How Corporations Operate Tax Free

October 29, 2000 2:32 PM

How Corporations Operate Tax Free Senator Byron Dorgan on corporations getting away with billions of dollars of taxpayer money. One of the reasons: they negotiate their taxes behind closed doors with the IRS. Wouldn’t you like that access?
posted by capt.crackpipe (17 comments total)

And here i was, thinking that they just had damn good lawyers and accountants, who find all the loopholes necessary for not paying a single cent in taxes. There was something fundementally wrong with that, in my opinion, and now it's all clear.
posted by Zool at 3:11 PM on October 29, 2000

I wonder if this ever seeped into the corporate media (yeah, right), if people would realize how much of a change we really do need?
posted by veruca at 3:37 PM on October 29, 2000

That long thread a week or so ago about tax cuts under Gore and Bush seem positively ludicrous went compared the corporations’ deal. You pay your way in America, shouldn’t the companies that benefit from your money do the same?

posted by capt.crackpipe at 4:22 PM on October 29, 2000

All the more reasons to get rid of the IRS.
posted by gyc at 5:26 PM on October 29, 2000

We could get rid of corporate taxes all together, it be better for the economy as a whole.
posted by Mick at 5:42 PM on October 29, 2000

Since it is big corporations that enable Americas politicians to even run for office, it is therefore only natural that they will return the favour once in power.

This situation is wrong and until it changes, the general population will continue to suffer.
posted by Zool at 6:04 PM on October 29, 2000

Which would you prefer to see as a direct result of higher corporate taxes?

a) higher consumer prices;
b) lower wages;
c) lower-quality products and services;
d) higher unemployment;
e) more jobs moving out of the country;
f) a stock market "correction;"
g) a combination of two or more of the above?

Choose carefully to ensure that the "general population" does not suffer.
posted by kindall at 7:04 PM on October 29, 2000

Obviously Communism is the only way. No more private corporations at all! We don't need those fascists.
posted by smackfu at 7:05 PM on October 29, 2000

Communism works great in theory, it's a shame it doesn't in reality.

Kindall, i'll direct your attention to the original post which said " How corporations operate tax free " not increasing existing corporate taxes.
posted by Zool at 7:47 PM on October 29, 2000

kindall -- if you are going to make sweeping claims about the relationship between corporate taxes and (a) - (d), it would be helpful if you would cite at least a few papers from the economic literature on taxation. From what I've read, those relationships are tenuous at best, assuming you hold total tax revenues constant.

Corporate taxes are helpful, in my view, but the personal income tax should be replaced with:

(a) a tax on ecological footprint (progressive consumption tax)
(b) a tax on short term financial transactions (tobin tax)

This would encourage sustainability and economic stability, while removing the unnecessary disincentives associated with the current income tax.
posted by johnb at 7:54 PM on October 29, 2000

h) The opposite of each as listed above.

I don’t mind companies working in this country, I just want to take the subsides away from them so they’ll actually compete. None of what Kindall mentions would happen if companies were actually forced to compete instead of rest on their laurels. The airlines have a pricing cartel sanctioned by the government called the IATA which lets the airlines work together to artificially keep prices high. How is that good business? How is that good for you? Neither, it’s good for airlines.

Taking away corporate subsidies forces them to actually compete, instead of artificially holding up bad products and companies. Windows anyone? Without corporate subsidies you’ll see more competition benifiting consumers.

The stock market is a reflection of the stock market and nothing else. Using stock prices to shore up any arguement on how well companies are doing need only look at the last four years of Internet IPOs for companies which never had a revenue stream or are bankrupt.

If job markets were delicious elsewhere, Nike, MS, General Motors and every other company in the world would be housed in Russia or Africa by now.

If you actually read the article, you’d have seen this:

If there is one provision in the U.S. tax laws that demonstrates the hypocrisy of some free-traders, it is the subsidy for corporations that move their plants abroad. Globalization is supposed to give us a market free of preferences and subsidies, in which nations compete according to their "natural advantage." Yet the same people who preach about this idealized world market support a tax system that violates it in the most fundamental way. The U.S. tax code actually rewards companies that move their factories, know-how, or financial operations abroad. Close shop in the U.S., shift your assets to Singapore, China, or Bermuda, and the U.S. Treasury rewards you for your trouble.

There is no better time to move a workforce out the country — in terms of monetary savings — than now. Any company that hasn’t done it yet, won’t.

Corporations that continued making bad products would obviously go under, but the better ones would stay and grow. That’s free market economics. Why would we want to keep companies afloat that couldn’t do it themselves? Subsidies let them get away with making crap, because they’ll keep raising the bottom line irregardless of how well the company actually does.
posted by capt.crackpipe at 8:14 PM on October 29, 2000

Does the US have a goods and services tax?

Australia has, unfortunatley it does not cover all goods and services equally and therefore it is a bit of a joke.
posted by Zool at 8:17 PM on October 29, 2000

Any competent business is already charging as much as possible for its products, spending as little as possible making them, and paying its employees as little as it can. The most likely result, then, of increasing corporate taxes (or making those businesses that aren't paying corporate income tax pay them, same thing) is probably a stock price correction, since stock prices are (basically) set by expected future earnings and growth, both of which would be impacted by unexpected taxes. Of course, with so many ordinary Americans owning stock these days, either directly or through mutual funds, there's bound to be some suffering of the "general population" with this result. In short, my A-E choices were generally bogus.

I dislike double-dipping because it's fundamentally wasteful. The income generated by a corporation eventually becomes taxable individual income, either through salaries or through dividends, or it is invested back in the company (which drives up the stock price, eventually yielding capital gains taxes, and in the end resulting more taxable salaries or dividends). If you increase corporate taxes, you reduce the overall amount of individual income and thus the tax revenues generated from it. It seems to me as though simply taxing the revenue stream at one point or another would be sufficient; it's the same money no matter where you take it, and taking it at only one point would require less overhead for all concerned parties.

Of course, this same argument could be used for moving all income tax to businesses and off the individual, which I suppose might be a more popular proposal...
posted by kindall at 8:27 PM on October 29, 2000

Again, my friend, please read Senator Dorgan’s (from the great state of North Dakota! Go Bison!) article.

The assertions are plain. Not all the money made by corporations goes back into paying off overhead. Large swaths of income isn’t reported due to accelerated depreciation (not the article), deferrals, guarenteed loans (not the article) and transfer pricing (the $8,000 ball point pens) among a myriad of other corporate benefits.

So, I agree, we should tax income once, but let’s get it right. When corporations get away with grand theft the tax burden shifts on to you.

Transfer pricing is probably the single most important reason that so many major corporations pay little or no federal income tax. "The bottom line is that the American public is being robbed," says Finance Professor Simon Pak of Florida International University who has studied this question closely.

Zool: Do you mean sales tax? That’s state by state.
posted by capt.crackpipe at 8:44 PM on October 29, 2000

I can't understand why America doesn't introduce a transfer pricing law. Australia, New Zealand and some other countries have laws in place to regulate transfer pricing. JohnB: I agree with you on the progressive consumption tax, but have my doubts about the tobin tax (although if it was implemented in most major countries at the same time it would have its benefits). I would be interested in any links you have that explain the benefits of a tobin tax for America as I don't see much realistic hope of it being implemented in a country with a major financial center before America does it.
posted by jay at 2:32 AM on October 30, 2000

Zool (or any other Australian): Explain in a logical manner using reason and commonsense how your government came up with this list of taxable and tax-free items?
posted by jay at 2:53 AM on October 30, 2000

Jay : They are f**ked.

They tried to please as many people as possible so that they could implement it at all.

I am still paying nearly 50% tax on petrol, which pisses me off. If they would have done this uniformely across all goods and services they could have sold it on the 40 cents per litre saving on petrol alone.

Unfortunately the majority of Australians ( and probably the world ) are imbeciles who could not get their little heads around the concept of a GST.

The media did not help this situation by reporting mainly about the things that will rise like everyday groceries.

Everyone involved in this joke of a GST should be shot.
posted by Zool at 3:28 PM on October 30, 2000