This article on Yahoo Finance about the tax rates paid by the largest US firms is a pretty big eye opener. These tax numbers are astounding. Why, when the country's budget is in such disarray and public sector budgets are in dire straits, are these very profitable companies paying so little in taxes?
I know the theory is that they should be using the lower tax rates/excess income for hiring new employees, R&D, and expanding operations, but is this really happening? It seems quite a few firms are expanding operations by buying rivals, but that only seems to further monopolize companies and, usually, leads to them laying people off that might be redundant when the companies merge. Even though the article has Boeing claiming that they hired 9,000 workers, it does not say how many they might have laid off in previous years.
Many of these private sector gains have been more than offset by public sector losses due to, you guessed it, lower tax receipts. Is it really a net positive when a company gets a tax break for hiring a few employees when, in doing so, the break causes public sector workers to get laid off?
Is this really what was intended by lawmakers when they created these tax breaks? Do you believe more tax breaks will cause companies to begin hiring again? What do you think should be done about corporate taxes?
It doesn't matter what is done about tax rates for corporations due to this simple fact.
ReplyDeleteNo corporation in existence pays taxes.
It doesn't matter whether you raise the tax rate or not. All they do is simply pass the tax burden onto their consumers by 1) raising prices of their products, 2) make up the difference by laying off workers, or 3) by cutting back dividends to their shareholders.
None of which are beneficial to anyone.
I certainly agree on the point of any increased tax burden just being passed along to the consumer or taken out on the employee. However, I don't necessarily think that they would leave the country as many of the lower corporate tax people believe.
ReplyDeleteBut, what do you think should be done? As Merideth Whitney said; these corporations were able to get to where they were and stay where they are due to tax dollars. Those dollars educated their workers, built the roads/railroads/airports/ports/etc. they use to move their wares/get their employees to work, subsidize their construction projects, subsidize their losses (when they can write them off), provide police and fire protection, etc. Surely something must be paid for having that service provided.
Is there a tax plan you favor for them to be under, so that their fair share is paid?
I think what Whitney said is completely ignorant and bogus. Companies and businesses existed WAY before taxes did. The guy who owns that business, has likely paid WAY more in taxes for those roads, schools, police, fire than any other individual in that community did. Furthermore, the individual that owns that business took his OWN money (or money people were willing to lend him) and put everything at risk. He didn't know his company was going to be successful. There's no guarantee that his investment is going to pay off. He took a RISK. So why is it that everyone else (who took on ZERO risk) is entitled to a single penny of his money, outside the existing corporate and individual taxes and fees? What did they put on the line for that guy to be successful. Nothing.
ReplyDeleteFurthermore, those workers that were educated with those tax dollars, ARE being paid for their service, in the form of wages and benefits, they aren't working for free. On top of that, the extra tax revenue this business (and the owner) generates, is contributing to more money to the local schools/fire/police to make them better for the individuals who live there.
If you tax a company (or an individual) enough, they WILL go overseas. The only thing keeping them here is the cost of shipping/imports/exports/relocation that outweigh what they are paying in taxes. However, that doesn't mean you can't increase the burden enough to tip the scales the other way.
When an individual in this economy is successful, others benefit. When a company makes lots of profit, and decides to reinvest those profits into expansion, many people benefit. If you've got a billionaire living in your neighborhood, everyone benefits from the money he is paying to the local municipality, the products he purchases, and the jobs he is creating.
How is it completely ignorant and bogus? Yes, companies existed before income/profit taxes that were generally enacted in 1913, but they were still taxed by the federal government in the US through various corporate income taxes that were enacted and repealed since the mid-1800's.
ReplyDeleteBesides, if you look at when corporate tax rates were the "highest", those were what the majority would consider the "golden" years of the United States. Actually, after looking at that graph (it won't post here; sorry. I'm still learning this stuff. But, it is the IRS' corporate tax rate chart), the corporate tax rates start to fall drastically right about the time the US began really losing its industrial might to overseas manufacturers.
Granted, there are a million other reasons, globalization, the fall of the Iron/Bamboo Curtain, shipping containerization, unions asking for more while providing no better products/productivity, etc. that also facilitated that fall in industrialization, the lower taxes sure did not seem to help.
I didn't say they were being paid for their service. I said that the company is paying taxes to reimburse the government for PROVIDING those services and educated employees. You can't expect a 6-7 year old to know that, one day, he/she will get paid for spending all of those years getting educated. You provide the education, through tax dollars. If those tax dollars aren't paid, is a poor family going to be able to afford to educate their will-be worker? Or are companies going to step in to educate their future population and pay them in "corporate" dollars; a la mining companies paying workers in currency only valid at mining company owned stores? Lifetime of servitude, perhaps?
Same goes for roads. Sure, back in the way back, companies did not pay for a government logging crew to hack through the woods to build them a road. They used free/fee (government) transport, like rivers and seas.
But, the rise of roads, semis, and the Interstate Highway System (paid for by tax dollars) have, undoubtedly, been an ENORMOUS help to businesses. Imagine if the government had not done that? Do you think that private companies would have used their money to build such roads? Or, perhaps, do you think, maybe, there just wouldn't be commerce outside of a reasonable area?
Where overseas are these companies going? Europe? Taxes are higher there? China? That's a friendly place for business. Some tax-haven island somewhere? Perhaps, but they aren't employing a significant amount of people there; just using the loophole.
Google is a huge presence in Mountain View and employ tons of people there, but they have already found themselves a million tax loopholes and pay way less (% of income-wise) than the majority of individuals in taxes. Same for GE and a ton of other companies.
These companies already found their way "out" of the US, due to a tax code that is more full of holes than my socks.
I'm sorry, but I can't buy your Reaganomics claim any more. I used to think that, perhaps, that was true; but this downturn has shown it is not. You even say in your last line that the billionaire is paying the municipality; how is that? Taxes? Okay.
TL;DR: I agree that, on an individual level, keeping as much of your money as possible does help. But, that's because MOST individuals spend most of their money, so it is pumped back into the system. I believe this true even for tax expenditures on Welfare/Medicare/SSI/and even pork-barrel projects. The money comes back.
ReplyDeleteWhen corporations and people over a certain income limit (I can't quantify that limit, but there is a ballpark where you, honestly, are not really spending anymore on cars, houses, clothing, etc.; you're just socking it away in investment accounts) that the money becomes stagnant. This is what is happening now. Corporations might be pumping money into R&D, but they sure as hell aren't "expanding" in a way that helps the economy. They are gobbling up competitors, laying off now-redundant employees, and shuttering facilities. They are sitting on mountains of cash that are, literally, pulled out of the system and stagnated. That does absolutely no good and will not get us out of this quagmire, IMHO.
I'd rather tax them and spend those dollars on MEANINGFUL infrastructure. I'm talking a legitimate rail system, increased public transit in cities, a new power/utility grid, and better education to name a few.
As an aside, I know there isn't really anyone here, right now, but I am still workin on it. If people do start interacting, do you think discussions like we're having now on this page will be seen, or should there be another way to do this.
Thanks for the discussion and input, buddy.
Ahhh, it wasn't the link that didn't work, it was the fact I talk too much. Here's another try: http://3.bp.blogspot.com/_otfwl2zc6Qc/RhqI368z6qI/AAAAAAAABE8/v1O2-m6Tbfc/s1600-h/corptax.bmp
ReplyDelete"They are sitting on mountains of cash that are, literally, pulled out of the system and stagnated. That does absolutely no good and will not get us out of this quagmire, IMHO."
ReplyDeleteSo what you're saying is that us taxpayers/voters/whomever, know how to spend a company/individual's money better than they do, so we should force them to spend this money by way of taxes? What right does anyone have to tell someone else HOW to spend their money? Is this America? Where does it end? At what point does it change from "you are free to spend your own money how you wish" to "you are no longer free to do with your money as you wish, you must give most of it to us because we know how to spend it better than you do".
I feel this view is morally wrong.
This is what is great about a free-market system. If you don't like what a company is doing, whether it's shipping jobs overseas or sitting on large cash reserves, then you are free to stop buying its products, and free to speak out and convince others to do the same.
Furthermore, Government hasn't exactly proven itself a wise spender of the tax money it already collects. Programs like Cash for Clunkers, bank bailouts, "green" energy loans & subsidies (Solyndra), and the list can go on for miles. The truth of the matter is, Government has absolutely ZERO risk when it decides to take on large projects or issue loans to companies favored by whatever party is in power (both R & D are guilty of this). What risk is there? That the Government will go bankrupt (we can see that hasn't stopped anyone). That their salaries and jobs will be lost if they make a bad decision (ha! yeah right!). So what motivation do they have to thoroughly investigate how the money will be spent or how efficient the project will run? Perhaps this is why almost every single government project runs over time and over budget (i.e. that high-speed rail project in CA?), and also perhaps why the deficit is as high as it is.
In regards to education, my point still stands. Any business owner has been paying taxes from the moment they first held a job or started hiring employees of their own. They don't need to "reimburse" the government when they've been funding public education the entire time. Besides, how is that public education system working?
http://reason.com/assets/mc/dpowell/2011_01/derugy-column-chart2.jpg
Government is spending money money than ever, yet the product (education) hasn't improved one lick! This is just another example of how Government has no motivation to spend the public's money wisely. How much more good could people have done if they were able to keep a huge chunk of this money that's obviously being wasted on public education?
Don't even get me started on why rail will never succeed in the US. Again, another waste of money. Just because someone in Government thinks it will be a good idea, we spend billions of dollars on it, and unlike a private business, Government suffers no consequences for making horrible decisions, and simply collects MORE taxes from the public in order to keep funding their failure of a project.
The problem isn't how much we collect in taxes, the problem is how that money is being spent.
I wanted to answer your last question separately.
ReplyDeleteI think this is the best way to have discussion on a blog/website. It allows people to click and read the articles they want to read, without forcing them to scroll through pages of comments/discussions on topics they aren't all that interested in.
What you can do to help with blog posts is to cut them in half, and put the entire article on a separate page, that way if it's a particularly long article, people won't have to scroll through 8 paragraphs, and can just click a "read more" button, where they'll find the full article and the comments.
In principle, I totally agree with you. I really do not want the government telling me, you, corporations, or anyone else how to spend their money.
ReplyDeleteI will make somewhat of an exception for retirement funds. Many people are not smart enough to save on their own and, personally, I don't like the fact that, moreso now than in the past, they are expected to save their money via a casino gambling trick like the stock market. Social Security/something similar should be paid for by each person, for themselves and their future retirements.
I agree with you on the government being a terrible spender of money. Pork barrel projects, their own high (well, high in relation to public servant salaries, not compared to comparable CEOs) salaries, repaving roads that don't need repaving, paying for politicians bullshit trips, etc., all can be inefficient uses of government funds.
However, the economics of it are what make the difference; especially in a sputtering economy like this one. As I said earlier, the majority of government dollars spent, wasted or not, are funneled right back into the system. The Welfare recipient is using the majority of their money to go to the basic necessities; the grocery store, the power company, clothing stores, etc. These business in poor neighborhoods exist because, well, you have that government check coming in and those dollars flowing through the system.
Even a ridiculously overpriced construction project that the contractor is ripping the government off for is still, for the majority, making it into the system. Even if the construction company owner is using the money to build a pool, he still is paying workers to do the project, buying the supplies, putting people to work, and stimulating the economy.
Is it waste? Yes. Could it be spent better? Hell yes. But, at least it is spent and, in this time of need, flows back into the economy.
Corporations are not doing this. They are sitting on mountains of cash just waiting to see if the recovery takes off or not; thus stalling the recovery by hoarding cash and not hiring workers. Sure, there is some of that probably going into R&D, which will help.
A majority is going into gobbling up competitors, as I said before. That situation does not help the economy at all, as it just makes even bigger monopolies and lays off more workers.
But, for the most part, the money is just sitting...waiting...for something to happen. I guess, when it actually does, the money will possibly explode out of their coffers and scores of new workers will be hired. But, at what cost? Years of ready and able workers will have died on the vine, so to say, and they'll be left in the no man's land of no experience and too many years since they were educated.
This is why I say the companies should pay taxes. I personally believe that their war chests would be better spent on pork barrel swimming pools, where the money actually gets back into the system and creates jobs and demand. This is how we can recover.
Personally, I'd love to see it spent in infrastructure. New pipes, new bridges, new power grid, renewable energy, education, etc. That's what I want to see. The New Deal Part III. You've been to other countries and see their infrastructure. How nice were the trains in Western Europe? The roads?
I also agree with rail not being the best fit for this country in it's present state. But, I think developing a decent rail system could shape the future. When you look at cities like NY and Chicago, you can see how they developed centered around transportation and mass transit. The main reason of this is because they grew into large cities BEFORE cars came into the picture.
ReplyDeleteBecause we are a relatively new country and and a majority of our growth has come out of having automobiles, we set up our lives around them and we believe they are the only way to live.
Don't get me wrong, I LOVE cars. But, I would love to see a concerted effort to change us back to a culture not so reliant on them. I think that if we developed better mass transit technology, we could have a revival of major cities. Sure, at first, it might seem wasted. However, as people begin to use the systems and live near their hubs and stations to enjoy the convenience that they provide, I think we could drastically change the culture of the US.
Besides, with population growth being what it is, we're gonna need those suburbs back to turn back into farms for food production. Haha.
Man, I really am too wordy. Haha. Thanks for the input on the blog. First off, what do you mean about making the articles their own page? I am a computer moron, so you'll have to explain it to me like I eat paint chips.
ReplyDeleteSecondly, should I start splitting off my ideas/rants into smaller bits? Do you think it will be too overwhelming to post everything in smaller pieces?
At this point, I'm not really sure how to go or where to take this. I am trying to get some sort of discussion with my friends (and, with any luck, lots of people that are not my friends) about the world today. Nothing biased, no name calling, no sides; just discussion of ideas. That's all I want.
Now, I just post articles up and, along with them, a few personal thoughts. Should I just stick to articles and leave my thoughts for the comments? Or, should I utilize more of my thoughts and use the articles as talking points?
Your help is appreciated. Thanks, man.
What you're doing is the essence of blogging. I tried to run my own for a while but it became tough to update with increased responsibilities at work, etc.
ReplyDeleteAs for what I mean with articles being their own page. Here's one of my Reich-wing blogs that I like the format of (ace.mu.nu). For their long-winded posts they have a "continue reading" link, that expands the article. I'm not sure how to do the expanding thing, but you can do a "read more" that will link to a dedicated page for that article. For example...
This is your main page:
http://nycbg.blogspot.com/?spref=fb
And this is the link for the article we're commenting on now:
http://nycbg.blogspot.com/2011/11/corporate-tax-rates.html#comments
A lot of people will say that most readers won't stick around for more than 2-3 minutes unless they see something that interests them. Because of that, I think it's always best to have a short paragraph or two that's readable from the main page, and then if your post is longer than that, you put a link that takes them to the full post.