Corporate and Big Business Taxes Fraud Solution: Don't Tax Them

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Corporations and Big Business Taxes Solution: Don't Tax Them

Get More Taxes From Big Business - Don't Tax Them

from the Curmudgeon's desk: GA Anderson

Big businesses or corporations are not evil, or bad, or greedy, and they generally pay all the taxes that they are required to pay, but too many Americans don't see it that way. They think big companies or corporations are greedy unpatriotic tax dodgers that put profit and the almighty dollar first, above all else. But that is just because they don't understand business or corporations. Or the real problem.

Most Americans that complain about big corporations just don't understand what a corporation is. It is a business structure directed by people, and an easy definition of what qualifies as a big business or corporation, (at this level, they are the same thing), is that if they are big enough to be traded on the stock exchange, then they qualify as a big business*, and these businesses are some of the most scrutinized and regulated entities in our economic system. The problem isn't big business, it's the rules and corporate tax codes that apply to them.

So if you want more taxes from them, or more patriotic responsibility - then don't tax corporate profits at all, because the U.S. tax code is a primary driver of all their actions to retain that profit. Almost all the "bad things" people think corporations do are related to the government's involvement, from tax codes to incentive programs.

*there are privately held companies, (no public stock ownership), that also qualify as big business.

Big Businesses or Corporations don't make decisions - people do.

A corporation isn't greedy, but the people directing it's actions may be. A corporation doesn't take jobs overseas, but it's management may. A corporation does not dodge taxes, but the people running it will hire the best tax accountants to take advantage of every tax break or loophole they can find - or buy. A corporation is only a business structure. Not an evil or greedy entity. It can be compared to a car - the sole purpose of which is transportation. But it is unable to accomplish that purpose without human action and direction. Same for a corporation - it's sole purpose is to provide a business structure for the capitalistic pursuit of profit, but it can do nothing without human action and direction.

The perceived evils of big business aren't that at all, they are the evils of greedy people. Once that is understood, it is much easier to see the real problems, individually, not the generalizations of "big business" or "big corporations," that only serve to mislead and misdirect public attention from the real causes.

One solution - don't tax corporate profits

The best way to tax corporations is to not tax their profits at all! That's right, zero corporate taxes. Let them keep all their profits, tax-free. Instead, tax the distribution of those profits.

Here's the logic: People start businesses to make a profit. It's that simple, that is the purpose of being in business. Why else would anyone start a business in our capitalistic economy if it wasn't to make money? And the only way to make money is to, 1) price the product or services such that when all business expenses, (taxes are a business expense), are deducted, there will be something left - a profit, and, 2) control those business expenses in the most efficient way possible - to protect that profit.

A young kid's corner lemonade stand is a business. Is that young kid doing it just to cover costs and hand out lemonade for the fun of it, or to make a little money - a profit, to buy something they want? Would it be logical to begrudge that kid a profit? Are they evil or greedy for wanting to make money? A corporation is exactly the same concept, just on a larger scale. So if it is okay for that young kid to make a profit, why is it wrong for a corporation to make a profit?

It is not wrong for either one to make a profit, and it is not wrong for either one to try to keep as much of that profit as they can, while still obeying the rules. And corporations have a lot of rules to obey. That is the problem. Too many government rules, and too many politicians willing to make new ones.

To get more tax money from corporate profits - stop taxing them. Get rid of the corporate tax code rules and government subsidy programs. Leave the profits alone and the corporations won't need to buy politicians or hire legions of tax lawyers and CPA's to change or get around them.

The Upside-down proof of the No-tax logic

In what will seem like a "bizarro world" type of reasoning, an excellent, and very legitimate report, (2 years in the making), from Citizens for Tax Justice* readily shows that the problem is the very act of taxing corporate profits, not the rate of taxation. The report - titled: "Corporate Tax Payers and Corporate Tax Dodgers," looked into the Federal taxes paid by 280 companies from the Fortune 500's" list of top U.S. corporations, for the years: 2008-2010,

During this period the Federal corporate tax rate was 35%.

Their findings, for a three-year average, (2008, 2009, 2010):

  • 71 companies paid more than 30% (average tax rate of 32.5%)
  • 98 companies paid between 17.5% - 30% (average tax rate of 24%)
  • 111 companies paid less than 17.5% (average tax rate of 4.6%)

But... of those final 111 that paid less than 17.5% corporate taxes:

  • 67 companies paid an average tax rate of 0% - yes, 67 huge corporations paid zero dollars in taxes averaged over a 3-year period
  • 30 companies paid (-6.7%) in taxes - in other words, our government paid them 6.7% of their corporate taxes in tax rebates and actual refunds.

That sure doesn't seem to buttress the argument to stop taxing their profits at all, until you look at the reasons these companies were able to get away with not paying any taxes, or even getting tax refunds, on hundreds of millions of dollars of profit. Even worse, all their actions were perfectly legal - they played by the rules.

The reasons they were able to do this, (the report's conclusions):

  • A tax code that was rife with special interest loopholes - how do the loopholes get there? - political legislation, so don't blame the corporations, blame the politicians
  • Government tax deductions - like the "bonus" 1-year 50% additional depreciation allowance. It sounds complicated, but it boils down to a free 50% increase in the tax deduction on business equipment and machinery in the first year. The affect is a reduction of taxable profits. - how did that extra 50% "bonus" get there? - political legislation, so don't blame the corporations, blame the politicians.
  • Government incentive programs - programs that offer business tax breaks and deductions if they do something the government wants - sort of like paying farmers NOT to plant crops, only relative to business practices instead of crops. G.E. received hundreds of millions from these incentive tax breaks and deductions, some in response to their actions to move plants and jobs overseas. - how do these incentives and tax breaks get on the books? - political legislation, so don't blame the corporations, blame the politicians
  • Government subsidies - our government actually subsidizes a portion, or all of a business's expenses when they do something the government wants, or thinks is beneficial to America. How are these subsidies created? -by political legislation, so don't blame the corporations, blame the politicians. And who decides if a company gets these subsidies? Government bureaucrats - think Solyndra.

All of that just seems to affirm that corporations really are greedy tax dodging un-American and immoral profit monsters. But what it proves, in fact, is that corporations play by the rules. It is not the corporations that are greedy - it's their directors, and the politicians that do their bidding for money and influence.

The problem is the rules. Too many, and too wrong. Get rid of them and stop taxing corporate profit. Take away the motivation and opportunity. Let them make all the profit they want. Let them take all the effort they devote to "working" the tax laws to protect that profit and turn it to making more profit. Then tax the distribution of that profit, not the corporation that makes it.

*Citizens for Tax Justice is a non-profit, non-left, non-right, organization, and you can read the report that supplied the above details here.

The real Big Business Tax problem

The real Big Business Tax problem is not what they do, but what the rules allow them to do. And who makes the rules? Politicians. So the best solution. Get rid of the rules... and the crooked politicians that can be bought to make them.

The reason Zero corporate taxes is the solution.

If there are no corporate taxes, then there is no need for the 1000's of pages of tax code that applies to them, or the accountants hired to exploit them, or the off-shore dodges to get around them, or the crooked politicians paid to create them. Problem solved.

But then where does the government get legitimate taxes from the corporations?

From the distribution of the profits. Corporations may make profits, but they don't keep them. The profits go to the people that own the company - the shareholders. In the form of dividends. After a company deducts all it's business expenses, (taxes are a business expense), what's left is the profit, which is then divided up and distributed to the shareholders in the form of dividends. That's where corporate profits can be easily taxed, without all the other issues that are involved in corporate tax codes.

Yes, the income tax code is a problem too, but at least it is a problem much less easily manipulated by influence peddlers. And it will also be harder, (hopefully), to get special-interest loopholes and rules implemented into the general income tax codes. But at least if the issue is in the general arena of income taxes, any efforts to manipulate the rules will be individual efforts, and not those of powerful industry lobbying efforts.

So top complaining about big business and big corporations. They are not the problem. They can only do what people direct and/or allow them to do.

Complain about, and act on, the real problems - influence-peddling and corrupt politicians. You have two very powerful tools: the vote of your consumer dollar - don't spend it with companies you don't think are good citizens, and your political vote - don't spend it on corrupt politicians.

If you aren't willing to do that, then stop complaining - you forfeit your right.

See more GA Anderson Political articles

GA Anderson aka the Curmudgeon
GA Anderson aka the Curmudgeon | Source

About the Author

Writing for the Daily Constitutional, and commentary from the Curmudgeon's desk - GA Anderson

"Seeing it does not make it real, and reading it does not make it true. Use a little common-sense and trust your instincts." - GAA

*Composite image component source citations: Creative Commons images from:commons.wikimedia.org, flickr.com/creativecommons, search.creativecommons.org, http://googlesystem.blogspot.com/2009/06/find-creative-commons-images-in-google.html. *photo and image source credits: divider and separation images - http://gaanderson.hubpages.com

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Big Business Tax Solution: Don't Tax Them Comments 11 comments

Charles James profile image

Charles James 4 years ago from Yorkshire, UK

I agree that corporations do lots of tricks to reduce their tax liability. Many of these are not good for broader society.

The money the corporations do not pay in tax would then be taxed as shareholder dividends - but only at 30% or so. So the total tax take is reduced.

I agree that the subsidies paid via the tax system also disappear, but there is still a net loss to public revenue.

Interesting idea - I have rated up.


GA Anderson profile image

GA Anderson 4 years ago from USA Author

@Charles - thanks for the visit and reading Big Business Tax Solution: Don't Tax Them.

And thanks for the rate-up, and thoughtful comment.

It's too early here for me to do the math, but I'm not sure it would be a net loss, after all they are not paying the 35% corporate tax now.

This was just a bare bones concept, but I think if we just dump the corp tax codes, and make the dividend tax a straight tax without special tax codes just for them, it would simplify the system - and a simple system is much harder to try to beat because of the lack of loopholes and special-interest goodies.

seems like a simple solution to me.

GA


Credence2 profile image

Credence2 4 years ago from Florida (Space Coast)

I hear you GA, but I have also heard the argument 'guns don't kill people people kill people" Sounds like much of the same to me. The corporate structure is such where the general capacity to rip off is increased a thousand fold.

Like you say the rules and the regulators are at fault, but it is the 'right' and their advocates that are most resistant to closing any loopholes and advantages that these entities and their individual components take at the taxpayers expense. I give Thurston Howell no quarter!Their lobbyists in Washington influence peddle and make certain the advantages remain in their favor, that is my problem. Too many of the legislators and lobbyists are indistinguishable from Thurston Howell, himself. So, what about main street? So, if you want not to tax corporations, the individual components and all their profits can be can be taxed without any loss of general revenue, then fine. I go along.

"They think big companies or corporations are greedy unpatriotic tax dodgers that put profit and the almighty dollar first"

Well is this not true, that is what they are there for, the dollar first?

Most informative article, thanks Cred2


GA Anderson profile image

GA Anderson 4 years ago from USA Author

@Cred - glad to hear from you again, looks like we might have some rough sledding ahead on this one though

Yes, that is correct - guns do not kill people - people do. Seems pretty straight forward to me. Knives and clubs are also used to kill people - ban them too? How about hammers? Ice picks?

Sorry, but I don't agree that corporate structure is set-up to rip people off. Come on Cred, you are usually more rational than this. A crooked sole proprietor business can cheat on taxes, abuse government grants and subsidies, and rip people off too - is that their general set-up too?

But we can agree that, generally, it has been the pro-business "right" that were obstacles instead of solutions - notice I said generally, not always

G.E. is a sweetheart of the Obama admin, and it turns out they are one of the worst offenders, in almost all categories.

of course corp lobbyists try to peddle influence - isn't that their job? And from the looks of things they were pretty good at it. But if we cleaned up Washington, it would not be so easy for them to succeed. But remember, even though the canvas appears red, there is plenty of blue involved too. Just under different guises.

and that was the whole point - just get rid of the corp tax code and all its issues. Tax the distribution instead - you are still taxing the same money, just from a slightly less corruptible direction.

And yes, the pursuit of profit IS the purpose of a corp. Do think something is wrong with that? Would you expect them to strive to just meet costs? Would you exchange you work labor for just bare survival necessities - and nothing more? (if you have a choice of course)

Looking back, I think your points reinforce the points of the article - corps aren't the issue, it's the people running them and corrupt politicians that make their actions possible.

Think of the irony - corps decry their tax burden, so fine, give them what they want set them free. Now wait for the shareholders to start crying a seeking influence.

As always - glad to have your input

GA


Credence2 profile image

Credence2 4 years ago from Florida (Space Coast)

Thanks, GA

We all know that small businesses are not equipped to take advantage of the tax code on the same scale. I did not mean to get into my beliefs on gun control or whatever. The people use the(corporation) instrument, enabled by the politicians to far greater effect to avoid taxation, than what they could on their own individually, is that not true?

While this pursuit of a profit is natural and expected, it cannot come at my expense, you pay whatever your portion should be, if the politicians are in bed them, then we get rid of them too.The interests of main street and their street are not the same. That is my point.

But we can agree that, generally, it has been the pro-business "right" that were obstacles instead of solutions - notice I said generally, not always

MOSTLY.... So why is that, is that part of the free-enterprise laissez faire mantra of the GOP? Who do they consistently protect?


GA Anderson profile image

GA Anderson 4 years ago from USA Author

@credence2 - good points, I don't mean to offer a curt response. But I agree with your points, so....

thanks for the good discussions, and thank goodness for Baskin Robbins :)

GA


Damian 4 years ago

This is a joke. "There are too many loopholes, so they shouldn't have to pay taxes." "It's not the corporation's fault it's worth billions, it's the people running the corporation who are responsible for continually taking advantage of poor people." "Blame the politicians who wrote these laws, not the corporate scumbags who paid for them." The point is, outsourcing should be illegal. Tax cuts and loopholes for large corporations should be illegal. This is an entire article on how we should be okay with being taken advantage of by people (corporations and politicians) who have more money than us. The tax system is a joke, as is the political system that runs this country. There is no fixing it; the only possibility is to destroy it and start over. If you don't see that, this is the place for you. Hope you're happy arguing for big business while it takes your money and laughs in your face, you bunch of political sheep. I'm expatriating as soon as I possibly can. This country is amazing, but this country is overcrowded with ignorant, hedonistic people who seem to be ENTIRELY incapable of forward thinking and logical reasoning.


GA Anderson profile image

GA Anderson 4 years ago from USA Author

@Damian - Best wishes on your trip. It appears you are not a business person, but you have access to a computer and the internet, so you must be a worker - or have a government-check income, either way, I hear Greece is great this time of year.

Or if you are really serious about your views, maybe you would be happier a little farther East.

GA


philabustah profile image

philabustah 4 years ago from Boston, MA.

You are one crazy ideologue! ( I mean that in a good way.) After all, it's important to know how we got into the situation we are now in. I call it "generational failures." Failures to stand up for one's liberty, their freedom, their individual rights-for them and their children. The conservatives and their constant quest for corporate dollars and billionaires are the prime generator of this depravity...whilst the Dems caught onto to still be part of the game. However, Dem constituents always took issue with their own. Reps just waved the flag and said 'do what thou will as the whole of the law.'-Satan. So, you think if we stopped taxing corporations they would quit lobbying, buying favor, removing laws and regulations???? Hah hah hah- Sorry! Not buying it.

Look up your history. Individuals are NOT LEGALLY taxed. Hence, it is the individuals and families that should not pay taxes. But, it is law and has always been, that profiteers pay taxes. I'm for what the founding fathers wanted.


GA Anderson profile image

GA Anderson 4 years ago from USA Author

@Philabustah - thanks for the visit and comment, but I think you missed my point.

I advocate taxing the MONEY, (ie. dividends, splits, etc.) that corporations pass on to their owners/shareholders.

Then it would be the individual recipients of that money that would have to make the effort to reduce their taxes.

Take the motivation, (and pressure) of paying taxes AND maximizing profits off of corporations - and let them focus on business operations.

I would envision this scenario...

Corporations no longer have tax liability. So, forget those expensive positions and maneuvers to avoid or minimize them.

But... when those "profits" are distributed - in whatever manner - which is generally to individuals - THEN tax them. Let the tax liability and responsibility lie with the individuals or entities that receive the money.

I would suggest that the Treasury would see more revenue than it does from the corps. I think that the people that would jump through the tax loopholes/evasions that many corps do now (because their mandate is to maximize profits), would be a minority. And much more easily held accountable.

GA


philabustah profile image

philabustah 4 years ago from Boston, MA.

Sure, I can agree with that method of taxation. Absolutely. But do you think Warren Buffet would agree with it?? :) Like the Buffet rule itself, the elite would never allow it. All smoke and mirrors.

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