’s the point?!!
April 21st, 2011 at 2:36 am
Hey Christopher!
You got me, I am an undercover agent for XOM. XOM sets gas prices worldwide from Texas in cahoots with Dick Cheney, they own all of OPEC, Putin and Chavez are in their dirty pockets, the mullahs in Iran are their lackeys, XOM pays no taxes, makes obscene profits and destroys the planet. The gas it brings to you daily, the electricity, heating, air conditioning, fertilizers, plastic materials, all should be banned or be provided…by who?
About DC: I agree we have a problem here; DC is largely paralyzed by special interests, often conflicting. But the US is still the best place one can live in and a little bit of civility doesn’t hurt so before accusing me of “shilling” and “missing the point intentionally” just read the data and make comments to the best of your ability, have a nice day and beware of Bernie’s fantasies.
April 21st, 2011 at 3:13 pm
curb: doubtful youre still reading this, and i wouldnt know how to get your contact information anyway but you could argue that nearly ANY tax on corporations is an indirect tax on us. They have numbers to hit in terms of net profit, and will do what they can to meet them, whether thats fudgery, price raising what have you.
I used to be really against consumption taxes for regressive reasons. I dont think that matters much anymore. IF states have consumption taxes we can too, and if youre politically so inclined i wouldnt be terribly upset if you made up for it by making a more progressive income tax.
The reality is we are all going to have to pay, the question is if you raise “X” dollars in revenue, where does that x come from at the end of the day?