GE paid no taxes; Goldman Sachs paid $14 million last year. The GAO reported in 2008 that “two out of every three United States corporations paid no federal income taxes from 1998 through 2005.”

Companies have become all too astute at paying for loopholes which allow them to shift profits abroad, or move their gains (on paper) to foreign low-tax/no-tax nations.

Since tomorrow is April 15th, it is a good time to look at the overall tax payments corporations have made. As the graphic below shows, the change in corporate taxes — not merely rates, but what they actually paid — over the past half century is astounding.

Corporate Taxes as a Percentage of Federal Revenue
1955 . . . 27.3%
2010 . . . 8.9%

Corporate Taxes as a Percentage of GDP
1955 . . . 4.3%
2010 . . . 1.3%

Individual Income/Payrolls as a Percentage of Federal Revenue
1955 . . . 58.0%
2010 . . . 81.5%

Anyone who is serious about closing the US deficit should consider the changes in what corporations pay in taxes and the rise of the deficit.

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click for larger graphic

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Source:
Loophole Land: Time to Reform Corporate Taxes
Graphic PDF
Demos, APRIL 12, 2011

http://www.ourfiscalsecurity.org/taxes-matter/2011/4/12/loophole-land-time-to-reform-corporate-taxes.html

Category: Really, really bad calls, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

81 Responses to “Corporate Tax Rates, Then and Now”

  1. While you cannot disagree with the numbers presented, the argument is misleading.

    You have to also compare Non-U.S. corporate tax rates & tax/gdp to U.S. corporate tax rates and tax/gdp.

    What you will find that the U.S. rates and tax/gdp in the 1950s were definitely higher than today BUT ALSO comparable to Non-U.S. corporate tax rates and tax/gdp.

    So — if you raise U.S. corporate tax rates now, all you will succeed in doing is increasing the cost of doing business in the U.S. as opposed to other countries with lower costs and tax rates (ex-Communist countries come to mind such as China, etc).

    The real issue is encouraging manufacturing and production in the U.S. – break the harmful fixed exchange rate with China and equally harmful foreign ownership of U.S. government debt…..

  2. dhuv says:

    I find it very interesting to see these numbers but to be honest with you “Correlation does not imply causation”. In my opinion, our debt has been rising for a couple of main reasons.

    - Our debt based monetary policy. It does not really allow for a decrease in debt without causing pain in the economy.

    - The amount of social programs that the government is involved in now is significantly higher in 2010 than in 1955. (domestic policy)

    - The amount of world policing we do is also significantly higher. (foreign policy)

    I think Ron Paul said it best here http://www.rlc.org/2011/04/11/ron-paul-on-ryan-budget/

    “We are dealing with a problem in Washington as a budgetary accounting problem and that’s not it. It’s a philosophy problem. What is the philosophy of government? What should the role of government be?”

  3. Alaric,

    I never mentioned tax rates; this is about loopholes and accounting that allows profits earned in the US to be shifted overseas …

  4. machinehead says:

    ‘Anyone who is serious about closing the US deficit should consider the changes in what corporations pay in taxes and the rise of the deficit.’

    Agreed. It’s a well-accepted economic result that corporations are basically conduits. They pay wages to their employees, invoices to their suppliers, and dividends to their owners. If all of these parties are taxed as individuals (or in the case of corporate entities, pass on the payments to individuals), then taxing corporations leads to double taxation.

    Businesses can organize as partnerships, LLCs or S corporations to guarantee their untaxed, pass-through status. C corporations still retain some advantages, but only because their effective corporate tax rates are relatively low. Any attempt to seriously hike taxes on C corps will be avoided by a mass conversion to LLCs and S corps.

    Taxing corporations has a superficial appeal as a populist issue. But it’s not economically efficient, and the complex tax code already provides legal ways of avoiding it. Corporate tax rates stay low, because of competing zero-tax ‘passthrough’ forms of business organization.

  5. UncleMilty says:

    Isn’t some of this due to the growth in pass-through entities (LLCs, S-Corps) due to double taxation. Most small businesses I know with C-Corps keep their profits at zero by increasing wages and bonuses for the owners. The gov’t is still getting a large chunk of those profits. My guess is that if you ended double-taxation and made the rates the same as the highest individual rate (or perhaps lower), you would see a dramatic increase in corporate taxes with a corresponding decrease in personal taxes.

    ~~~

    BR: No.

  6. Moss says:

    Loopholes and accounting.. which the armies of lobbyists, tax attorneys and accounting firms have crafted over the years. Actual tax rates mean little when countless non economic incentives exist for those with the resources to exploit the tax code. It needs to be rewritten in black and white so that there is little room for interpretation.

  7. BR – thanks for your comment regarding rates.

    1. There is one point you should consider in this comparison – in the 1950s ‘flow-through’ Limited Liability Corporations did not exist. These corporations do not pay tax; rather, as I am sure you know since you run an investment business, taxes are paid on an individual’s returns as the income flows through to them. A very significant portion of new businesses are now set up as LLC’s rather than as traditional corporations, which would skew this analysis.

    2. You are correct: tax ‘loopholes’ are a way of changing rates for favored constituents. Loopholes help to obscure what people actually pay. Note that the obfuscations in the tax code work both ways, they can work against you…
    examples include the phasing out of the NY Star property tax relief for those earning over $500k – this will result in some cases a 5% increase in property tax in 2011; phasing out of deductions, the AMT….

    3. When looking to compare tax policy of the 1950s vs today in terms of the total tax $ / gdp, I am not sure you can escape an examination of the different rates across geographies, it is very relevant to discuss competitive tax policies of other countries if what you are trying to do is increase business activity here….

  8. Petey Wheatstraw says:

    Alas, if a Corporation is a person, it should be taxed as one. No double taxation there. In addition to being a Get Out of Jail Free card, corporate status should not be a means to evade taxes.

    Correlation does imply causation. It does not prove it, but it does imply it, and in many cases, the implication/causation relationship is valid.

    Moss: Yup.

  9. wally says:

    It used to be that there was such a thing as being a good citizen. What a joke today, huh?

    I live within a mile or so of the UNH (United Health) offices. In a world of out of control medical and insurance costs and desperate attempts to control projected spending on such costs, including cutting benefits to people with low incomes, they just decided to give their CEO $10 million. This on the heels of the whole sorry episode with their last CEO.
    That’s the sort of tone-deaf, politically insensitive, uncaring, greedy people who have gotten themselves in control of so much of American business.
    And it shows.

  10. ThePlainsman says:

    If I’ve learned one thing about taxes, it’s that most people don’t have a clue about who pays and who doesn’t. One of the other things I’ve learned is that what those folks “think”, cannot be changed with facts. They will simply give you arguments like above. Anyone with a brain can fully see and understand (and this is the key) that US Corps are clearly not pulling their weight in our economy these days. To argue otherwise is to be a) completely uninformed, b) disingenuous, or c) all the above.

  11. You have a basic problem here: the debt problem in the U.S. is too large now to be dealt with through tax rises alone!

  12. Petey Wheatstraw says:

    Tax burden by country. We’re hardly the most taxed (despite our current 3 wars):

    “Denmark had the highest total tax revenue as a percentage of G.D.P., at 48.3 percent, followed by Sweden at 47.1 percent. Turkey and Mexico had the smallest tax burdens, at 23.5 percent and 21.1 percent, respectively.

    In the United States, tax revenues represented 26.9 percent of total output last year.” (2009)

    http://economix.blogs.nytimes.com/2009/11/24/the-tax-burden-around-the-developed-world/

    Why aren’t businesses flocking here?

  13. beaufou says:

    Big foreign corporations are also profiting from the loopholes, an estimated 28% are not paying any taxes at all.
    As for the job creation/tax break argument, we all know the private sector has not created jobs in the last 10 years, small businesses actually accounting for 75% of the employment flatline, meanwhile two thirds of American and foreign corporations have not paid any federal income tax, despite taking 2.5 trillion in sales a year.

    It is time for some serious changes, tax breaks can then be offered for actual job creation, not finding loopholes.

  14. NoKidding says:

    “Anyone who is serious about closing the US deficit should consider the changes in what corporations pay in taxes and the rise of the deficit.”

    Of course by deficit, you mean fiscal deficit.
    If you meant trade deficit, then the opposite data and conclusion would apply.

  15. We need a heavy dose of reality when it comes to corporate taxation. The Sixty Minutes piece did a pretty good job of showing how we are simply not competitive with the rest of the world. We can lambaste corporations all we want for not paying their fair share, but it won’t change anything since the politicians will continually provide tax loopholes to their biggest donors. Rather, we need to lower the rates to match other nations and simplify the code. This will attract capital from big corporations. It is better to get 15% of $2 trillion than 35% of nothing. Plus, this will provide a much needed boost to the smaller C corps that can’t employ a team of CPAs to find all the loopholes and are stuck paying a 35% tax rate. As beaufou notes, 75% of new jobs come from small business. Let’s give them a greater incentive to create jobs.

    We need to think competitively and not merely vocalize our displeasure at the corporations not paying their fair share.

  16. VennData says:

    I think Reagan Said it best when he raised taxes six times to counteract the cuts in the high top marginal rates…

    http://old.nationalreview.com/nrof_bartlett/bartlett200310290853.asp

    … Rand Paul, and Ryan and the right wingers say we need to “simplify the rates.” Why? What do three or four different increases in rates have to do with complexity? The tax code is tens of thousands of pages, making it a flat tax simply raises the taxes on the working people (they have to pay additional payroll taxes on incomes under $100K) and lowers the taxes of the rich who don’t pay those 15% payroll taxes on higher incomes.

  17. curbyourrisk says:

    GREAT ARGUEMENT FOR A FAIR TAX.

    You seriously want to close the deficit. Here are two tarriffs you could possible get behind.

    1) A wage tarriff. All companies exporting to the United States are forced to pay the difference between a fair wage in the country of manufacture and the fair wage inside the United States. NOW THAT IS A LOOPHOLE BEING CLOSED.

    2) An Enviornmental Tarriff. All companies that manufacture in countries with less strict environmental laws than the United States are forced to pay the cost difference in producing the same good here in the states, than it costs them to produce it outside our environmental laws.

    Once you enact these 2 tarriffs……THEN you declare a repatriation holliday for cash held outside the United States, but you only get to bring it home at 5% if you 1) create jobs here with it. 2) Shift manufacturing back home.

  18. TDM says:

    Deficits crowd out private capital. Nothing crowds out private capital more than taxes on private capital. Anyone who is serious about reducing the impact of the US debt should stop trying to increase taxes on capital. Corporations are capital. Eliminating double taxation of foreign income would cause repatriations of capital. The supply of domestic capital would increase and the impact of the debt would decrease. Plus, getting rid of corporate taxes would liberate massive amounts of brain-power to increase productivity and the standard of living.

  19. ironman says:

    BR wrote:

    Anyone who is serious about closing the US deficit should consider the changes in what corporations pay in taxes and the rise of the deficit.

    This is a bit mistaken. What you’re missing is that while corporate tax collections have declined, they have been offset, almost dollar for dollar, by increases in the employers’ portion of federal payroll taxes. You can confirm that by looking at the combined amount of taxes that U.S. corporations pay as a percentage of GDP, which has been remarkably stable since World War 2.

    In practical terms, the U.S. has shifted from taxing the income of corporations to taxing the size of their payrolls. Now, here’s a couple of interesting questions: What effect would that have on the size of a corporation’s payroll in the U.S., as measured by either total dollar amount or number of workers? Could rising payroll taxes over time have pushed corporations to outsource U.S. jobs to foreign countries as a strategy to minimize the taxes they would otherwise have to pay.

    Classic unintended consequences!

  20. Petey Wheatstraw says:

    TDM:

    “Plus, getting rid of corporate taxes would liberate massive amounts of brain-power to increase productivity and the standard of living.”
    ________________

    We have low, and, as the post indicates, frequently no, taxation on corporations. Why has our productivity gone up, but our standard of living (excluding debt) and compensation gone down?

    Corporations are people.

  21. Greg0658 says:

    many moons ago I said we need “a long tail slow growing flat tax” .. then folks will decide when the burdon is just to much to try harder – and LEAVE SOME SCRAPS for others

  22. wally says:

    As a wealthy class develops, increasingly, within the US, the case is more and more readily made that the government is a better investor and circulator of money than wealthy individuals. Higher taxes would probably increase velocity of circulation at this point. Plus, we’d get something for our money that’s more useful to us than yachts, overprice Manhattan digs and speculation in commodities.

  23. wannabe says:

    So you are saying a gigantic, byzantine government favors the wealthy and powerful? Who would believe that nonsense?

    Word Count, Internal Revenue Entire Code and Regulations:
    1955 = 1,396,000
    2005 = 9,097,000

    Source: http://www.taxfoundation.org/research/show/1961.html

    “It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?

    Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the moneyed few over the industrious and uniformed mass of the people. Every new regulation concerning commerce or revenue, or in any way affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow-citizens. This is a state of things in which it may be said with some truth that laws are made for the few, not for the many.” – James Madison, The Federalist No. 62

    Just another dishonest, hypocritical libertarian, I suppose.

  24. Lukey says:

    The way I look at it, if a company’s supply costs go up, at some point they raise their prices. If their wage cost goes up, eventually they are going to raise their prices. If energy prices go up, at some point they are forced to raise their prices. So, if we are successful at increasing corporate taxes, aren’t they just (at some point) going to pass that on to their customers? And if so, why do we want to tax ourselves more by increasing corporate taxes?

  25. franklin411 says:

    Is anyone surprised? We’re seeing the “Californization” of America:

    In the 1970s and early 1980s, California imposed a number of “reform” measures by right-wingers–

    Prop 13: Billed as a “taxpayer’s revolt,” but it actually shifted the tax burden in CA from 2/3 corp 1/3 individual to 2/3 individual, 1/3 corp.

    Various Props: Imposed a 2/3 vote requirement to raise taxes and fees, making it virtually impossible to do so.

    Term limits: Promised to put the people back in charge in the capitol, but what actually happened is that politicians came and went before they learned the game, leaving the lobbyists as the only guys in the room who knew how to work gov’t.

    As a result of these Republican laws, California’s economy is now a smoldering wreck. Guess what?

    Now the GOP wants to do it to America. The GOP is demanding a massive corp tax cut, they’re demanding a 2/3 vote for tax increases combined with automatic spending cuts, and they’re demanding term limits.

    Have you enjoyed laughing at California, America? Well, now you know how the rest of the world will feel, laughing at the USA in 10 years!

  26. franklin411 says:

    PS–How about comparing a chart of corporate tax rates against a chart of discretionary spending as a percentage of GDP? That would give us a good idea of whether we have a spending problem or a revenue problem… =)

  27. fugazzi says:

    Ironman: very interesting point worth looking into, and probably spot on as to the unintended consequences…thanks.

    TDM: Ok, so, to create wealth, you must make productive investments…they lead to productivity gains…then the question becomes, how do you “share” those productivity gains between Work and Capital…give too much to work, and capital will go invest somewhere else…give too much to capital, and the social fabric of your country falls apart (think feudal states, banana republic and so on and so forth)…the Fact that workers compensation over the last 30 years is more or less flat after inflation, while the income of the top 2% as tripled (ok, that last bit i admit, is only from memory from a graph seen somewhere, can’t be entirely sure, but even if it’s off by 50%, the difference is still striking) is proof that productivity gains in america over the last 30 years went entirely, i repeat, ENTIRELY to capital…So, to say that to make things better we need to help capital some more is really being brain dead…

    The genius of the anti-tax crowd has been to conflate different people and businesses into the same vague categories…for instance, 35% tax rate on corporate profit is very high…but who pays that level? most likely small and medium businesses…on the other hand, show me a company from the SP500 who pays those 35% and i’ll show you a CFO that needs to be fired…bottom line, lower the tax rate but close the loop-holes…
    Same goes for the taxes “on the rich”…to say that someone who makes 250k$ a year is “rich” and should pay the same rate than somebody who makes 2, 5, 20m$ a year is a joke…there used to be a dozen or so tax brackets, maybe that wasn’t that crazy…and again, saying that taxes are too high is ignoring the simple fact that the marginal rate is currently very close to a 100 year low…with the highest level in the past more than double that level (actually 94% if i remember correctly..then again, it was to pay for WWII)…the whole of the 50s, 60s, and 70s had top marginal rate upward of 70%…where the “rich” so unhappy back then? was the US economy doing so badly?

    Last point, i read an economic paper not long ago that tried (and succeeded as far as i understand it) to show how when the tax rate on coporation goes down, the growth rate of GDP goes down in the following years…the argument was that, a “relatively” high tax rate gives incentive to “invest”, in machine, process, research, people, to reduce the income and in a way by investing, “defer and increase” it…when the tax rate gets low, you get an incentive to “cash-in”, extract the value, rather than invest…again, there should be a “sweet spot”, where that effect works best, and doesn’t become counter productive in discouraging any activity for lack of profit prospects…

    Well, anyway, sorry for the long rant…-)

  28. Petey Wheatstraw says:

    Why does every goddamned body who wants lower corporate taxes completely ignore the growth of corporate “profits” and CEO compensation? Our tax dollars go to these corporatist fucks, but if we tax them in turn, the system will fail? We have a corporate welfare state, and all you can think to do is to give the alcoholic another free drink?

  29. UncleMilty says:

    Regarding BR’s terse response to my previous post…

    Are you suggesting that the growth in pass through entities has NO impact on the shift in revenues from corporate to personal taxes? I think most of the abuse is with the largest multi-national corporations. But a huge amount of tax revenue comes from the thousands and thousands of small and mid-sized businesses, most of which are pass-through entities. I work in a small little accounting firm in a small little town. We’ve been in business since the 1950s and we don’t have a SINGLE C-Corp paying sigificant taxes over a long period of time. They have all switched to pass through entities or bonus out the income to the owners. This isn’t the whole story, but grouping small and mid-sized (but often profitable) domestic businesses with the large Fortune 500 types makes the data seem more like a talking point and less like a serious basis for policy changes.

    By the way…is all of your firm, which I assume is profitable, in a C-Corp, or are you using pass through entities? Would your answer be the same in the 1950s?

  30. beaufou says:

    If two thirds of individuals didn’t pay their taxes, they would be considered free-loading deadbeat socialists, why on earth doesn’t that apply to corporations who turn their extra cash into multi-million bonuses and extras for already wealthy investors.
    This is exactly why we are seeing so much inequality.
    The goal is not to raise taxes but simply to have corporations pay them, small businesses do and are more efficient at creating jobs.

  31. Patrick Neid says:

    Gaming the Tax code has been a national sport since WWII. Nothing will be done. Only a revolt of some sort/total financial collapse resulting in a complete new tax code will any of these issues be truly dealt with. I have been listening to this reel to reel loop about the lament of companies/individuals escaping taxes for 40 years. The tax code as written is like squeezing jello.

  32. DeDude says:

    Time for an alternative minimum tax for corporations (after all if it is good for personal income it should be good for corporate income – they are also persons). Let’s say the sum of total compensation for their 5 top compensated in their leadership + the value of any dividend + the cost of any stock buy backs = minimum taxed corporate income.

  33. machinehead says:

    ‘As a wealthy class develops, increasingly, within the US, the case is more and more readily made that the government is a better investor and circulator of money than wealthy individuals.’ — wally

    You mean the government that runs a global military empire that doesn’t pay for itself? The government whose entitlement programs have a negative net worth of $202 trillion, according to Laurence Kotlikoff? The government which has let our infrastructure deterioriate to the point that interstate highway bridges collapse? The government which licenses dozens of nuclear reactors which store used fuel rods in open pools (same as Fukushima) because it can’t solve the nuclear waste storage problem? THAT government is a ‘better investor’?

    AH HA HA HA! Wally, share the blotter acid, dude!

    Sincerely, The Beav

  34. Edoc says:

    Lukey, I think the basic counter argument goes something like this:

    The Economics 101 textbook says that companies maximize their supply (and therefore revenue) according to demand. Companies constantly evaluate and adjust their prices according to the highest level the market will bear. Raising their prices beyond that point will lead to lower sales volumes, and any level below that is leaving money on the table.

    So in a competitive marketplace, there is usually very little room for companies to raise prices to pass along new costs or taxes to the consumer. The higher prices will cause you to lose sales volume (depending on other factors, market elasticity, etc.) and consumer will purchase from a competitor or find a suitable substitute. So in this scenario, higher taxes do indeed come out of corporate profits.

  35. willid3 says:

    considering that we have given lots of tax breaks with the understanding that those we gave them to would create jobs. and so far that hasn’t worked at all. makes one wonder why is it that when tax rates were much much higher, a lot of todays wealthy earned their wealth. and then i though of a theory as to why that is. if you give a pay raise to a worker for no reason, why would you expect them to be more productive? and isn’t giving a tax break to some, without any requirement that they do some thing for it, doing the same? its like you gave them a raise, for not doing any thing more, so they don’t.
    well you know why the corporations that run the nuclear power plants use open pools to store them? because its cheaper to do that than the alternative method. and their government regulators won’t force them to use the safer method. so whose fault is that? the corporation who won’t do it, or the government who won’t force them too?
    and while infrastructure has been deteriorating for decades, is that because we don’t want to pay for it? after all, that would be spending, and we would have to actually raise taxes some way to pay for that. can imagine any party that would advocate against that can you?
    and the only military that has ever paid for it self, was run by pirates. not sure we really want that do we?

  36. willid3 says:

    many push that taxing corporations is just a pass through. well instead of the argument that corporate taxes should be 0 (can’t imagine who would support that can you???) and do the reverse, eliminate the employees taxes, and raise the taxes on corporations.

  37. JackOtter says:

    Does anyone have a good source for what percentage of profits corporations actually pay in taxes? Sure the rate is 35%, and we know GE and Carnival don’t come close to that, but it would be interesting to see, say, average corporate tax paid by the S&P 100, 500, and Russell 2000. I’m guessing the smaller companies pay a higher percentage, since they have fewer accountants and smaller overseas operations (in aggregate).

  38. [...] US companies tax burden has shrunk dramatically in four decades [...]

  39. RadioFlyer says:

    @beaufou, re: “If two thirds of individuals didn’t pay their taxes, they would be considered free-loading deadbeat socialists…”

    Um, not quite two thirds, but you are aware that about half of the individuals in this country do not pay any federal income taxes….right? And a good portion of them are actually well in the black when analyzing their cost/benefit relationship with the federal government. And their state governments as well.

    Not sure if this other point has been made, but I’d be willing to bet that the majority of those that complain that corporations don’t pay any/enough taxes, and are “people” – or any other form of taxpaying entity – are the exact same folks that kick and scream when those same entities spend money in any form or amount on elections/political advertising/etc. In other words, they want you (it) to just shut the hell up and pay.

  40. frodo1314 says:

    BR – but hasn’t our standard of living risen dramatically since 1955, so is all that has happened bad?

    I live better than my parents did and they live better than theirs did. I believe that’s true for a high percentage of US citizens. Couldn’t this be partly because of the data you show?

    At least some of that resulting increased profit is getting down to the working class – and not just through increased job opportunities and higher wages but through lower relative prices for products. Not all of that money is getting stuck in CEO’s pockets.

    That to me is the more compelling argument for the negative in all this: when you compare the relative rise in CEO compensation compared to middle class workers – which you have shown very effectively before.

  41. Joe Friday says:

    dhuv,

    “In my opinion, our debt has been rising for a couple of main reasons.

    - Our debt based monetary policy. It does not really allow for a decrease in debt without causing pain in the economy.
    - The amount of social programs that the government is involved in now is significantly higher in 2010 than in 1955. (domestic policy)
    - The amount of world policing we do is also significantly higher. (foreign policy)”

    According to the independent non-partisan Congressional Budget Office, your “opinion” is wrong, as they report the number one reason for both our current federal deficits and debt, as well as our mid-term future federal deficits and debt, is FAR AND AWAY from the massive plunge in federal income tax revenue as a result of the numerous rounds of tax cuts for the Rich & Corporate enacted subsequent to the federal budget surpluses at the end of the last century.

  42. Joe Friday says:

    Alaric Investments,

    “You have a basic problem here: the debt problem in the U.S. is too large now to be dealt with through tax rises alone!”

    Nope.

    Just as an example, if the numerous rounds of tax cuts enacted during the previous administration were simply allowed to expire, that would eliminate about 75% of our projected federal deficits.

  43. Joe Friday says:

    ironman,

    “What you’re missing is that while corporate tax collections have declined, they have been offset, almost dollar for dollar, by increases in the employers’ portion of federal payroll taxes. You can confirm that by looking at the combined amount of taxes that U.S. corporations pay as a percentage of GDP, which has been remarkably stable since World War 2.”

    Both of those are wrong on so many levels. The shift has been from Corporate America to individual Americans:

    Percentage of general fund tax collections from corporate taxes:

    1940s – 33%
    1950s – 31%
    1960s – 27%
    1970s – 21%
    1980s – 15%
    1990s – 16%
    2000s – 11%

    Percentage of general fund tax collections from individual taxes:

    1940s – 44%
    1950s – 49%
    1960s – 57%
    1970s – 66%
    1980s – 72%
    1990s – 71%
    2000s – 76%

    [Internal Revenue Service]

    (This was prior to the numerous rounds of tax cuts for the Rich & Corporate enacted after 2000.)

  44. DL says:

    “Anyone who is serious about closing the US deficit should consider the changes in what corporations pay in taxes…”

    So it’s all just “free money”….?

    In that case, let’s raise the corporate tax rate to 90%, and eliminate all deductions.

  45. BillyQ says:

    Corporations are ARTIFICIAL persons. They are owned by real persons who pay tax on their earnings and dividends like anyone else.

    Businesses of any kind will never pay tax. Taxes are a cost of doing business and will always be charged to the customer. When business income is taxed more larger margins are required to provide the same return to the owners. All businesses within the nation are subject to the same tax so they will all raise prices. Foreign producers may have an advantage if their tax rates are lower. If margins can’t be restored there will be less investment in that line of business and it will possibly be lost.

    Offshore revenue of US corporations really shouldn’t be taxed by the US anyways. It is already taxed where it is earned. These foreign business operations could be separated off and that would be the end of the issue.

    There is no untapped well of corporate tax revenue. Corporate tax increases just suck money from somewhere else and put a drag on private enterprise.

  46. Rant2112 says:

    You can’t just set the corporate tax rate wherever you want and get a linear return in tax revenue.

    Corporations are mobile. If you want corporations to be based in the US then you have to have a competitive tax system. Alternatively you can have tariffs to restrict external access to our market but that has undesirable side effects as well.

    Individuals are not as mobile. People, in general, aren’t going to move out of the US to avoid taxes.

    Would you rather have more companies located in the US but a higher individual tax rate or few companies here and a lower individual tax rate? I think the latter would likely result in fewer jobs and lower wages.

    Sounds to me like the system is optimizing itself.

  47. MikeG says:

    It’ll be a frosty day in hell before you see any of this mentioned in the corporate media.

  48. Dan Z says:

    Somewhere will always be cheaper for corporations, so that is not a valid argument for not raising corporate taxes and closing loopholes.

    How about, if a corporation moves overseas to avoid U.S. taxes, all of their U.S. patents and copyrights are no longer protected? Lets see how profitable moving overseas would be in that case.

    I find it amazing that year after year people still believe in that trickle down crap, no matter how much evidence piles up against it.

  49. BillyQ says:

    After WWII the US corporations produced most the goods for the US and the world. US industry was huge in the world. Big tax revenue.
    The rest of the world rebuilt and began to export. Now the US imports most things. Industry is a smaller part of the economy. Government is now the biggest part. Relatively less corp tax.

    Many Americans support this change. Activists like Ralph Nader and Michael Moore have fought hard against industry. Maybe the best thing would be to raise corporate rates to 99%. Just import everything. End the exploitation of workers. Let everyone work for government. Provide healthcare and bomb and plunder foreign countries.

    Just get rid of those hated corporations and high earners. Equality rules.

  50. David T says:

    As a small business owner I have 40 employees, most highly paid professionals working in the Energy Industry. Our accounting department spend countless hours managing the “tax” side of what we do. Not just at the Fed level but the State level, and local. So much paper, so much time to keep track of it all.

    A reform of the tax code would be welcome. We have to start somewhere, so why not at the Fed level. It should serve as a guide for States and Local government bodies to simplify, simplify, simplify.

    Our company is structured as an L.L.C. company and the profits (and losses) flow through to our small group of shareholders individually. So our company technically pays no tax but our members pay taxes. We send out K-1 reports to each and their tax preparer balances out the tax burden from out company in with other K-1′s they may obtain as well as any personal income.

    So when people start throwing out statements like, “lets tax the rich to fix our problem” I get confused. I don’t consider myself “rich” however I would fall into the +$250 bracket. The tax people must understand the income I report is not cash in my hand, its my proportionate share of the profit. We simply distribute enough to pay the tax portion, the rest stays in to run the business.

    My math is simple, I don’t see any way we can correct the deficit without a. cutting the size of government, b. reducing entitlements, c. reduce the amount government gives in credits and d. increase income from businesses and individuals by focusing on growth not tax.

  51. Joe Friday says:

    BillyQ,

    “Businesses of any kind will never pay tax.”

    Then why do they hire an army of Pucci and Gucci wearing weasels to lobby Congress ?

    ~

    “There is no untapped well of corporate tax revenue. Corporate tax increases just suck money from somewhere else and put a drag on private enterprise.”

    Then why did the national economy perform MUCH better when taxes on the Rich & Corporate were MUCH higher ?

  52. Joe Friday says:

    David T,

    “My math is simple, I don’t see any way we can correct the deficit without a. cutting the size of government, b. reducing entitlements, c. reduce the amount government gives in credits and d. increase income from businesses and individuals by focusing on growth not tax.”

    Your “math” is wrong.

    As I posted upthread, according to the independent non-partisan Congressional Budget Office, the number one reason for both our current federal deficits and debt, as well as our mid-term future federal deficits and debt, is FAR AND AWAY from the massive plunge in federal income tax revenue as a result of the numerous rounds of tax cuts for the Rich & Corporate enacted subsequent to the federal budget surpluses at the end of the last century.

    Why would you want to concentrate on areas that are NOT drivers of our current federal budget deficits and debt instead of the areas that ARE the drivers of our current federal budget deficits and debt ?

  53. willid3 says:

    well you know that 250K+ is more than 5 times the median average income in the US. you may not feel rich, but compared to 90% of the country you are.
    and if cutting taxes on corporations was supposed make it so that they would pay better.
    why haven’t they?
    and if was suppose to create jobs?
    why haven’t they.
    incomes for 30-40 years have been going down. not up
    and the last decade with all of the tax cuts, we had the worst job creation record since they started keeping recordd

  54. beaufou says:

    Radioflyer,

    “the share of the increase in overall national income, after adjusting for inflation, that has come in the form of wages and salaries has been smaller than in any other recovery since the end of World War II”

    “The share of national income gains going to corporate profits has been significantly larger during this recovery than in any other post-World War II recovery.”

    http://whiskeyandgunpowder.com/corporate-profits-increasingly-to-disappoint/

    And this dates back to 2006, before the crisis, what happened after?
    Record Corporate profits:
    http://seekingalpha.com/article/261609-will-the-surge-in-corporate-profits-bring-stronger-job-growth

    And the citizens not paying their dues because they are doing so well, wtf?
    http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

    As for shutting the hell up, I don’t think your kind would like the bottom 90% to actually influence the political process, they can’t afford it, better keep them there, right?

  55. Greg0658 says:

    on that statement “250K+ is more than 5 times the median average income … you may not feel rich, but compared to 90% of the country you are” I’d say to that > a goldfish will grow to the size of its swim space

    BillyQ if I read your thoughts correctly – in a matter of 1hr13m you had polar opposite plans .. maybe your thinking in word form (& thats ok by me – sometimes the stuff these folks say in here matters)

    and a couple good ones:
    “the only military that has ever paid for it self, was run by pirates. not sure we really want that do we?” .. nope
    and:
    “do the reverse, eliminate the employees taxes, and raise the taxes on corporations.” .. now that would be a change towards single taxation with the world paying its share (if they want the stuff)
    :-D-

  56. DeDude says:

    David T;

    If one of your employees got 300K/year in salary and invested 150K of that by purchasing stocks in a company (e.g., Ford), should he be taxed for 300K in income or 150K in income? What you are doing is basically the same thing although you are putting the money into your own company. So yes you are “rich” because you make a huge amount of money. However, you do not feel rich at this time because you spend most of your money investing in a company (your own). But it is your choice to put a huge part of your income into your own company (probably because you expect a huge return on that investment). When you get to the point of selling your company you will not only be rich but also be able to feel rich (if all goes well, and I wish you the best).

  57. RadioFlyer says:

    @Beaufou, Re post at 3:29pm: If you’ll take a step off the soapbox for a second and reread my comment to you, you’ll notice I did not mention anything about so-called income inequality or record corporate profits, or pretty much anything you’ve mentioned in that reply.

    The point I was (and many others are) making is that a business is not a human being, and thus can’t pay anything – the human beings that are owners/shareholders/employees, etc. are in fact the ones that pay the taxes – whether they pay them on the corporate level or the personal level, capiche?

    I agree with many on here that the tax system in this country is a joke…but that isn’t the real problem, it’s the fact that a large portion of the “leaders” in this country (in both government and private sector, Left and Right, etc., etc.) have a totally bankrupted moral and ethical code – as has a large portion of “the rest” of the population at all income levels – but again, that’s getting off topic. (Besides, with more and more people riding in the wagon and less doing the pulling every year, I don’t see the rich v. poor sentiment getting better any time soon.)

    It may surprise you to know that I in fact believe that higher income earners in this country probably should be paying a little more in taxes, and that government spending should be reduced…you see, it’s a little more complicated that picking one side and then slinging mud. With regard to your reference to “[my] kind”, you have no idea what my kind is, but clearly you’re just more interested in partisan rhetoric.

    And as to your comment about the “top 10%” influencing the political process through advertising and/or campaign contributions, that’s ridiculous. I’m guessing you’re the same kind of person that wants to stop McDonald’s from putting toys in happy meals. Advertising is just that, advertising. It doesn’t put a gun to anyone’s head and force them to do anything – if you can’t take personal responsibility for educating yourself about the candidates, or telling your kid they can’t have that deadly cheeseburger/fries/SpongeBob toy, then maybe you shouldn’t be voting and/or complaining.

    Lobbying is a bit of a different story, but I didn’t mention that, and that’s not the subject of this post, so let’s not go there.

  58. beaufou says:

    Nice move,

    Mc Donald?
    I guess that’s how you call Congress, corporations are considered citizens nowadays, the Supreme Court decided so, they are no longer a group of people paying their taxes separately, they are citizens…why don’t they pay their taxes? they can certainly afford the millions in lobbying and campaign contributions.
    As for the toys, well, they could give out free dildos for every American voting, you seem to think the political ladder is based on fairness and competence, I am sorry to say, I don’t think it is.

    You did mention that a lot of people are not paying taxes but are well in the black, that is simply not true, look at the facts, people are not in the black, a large majority are struggling.
    Partisan? what the hell is partisan about actual numbers?
    If reality doesn’t agree with your thought process, I am not the partisan.

    And you don’t want to talk about record profits while paying no taxes and creating no jobs, no, it’s partisan.

  59. RadioFlyer says:

    @Beaufou, you’ve completely missed the point(s) yet again. Since you seem to be having difficulty putting coherent sentences and thoughts together, not much point in continuing.

  60. philipat says:

    Since Tax reform is unrealistic, get tough on transfer pricing and/or use an AMT for US Corporations. If they move operations offsshore, nothing lost. They already manufacture almost everything in China, Vietnam etc. at the expense of US jobs. They would still have US operations and would probably pay more on those than the total tax bill at present because it would be more difficult to shift US-derived profits offshore. About the only thing that US Corporations do for the US is fly gigantic US flags outside Corporate HQ.

  61. beaufou says:

    Yes, you’re right, ruining society is too complicated for simpletons to understand.
    I’ll draw a picture next time.

  62. David T says:

    Joe Friday & DeDude (interesting names I must say…..)

    I’m not sure you understood where I was going with this. The amount I report on taxes is a direct proportion to the the membership interest in a small company. My salary is no where at that level. The money we leave in the company allows us to employ more people, creating jobs. All of the K-1 reported income is personal income and yes I pay tax on all of this, so your comment on how much should be taxed is off because its all taxed. My investment in my company comes with “after” tax dollars. Oh yeah all the people I am able to employ because of success, they all pay income taxes as well. If we are burdened as a small business owner with more taxes it will affect our ability to do this.

    And yes I “invest” in our own business as a “private” business not a publicly traded company like your example of Ford Motor. I’m not saying there are not large companies who skate on taxes. But smaller companies have little room to do the same and should not be lumped into the basket with large national and multi-national public companies. My bank is down the street not in Switzerland. This is my point. How do we separate the two? I pay the tax bill and don’t get any breaks, credits, exceptions. As an individual we don’t get a breaks like Wall Street multi-nationals and nationals. We’re not GE who take so many exceptions and store cash offshore. Oh yeah didn’t President Obama just appoint Mr. Immelt to an advisory position for jobs and competiveness?? Whats with all of that? Reform, yeah whatever.

    What size of company do you work for? A large corporation or a small business like mine, or do you own your own business? I’m sure the opinions you share have to be influenced by your situation. I’m all for growth in business and personal income so tax base goes up. I disagree with the cause of a great portion of the deficit. I see it as government spending on all sorts of things which have not produced a return on the investment. Sure lots of good things but we can’t afford all of the good Washington wants to spend on, plain and simple. We need to cut spending.

  63. Joe Friday says:

    David T,

    “I disagree with the cause of a great portion of the deficit.”

    Then you disagree with the U.S. Treasury and the independent non-partisan Congressional Budget Office.

    ~

    “We need to cut spending.”

    Nope.

    The federal budget deficits and debt are not primarily from spending. They are as a result of the numerous rounds of tax cuts for the Rich & Corporate. The only spending impacting the federal deficits and debt (and it’s a distant second to the tax cuts), is the three unpaid for wars, the unpaid for prescription drug plan for the pharmaceutical corporations, and other Corporate Welfare.

    Not to mention, you could eliminate ALL non-defense discretionary spending –

    Eliminate all the air traffic controllers and shut down all the airports, shut down the entire federal prison system (and release all the prisoners), shut down the federal court system and eliminate the federal marshals, shut down the Justice Department along with the FBI and the ATF, shut down the customs service and eliminate the border patrol and Coast Guard, and shut down the CIA/NSA/DIA/Homeland Security, and more

    - and STILL not even come close to balancing the federal budget.

    In other than the specific areas I mentioned, spending is NOT the problem.

  64. RadioFlyer says:

    @beaufou, save your crayons for class tomorrow. Pretty clear you couldn’t draw a picture that would even be worthy of ankle level on my fridge.

    @DavidT, perhaps you’re having fun, but you might as well save your breath, you can’t get through to people like Joe Friday, Beaufou, Petey Wheatstraw, DeDude, et al, that are just following the play book from Chomsky, Alinsky, Moore, et al. Like their idols, they live in a fantasy world filled with puppies, rainbows and free ice cream for everyone. Wish I could live there as well, but alas, I’m stuck here on Planet Earth with you.

    FWIW, there’s plenty of hyperbole at the other end of the spectrum, it’s just that the “lefties” seem to really have their pitchforks out and sharpened up for this one.

  65. mcdruid says:

    JackOtter: Dividing taxes paid by corporations by corporate profits for 09 gives an effective tax rate of 20.3%.

    But the tax burden apparently varies wildly by industry. According to the NYT, software firms only pay about 11%. So if you reduced the tax rate to 20% and killed all loopholes, then software firms would end up doubling their tax rates. Some other firms, notably utilities, would have theirs reduced.

  66. DeDude says:

    David T;

    If I understand the system right, then the money you invest in your company is basically like a Roth IRA,; you pay the taxes now and then you can have tax-free investment gains later? If not, why on earth would you take the money out of the company to get it taxed as income and then put it right back in again? So it is your choice to do this based on a tax-preference, because you know that in the long run this approach will give you the least tax expense. If you were more concerned about growing your company than about lowering your taxes and increasing your long-term profit, you would simply leave that money in the company and be able to grow the company even more (because less capital would be lost up front to taxes – although your overall taxes later would be more).

    That aside I agree that big business have tax-advantages that small companies cannot get. Similarly to that, small businesses have advantages that regular working people don’t. So you are complaining that you don’t have all the advantages of the big guys, I wish I could have the advantages that you have (and put unlimited amounts of money into my Roth IRA for tax free investment earnings). Everybody looks at things from where they are and rarely understands how their own wealth and advantages looks from others position. I have no doubt that you work hard and are doing something that is good for society. However, when someone starts complaining about increased taxes on income over 250K (I am so poor, cannot afford, etc.) they in my opinion reveal themselves as spoiled brads, who don’t understand how regular people live, or that without the infrastructure provided by society they would live in a cave (and certainly not make $250K+).

    I personally think we should cut drastically in the part of the federal spending that is wasted on defense and national security. Social security is money people have already paid (I hope you are paying payrole taxes on your partnership income?), so it would be robbery to cut anything there. Medicare/Medicaid is a health insurance program that has failed to increase its premium in spite of increased medical cost. Like all the private health insurance plans, they need to increase the premiums (taxes). The remaining part of the budget has been combed over every year since Reagan and we can do that again, but don’t expect to find any waste that will “solve” a $1.5 trillion deficit even if you did all those things Joe Friday are suggesting.

  67. Joe Friday says:

    RadioFlyer,

    The American RightWing STILL believes that cutting federal income tax rates generates more federal income tax revenue, and I’m the one that’s living “in a fantasy world filled with puppies, rainbows and free ice cream for everyone” ?

    UH HUH.

  68. David T says:

    DeDude.

    I appreciate your side of the discussion and can say we agree to disagree. I do agree with you and Joe Friday that we cannot “cut” our way out of the deficit. It will take a creative approach. I agree with less tax loopholes for national and multinational corporations (i.e. GE is a good example)

    However, I’m not sure I’ve clearly described how a small business LLC works with regard to taxes. Really.

    The money we “report” as individual shareholders is not technically “taken out” or “re-invested” in the business as you describe. The tax law is pretty clear and straightforward here. The company issues K-1′s to shareholders sort of like it issues W-2′s to individuals who earn any income in the company. The sum of all reported income on the K-1′s is the total bottom-line of the company. You asked why would we take it out so it could be taxed??? Please understand how LLC’s and Sub-S’s work, members of an LLC don’t take it out but members do have to report it as individual income just like individuals report using their W-2. Fundamentally I feel this is where you and I got off the rail. I feel you are using the C-Corp concept in your logic which is totally different from an LLC or a Sub-S. In a C-Corp profits are held in company for growth and reinvestment. Only when the company distributes dividends do individuals pay taxes. The C-Corp pays corporate taxes, LLC’s and Sub-S’s don’t pay corporate taxes as ALL of the annual profits flow through to the individuals for reporting as INDIVIDUAL INCOME. This is how all small businesses work.

    How many businesses do you know take ALL of their profit at the end of each year and remove it from the business?? Depending upon the cash cycle of the business the company likely doesn’t have the cash to distribute all of the profits. If a small business reports a year end “net profit” of $500,000, in most cases I would bet it is not possible for the company to take this money and pay it out to the shareholders because that would be a huge cash drain on a small business. But, the shareholders must through their K-1 report their share of that net income for their personal taxes. This is the part I feel you’re not on the same page with me.

    In any LLC the K-1 identifies the proportionate share of the company’s profit to the shareholder. This DOES NOT MEAN the shareholder gets the money in his / her hands, it only means the shareholder REPORTS the share of the net income, or taxable income. That amount of reportable profit goes onto the individuals tax return as an income stream. From there the INDIVIDUAL pays the tax rate just like all of the other individuals who report income in the respective bracket. I’ve had years due to cyclic end of year turn down where the company didn’t even have the “cash” to pay the tax portion for the shareholders and the money comes out of the shareholders pockets totally.

    So when you look at the historic trend shifting the burden of taxes from corporate to individuals, are you accurately taking into account the number of individuals who are receiving K-1 statements from their participation in companies and therefore paying the taxes as individuals? We’re actually a small business by all measure.

    I know of several fairly large LLC companies in our region where the shareholders are paying taxes on millions of K-1 reported profits. (remember company profits are a good thing) In several of these only the tax portion is able to come out of the company because of forward looking needs for cash in the business. (growth in business sucks cash) These individuals would be in the “individual” column of the tax trend, not the “corporate” column. If you were able to re-allocate the magnitude of such tax payments from individuals which were (before LLC & Sub S’s) considered corporate, would the numbers reflect the same trend?

    You seem to have a better handle on those statistics than I do. Can you locate any report showing the shift or impact of LLC & Sub-S individual taxes to the trend in corporate vs individual tax burden?

  69. David T says:

    Further reference for sake of clarification.

    LLC

    First, there are no tax advantages (or disadvantages) to forming an LLC. In fact, forming an LLC won’t change a thing for Federal income tax purposes. Single-owner LLCs are taxed just like sole proprietorships, and multiple-owner LLCs are taxed just like partnerships.

    You should, however, be aware that forming an LLC might subject your business to additional state taxes. Certain states (California for instance) subject LLCs to “franchise taxes” in addition to a typical income tax.
    S-Corporation

    S-Corporations have the ability to provide some tax savings as a result of the fact that profits from an S-Corp are not subject to Self-Employment Tax. However, before you’re allowed to distribute any profits, you are required to pay any owner-employees a “reasonable salary.” This salary will be subject to social security and Medicare taxes (which total the same amount as the Self-Employment Tax). As such, the tax savings only take effect once the business has a pretty sizable income.

    Also, you should be aware that S-corporations are significantly more complicated from a tax and legal standpoint than LLCs. So if you form an S-corp, know that you’re going to be spending a great many more billable hours with your accountant/attorney.

    C-Corporation

    Unlike most other business structures, C-corporations are taxable entities. This means that the corporation itself is taxed on its income (as opposed to other structures which simply pass the income along to the owner(s), who are then taxed on it).

    The big disadvantage to C-corp taxation is that distributions of profits (known as “dividends”) are subject to double taxation. In other words, the corporation is taxed once on its income, and then the shareholders are taxed upon any dividends they receive.

    Also, like S-corporations, C-corporations are more complicated from an accounting/tax/legal standpoint than sole proprietorships, partnerships, or LLCs. As such, C-corp owners tend to incur fairly high legal and accounting costs.

  70. andreveloso says:

    I have a totally different reading to this article: I mean, why do we have a corporate tax after all? Thousands of regulations, costs, companies setting up shop overseas, bureaucracy, loopholes, for a damn 1,3% GDP in revenue?! Why not establishing a tax haven on all US territory, atracting thousands of companies, jobs, and much more than these lost revenue in GDP growth?

  71. RadioFlyer says:

    @Joe Friday, Those guys on the far right of the spectrum are probably just as wrong as those of you on the far left of it. I said so a few times above. Your absolute unwillingness to concede that spending is at least part of the problem just proves that you’re on the far left. Your comment at 12:50pm yesterday, specifically with regard to the “massive” plunge in revenue, is absurd. Check your facts.

    The “Big Picture” here is whether the government should do more or less. Those on the left believe more to varying degrees, the right, less to varying degrees. I think many on the “right” would be okay with paying a little more in taxes if spending was reigned in – and expectations of what the federal government should be responsible for were addressed.

  72. Greg0658 says:

    DavidT that was an interesting read. Myself I’ve stayed a sole proprietor. The incorporating to distance home & work never seemed to rise in importance.

    On reading all the info you supplied – I’m left wondering why you are required to pay taxes on money not withdrawn from the LLC partnership. I could understand sending a form stating LLC growth or loss – for the future and government stats stuff.

    You don’t have to explain anything to me, I’m sure I’m missing something. Because paying taxes on stuff inside the books of a business would seems to have future MTM (mark to market) advantages & imo mostly disadvantages.

    To take a line from “Shooter” starring Mark Wahlberg and redux it abit “I’m just a pecker with a camera”
    http://www.imdb.com/title/tt0822854/
    “I’m just a peckerwood who lives in the hills with too many guns”

    and in closing – best wishes keeping the flows going.

  73. David T says:

    Grego658….
    Interesting when considering MTM with LLC’s. In all of my experience in creating and selling LLC’s the past history has no impact on the market value of the company. Only the substance of the company (assets, intellectual property), along with the current and forward looking ability of the company to earn profit. So multiples are generally only based upon current or past year EBITDA, depending upon nature of business and market.

    The reason for this being is that LLC’s don’t accumulate profits, only short term cash for operations. In a C-Corp the undistributed dividends are part of the “value” no such equivalent exists in LLC’s or Sub S’s, or Sole Proprietorship such as yourself.

    I just feel there is more to this than simply the imbalance promoted.

  74. Joe Friday says:

    RadioFlyer,

    “Your absolute unwillingness to concede that spending is at least part of the problem just proves that you’re on the far left.”

    Guess you missed the part about:

    ‘The only spending impacting the federal deficits and debt (and it’s a distant second to the tax cuts), is the three unpaid for wars, the unpaid for prescription drug plan for the pharmaceutical corporations, and other Corporate Welfare.’

    ~

    “Your comment at 12:50pm yesterday, specifically with regard to the “massive” plunge in revenue, is absurd. Check your facts.”

    Once again, both the U.S. Treasury and the independent non-partisan Congressional Budget Office DISAGREE with you. After numerous rounds of tax cuts for the Rich & Corporate, by 2004 federal receipts had plummeted down to levels not seen in half a century. From the November 2004 CBO ‘Monthly Budget Review’, citing U.S. Treasury data:

    “Receipts in 2004 … As a share of GDP, they accounted for the smallest proportion since 1959”

    http://www.cbo.gov/doc.cfm?index=6002&type=0

    Check YOUR facts, dude.

  75. DeDude says:

    Dear David T;

    We are obviously from different “worlds” with different perspectives, but I very much appreciate your willingness to have a conversation. We need a lot more of that in this country and on the internet. I have family members who ran small businesses (now retired), but otherwise do not have a lot of knowledge about tax issues related to running a business.

    Personally I am not concerned about the level of taxes paid from businesses the size of yours – until you get past the 500 employee mark. I do get your point that some of what in the old days would be counted as corporate taxes may today be counted as income taxes (if indeed many of today’s LLC’s would have been corporations in the old days). I don’t have data to say exactly how much that pushes the numbers on either side of the equation. What I do know is that when you take a look at taxes paid by individual large corporations the revenues are up and taxpayments are down.

    I think that any increase in the value of your LCC is a profit and should ultimately be taxed as income. However, I understand that the problem of needing/wanting the money to invest and grow a successful business clashes with paying the taxes. Whereas I would not budge on the idea that the increased value of your business should be taxable income, I may accept that paying the taxes could be deferred if it is clearly demonstrated that the money is used to create more jobs. Maybe an LCC should be allowed to defer paying taxes on an amount that corresponds to its increase in pay role and part of its investment in new major equipment.

  76. Greg0658 says:

    “I think that any increase in the value of your LCC is a profit and should ultimately be taxed as income.” .. I still Don’t – but maybe I don’t get what LLC businesses* normally do as “work performed”.

    I still think taxes should be on income passing hands from the provider to the buyer minus costs of doing business (because thats how it is now designed). I still think a family unit is missing that boat with laws as currently written. And I think advertising deductions are an abuse (bigger and bigger the bigger the TBTF).

    Which thread did I see 4 primo vacations a year is “winning”? I missed that boat – providing advertising videos for a buyer on tropical islands and other various swimming holes.

    * coda – take Facebook – by my observances that is not a $60B company – but someone placed its “value” there.

  77. Greg0658 says:

    had to log back in and fess up … wow this thread is 1/2 way down page 2 now – been clicking backwards thru ‘em

    that “4 primo vacations a year is winning” paid for as a work-cation .. that is plain old jealousy talking me thinks .. if I were in there – I’d be keeping my mouth shut :-|

    I should have gone to Hollywood as a boy :-)

  78. DeDude says:

    That is probably our difference. To me the owner of the LCC is performing work every day and that gives a “salary” in the form of increased value of his business – which ultimately will be the payment for all that work (in some cases decades later after the business is sold). So the compensation (salary) for a small business owners hard work is to a large degree the increased value of that business (if it is growing). Most will invest that “income” right back into the business (often without even taking cash out to put back in). To me that is completely equivalent to a wage earner getting paid, and then investing that salary (although he usually will not invest all of it into the company he works for). I do recognize that when the “salary” does not come in cash but in increased wealth (of something that cannot in practice be sold), some kind of deferment for paying the tax is probably fair. Different people different views.

  79. RadioFlyer says:

    @Joe Friday,

    My bad, I did miss that part (which you’ve conveniently taken out of context of your own comments) and so shouldn’t have said you’re “absolutely unwilling”. Perhaps I was too focused on other statements you made immediately before and after that part. For example:
    “DavidT: “We need to cut spending.”
    Nope.
    The federal budget deficits and debt are not primarily from spending. They are as a result of the numerous rounds of tax cuts for the Rich & Corporate.”

    And, “In other than the specific areas I mentioned, spending is NOT the problem.”
    And, “Why would you want to concentrate on areas that are NOT drivers of our current federal budget deficits and debt [spending] instead of the areas that ARE the drivers of our current federal budget deficits and debt [taxes/revenues too low] ?”

    So let’s be honest here, “that part” that you point out wasn’t an acknowledgement that spending is any real part of the problem, it seems to be more your way of taking a dig at the choices that some of the revenue (or lack thereof) was spent on. And FWIW, those choices (about $100B/yr for Overseas Contingency Operations and about $50B/yr for Part D, no idea how much “corporate welfare” is) are a drop in the bucket of the overall $3.8T+ annual budget (against projected revenue of just over $2.1T).

    ~
    Nice, use a 2004 CBO report to back up your argument about the current situation. Is that the best you could come up with? Besides, it doesn’t even speculate, let alone state, that the drop in revenues was driven by the tax cuts – that’s your editorializing. Don’t think I saw the word massive (or anything that would even remotely be construed as massive) in there either. A drop from $2.0T (’00) to $1.8T (’03) is hardly massive.

    How about the fact that the drop in revenues started in 2001, and reversed in 2003-04, then peaked (at historical highs) in 2007-08…think maybe any other economic factors had anything to do with those, and not just the tax cuts?

    http://en.wikipedia.org/wiki/File:U.S.-income-taxes-out-of-total-taxes.JPG
    http://en.wikipedia.org/wiki/File:U.S._Federal_Tax_Receipts_as_a_Percentage_of_GDP_1945%E2%80%932015.jpg

    ~
    Here’s another example of your skewing of the facts:

    “Just as an example, if the numerous rounds of tax cuts enacted during the previous administration were simply allowed to expire, that would eliminate about 75% of our projected federal deficits.”

    Do you have data to back that up? According to your darling, the CBO, the “Bush Tax Cuts” “cost” about $200-300B/yr – so how does that pay for 75% of a $1.6T+ annual deficit?!? Let alone the projected deficits in the near future? (See CBO figures here, reference 24 of this http://en.wikipedia.org/wiki/Bush_tax_cuts)

    Here’s a more detailed take on it. (And before you flame me for using the partisan Heritage Foundation, I will stipulate that they aren’t exactly un-biased, however they do use an awful lot of facts and figures from the CBO in this analysis. This just happened to be one of the sources that came up during a search.)
    http://www.heritage.org/research/reports/2010/06/the-three-biggest-myths-about-tax-cuts-and-the-budget-deficit

    ~
    To sum up what I’ve been saying all along, taxes and/or revenues might be a little too low (for any combination of numerous reasons), but spending is the real present and long-term problem.

    That said, who’s to say that 17-19% of GDP is the “right” amount of revenue to target…maybe it’s 15%, or 10%, or less – with MUCH less government spending?!?!?!

  80. Joe Friday says:

    ‘Wikipedia’ is opinion.

    ‘Heritage’ is a fake RightWing front group.