What is particularly illuminating about The Week article is that rather than just blame GE, it lays out various opinions on whom to blame for this sweet arrangement.
It’s not enough to just blame GE. We do have the highest corporate tax in the world. We also have a “byzantine tax code” that rewards winners and dings the losers. We have politicians who have been invested in to maintain the status-quo.
As most of us are facing the tax season having done our taxes or preparing to do so, the injustice of sweetheart deal resonates within. We deserve better than this, particularly amid the cries to cut the budget, but how do we demand tax reform when the system is so rewarding to Congressional and Executive branch decision-makers and its corporate “sponsors?”
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p>What does this mean exactly?
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p>On a side note, every single exemption, carve out, etc. that the Dems voted to eliminate would be counted as a tax increase. If the Dems got rid of 50 of ’em, the Republicans would claim that Dems are job killers because they voted to raise taxes 50 times !!!11!1!1!one!1!!juan1!1!
in The Week article, noted that having a high base tax rate is what’s driving the patchwork approach to tax policy. A simpler code, with all the “fixes” eliminated might actually result in a fairer tax policy that provides a reasonable revenue stream – instead of nothing from these corporate giants.
Study says most corporations pay no U.S. income taxes
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p>It’s only a high tax rate if you actually pay taxes. For most corporations, there is no tax rate.
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p>But the published tax rate is meaningless on its own; it is the effective tax rate that counts. And in this case, GE has a negative effective tax rate.
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p>This is just how the US tax code has developed, to have a high published rate but also have many deductions and exemptions. And this is true both on the individual as well as corporate side. Therefore, it is a red herring to simply cite the high corporate tax rate in the US as the cause of all problems. Yes, it can be argued that the US method results in much more “gaming” of the system, but that is a much more nuanced discussion.
If you read the article that I linked, it mentions this very issue. It’s the “fixes” that have resulted in a complex web of tax code that allows these global firms to evade paying anything and it’s time to fix it. It’s not just a red herring; a high tax rate loaded with loopholes means a lack of transparency (really, who has time to read tax code law and figure out who pays and who doesn’t) for both corporate and individual taxpayers, and a resulting misplaced tax burden one some other business entity or US taxpayers.
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p>Tax reform is necessary and long overdue. Given President Obama’s relationship with the CEO of GE, I wouldn’t bet the house on it. As far as I know, lobbyists aren’t going broke in DC. It was a $3.47 billion dollar business in 2010, echoing the record pace of $3.49 billion in 2009.
I suppose all the work that Jack Welch’s GE did to “clean up” all the PCB’s and other poisons they dumped into the Housatonic was deductible. After all they were making various war machines, that actually produced some good paying jobs for folks from the Berkshires.
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p>Of course they ruined their own fishing holes. “Can’t eat fish with big growths coming out of their heads.”
Of course I am aware that is a Tea Party phrase, but it’s the truth. Our government is not working for us, it is working for the chosen few.
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p>I wish that we could stop the “lesser of two evils” voting mentality and rally behind someone who is not in corporate pockets. Until we do that, nothing will change.
So we have a really high official corporate tax rate, which is paid primarily by medium-sized and even small businesses, thus discouraging entrepreneurship (presumably) and irritating a lot of smallish business owners (maybe causing them to go all Tea Party?) but we aren’t getting any revenue from the most profitable and largest corporations. Taxing GE would probably do more to help fix the budget problems than a hundred small corporations, but they’re exempt because of lobbyists and loopholes. This is the worst of all possible worlds, an upside-down tax code.
Tax code reform, we know how it will all end. The corporate tax rate will go down, but all the loopholes and inequity will stay. Maybe some new loopholes, benefiting the wealthiest corporations, will be added to sweeten the pot. That’s what’s known as “compromise” these days.
Personally I’m not quite sure whether it’s as important to tax corporations as it is to regulate them, making sure they don’t defraud customers or employees, don’t pollute the evironment or maintain unsafe facilities, etc. Also, there should be a way to penalize corporations that don’t put any Americans to work- but I’m not sure how.
Should be working on some of these points.
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p>However, I am not hopeful for any major changes as Obama has named Jeffrey Immelt of GE as its leader.
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p>The issue, as many have noted here and elsewhere, is that the large companies have lobbyists and other access to DC leaders who craft tax legislation and, more important, regulation that medium and small businesses do not. They will push for tax policy that supports their business first and foremost. This has contributed to a tax code that is byzantine at best and requires a multi-billion dollar annual industry to help companies and people comply with and take advantage of the various complexities inserted into the code to benefit certain groups or companies or drive certain behavior.
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p>The periodic talk of changing or revamping or simplifying (or whatever words you choose) the tax code goes nowhere as the interests opposed to significant changes vastly outweigh, although not necessarily outnumber, those who would favor changes.
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p>But if we had leadership that was determined to get the job done, they could. They just keep acting as if that they have no power. I don’t believe that. With desire, determination and ingenuity, all of this could be corrected. Instead, we get bad policies written under the guise of compromise. I believe they have no desire to change anything.
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p>I know this idea is unpopular on this site, but Democrats are participating in the faux compromise schemes too, including President Obama. It’s just too bad that most will still rally around him come election day. I’m not going to.
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p>I won’t vote for the lesser of the two evils. I just won’t vote.
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p>I will let perfect be the enemy of the good because good is the enemy and perfect is the real solution.
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p>I am not Obama’s liberal base demanding that he follow along idealogical lines. I am a working middle class American citizen demanding representation. Neither party is representing working middle class Americans.
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p>For the next 15 or so months, my personal campaign and my personal responsibility is to get out the truth to my sphere of influence. I will be doing that, and have already begun.
Yup, don’t vote. That’s the answer. It sure works for all the other Americans who don’t vote, right?
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p>No?! Huh, I wonder why.
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p>And you’re actually going to try to get other people not to vote?
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p>Sad.
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p>Correction, it’s actually pathetic.
liveandletlive is expressing a common feeling. No one’s listening. Call it what you will….but there are people who are disheartened. They voted for hope and change….and feel as thought they’ve gotten something else all together. I was asked last night was the difference was between the democrats and the republicans when it came to tax policy. I said “only spelling.”
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p>And in liveandletlive’s defense – if I feel that I cannot morally vote for someone – I write in my candidates of choice, often people I admire.
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p>And Seth JP – is this the “politics of decency” that you’re practicing?
Justice4All,
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p>I think that you miss something of major significance in your defense of liveandletlive.
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p>You say that when you feel you can’t vote for any of the available candidates in a particular election, you write someone in, and this (presumably) on a case by case basis. When I can’t bring myself to vote for any of the candidates, I leave that particular part of the ballot blank. You and I are engaged in the process, making decisions (we hope) based on the individual merits of the candidates and the particulars of the election in question. But not liveandletlive. He’s decided, in advance, not to participate in the electoral process at all. And what’s more, he’s dedicated himself to a campaign of convincing as many people as possible to do the same. That, to me, makes liveandletlive a deeply misguided and potentially dangerous person. Not dangerous as in he’s going to do violence to some individual, but dangerous in as much as his efforts to convince folks to disenfranchise themselves, if successful, weakens our democracy. And I believe that that’s just about the exact opposite of what most of us here at Blue Mass Group are trying to do.
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p>Which brings me to the politics of decency. To me, that quote speaks of two things:
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p>1. That our policies should be rooted in kindness and an attempt to help our fellow man; and
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p>2. That we should treat our political opponents with respect and not stereotype them, vilify them, etc.
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p>It does not, however, (and this is just my opinion of course) prohibit the use of sarcasm or preclude one from pointing out when another is headed off the deep end.
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p>Please recall, I didn’t say that liveandletlive was an idiot, or unpatriotic or craven or any of the other wonderful slurs that we all too often throw at our political opponents. I said that his behavior was pathetic – in other words: “causing or evoking pity.” He obviously cares enough to post here and yet he’s let himself get so caught up in disappointment and frustration that he’s cutting off his nose (and all of our noses, as well) to spite his face.
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p>I think it’s pathetic. I feel sorry for him. I really do.
that you get more flies with honey. Your response back to liveandletlive wasn’t anything like that. It certainly isn’t going to sway her to your side.
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p>Here’s the thing – whether you agree or disagree with liveandletlive’s approach – the only way to let a politician know that you’re not happy is at the ballot box. Voting for them is voting for the status quo; it’s a tacit endorsement of what you consider bad behavior. Staying home is a time honored “vote with your feet” move. I don’t necessarily agree with it….but I respect it. It’s better than being sheep.
If it’s the only way to make them listen, I’ll do it. It’s not like we haven’t been trying hard to make our voices heard, yet no-one is listening. So if need be, I’ll be heard that way.
I’ve decided to join the “potentially dangerous” club. LOL
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p>Actually, what I’m doing is fighting for what I believe in. If you find that pathetic I don’t know what to say about that. I’ve never really been a “follow the leader” kind of person. I will definitely follow if your leading me in the right direction, and I’ll even give you plenty of time to sort out the kinks to head in the right direction. But if your messing around, and it’s become obvious that your not going to lead in the right direction, I’ll take the next exit out.
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p>My vote is not a given, it has to be earned. It has not been earned, and I believe the public has a right to know the truth. They are not getting the truth from traditional sources of news.
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p>While you may find it pathetic that I feel obligated to speak the truth about what is going on in our goverment, you may be glad to learn that I speak the truth about both parties, the Democrats and the Republicans. My reviews about the Republicans are far more scathing than they are about the Dems. So while I may cause people to worry about the path our current Democrats are leading us down, rest assured I will be sure to cause even greater worry about the path the Republicans will lead us down. I am always fair and always truthful.
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p>Don’t waste your time feeling sorry for me. Spend your time fighting for change that YOU can believe in. OK.
The trouble is that both of you are right.
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p>SethJP is correct that not voting is a disaster, at least if many more people do it. If those who know and care about a specific policy issue don’t vote, than that issue will be decided by those who do not care. That has to be bad.
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p>At the same time, liveandletlive is absolutely right that there is all-too-frequently no discernible difference between candidates, especially when measured by what they actually do. Voting for the “lesser of two evils”, especially when the voter genuinely feels that each candidate really is evil, is hypocritical and wrong. A write-in or a bullet is really no different from not voting.
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p>I feel as though we, and I, face a genuine quandary. There are no reasonable choices. I share liveandletlive’s aversion to voting in an election where there is no opportunity for needed change. I share SethJP’s aversion to not voting.
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p>Our system of governing is broken. Our nation is making terrible, murderous, and even suicidal decisions about matters of grave international importance, and not just one. Our actions are literally destroying humanity, and our much-vaunted “democracy” is utterly powerless to change our direction. We tried, hard, with Barack Obama. So far, that effort is an utter failure.
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p>I really don’t know what I’ll do.
Maybe I need a better understanding of things here. The way I understand it, a business can be organized in four ways — sole proprietorship, LLC, C-Corp, and S-Corp. There are differences between the types, best found here.
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p>Of those four types, only the S-Corp pays corporate taxes (the rest pass through income to the owners and the owners pay income tax plus Social Security/Medicaid tax). So this is the tax rate we’re talking about being “high”. S-Corps can transfer money to the owners via dividends (which are taxed at 15%, and are exempted from Social Security/Medicaid which is 15.3%).
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p>If we lower or eliminate the “corporate tax rate”, then it would make sense for a lot of people to incorporate as a C-Corp. Why? Because if you’re self-employed with a high income, you’re paying a top rate of 13.3% + 35% on your profits — 48.3%. If you organize as a C-Corp, and have a profit of $100,000 the corporation would pay 39% on profit over $100,000 (up to $335,000). Any dividends would then be passed to the owner(s) and taxed at 15%.
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p>So that means if we lower the corporate tax rate to, say, 20%, and someone makes $110,000 as a sole proprietor, they would pay 28% + 13.3% = 41.4% on their top bracket. Or they could incorporate and pay 20% + 15% = 35% on their top bracket. The 39% bracket is stopping people from doing this now. Eliminate or reduce it and you will see tax revenue drop – people will always elect the status most beneficial to them.
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p>I really don’t understand the complaints about “deductions”. If we tax corporations on income rather than profits, this would really hurt labor-intensive companies, and could even encourage things like offshoring of labor to foreign companies. Imagine that you buy an item for $1, put $20 of labor into it, and sell it for $25. Under today’s rules, your profit is $4 and that is what you pay taxes on. If your taxes were based on the $25 (or even $24), and you couldn’t deduct the $20 in labor costs from the taxable basis, this changes the picture dramatically. I don’t think there is a feasible way to eliminate “all deductions”.
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p>It would be even worse for someone buying a $1,000 item and selling it for $1,100. They would pay, say, a 20% tax on $1,100 ($220) when they only made $100 from the sale of the item. The federal tax would become a form of transactional tax, and this would hurt smaller businesses — let me illustrate — if your company is very horizontal, and you plant tomatoes, pick them, process them, package them, distribute them, and sell them in your own grocery store, you will pay, say, 20% on the retail price of your can of tomatoes.
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p>If you are a store owner, you will also pay 20% on the retail price of the can of tomatoes. But the distribution company will pay 20% on the wholesale price of tomatoes. The processing company will pay 20% on the price it sells to the distribution company. The picking company will pay 20% on the price it gets from the processor. The tax paid is compounded for smaller companies because there are more transactions in that chain. This will give an advantage to large companies.
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p>I think we should structure our taxes in ways that give more advantages to smaller companies – because smaller companies hire more people since they can’t take advantages of efficiencies of scale (10 car dealerships will pay 10 marketing people, whereas 1 large dealership doing the same volume will pay just one). But we should be very careful in how we approach this situation, because “simple” solutions could be disastrous to our economy.
Your chart is missing one – the LLP, which is how many lawfirms have recently re-organized themselves.
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p>The “complaint” that’s being raised is about how the current tax code, with its various patches and fixes, favors some companies, even gigantic global corporations….at the expense of others. These corporations have multiple entities throughout the world, with holding companies and hybrids ensuring maximum tax benefits. It’s unconscionable that GE should have no tax bill on 5 Billion USD in US profits, and 14 billion globally. Of course, they have a cadre of lobbyists, tax lawyers and advisors at their behest, to ensure such treatment…that the rest of us could only dream of.
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p>To your point about which is the best business form, it often depends on what state the business is filing in. Delaware is known for its pro-business climate. And actually, in terms of business trends, there’s been a significant shift towards filing as LLCs, with combine the favorable tax treatment of a “pass-through” company with the indemnity provisions of a corporation.
I agree that there is a labyrinth of special tax treatments and accounting tricks. I think that is different from criticizing “deductions” in general, which is what a lot of the common-man criticism seems to be focused on (like “lower the rate but eliminate the deductions ). It mirrors the conventional wisdom about what Reagan did (not sure if it is true) when he lowered the taxes on the wealthy (i.e. he supposedly also limited the deductions so that the wealthy paid more, again, not sure if this is true and I don’t want to just repeat it if it is false). There also seems to be an undercurrent in this country for a flat tax on income without any deductions. I think that the simplicity of that concept is masking some insidious advantages gained by the wealthy.
as the rust belt grows.
http://www.infowars.com/how-ca…
By deliberate design all of this is.
If we do not invest in our education and infrastructure, we will be relegated to second class status as an economic power.