Senators Propose Big Corporate Tax Cut

Source: NYT

Calls to cut taxes on large corporations may seem odd given that the nation faces a $1.55 trillion budget shortfall for the coming fiscal year. But that is exactly what a couple of senators, one Republican and one Democrat, would like to see happen. They jointly introduced a bill in Congress on Tuesday that would cut the corporate income tax rate to a flat 24 percent from 35 percent by eliminating some tax breaks.

“The United States has the second highest corporate tax rate in the industrialized world,” Senator Judd Gregg, Republican of New Hampshire, said at a news conference to discuss the bill he wrote with Senator Ron Wyden, Democrat of Oregon. “After this law goes into effect, which I certainly hope it will, we will be pretty much competitive with everybody who’s a major player in the corporate world but, certainly, the countries which are our primary competition in Europe and Asia.”

Mr. Gregg said cutting the corporate tax rate to 24 percent would help spur the economy and encourage more investment at home, translating to more jobs.

Read more: http://dealbook.blogs.nytimes.com/2010/02/23/2-senators-propose-big-corporate-tax-cut/

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Now where have we heard this before; allow big corps access to more profits and those corps will not keep the money to give execs big bonuses but they will use those profits to create more jobs.

on tax reform,” Mr. Wyden said in a statement.


Seems Wyden is a firm believer in that whole bi-partisan bs.

libertarian/republican there.

Many corporations already pay no taxes at all. Shift the burden onto the poor and middle class - that's the ticket!

Cutting taxes does NOT create jobs. This has been proven in the real world, which is not where these two dipshits live.

What a couple of assholes.

while on record we have a certain printed rate, in actuality, as said here, "Many corporations already pay no taxes at all."

The corporatons as a whole pay a lot less than they paid 20 years ago. This is a right wing con job. Sadly, someone who is supposed to have a brain, Wyden, hasn't figured that out yet.

To send all those jobs overseas!!!!! :sarcasm:

How about "for every new employee you hire and keep employed for more than x months you'll get x off of your taxes.

HOW MANY TIMES do we have to see this BULLSHIT "If we do this, then they will do THAT" when that thing NEVER FUCKING HAPPENS.

The bankruptcy act which gave credit cards priority status was to lower credit card rates!

:wtf: :wtf: :wtf: :wtf: :wtf: :wtf:

from the article:

Mr. Gregg and Mr. Wyden said they had worked over the last two years in writing the bill but had yet to gain the backing of other important senators. The bill may be taken up for debate as the Bush tax cuts expire later this year.

Most large corporations haven't paid taxes in years.

Big bonuses, golden parachutes etc. It's easy to piss away the taxable profit.

Will this bill address the moving of corporate offices offshore to avoid taxes?

Dontcha just love tax loopholes?

:bounce:

Section 162(m) limits deductions on salary to $1,000,000. Bonuses based on performance are allowed under the code, so long as certain criteria. Working with the Service on a continious basis, I GUARANTEE they would disallow bonuses that just wiped out taxable income every year.

If enough loopholes are closed, and employment requirements included that a certain number of American employees
at every level must be hired, I can see it. I'll bet that an across-the-board 24% with no loopholes or exceptions
would net the government higher revenue that it is getting now. The trouble is, I doubt that such a thing could ever
be enforced, or even written so cleverly so as to bring in 24% of the profits of every American corporation. Look
at Halliburton--as soon as the Cheneybush administration ended, they moved their world HQ to Dubai. Problem solved,
Halliburton is no longer an American corporation.

Write it and enforce it so it works, and I'll be impressed--sort of like meeting the Tooth Fairy in person, I fear.

I work in the tax department of a Fortune 500 company and we definately pay a lot of taxes. Before this, I worked in a couple Big 4 public accounting firm and all the corporations paid right at 35% (plus or minus deductions allowed - the biggest being the Section 199 deduction). I have to call BS.

Here's just one: http://moneycentral.msn.com/content/Taxes/P80242.asp

Think about this as you sign that check to Uncle Sam next week: More than 60% of all U.S. companies paid no federal tax at all during the boom years of 1996 to 2000, the General Accounting Office reports.

In 2000 alone, 94% of all U.S. corporations paid less than 5% of their total income in corporate taxes, the GAO said in a report released Friday. Among the largest corporations -- the 1% of all corporations that owns 93% of all corporate assets -- 82% paid less than 5% of their income in taxes.


Results from this search: " largest corporations paid no federal income tax" equals 6,700,000 hits.

http://www.reclaimdemocracy.org/corporate_welfare/real_tax_rates_plummet.php

But of the 275 Fortune 500 companies that made a profit each year from 2001 to 2003 and for which adequate information to draw conclusions is publicly available, only a small proportion paid federal income taxes anywhere near that statutory 35 percent tax rate. The vast majority paid considerably less.

In fact, in 2002 and 2003, the average effective tax rate for all of these 275 companies was less than half the statutory 35 percent rate. Over the 2001-2003 period, effective tax rates ranged from a low of -59.6 percent for Pepco Holdings to a high of 34.5 percent for CVS.

Over the three-year period, the average effective rate for all 275 companies dropped by a fifth, from 21.4 percent in 2001 to 17.2 percent in 2002-2003.

The statistics are startling:

Eighty-two of the 275 companies, almost a third of the total, paid zero or less in federal income taxes in at least one year from 2001 to 2003. In the years they paid no income tax, these companies earned $102 billion in pretax U.S. profits. But instead of paying $35.6 billion in income taxes as the statutory 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they received outright tax rebate checks from the U.S. Treasury, totaling $12.6 billion. These companies' "negative tax rates" meant that they made more after taxes than before taxes in those no-tax years.
Twenty-eight corporations enjoyed negative federal income tax rates over the entire 2001-2003 period. These companies, whose pretax U.S. profits totaled $44.9 billion over the three years, included, among others: Pepco Holdings (-59.6 percent tax rate), Prudential Financial (-46.2 percent), ITT Industries (-22.3 percent), Boeing (-18.8 percent), Unisys (-16.0 percent), Fluor (-9.2 percent) and CSX (-7.5 percent), the company previously headed by current Secretary of the Treasury John Snow.
In 2003 alone, 46 companies paid zero or less in federal income taxes. These 46 companies told their shareholders they earned U.S. pretax profits in 2003 of $42.6 billion, yet they received tax rebates totaling $5.4 billion. Almost as many companies, 42, paid no tax in 2002, reporting $43.5 billion in pretax profits, yet receiving $4.9 billion in tax rebates. From 2001 to 2003, the number of no-tax companies jumped from 33 to 46, an increase of 40 percent.
In 2001, the Treasury paid corporations $40 billion in tax refunds, a third more than the 1998-2000 average.
Then in 2002 and 2003, after the law was changed to expand tax subsidies and make it easier for corporations to carry back excess tax breaks to earlier years, corporate tax refunds skyrocketed to an average of $63 billion a year - more than double the 1998-2000 average.
Corporations are now paying the lowest levels of taxes in the post-World War II era. In fiscal 2002 and 2003, federal corporate incomes taxes dropped to their lowest sustained level as a share of the economy since World War II.

There is a world of difference between GAAP accounting and tax accounting. The SEC has rules in place that accelerate deductions and defer income, thereby making income numbers a bit more conservative. The Service, on the other hand, has rules that tend to accelerate income and defer deductions, thereby driving up taxable income (the 2 biggest exceptions are deprecation and amortization). Thus, I have seen MANY companies with a loss in year on and huge taxable income and then a couple years later, when the deferred items reverse, have huge book income and a tax loss. It is the nature of how the competing government agencies write their recognition rules.

This analysis looks like it is comparing GAAP income to income taxes paid on the TR, which is a faulty comparison.

from the government is the point. Whatever standard you wish, net tax payments are still in USD, and the fact is, on the companies that can be identified, they are paying little or nothing in taxes, and in some cases, receiving receiving net dollars from the government.

Bucks is bucks.

Overall, I would be very interested in seeing the actual data. I can honestly say of the Fortune 500 companies I have worked on (3), none of them even come close to fitting the results of this study.

experiences with 3 companies for an untold time period. Which do you feel is more valid?

This study names company names. You don't. You've got some burden of proof here to maintain.

Thus, I would be interested in seeing the study. Are they looking at consolidated income? If so, then it would make sense it is lower since the US has the second highest corporate tax rate in the world. THus, if you include contries with tax rates of 15-25%, of course it will bring the number down. Plus, it should be noted that companies are NOT intended to pay 35%. There are perms built into the code for this exact purpose (the biggest being Section 199 Domestic Manufacturer's Deduction). It is the same as people saying we should have 90% tax rates like we did in the past, while ignoring the fact that NO ONE paid anywhere near that because they had 3-4 times the number of deductions available now.


Lets look at some breakouts:

Pepco - 2009

http://www.sec.gov/Archives/edgar/data/8192/000119312510041024/d10k.htm#toc41946_12

Book Income - 235,000,000
Consolidated Effective Tax Rate - 31.9%

Pepco - 2008

Book Income - 300,000,000
Consolidated Effective Tax Rate - 35.9%

Pepco - 2007

Book Income - 334,000,000
Consolidated Effective Tax Rate - 36.0%

Prudential FInancial

http://www.sec.gov/Archives/edgar/data/8192/000119312510041024/d10k.htm#toc41946_12

2008

Book Income - (1,118,000)
Consolidated Effective Tax Rate - 41.2%

2007

Book Income - 4,686,000
Consolidated Effective Tax Rate - 26.6%

2008

Book Income - 4,394,000
Consolidated Effective Tax Rate - 28.3%

Frankly, after look at the 10-K for the first 2, I quit looking as it is meaningless without seeing details of how they came to their conclusions. The effective rates are somewhat in line with what I would expect. The difference (which they highlight) is the current to deferred split. However, the analysis on bonus depreciation is wrong because while new equipment will continue to get a 50% deduction up front (expired 12/31 of last year, but Obama wants to extend it), it is for mostly 5 & 7 year property. Thus, within 4-5 years, you will start to see that big acceleration flip.

Frankly, that explains a big chunk of what they would have seen in 2001-2003 as that is when bonus depreciation was first passed. Companies now do NOT see that continued benefit from this deduction.

http://www.reuters.com/article/idUSN1249465620080812?sp=true

Study says most corporations pay no U.S. income taxes
WASHINGTON
Tue Aug 12, 2008 12:54pm EDT

WASHINGTON (Reuters) - Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.

The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.

More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.

During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.

The report did not name any companies. The GAO said corporations escaped paying federal income taxes for a variety of reasons including operating losses, tax credits and an ability to use transactions within the company to shift income to low tax countries.


more at link

Again, I do corporate tax provisions for a living. Thus, this is my single largest area of expertise.

If someone told me over 50% of US corporations pay no income tax, I would not be surprised in the least. Given that hundreds of thousands of C Corps in the country, most are small companies which have a MUCH higher chance to run losses. Once again, this link lacks facts to make the claims meaningful.

This, coupled with the fact that it continually references GROSS sales makes me question if it is intentionally misleading. EVERY company has positive gross sales as this is the sales price of your goods before ANY expenses (including the cost of purchasing that product).

Once again, this story lacks ANY meaning due to its lack of any substantive information. So, I would also love to see the details of the study.

since you are unwilling or unable to provide any methodology, names , or any of the other things you demand others bring to the table to prove their points, I bid you adieu.

Have a nice life and work for corporate tax reduction for those poor overburdened babies.

After ten years of experience, I feel comfortable with my knowledge of how the US tax code works. When I suddenly see something that contradicts much of this, I am naturally interested. I become skeptical when I see claims with no real facts. What facts DO appear are mis-represented (i.e. a complete misrepresentation of the long-term impact of bonus depreciation and referencing GROSS sales). These are not concepts that vary from company to company. They are set facts such that if your understand it's impact on one company, you understand it for all. Thus, it definately smells bad.

To be blunt, unless you have worked on US income tax (and, specifically income tax provision) for a meaningful amount of time, I tend to go with what I have seen for an absolute fact in practice and don't lend credence to unsubstantiated articles I read. This is not to say they are wrong, but until they provide meaningful support with their summary article, it means nothing and lacks any substance.

Don't tax corporations at all. Just restore the top tax rate for individuals to 91%. Oh, and while you're at it, no breaks for "capital gains".

ain't happenin. We are feeding the wrong idol.

http://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States

Using the "effective" U.S. corporate tax rate of 25.2%; it is the fifth largest in the developed world, less than Germany, Italy, Japan, and Canada <10><11>
The high average "combined" federal and state corporate tax rate, estimated at 39.3%, is second largest to Japan's combined rate of 39.5% among OECD countries.<12>
Moreover, critics claim the corporate tax hinders economic growth as it directly reduces the level of investment by taxing away money that would otherwise be used to invest by corporations.
Criticisms of U.S. corporate income tax, however, often ignore comparisons of overall corporate tax systems. Meaningful comparisons of tax systems account for income, value-added, employment, sales and other taxes affecting businesses. For example, the United States does not have a value-added tax, while the remainder of the industrialized world has value-added tax typically ranging from 15-25% (Canadian and Japanese rates are 5%).<13>
Criticisms of U.S. corporate income tax also ignore the fact that a two thirds majority of domestic and foriegn corporations, through the use of various loopholes, pay no federal income tax at all according to a Government Accountability Office report published in Aug. 2008.<14>
Examples of the misleading nature of the above listed "tax rates" is given by Igor Greenwald in an article entitled "High Corporate Tax Rate Is Misleading" <15>

These two are just rollin' over for their benefactors.

"Middle-class and low-income taxpayers will benefit from Wyden-Gregg’s near tripling of the standard tax deduction, which will not only reduce tax bills but relieve Americans of the stress and responsibility of maintaining the records and receipts needed to document itemized deductions. These simplifications alone will make it possible for most taxpayers to file a simple one-page 1040 form and in an effort to make paying taxes even simpler, individuals and families can request that the IRS prepare a tax return for them to review and sign."

And this:

"But the proposed tax changes are not necessarily a gift to corporate America. A key point of the plan would be the elimination of certain tax breaks for corporations, mainly for those working in the energy sector, and would also end the practice whereby a multinational company is only taxed on the income generated abroad when it comes back onshore. The senators argue that multinationals will lose the incentive of keeping their cash offshore, allowing for that money to be reinvested in the United States."

is that usually statements such as that are just PR. Elimination of tax breaks for corporations are always in proposed bills but are never to be found in final bills.

And if there is any trace of talk about reducing tax breaks for corporations in the final bill, there is always a work-around where corporations use it to their advantage. See the credit card bill that was just enacted this month. It was supposed to protect cardholders but did not. It worked out to the advantage of banksters.

Middle class Americans? The poor?

The income tax on wages decreases as wages decrease. And with more and more people unemployed, wages are decreasing rapidly.

Our government is incurring more and more debt and receiving less and less tax revenue. Where do Gregg and Wyden propose to make up the shortfall?

Ordinary Americans are losing their homes as it is. These senators are completely unrealistic.

Are these senators willing to cut their salaries, health care benefits and pensions and those of their staffs to pay for the corporate tax cuts?

this is disgusting.

this will be enacted in some form, and with Obama's support. Any takers?

But cut all the loopholes and make damn sure they PAY 24%.

ONLY if all of their employees and operations are located in the U.S.?

And even higher rates for all those off-shoring their operations.

We don't need to bring our wages down to China. Corporations need to bring their wages up to meet us.

Cheap consumerism really isn't cheap, nor is it sustainable.

But I don't think that's even possible.

the section on paying for it makes no sense to me. A tax on internet gambling is not going to raise $662 billion. I'm assuming this would all go onto the deficit. Judd Gregg deficit hawk my ass.

The bill proposes specific revenue offsets to the lost tax income like one that would legalize and tax Internet gambling. The Congressional Research Service estimated that those proposals would raise $662 billion over the next 10 years based on President Obama’s budget if fully enacted by Congress. But that is not enough to cover the lost tax receipts, the research service said, noting that the proposal would cost an extra $230 billion over 10 years.

The bill moves to close that gap by cutting an average of $23 billion a year for the next 10 years from corporate and business-related spending and transfers. If Congress were to make those cuts, the Congressional Research Service said the bill would be deficit-neutral, but it warned that the estimates it made were “very rough.”

the average American. :sarcasm: Saddest part? I think it will happen.

:wtf:

How can we be hearing this? More tax cuts for business when the TAXPAYERS of this country are underemployed, losing their homes, without decent health care and forget college for the kids?

If this gains any support at all, I swear it's seriously time for revolution stage 1. I cannot believe this.

... has the world's most incompetent accounting and legal teams imaginable! The poor, "overtaxed" corporations get no sympathy from me.

Not surprising to see dem support for it; after all the "health reform" bill is a huge sop to the despicable insurance companies.

Second thought - might just work, as long as the tax cuts for the corporates goes directly to the workers. An amendment preventing the tax cuts going directly to the upper management (i.e., bonuses redirected back to the workers), but used exclusively to hire more workers will help.

Just my thinking.

I didn't like him but didn't he say when he was running for president that he paid the same amount of tax as a guy making 36,000 a year or am I mistaken?

Trying the Same Shit Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over and Over Again . . . and Hoping it Works THIS TIME!

:eyes:

That is the key question. Today many companies pay no income tax so changing the top rate will have no impact on them. On the other hand, if eliminating deductions means some of those companies will start to pay taxes then this could be a good trade-off, especially if some of these deductions encourage companies to move jobs overseas. I want to see the details before taking a knee-jerk reaction in opposition to this bill. Senator Wyden is no Ben Nelson (who voted against the jobs bill).

At least then the money will FOR SURE get to the people who need it and not just add to the top execs bonuses

That didn't take long at all. :shrug:

:facepalm:

The message is incoherent. Are we trying to increase revenue to the government? Decrease tax load to the lower classes? Increase employment? Take your pick and make the policy match.

A caveat is that it isn't all rainbows and unicorns, there are tradeoffs required due to some rather unforgiving physical laws of the universe.

of those other countries. And have very little regulation of corporations.

Wyden needs a swift kick in the balls.

How would trying it again come out any differently?

and then we'll talk about imitating their corporate tax rates.

:mad: :mad: :mad: :mad: :mad: :grr: :grr: :grr: :grr: :grr: :grr: :nuke: :nuke: :nuke: :nuke: :nuke: :nuke: