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25 Big Corp CEOs Made More Than Their Companies Paid in Federal Taxes
September 1, 2011 1:47 AM   Subscribe

Corporations don't dodge taxes. People do. "The report found that the CEOs of 25 major companies paid themselves more than their companies paid in Federal income taxes. Exhibit 1 on page 31 names and shames them (well, assuming they are capable of shame), and they include John J. Donahoe of eBay, Robert Coury of Mylan Labs, Jeff Immelt of GE, and Robert Kelly of Bank of New York. The New York Times article on the report elicited some not-convincing rebuttals." NYT version [via]
posted by marienbad (72 comments total) 18 users marked this as a favorite

 
I see the point and recognize high salaries are just one of many ways to reduce net income, but an executive receiving W-2 salary pays quite a bit of tax, so what's the harm from the Treasury's perspective? You can see this principle at work on a humane scale by looking at the rules for an S-Corporation (a bit of a tax dodge for its owners.) The IRS requires a substantial percentage of the S-Corporation's profit to be paid out in salaries and not shareholder distributions because, essentially, that's where the money's at for them.
posted by michaelh at 2:13 AM on September 1, 2011


Of course, a way more awesome tax dodge would be to pay high wages and salaries to everyone at the company.
posted by michaelh at 2:22 AM on September 1, 2011 [40 favorites]


Well, the executive may or may not pay quite a bit of tax (and I tend to believe that most don't on this level), but I agree the comparison is absurd and made for populist appeal purposes. The issue is far more complex, obviously, considering American (or Western, for that matter) tax codes. But, the Atlantic is as the Atlantic has always done.
posted by converge at 2:26 AM on September 1, 2011 [1 favorite]


I can't help but feel like America's Big Business woes would all go away if we just riled up that ol' anti-trust law furor.
posted by Mooseli at 2:36 AM on September 1, 2011 [4 favorites]


$1,000,000 extra in the paycheck of these douches means almost nothing to them and probably gets banked offshore or otherwise disappears from the economy. That same $1,000,000 paid as $1,000 bonuses to 1,000 low-level employees both builds loyalty, increases morale and gets spent immediately, boosting the economy. If corporations were sentient entities in and of themselves there is no way, none, they would pay their top executives anything like what those executives are actually paid.
posted by maxwelton at 2:48 AM on September 1, 2011 [53 favorites]


Our 25 hyperactive tax-dodging corporations employed a variety of avoidance techniques. Not all of these techniques are nefarious. Some corporate tax breaks can have redeeming social value. Incentives that encourage our economic transition to a green energy economy offer one example of these beneficial breaks. But such incentives as these play only a minor role. The lion's share of tax breaks reward corporate behaviors — from "offshoring" to accelerated depreciation — that are of questionable value to society, especially over the long term.

"Not all of these techniques are nefarious."

This is the core of the problem really. American Liberals love tax breaks as much as Conservatives and both appear to agree that the tax code is primarily a tool of social engineering rather than simply a means of collecting revenue to support government operations.

In truly progressive societies, the tax code is the epitome of simplicity. Whereas my U.S. return is as thick as a small book - which cannot be prepared without expensive professional assistance - my Swedish return is generally two pages in length with the only deduction being for home mortgage interest. Same person, same income. Completely different ideas about the role of taxes.
posted by three blind mice at 3:08 AM on September 1, 2011 [18 favorites]


Well, the companies should be trying to minimize the taxes they pay. Why would you want to give the government free money that you don't actually need too?

Also, if the government puts in tax loopholes then obviously they intended to incentivize something so doing something differently because of the tax benefit in theory is what those loopholes are supposed to cause (i.e. tax credit for solar installation)

The problem is the corruption in the system that gets stupid loopholes put in and so on.
posted by delmoi at 3:24 AM on September 1, 2011 [2 favorites]


Umm... Wait, what?

I'll agree that I consider paying anyone double-digit millions insanely high. But tens of millions on profits measured in billions doesn't amount to a drop in the bucket compared to how much taxes those corporations should have paid.

More importantly, "solving" this plague of overpaid CEOs doesn't mean the corporation will suddenly start paying its fare share of taxes.

We have a problem here, but "executive compensation reform" ain't the cure. We need to fix the loopholes that allow corporations to shift profits and losses between countries to game those countries' various tax codes.

Make no mistake, I'd love to see a "maximum allowed compensation disparity" law, somewhat like 401k HCE testing, where the CEO can only make perhaps 100x the income of the company's lowest-paid peon. But let's address the real problems before we move on to merely punishing-the-rich-for-its-own-sake.
posted by pla at 3:50 AM on September 1, 2011 [3 favorites]


I really couldn't agree with delmoi more. I absolutely hate that corporations are able to skirt tax law, but when it comes down to it, you better believe I'm clawing every last cent I legally can back from the Feds, to the letter of the law, just as I do for my business, and just as I would do if I were a CEO of a huge company. If the government is going to fight me tooth and nail to the letter of the law, I'm going to fight right back.

Tax reform is necessary. This is a false equivalency and it makes for some pleasant shaming, but pla's point that executive compensation reform isn't the solution rings true. Fix the horrifying, gaping loopholes and start collecting real tax or quit your bitching when people use whatever legal, valid resources are available to them to avoid paying taxes.
posted by disillusioned at 3:56 AM on September 1, 2011 [2 favorites]


Well, the companies should be trying to minimize the taxes they pay. Why would you want to give the government free money that you don't actually need too?

Because companies always claim to be doing good for their communities, for the environment, for the country, for the world. Yeah? Then put your money where your PR is.

Taxes pay for good things enjoyed by everyone at the company and their families, and by all of the company's customers and their families, and by all of the company's stockholders and their families, and by poor people who cannot afford to send their kids to private schools or even feed them unsubsidized meals, and so on.

Paying taxes is also a legal requirement. Actively working to get around the law -- obeying the letter of the law but not the spirit of the law -- doesn't sound like good business or good corporate citizenship.

But I guess corporations run by tax dodgers are going to be tax-dodging corporations.
posted by pracowity at 3:58 AM on September 1, 2011 [3 favorites]


I'm going to get my pitchfork.
posted by Hop123 at 4:38 AM on September 1, 2011 [1 favorite]


America is not a corrupt nation, where so many of the wealthy take taxpaying citizens for a ride, because so many of our wealthy citizens have found a way to make their outsized compensation legal - and in doing so find their way to our elected representatives to keep it legal, by any means necessary.

To coin an oxymoron, we are a nation of legal corruption, aided in that by the largest phalanx of corporate attorneys the world has ever known.
posted by Vibrissae at 4:39 AM on September 1, 2011 [8 favorites]


I thought the USA was founded on the desire to not pay tax.
posted by pompomtom at 5:00 AM on September 1, 2011 [1 favorite]


Nthing Vibrissae. Why break the rules when you can legally buy the rulemakers to rewrite the rules in your favor?
posted by lalochezia at 5:10 AM on September 1, 2011 [1 favorite]


Aren't corporate tax liabilities simply passed on to the consumer? Always?
posted by klarck at 5:20 AM on September 1, 2011


I can assure you that every single tax loophole is put in the law because these folks hired lobbyists to put them there.
posted by Jon_Evil at 5:20 AM on September 1, 2011 [1 favorite]


These people are the modern Pharisees. They know the absolute letter of the law but complete ignore the spirit of the law.

As far as CEOs paying a fair share individually: Isn't a good part of their compensation paid in stock? That would tend to lower the percentage they pay in taxes, no?

Taking advantage of existing laws to avoid taxes is legal, but it is still scummy and it has gotten to the point where it is debilitating for the country. Once again, lobbying and palm-greasing is the problem.
posted by Benny Andajetz at 5:21 AM on September 1, 2011 [1 favorite]


Paying taxes is also a legal requirement. Actively working to get around the law -- obeying the letter of the law but not the spirit of the law -- doesn't sound like good business or good corporate citizenship.

Are you joking? There are entire office buildings throughout this country full of people dedicated to crunching numbers and finding loopholes, all in the quest of avoiding taxes for individuals and corporations alike. Avoiding taxes is practically enshrined as part of proper corporate stewardship.
posted by Thorzdad at 5:21 AM on September 1, 2011


I'm with delmoi on this one.

Even if you think that companies have some ethical duty to pay more taxes than they can get away with, they quite simply are not going to. If you actually want the situation to change, you have to direct your ire toward our feckless elected officials. Unless there is actual a) change to the written law and b) meaningful enforcement of it, corporations are going to continue to do exactly what they have been doing. You can get red in the face decrying them for but it's tilting at windmills.
posted by dixiecupdrinking at 5:33 AM on September 1, 2011


Why would you want to give the government free money that you don't actually need to?

I look forward to a day when this sort of thinking is considered egomaniacal and sociopathic.
posted by aught at 5:44 AM on September 1, 2011 [13 favorites]


Well this seems fair.
posted by Maisie at 5:55 AM on September 1, 2011


an executive receiving W-2 salary pays quite a bit of tax,.

HA HA HA HA HA HA. OH HAHAHAHAHAHA. HA HA. HA.

HA.

More broadly, however, pla is entirely correct; executive salaries are both obscene, and wholly unjustifiable, but it is the tax system that is truly the problem here - let's not lose perspective, here, even though it feels great to hate on parasitic, exploitative rich bastards.
posted by smoke at 5:56 AM on September 1, 2011


Also, if the government puts in tax loopholes then obviously they intended to incentivize something

To incentivize campaign contributions and cushy jobs for realatives, I'd guess.
posted by tyllwin at 6:05 AM on September 1, 2011 [2 favorites]


I absolutely hate that corporations are able to skirt tax law, but when it comes down to it, you better believe I'm clawing every last cent I legally can back from the Feds, to the letter of the law, just as I do for my business, and just as I would do if I were a CEO of a huge company.

Except that the CEO of a huge company has no trouble clawing back much more than you within the letter of the law, because he actually gets to write that letter. I'm not joking: the most scandalous revelation in that report is that many of those large companies actually pay more in political donations than in tax.

And they do get their value back: in one occasion, when I remarked to a bunch of high-flying corporate tax advisors that a particular new tax exemption in certain European country seemed drafted intentionally favour of a specific industry, they all had a big laugh and answered that, no, it had not been written for those companies, but by them.

The trouble with the current state of representative democracy is that, while paying a member of the executive or the judiciary to break the law is corruption, paying a member of the legislative to change is largely condoned. Because they have also written the laws regarding corruption...
posted by Skeptic at 6:10 AM on September 1, 2011 [11 favorites]


Why would you want to give the government free money that you don't actually need to?
-
-
I look forward to a day when this sort of thinking is considered egomaniacal and sociopathic.



Does that mean when you complete your next tax return you'll be including a cheque in the envelope for an extra $5000 as a donation to the government?
posted by Randwulf at 6:11 AM on September 1, 2011 [1 favorite]


The problem is the corruption in the system that gets stupid loopholes put in and so on.

I think you got your chickens and eggs out of order delmoi.

The corruption comes from a system where loopholes are possible to put it. Americans accept a tax code of tens of thousands of pages - the ability to add a few pages more or less is an open invitation to corruption.

This is where a flat tax has big advantages. If there are no loopholes there would be far less corruption directed towards manipulating them to the advantage of one person/corporation or another. The only discussion would be over the rate of tax which is much harder to corrupt to the favor of specific individuals/corporations/social causes.

But, of course, liberals hate the idea of a flat tax because it takes their biggest tool of social engineering away from them so the complex tax code remains and conservatives run amok with it.
posted by three blind mice at 6:18 AM on September 1, 2011 [1 favorite]


By the way, those 25 particularly unethical and anti-American corporations are:

Stanley Black & Decker, Ford, Chesapeake Energy, Aon, Bank of New York Mellon, Coca-Cola Enterprises, Verizon, Dow Chemical, Prudential Financial, Ameriprise, Honeywell, General Electric, Allegheny Technologies, Mylan Laboratories, Capital One Financial, Wynn Resorts Ltd., Marsh & McLennan, Boeing, Motorola Solutions, Nabors Industries, Qwest Communications, Cablevision Systems, Motorola Mobility, eBay, and International Paper.

*hears what sounds like 25 lawyers knocking at his door simultaneously*
posted by pracowity at 6:19 AM on September 1, 2011 [3 favorites]


But, of course, liberals hate the idea of a flat tax because it takes their biggest tool of social engineering away from them so the complex tax code remains and conservatives run amok with it.

It's not all or nothing: you don't have to have an obscenely complicated tax system just because you don't have a flat tax system.
posted by pracowity at 6:21 AM on September 1, 2011 [4 favorites]


three blind mice, a progressive tax rate is not an instrument of social engineering, but simply the recognition that disposable income increases disproportionately with total income, and that those earning more both can afford to pay proportionately more and benefit proportionately more from the public services paid by taxes that those who earn less.

And I say this as somebody who earns quite well, lives in a country with a highly progressive tax rate and quite nice public services and abhors tax loopholes and administrative complexity.

It's not all or nothing: you don't have to have an obscenely complicated tax system just because you don't have a flat tax system.

Indeed, somebody mentioned the simplicity of Swedish tax returns, yet you can be sure that Swedish taxes are progressive (heck, in Sweden, even traffic fines vary according to income!).
posted by Skeptic at 6:34 AM on September 1, 2011 [9 favorites]


This is where a flat tax has big advantages. If there are no loopholes there would be far less corruption directed towards manipulating them to the advantage of one person/corporation or another. The only discussion would be over the rate of tax which is much harder to corrupt to the favor of specific individuals/corporations/social causes.

The flat tax has nothing to do with it. The debate is and always will be around what constitutes "income" and what deductions/exemptions should be available.

A progressive tax is not "corrupted in favor of specific individuals, corporations, or social causes" until it's garnished with exemptions, loopholes, and deductions. Anyone who says that the progressive percentage scale is the problem is either confused, or using a complex debate as cover for their desire to implement a regressive tax regime.
posted by verb at 6:34 AM on September 1, 2011 [9 favorites]


But, of course, liberals hate the idea of a flat tax because it takes their biggest tool of social engineering away from them so the complex tax code remains and conservatives run amok with it.

Do you even understand what a tax loophole is? It is utterly divorced from whether we have a flat or progressive tax structure. Flat taxes do not appreciably simplify tax computation over progressive structures.
posted by indubitable at 6:37 AM on September 1, 2011 [3 favorites]


It's every citizens patriotic duty to minimize their taxed to the fullest legal extent possible.

It's the governments duty to ensure maximum compliance with tax regulations to ensure adequate funding for government expenditures.
posted by blue_beetle at 6:38 AM on September 1, 2011


using a complex debate as cover for their desire to implement a regressive tax regime

Or, in this case, safeguard it (Warren Buffett has conclusively shown that the current tax system already is regressive, at least for the highest incomes).
posted by Skeptic at 6:38 AM on September 1, 2011


we need to form an adjunct agency within the IRS filled with altruistic former Google programmers that create algorithms to change the tax loopholes every year to make it cost prohibitive for corporations to hire armies of lawyers and accountants to find the loopholes. Corporations have been engaged in active war with America since Reagan refused to enforce Sherman Antitrust Act, it's time we formally declare it back.
posted by any major dude at 6:48 AM on September 1, 2011


Corporations don't dodge taxes. People do.

but...Corporations are people!

furthermore...Soylent green is people!

therefore... Soylent green doesn't dodge taxes, Soylent green does.
posted by mcstayinskool at 6:54 AM on September 1, 2011


Flat tax rates and "progressive" tax rates are not mutually exclusive.

Sweden has a "progressive" tax consisting of a base rate of "kommunal" tax (around 28%) up to about 360.000SEK in annual income and than an additional "riksskatt" (around 21%) on all income over that. So basically everything over 50 thousand dollars a year is taxed at 49%. What is lacking from the Swedish tax code is the myriad of exemptions, credits, rebates, etc. which litter the U.S. tax code. And then there is the MoMs (a value added tax) of 25% on pretty much everything you buy.

Had enough yet? In a progressive society EVERYONE pays a lot of tax.

American liberals only want to tax the rich and that shit is old and tired.
posted by three blind mice at 6:58 AM on September 1, 2011


I thought the USA was founded on the desire to not pay tax.

That's a popular misconception. But it's not true.
1. The Tea Party was not a protest against high taxes. The Boston Tea Party was certainly a tax protest, but it was not a protest against high taxes. In fact, it was sparked by a tax cut, not a tax hike.
The Boston Tea Party was sparked by a tax cut on tea imports that certain prominent men in the community--most of them also tea bootleggers--opposed. Those prominent men staged a protest and got all the rabble riled up over "No taxation without representation," meaning, they wanted representatives in the British parliament that would vote in the colonist's interests on import levies and other protectionist policies.
posted by saulgoodman at 7:03 AM on September 1, 2011 [4 favorites]


American liberals only want to tax the rich and that shit is old and tired.

First, that's horseshit. Demanding some equity is way different than that.

Second, you're glossing over some very serious differences between Sweden and here. It's much easier to tax lower down if basic services like education and health care are covered to any kind of reasonable extent. You can't tax people down the line if they are already spending their last dime on basic necessities. Liberals would have absolutely no problem with a system like Sweden's.
posted by Benny Andajetz at 7:04 AM on September 1, 2011 [8 favorites]


I see the point and recognize high salaries are just one of many ways to reduce net income, but an executive receiving W-2 salary pays quite a bit of tax, so what's the harm from the Treasury's perspective?
Unlike salary and bonus, stock-option grants are typically an untaxed event at the time of grant. For the most widely used options—nonqualified stock options (NQSOs)—executives are taxed at the personal income tax rate on option profits (the difference between that stock price and the exercise price times the number of options) when the options are exercised. The company receives a parallel deduction against corporate income at that point. If the executive continues to hold the shares after exercise, any subsequent appreciation is taxed at the capital gains rate in the usual way. In 1993, an additional feature was added to the tax code [Internal Revenue Code section 162(M)] that disallowed a corporate deduction for any executive pay above $1 million that is not performance- based. While this rule affects executive salaries, most bonuses qualify as performance-based, and standard stock options automatically qualify. Therefore, this provision gives companies with highly paid executives an incentive to give more pay in the form of bonuses and stock options...
Here's a summary of another Executive Excess report:
According to Executive Excess, the most expensive CEO pay tax loophole is something called the stock option accounting double standard, which is a discrepancy in accounting rules that allow companies to value stock options on their grant dates, not on the day executives cash them in. Since the value of the stocks usually rise, the company avoids paying taxes on the higher value. The report estimates that this double standard accounts for half of the $20 billion in lost tax revenue.

The other loopholes and their cost to taxpayers include:

Preferential capital gains tax treatment of “carried interest,” a pay practice for private investment fund managers that allows them to count significant income as capital gains instead of professional fees. The report says this practice costs taxpayers $2.6 billion in unpaid taxes a year.
Unlimited deferred compensation accounts, a perk for CEOs at large companies, which costs $80.6 million in lost revenue. The median value of top executives’ deferred payments is $4.5 million, according to Equilar, a pay analysis firm, yet most taxpayers are limited to a $15,500-a-year maximum they can shield in a tax-deferred 401(k) account.

Even more deferred compensation is stashed in offshore accounts. The study says it costs taxpayers $2.1 billion a year, but a recent Senate investigation pegs the price at $100 billion a year.

Unlimited deductibility of executive compensation, which allows companies to deduct the cost of executive compensation from their income taxes, as a business expense, which costs $5.2 billion annually.
Now, that first article was written (I'm fairly sure) in 1999. The second was written in 2007. What happened in between? The Economic Growth and Tax Relief Reconciliation Act of 2001.

Instead of raising taxes to pay for the many wars we started in 2001, we accelerated the tax cuts in 2003. Ten years later, the millionaires don't even want to match the payroll tax rates that are paid to their employees. They paid good money for a double standard that benefits themselves, and they'd rather continue to fund the scapegoating of one man who has been President for 3 years instead of the thousands of collaborators who have been dismantling our tax policies and government regulation since 1980.

Tax policies and regulations that had prevented a huge boom and bust cycle for seventy years. Tax policies that created a thriving middle class that was the envy of the modern world. Tax policies that encouraged real domestic business investment, instead of rewarding overpaid CEOs every time they came up with a new loophole to ship jobs overseas to boost their stock prices.

So, why do CEOs care so much about their stock price, to the point that they will sell out their fellow citizens?

It's because CEOs are paid in stocks, and since they only care about themselves -- how do you think the climbed to the top in the first place -- they will gladly gut America to put a few hundred million more in their account, and then cash out before everything falls apart. Or coerce the government into covering their bad bets when they get caught with their pants down. They're nothing more than a new aristocracy, but they don't have to fall back on royal blood to maintain their position. They have bought and paid for every branch of government. They have bought and paid for the fourth estate, so they don't have to worry about too many people finding out. They have succeeded in turning everything in our culture into a dollar sign, which not only is destroying the level of discourse that our society is capable of, because philosophy and morality can't get you rich, but it also gave them a free pass to do whatever they want. All they have to do to prove they are right is point to the zeroes in their bank account.

Their money buys them regular access to politicians you will never talk to. It buys them votes through massive propaganda, to the point that they have made 40 million Americans discard vast portions of their own belief system for a Golden Calf in sheep's clothing, espousing their Christian humility while they mock the poor and praise the wealthy.

The massive accumulation of capital in the hands of such a small population is the greatest threat to our society since the Cold War, and probably since the Civil War. Instead of an outsider threatening to destroy lives and the material parts of our country, the influx of straight materialism is destroying our core belief systems. It's the end of egalitarian enlightenment as we know it, and what's worse, people are abandoning it by choice.

The next time you go to a large convention, or a concert, or a football game, take a hard look at all of the VIP perks. Look around your own community to the increasing number of gated communities. Take a look at the unemployment figures that almost exclusively punish minorities. It's a creeping economic apartheid, and it's accelerating.

There is a new second class citizen in America, and it's you.
posted by notion at 7:07 AM on September 1, 2011 [37 favorites]


No, TBM, you're wrong. There's sound thinking behind progressive tax systems. They're much fairer than the two-tiered code you describe, which is even more classist than a progressive schema. And they work. Flat taxes are regressive and onerous on middle and lower income earners. We just need to get rid of all the loopholes and exemptions, and returns the marginal tax rates to what they were during more prosperous times in America.
posted by saulgoodman at 7:07 AM on September 1, 2011 [4 favorites]


Flat tax rates and "progressive" tax rates are not mutually exclusive.

They are mutually exclusive by definition. I think you're confusing the popular definition of 'progressive', meaning forward-thinking or generally liberal in nature, with the actual definition of progressive tax.


American liberals only want to tax the rich and that shit is old and tired.

This is demonstrably untrue. The fact that most of the conversation revolves around the tax rates paid by the rich does not indicate that liberals believe that only the rich should be taxed. Is it really that hard to talk about complicated subjects?
posted by verb at 7:12 AM on September 1, 2011 [2 favorites]


Had enough yet? In a progressive society EVERYONE pays a lot of tax.

This is the important difference. In countries like Sweden, everyone pays taxes but the government provides tons of services (free health care, free education, etc.), redistributing that money.

In America we try to get similar redistributive effects by selectively not collecting taxes in the first place. Instead of paying for health care and education, the government collects less taxes from people who spend money on those things. And then we tell ourselves that getting a tax break is different from getting a "government handout."
posted by straight at 7:37 AM on September 1, 2011 [5 favorites]


Sweden has a "progressive" tax consisting of a base rate of "kommunal" tax (around 28%) up to about 360.000SEK in annual income and than an additional "riksskatt" (around 21%) on all income over that. So basically everything over 50 thousand dollars a year is taxed at 49%.

At least according to Swedish Wikipedia, income under 18 200 kr is exempted from income tax, and there are three income tax rates above it: 31% (including 24% local "kommunal" tax, and 7% district "landstigt" tax) for income between 18 200 and 380 200 kr; 51% (including an additional 20% national "statlig" tax on top of the previous 31%) for income between 380 200 and 538 800 kr; and 56% (because the "statlig" tax increases from 20 to 25%) for income above 538 800 kr.

That is a progressive income tax, even if perhaps not progressive enough in my eyes, considering that Sweden also has a substantial flat payroll tax...
posted by Skeptic at 7:45 AM on September 1, 2011 [1 favorite]


Also, seconding others who have noticed that you appear to mistake progressive in its political and mathematical senses...
posted by Skeptic at 7:49 AM on September 1, 2011 [1 favorite]


25 Big Corp CEOs Made More Than Their Companies Paid in Federal Taxes

So, these CEOs are the ones really backing the Tea Partiers? All of these once-middle-class seniors are out there waving their shitty, often misspelled signs on behalf of their Super-Wealthy sponsors?

(You know, like the way that people were able to get out of Vietnam and the Civil War by paying proxies to go in their stead?)
posted by vhsiv at 8:06 AM on September 1, 2011


Taxes aren't less "progressive," in the technical sense, because Sweden is more progressive, in a vaguely political and social sense. The basic tax setup in Sweden was, to my (admittedly limited and cloudy, read a book about this years ago) understanding, a product of early bargaining between the gentry or wealthy of the day and socialist leaders. The U.S. used to have the more progressive tax, in a technical sense, but that's been cut away by loopholes--which, as someone noted, are bargained for through lobbying by corporations (thus saying, "Hey, you want them to pay less, just change the law, 'cause everyone fights for their pennies," is profoundly silly).
posted by raysmj at 8:11 AM on September 1, 2011 [1 favorite]


three blind mice: In a progressive society [like Sweden in particular] EVERYONE pays a lot of tax.
Sweden has the world's lowest Gini coefficient (23). The US's is nearly double that (45). It makes sense that the tax curve appropriate for Sweden would be flatter than the tax curve appropriate for the US.
American liberals only want to tax the rich and that shit is old and tired.
In the US, the rich have all the money. You can't get blood from a stone. Raising tax rates on the lower classes will not raise a significant amount of additional revenue (lower bar).
posted by Western Infidels at 8:29 AM on September 1, 2011 [5 favorites]


I look forward to a day when this sort of thinking is considered egomaniacal and sociopathic.

Does that mean when you complete your next tax return you'll be including a cheque in the envelope for an extra $5000 as a donation to the government?


No, but thanks for trying to obnoxiously shift the terms of the discussion (using the typical right-wing response that tries to depict any lefty who doesn't live like a monk as a hypocrite). That might work on network news shows - but I hope Mefites are smart enough not to fall for it.

What it means is I won't be hiring a sharp tax lawyer to help me cheat the system, and it means I don't work "under the table" to weasel out of my fair share of supporting our civilization. It means I would vote for elected officials who might raise my taxes to support a budget that would benefit the disadvantaged in our society and improve the decaying infrastructure we all depend on.

And as far as that $5k check goes, many of us do send something in that range that to charities like food banks and war relief every year, in my case because I know these important needs are not the current U.S. government's priorities.
posted by aught at 8:56 AM on September 1, 2011 [7 favorites]


It's only a loophole if you don't get to take advantage of it, otherwise you call it a deduction.
posted by smackfu at 8:57 AM on September 1, 2011


American liberals only want to tax the rich and that shit is old and tired.

You have no idea what you're talking about. But I bet the line would look just dandy on a hand-lettered sign in the background of a Fox News reporter's report.
posted by aught at 9:03 AM on September 1, 2011 [1 favorite]


There appears to be some confusion here. It's not possible to make W-2 income disappear the way that trust assets are hidden, and W-2 income is salary/wage, not stock options. While it's true that every major CEO receives a lot of income in stock options, they frequently also receive a large salary, and it's impossible to avoid a huge tax bill on that. We're talking Bob Nardelli, not Eric Schmidt. The article appeared to be chiefly talking about W-2 compensation.

I used to prepare taxes so I know how much tax executives pay on their salaries.
posted by michaelh at 9:03 AM on September 1, 2011 [1 favorite]


We must tax the rich to save the rich. Otherwise we have to eat the rich.

This lesson has been forgotten.
posted by CautionToTheWind at 9:05 AM on September 1, 2011


Well, the companies should be trying to minimize the taxes they pay. Why would you want to give the government free money that you don't actually need too?

I've said it before, and I'll say it again: this is one of the most fucked up things about the USA.

Corporations/CEOs/the wealthy using every trick -- legal and illegal -- in the book to not pay taxes or cheat the government? That just makes sense, and who wouldn't do it?

Poor and disadvantaged not paying taxes or cheating the government? STRING THOSE "LUCKY DUCK" MOTHERFUCKERS UP!!!!!

(Note: I'm not accusing delmoi of having this attitude.)

I really think that if you were to transport a feudal lord from the past of Europe or Japan to modern day America, he would not recognize Senators or Governors or even the President as his modern equivalent. Instead, he would look at the CEO of a large, multinational company and see himself reflected in the present day. And he'd probably marvel at the fact that modern serfs are even more docile than they were in his day.
posted by lord_wolf at 9:25 AM on September 1, 2011 [5 favorites]


I still don't understand how celebrities "forget" to pay their taxes. Hello Wesley Snipes. I mean, isn't this something you see your parents do when you're young so you know it's part of adult life 101?
posted by stormpooper at 9:31 AM on September 1, 2011


STRING THOSE "LUCKY DUCK" MOTHERFUCKERS UP!!!!!

Obligatory Tom the Dancing Bug link.
posted by aught at 9:40 AM on September 1, 2011 [1 favorite]


Aren't corporate tax liabilities simply passed on to the consumer? Always?

Yes and no. This is one of the arguments corporations frequently deploy to justify the fact that their effective tax rates have plummeted, but it really doesn't get them anywhere.

The thing is that the same argument applies equally to any tax. Taxes on employees are passed on to the employer in demands for higher salaries. Sales taxes are passed on to manufacturers in demands for lower prices. At any point in the economy where you choose to extract tax, your choice ripples out to affect every other point.

But that doesn't mean that it's irrelevant where you insert those ripples. You'll end up with a different society if you mostly tax rich people, or mostly tax poor people. You'll end up with a different society if you raise retail prices. You'll end up with a different society if you tax a meaningful share of corporate profits.

Understanding exactly how any of those will function is tricky, so it's probably best not to think about it too much and keep using the traditional Inverse Lobbyist Compensation Metric like we always have.
posted by Honorable John at 11:12 AM on September 1, 2011 [1 favorite]




And as far as that $5k check goes, many of us do send something in that range that to charities like food banks and war relief every year, in my case because I know these important needs are not the current U.S. government's priorities.

This is the anti-tax argument. Awk-ward.
posted by michaelh at 12:11 PM on September 1, 2011 [1 favorite]


Because companies always claim to be doing good for their communities, for the environment, for the country, for the world. Yeah? Then put your money where your PR is.

I agree with you that these "friendly neighborhood corporate citizen" actions are deliberately taken to maximize PR return per investment rather than being genuinely altruistic. In the same vein the Rockefellers, Carnegies, and Gateses of the world performed many philanthropic acts with their large fortunes, fortunes which were no doubt significantly increased by diligent tax minimization and avoidance efforts.

But no matter how beneficially tax avoidance money may be spent, it still doesn't justify not paying fair taxes in the first place. I'd rather that the government spends the money to provide public goods to the people, because we get to vote and lobby on how that money is spent. No matter how philanthropically corporate profits are spent, if we use that as an excuse not to close tax loopholes then we're basically reducing funding for the equivalent government efforts, which results in a loss of governance over the manner in which those services are provided. You only have input into corporate governance if you're a shareholder, which means you essentially have to purchase your vote on the open market. The more money you can spend, the more votes you can afford.
posted by ceribus peribus at 12:16 PM on September 1, 2011


Why would you want to give the government free money that you don't actually need to?
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I look forward to a day when this sort of thinking is considered egomaniacal and sociopathic.
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Does that mean when you complete your next tax return you'll be including a cheque in the envelope for an extra $5000 as a donation to the government?
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No, but thanks for trying to obnoxiously shift the terms of the discussion (using the typical right-wing response that tries to depict any lefty who doesn't live like a monk as a hypocrite). That might work on network news shows - but I hope Mefites are smart enough not to fall for it.

What it means is I won't be hiring a sharp tax lawyer to help me cheat the system, and it means I don't work "under the table" to weasel out of my fair share of supporting our civilization. It means I would vote for elected officials who might raise my taxes to support a budget that would benefit the disadvantaged in our society and improve the decaying infrastructure we all depend on.

And as far as that $5k check goes, many of us do send something in that range that to charities like food banks and war relief every year, in my case because I know these important needs are not the current U.S. government's priorities.

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So then you won't be giving the government free money you don't actually need to.

That you won't be doesn't make you egomaniacal or sociopathic in my eyes.

If you were to try to cheat the system, yes. But paying only what you have to, no.
posted by Randwulf at 1:43 PM on September 1, 2011


The problem is that "cheating" is very fuzzy, at least here in Canada. If you are a business, what is an allowable expense, etc. can be quite fuzzy; a real mix of current practices of Revenue Canada, random guesses, and your tolerance for risk. More then a few people have been caught owing serious back taxes on review. More lawyers/accountants on your side reduces this risk, or gives you a better shot at challenging it.

There is an appreciable difference between randomly gifting the government money and going all out (i.e. really pushing the rules) to avoid as much taxes as possible. Equating the two doesn't help much.
posted by Bovine Love at 1:56 PM on September 1, 2011


Paying taxes is also a legal requirement. Actively working to get around the law -- obeying the letter of the law but not the spirit of the law -- doesn't sound like good business or good corporate citizenship.
But not following the letter of the law in this case means paying taxes that you don't owe. You're giving the government money that it doesn't even want and isn't asking for. How is that following the "spirit" of the law?

If companies want to pay for 'good things' they can do that directly, since obviously taxes also pay for things that are not exactly good.

What we need are better laws, not the expectation that corporations should give free money to the government for no reason.

How many of you claiming that companies should be paying extra pay extra on your taxes? (And btw, if you do it's like the IRS will find the 'error' and reimburse you)
we need to form an adjunct agency within the IRS filled with altruistic former Google programmers that create algorithms to change the tax loopholes every year to make it cost prohibitive for corporations to hire armies of lawyers and accountants to find the loopholes.
Why not just remove them entirely? Simplify the tax code and get rid of all the loopholes. That's what needs to be done, and the people responsible for that are members of congress. What we need to so is close corporate loopholes.
American liberals only want to tax the rich and that shit is old and tired.
I don't think you understand how much more money the rich have in this society. Something like 400 individuals control 50% of the wealth. more wealth then the bottom 50% of the population. 400 people.

And on top of that, people with the highest incomes actually only pay capital gains tax, rather then income tax because they are paid in stock options. That loophole needs to be closed.
I've said it before, and I'll say it again: this is one of the most fucked up things about the USA.

Corporations/CEOs/the wealthy using every trick -- legal and illegal -- in the book to not pay taxes or cheat the government? That just makes sense, and who wouldn't do it?
It's not cheating the government to follow the letter of the law. You are giving them the money they asked for.

The idea that companies should ignore the laws and only look at the broad outlines when paying taxes is insane. The argument I'm hearing seems to be that companies shouldn't spend "a lot of time" figuring out how much they actually owe in taxes, and should instead just kind of guess and hope they get it right because they might end up paying more? Because that's obviously completely ridiculous. There's actually a chance they might miss something and end up paying less then they're supposed to.

And that's just an absurd metric. Ultimately the question is whether or not companies should pay more then what the government is asking them to pay. The answer is obviously no. The problem here is congress and lobbyists and all the loopholes they put in. (Obviously corporations hire lobbyists to put in all the loopholes, which is a problem. But the problem is the corruption that lets those lobbyists do it)
posted by delmoi at 2:49 PM on September 1, 2011


Aren't corporate tax liabilities simply passed on to the consumer? Always?

No, only in inverse proportion to the elasticity of demand. In other words, if people have to have something, like bread, then taxes placed on the manufacturers will be fully passed on to the consumers. If demand is highly elastic, as for something like novelty items, then manufacturers will eat more of the tax rather than hurt sales by raising prices.

Paradoxically, a tax can sometimes lead to a price cut, depending on the degree of the tax and the slope of the demand curve. I got a pleasant example of this today; the spot price of coffee went down over the last month and I wondered whether retailers would hang on to the increase they levied earlier this year, but when I went to get my coffee at 7-11 they had cut the price from $1.09 to $1. Of course, the price of coffee is kept as low as possible because it's what brings people into the store so they can spend money on other things, but hey, whatever works. If they'd bring back the oatmeal cookies I'd buy those too.

Of course, all this takes place in a world of perfect information, perfect competition (or equivalent substitute goods) and zero transaction costs. In many industries what you've actually got is monopolistic competition and rational ignorance.
posted by anigbrowl at 4:44 PM on September 1, 2011


It's not cheating the government to follow the letter of the law. You are giving them the money they asked for.

Corporate/HNI tax advisers don't so much follow the letter of the law as stretch it to its widest possible extent. The example in the article of setting up offshore companies and selling IP to them in order license it back to the parents at absurdly high prices which are then booked as operating expenses is a good example. Traditionally, this is viewed as a fraud on the law.

I'm with Three_Blind_Mice in thinking we'd be better off if the tax code were slimmed down substantially and half the administrative savings were diverted to audit operations instead.
posted by anigbrowl at 4:51 PM on September 1, 2011 [1 favorite]


The example in the article of setting up offshore companies and selling IP to them in order license it back to the parents at absurdly high prices which are then booked as operating expenses is a good example.

Yup. Transferring IP for a pittance (or even for free!) to an offshore company, and then paying billions to the offshore company in royalties for the use of that very same IP absolutely stinks. This and other forms of transfer pricing are cases not so much of following the letter of the law, but of breaking the law in manners too complex for resource-starved tax authorities to prove in court. And who starved those tax authorities of resources?
posted by Skeptic at 2:41 AM on September 2, 2011






Western Infidels : In the US, the rich have all the money. You can't get blood from a stone. Raising tax rates on the lower classes will not raise a significant amount of additional revenue (lower bar).

You realize, of course, that the 50% mark on that chart corresponds not to the uber-rich, but to individuals making (roughly) a mere $33,000?

You can't use what percent of wealth the rich control as justifying a tax on income, because although you have a strong correlation between the two, you'll end up pretty damned disappointed when you discover that taxing the top 1% at even 100% won't even cover the current budget deficit.

Now, if you want to propose a serious inheritance tax, like 1% per million (capped at, say, 90%), consider me all for it. But take care not to conflate wealth with income.
posted by pla at 6:33 PM on September 2, 2011




You can't use what percent of wealth the rich control as justifying a tax on income, because although you have a strong correlation between the two, you'll end up pretty damned disappointed when you discover that taxing the top 1% at even 100% won't even cover the current budget deficit.
No, but the top quintile takes in enough income each year to eliminate the deficit quite handily without historically abnormal increases. That's why the Bush era tax cuts account for about 50% of our deficit, you know?
posted by verb at 3:41 AM on September 3, 2011


verb : No, but the top quintile takes in enough income each year to eliminate the deficit quite handily without historically abnormal increases. That's why the Bush era tax cuts account for about 50% of our deficit, you know?

Fair point, but you still need to keep in mind exactly who you refer to here. That top 1% only means "over $380k"... Damned good money, but not exactly "stupid rich". For the top quintile, you have a lower cutoff very near $100k - Again, certainly not hurting, but you can't just throw them in the same ballpark as CEOs and pro sports heroes and call it good.
posted by pla at 6:21 AM on September 3, 2011


Fair point, but you still need to keep in mind exactly who you refer to here. That top 1% only means "over $380k"... Damned good money, but not exactly "stupid rich". For the top quintile, you have a lower cutoff very near $100k - Again, certainly not hurting, but you can't just throw them in the same ballpark as CEOs and pro sports heroes and call it good.
Oh, I'm definitely keeping that in mind. That's why I support a progressive tax system: our current one is progressive in the income tax portion, but regressive in the payroll tax portion. The end result is that the various quintiles in the US tax base pay roughly equal shares over the overall tax burden.

The top 20% I'm talking about pulls in about 60% of the nation's income. The top 1% pulls in about 20% of the nation's income. They currently shoulder about 22% of the tax burden. There is a lot of room between the status quo and the hypothetical "Grab 100% of everything" extreme you describe. More than enough to eliminate the federal deficit, simply by returning tax rates to levels that were the norm for decades. Like it or not, that is a fact.
posted by verb at 6:55 AM on September 3, 2011 [1 favorite]


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