What the Top U.S. Companies Pay in Taxes
Apr 2nd, 2010 | By Charles L. Stanley CFP® ChFC® AIF® | Category: Featured ArticlesThis article explains in clear terms why a higher tax rate will usually result in fewer taxes being paid into the U.S. Treasury. Wouldn’t it be better if we had lower tax rates and actually collected them than higher rates that we don’t collect? Here’s what Forbes’ Christopher Helman found:
What The Top U.S. Companies Pay In Taxes
Christopher Helman, 04.01.10, 03:00 PM EDT
How can it be that you pay more to the IRS than General Electric?
HOUSTON — As you work on your taxes this month, here’s something to raise your hackles: Some of the world’s biggest, most profitable corporations enjoy a far lower tax rate than you do–that is, if they pay taxes at all.
The most egregious example is General Electric ( GE – news – people ). Last year the conglomerate generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.
For the rest of the story, go to Forbes.com
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An important note to make concerning this story involves, once again, the fear factor. The article implies that corporations paying more taxes will cause “job loss”, “lower wages”, higher prices”, etc. Here’s the problem with that implication – THE PROFITS will be subject to more tax… not operational costs/funding. The only accurate implication includes the effect shareholders will experience in lower dividends as that is directly associated with profits. All the other factors play no role regarding profits and therefore, should not be implicated as such. If those things occur, it will be based on a company decision that we need to profit more at the sake/sacrifice to the consumer or worker.
Jeff,
Here’s where I think you are missing the dynamic of higher taxes on corporations: If I am a CEO I will have an AFTER-TAX profit target, if my taxes go up, then I have to establish a way to increase my AFTER-TAX profits – that can be done by increasing prices and, as long as I don’t price myself out of my market, I can pay higher taxes and still maintain my target after-tax goal. So, whether I increase profits by raising prices or creating more internal efficiencies (meaning figuring how to maintain production with fewer employees), I will do what I can for my shareholders to keep the company profitable. Corporate Officers have a fiduciary duty to shareholders to maximize long term profits.
If taxes are raised on U.S. corporations, you can be sure every major CPA firm in the country will be working overtime to find ways to reduce the tax obligation under the new set of rules. Every major tax change has a subtitle to it – the CPA full employment act.
If we had lower, internationally competitive, corporate taxes, our corporations would not be working so hard to transfer profits overseas into more tax favorable jurisdictions. The U.S. would keep the few jobs that are impacted and the Treasury would collect more income taxes.
I understand the logic of keeping jobs in the U.S. by keeping taxes reasonable. That’s why Pres. Obama proposes to levy a tax that will, in essence, make the tax the same for any U.S. corporation located in any country.
The profit target you speak of is a subjectively determined target. Andrew Carnegie was once asked, “How much is enough?”… He replied, “Just a little bit more”. If companies communicate to their shareholders that due to being taxed more (something out of their control), the profit target has to be lowered. What you have is a battle between the have and have nots… WHO will really be taxed? The consumers (through higher prices) and workers (through decreased health benefits, wages, or hours to work) or the shareholders (translating in less money for dividends). There’s no law stating a company must make $X in profits… and again, these taxes are levied on profits. I understand you trying to make as much money for investors as humanly possible, but who suffers more overall? Someone with a lower dividend (don’t think that will cause someone to lose their home) or someone with a lower paying job with decreased health benefits?
btw, nice humor (CPA full employment act)
I agree, it’s like going slowly but surely. Collect lower tax rate but permanent than collect high tax rate but you’re not getting any because they don’t pay.