Your ineptitude bores me, Jopa.
If you have a problem with something Ben said, state it and give us your rebuttal.
Instead we get a vague generalization and personal attacks from you.

I replied to your response at the bottom of the page. Press [CTRL] + F and type, “Dear Time”. I didn’t realize I didn’t hit the reply button earlier.

If I may say it, ditto!

This is a little off topic but seeing that we are most probably colleages, I would like your opinion on what the avg real economic income tax rates paid by corporations are, particularly in a relatively closed domestic competitive environment. (hint, this is a trick question posed by one of my acctg profs a long time ago)

Does it hurt or help the economy if domestic corporations are required to pay much higher tax rates? Is there any collateral damage to citizenry by increasing corporate (and other business) tax rates?

Let the games begin!

MJG2112 – ha – trick Q indeed! And yes – off topic. But I’ll bite and add comment. Those of you less interested in taxes – feel free to skip this comment.

Let’s start with hardly anyone pays their tax rate as in tax bracket. C Corps are 35% (tax bracket not effective rate). Which is currently the highest. So businesses moving to a pass through (S Corps, partnerships, sole props, etc) get a lower tax bracket rate if their income is below the highest bracket (currently $388K) and they drop to 33%, 28%, 25% 15%, 10% or 0. If over that – also at 35% currently. However if we move that to 39.6% (Obama’s proposal) that changes that game again.

But let’s go back to “effective rate”. I don’t have any corporations paying 35% as an effective rate. And by the way – all of that is legal deductions and credits and planning to take advantage of opportunities that clients are able to do that fit with their business needs. Some sort of an average – well that would vary quite a bit depending on their situation and their tax guy. And tax code simplification is another discussion. (Obama BTW for those not in tax circles has added more complexity & uncertainty to the tax code than any other president I know of and he hasn’t even completed his first term yet). He makes tax planning a nightmare for us and our clients by passing laws in late Dec for short term periods that effect long term planning. Obamacare, threatening to increase taxes on business owners, pushing for Bush tax rate expiration, and a host of other unfriendly to business policies are in fact directly contributing to businesses not being able to hire or plan long term as they have a very real fear of being run out of business or having employee costs bankrupt them – of course they are hesitant to hire. It is also the progressiveness in our tax code that adds the complication, and with more complication comes more “loop holes”, and this is slanted to those who can afford tax professionals to help them navigate just trying to get a basic tax return or business return filed. If you’re mad about large businesses getting these benefits – get rid of progressives and their progressive tax policies and control of behavior and you will simplify the tax code to a place everyone can navigate. If you’re mad about not having a job – get rid of Obama. (I don’t need to say this to business owners – they already get it).

But here’s what gets me – news sites and people complain about these big bad evil corporations who may be paying a zero or something lower than 35% tax rate. That’s all slanted to make the story. They may not be making a profit, they may have prior year net operating losses they have carried forward from past years where they did not make a profit, they may claim legal tax deductions, they may be taking advantage of tax credits legally passed by the Obama administration to make businesses do one activity over another (think green energy) or any number of other legal and encouraged activities resulting in reducing their taxes and therefore their effective tax rate. These news story items do not tell the whole story of how they got something less than 35% only that is is less and are presented in a way to make it appear these corps are somehow evading taxes or doing something illegal. My experience is, very few are. If there is something illegal, then let’s talk about that and prosecute that. But let’s not demonize for taking a deduction for a business expense or taking a tax credit the government puts out there to get you to do a certain thing and then turn around and bash you for it. If you don’t want corporations paying a lower effective tax rate – then change the law (before they file not after the fact retroactively and demonize someone for “playing by the rules”).

Now back to the individuals who complain about those corps not paying a high enough rate – what’s YOUR effective tax rate? I posted another place on this site nearly half pay zero. Most of these are also taking out of the system by claiming other credits (child tax credit, earned income credit, etc) so their effective tax rate is zero or even negative. This includes by the way many who work and have a good job – but their tax refunds are higher than what they pay in (some people think they pay taxes when they actually do not). Much of this is thanks to Obama making several of these credits refundable (instead of non refundable – meaning you are not limited in your refund to your actual tax liability allowing people with no income to actual file a tax return to get a refund and advertising to them to come in and claim it) which makes our tax system a welfare system. We have another government branch to handle that – get it out of the tax system.

As for the corp tax rate being one of the highest internationally – well, if you’re big enough and able to move overseas to lower costs – it’s something to consider. Politicians need to remember that we need to compete for business (and high wealth individuals). Not pander and not crony capitalism. But you can’t do the progressive thing and just tax more and more and expect those who can do something about it to stay.

Wow, an incredible answer that is most certainly does your screen name proud. Good job.

However, I did say this was a trick question, right?

The answer provided by my professor was actually 0%. Corporations are just conduits for the pass-through of economic resources and goods / services.

Corporate taxes are part of the company’s cost structure and as such, corporations may be viewed as not actually paying taxes. Instead, corporations attempt to pass their tax assessment to the consumer through higher retail prices. Being a CFO who is highly integrated in the budget process, I can speak first hand that taxes are a key variable in establishing predeterimined profit (cash flow) objectives and retail pricing (when economically possible) is a primary factor to bridge these financial objectives, especially in a mostly domestic competitive environment. Foreign competitors with lower corporate tax rates and / or lower labor rates tend to have a competitive advantage in pricing that in some cases results in US companies being forced to absorb some or all of tax burden.

So, what does this mean?

1. If the corporation is able to pass 100% of its tax into its retail prices, the end consumer is the one who actually pays the “corporate” tax. This pass-through has no bias among economic classes which results in the poor shouldering a disproportionate amount of the “corporate” tax (wealthier individuals have a much higher savings / spending ratio)

2. If the corporation is not able to have 100% of its tax included in its retails:

a) Other internal costs will be reduced (i.e. labor reductions through pay increase limitation / freezes, higher production standards, changing to an overseas-based operation) and/or

b) Earnings will be decreased resulting in lower stock values and a higher capitalization rate (higher costs) for public corporations. These higher costs result in greater inefficiency in the financial market.

c) Of course lower stock values / returns also have a significant impact upon a company’s (and state’s) ability to fund pensions through investments, insurance rates (including health care cost), and an individual’s ability to retire, and many other issues.

These are just a few issues related to corporate taxes. In reality, there is an extremely complicated relationship between individuals and corporate entities but there is no denying that this relationship does exist. One cannot simply increase the tax burden of the “evil” corporations without simultaneously impacting through either higher inflation or decreased wage potential.

The old saying “What is good for GM, is good for America” is very much as true today as it was during the time of its origin (well, okay – back when GM did not have government ownership that is).

Great job! Totally agree with this analysis as well at an additional angle.

In other words – increasing taxes on corporations produces multiple layers of negative results for us.

There is a good and sound reason for there being “a” tax. But increasing rates in this economy at this time from what they already are do nothing but hurt us.

And yes, C corps also are “double taxed” by taxing C corp earnings at 35% and an additional tax on money shareholders pull out as “dividends”. We can also start adding several other taxes (payroll, medicare, social security, soon to hit Obamacare, sales & use tax, business license tax, business property tax, regulation compliance costs, and the list goes on). Not enough space to address it all here!

CPA:

Of course in addition to the 35%, C Corp dividends are taxable up to a 15%. Depending upon the ratio of dividend distribution to EBT. The actual tax percentage associated with C Corps could go as high as 50%.

Up to 50%! Again, it should be government thanking business, not the other way around.

Actually, as I rethink the discussion, the topic of taxes is actually spot on. The underlying objective of Obama’s speech was to show a dependency of corporate or business success upon the public sector and thus try to justify his idea that profitability should be more evenly distributed amongst all in the commune. If a person accepts this perspective, the person is much more inclined to endorse Obama’s efforts to place a greater tax burden upon those beyond the $250k mark. Where the corporate tax issue comes into play, is the question of what unintended financial consequences (assuming unintended) are levied against society in general, and the poor specifically, if this policy is enacted.

Of course – we’re watching politics set the stage to raise taxes on the “wealthy”.

Also, just one other comment. I agree with where you went with that – but also consider that by that basis (increase pass through costs to customers passes on the tax cost to the customer and then is not paid by the corp) that puts effective rate to zero by that method. This is a text book kind of solution and for some it makes sense. And clearly, increasing a cost to a business causes them to have to raise prices to customers (causing customers to pay higher amounts for the product they wanted). Completely agree. However, one added thought to move it from text book to the business owner actually running a business. At the end of the quarter or year, he actually has to sit down and right a check to the government for the amount of tax he / she owes. That often does not come out to zero magically at the end of the day even if they increase pass through costs to customers and make other adjustments. So even if you are left with increased prices to the consumer by increasing costs to the business provider, in my book if you have to write a check then you had a cost of doing business and therefore a tax (in this case) which makes your effective rate something more than zero. If they didn’t need to write that check, that money would be available to them to hire another worker, purchase more equipment, etc. It is not often we can actually get the effective rate to zero for all businesses by your method of increasing costs to customers as a cancellation of tax. Also, not every business can increase their cost to customers by the amount needed to cover this as it will depend on their industry and what they have available to work with and who their competitors are.

Just an added thought as I just reread your “zero” analysis. Not necessarily disagreeing with you – just adding another thought to the discussion. I would have a hard sale to explain to some of my corps that their effective rate was zero if they had to write a check.

I agree; the pass-through is not as clear-cut as I wrote. Part of this relates to timing differences and the company’s ability to forecast tax effects upon future profitability. In your example, the (I am assuming) smaller business owner writes a check for, say, an additional $5k to cover a higher tax rate. The business owner has fixed costs, some of which are inflationary-based, which need to be covered in the upcoming year. In this case, it is probable that the owner will in the year after the tax increase either 1) raise the price for his goods or services, 2) reduce payroll, 3) reduce other op costs, or 4) simply eat the $5k. The first option, raising prices, is an obvious pass-through of the tax increase. The remaining options have the effect of lowering the wealth effect created by the economic multiplier which has a more indirect, but nonethess, significant impact upon the micro-level economy.

In the case of the larger corporation which has a more sophisticated control system, the impact of the tax increase is realized by the economic community much more quickly but the net effects are the same (albeit on a much larger scale).

I suppose the take-away here is that there is direct connection to the consumer when corporate taxes are raised be it through a) increased retail prices, b) reduction in employee compensation, and c) weakened overall economic conditions through a reduction in the economic multiplier. Of all the citizens, the poor are the ones most impacted by higher corporate taxation because of their low disposable income levels.

I am a proponent of substantially lowering the corporate taxes to help jump start the economy.

I am fairly sure that this is not news to you, but American companies are holding on to near record levels of cash on their balance sheets. This cash could be used as investment into PP&E (plant, property, & equipment) that could restart domestic manufacturing and thus the US economy. However, the sound economic principle of risk & return is discouraging such investment.

The higher the risk, the higher the return – basic stuff eh? Today’s depressed economy is a risky market due to the substantial reduction in personal disposable income. Couple that with uncertainty in tax rates and the complexity imposed by the significant increase in the regulatory environment and you have one very serious risky scenario requiring an extraordinary return.

In terms of return, the US has one of the highest corporate income tax rates so sales revenue and / or gross profit margins must exceed that of foreign companies just to stay at par. However, in this economic environment, such revenue is highly improbable due to the aforementioned shrinkage in disposable income.

To balance the playing field and solve the risk / return dilemma, we need to substantially lower corporate tax rates for corporations domiciled and operating in the US and to offer a tax temporary abatement for US corporations if they agree to repatriation.

“I would have a hard sale to explain to some of my corps that their effective rate was zero if they had to write a check” – Yes, but imagine the increase in your firm’s business if you could.

I have to go back to work but this has been fun. If time permits I will check back later.

Thanks.

We are in lock step.

Many of those businesses are holding on to record amounts of cash because of what we see coming for them in increased costs for compliance, taxes, employee costs, and more directly being screamed at them from this Obama Administration. When we do tax planning for our businesses we run current case situation, and then a future scenario which includes what Obama wants / is passing and what their taxes will look like next year if no other factors change (so that we see the tax only impact dollar for dollar on their unique business situation).

It is actually much worse for pass through business owners (S Corps, partnerships, and sole props) because increasing the individual tax rate to 39.6 hits these businesses. The changes also bring back Pease (limits itemized deductions) Exemption phase outs, and the new to come next year 3.8% Medicare tax on investments, and others in addition to increasing tax rates (because your business tax is figured on your individual tax return for these business owners). Then we add Obamacare. Many business owners are staggering under what this all translates to them in real dollar need to plan for additional costs. Some of my business owners are not looking at a 3% increase (which is what the Bush Tax Rate expiration TV analysis makes it sound like it is seeming manageable) but some are looking at their taxes doubling when you add the other components of what Obama is passing. When you have a business owner who looks at the outlook and see he needs to plan for an additional $130,000 in taxes next year when he paid last year about $70K for taxes (when income and other factors do not change) that money has to come from someplace. Many are not in a place where they can remain competitive and hold market share if they try to overcome this only by increasing the price of their product. They may have to do it some – but it’s going to have to come from another source or combination of to get their business through this change. It often is hard discussions about who will need to be let go or whether their business can continue. It is especially hard on the small ones that don’t have anyone left to let go and many are holding on as it is. This is someone’s paycheck that there is now no money to pay because we have to pay it instead to Obama. Many owners haven’t been getting paid as they try to keep their employees with a paycheck and many are taking out large amounts of debt and having trouble getting the financing as it is. Every situation is of course different which is why business owners need to be discussing this with their CPAs to get the information they need relative to their unique situation to enable them to plan for what’s coming. This environment does not lend well then to “let’s go invest in a new employee we really need or some new equipment” kinds of discussions. And yes, those who can are hoarding cash in preparation.

I’d be a fan of making the corporate rate and all levels of income individual tax rates all the same at 15%. I believe our government should balance it’s budget on less and not more. And yes, that means they may need to cut a few things. But really – shouldn’t they? The rest of us need to when we live outside of our means. And that includes those businesses that they keep adding more costs to via tax and regulations.

I’d be happy to go through the government budget and would be able to have it balanced (if given all access and authority to do so), a plan in place to pay down the deficit, lower tax rates in place encouraging productive businesses and individuals to thrive and generate jobs and commerce, and we would still have all things in place we really need (defense, roads, etc). I would get rid of what we do not (in my opinion which is a LOT of government). Of course, I would never be elected and it would never make it through the committees. : ) Too many people want too many hand outs for doing nothing.

It’s been nice talking with you MJG – I like you! I’m sure I’ll see you on another site!

So Paul, tell me what business experience Obama has had, besides his current on the job training. Oh yes, community activist. What a crock. I wouldn’t trust Obama or Warren with a frigging lemonade stand.

“Alex, great post, but your preaching to the choir here. These folks have already been brainwashed by fox news, and rush. It is clear, none of them have taken the time to listen to the complete speech that these parts have been taken out of context. They hate Obama, and are being fed the fuel to keep that hate going.”

really Paul? yes, of course, we’re ALL brainwashed, all of us, not you though, your a f’in genius right? So… you must be a gov. worker(parasite) drone who actually feeds off the successful working class.

Alex missed the point that the ‘bulwark’ of society is independent small business workers who hire 90% of the work force, unless your in communist China. That Capitalism created the greatest economic engine in the free world, hello? the one that you feed off of. Government’s sole purpose is to protect this engine and the gov. is suppose to have limited powers. have you read the Constitution?

Yes, I hate Obama! Not because he’s black, I love Allen West, an American patriot. Obama is a clear and present danger to liberty, to our way of life, but you can’t see that because your filled with hate, you need someone to hate/envy because your a loser.

obama’s socialist programs have benefited you and you want more “free stuff”. America will decide in November, God help us! wooops, I hope I didn’t offend you by mentioning God. Call your ACLU lawyer you rat.

You cannot do anything but lie.

Paul you must be a total loser and no sense of hard work to build a business. To blame Fox news is just a butch of crap. What they reported was what came out of Obama black a** mouth ! You Liberails can twist and turn the truth all that you want, but you can’t hide it. Every Lier is reveiled in time and now it’s Obam turn ! He had hurt his own race because of his lies and his so call chance. So put a folk in him ( He’s Done ! ) Not Fox News Fault, let me help you along and follow me at jesse.lyles1facebook.com to see who this black man is. I have reseached him for a very long time and I won’t charge you for my sevices. Thanks Jesse Lyles in Paragould, Arkansas 72450

Paul, Alex, lousy posts. Just because you yahoos survived the abortion lottery doesn’t mean you can think. Frankly, in your cases, either you get ‘paid’ to send in your half-_____ responses, or you have too much free time on your utopian hands.
Do Amerika a favor, and go into business. Learn the difference between spit and shinola. Until then, you’re child-like theorists who understand little or nothing in the real world. Or, consider becoming teachers. Then, you can see firsthand how utopianism and freedom NEVER mix. Losers. By the way, your W H ‘God’ is a false ‘God.’

What is really scary is: “I’m from the Government, and I’m here to help you”.

His head is stuck somewhere else than in the sand

Sorry, no edit button.

“In business there is no question that the business entity stands alone…”

should have been:

In business there is no question that the business entity DOES NOT stand alone…

Thank you, MJG2112, for writing a well-thought-out and logical post, that even includes correct grammar and spelling. (OK, there was one mistake, but you caught it and corrected it.) Some of these posts are difficult to even understand, because it seems that the posters don’t proofread them before posting. Of course, this could be partly due to the fact that most of the posters have probably been “educated” in our nation’s shoddy public schools.

My father built his own business and made a success of it in the 1960s and ’70s. I’m sure he would have given the government credit for the interstate highways he drove on (he sold office supplies to stores), the law enforcement that allowed him to haul his wares without fear of robbery, the post office that allowed him to send bills and receive checks, etc., etc. He was audited nearly every year because he had a home office and the IRS is suspicious of those, but he always dealt with it easily because he kept good records. Obama was right, and any good businessman or businesswoman should be willing to give credit where credit is due.

Carrobin,

I don’t think it is the credit Obama is looking for. It’s the money (taxes). The support for increasing taxes on those he deems have not yet paid their “fair share”.

Thanks L W; I appreciate the positive feedback. I must admit though that my posts are not without grammatical and spelling errors as this is certainly evidenced by my initial contribution to this thread. Regardless, the key is to attempt to view these types of discussions objectively and provide commentary based upon reasoned logic and not to just “win” an argument or to simply hurt others with opposing views. I attempt to adhere to this philosphy but, like my spelling and grammar issues, am not always sucdessful in doing so.

Take care.

Carrobin:

First off, thank you for reply. I don’t wish to split hairs, but there a couple points I wish to comment on.

First, your rebuttal is based upon testimony you believe your father might make if he were directly participating in this discussion. Although you may have an open communicative relationship with your father, his feelings on the matter, without his direct commentary, are hearsay and are thus not very persuasive.

Second, it should be understood that government by itself is nothing more than a conduit in the creation of infrastructure. Government does not place shovels in the ground to create roads, businesses that are subcontracted by government do. And who pays the subcontractors that build infrastructure? Individual and business taxpayers do. In fact, it is through the taxroll provided by individual and business taxpayers that government workers are provided a place of employment.

The people should thank the government?!? No, the government should be thanking the people.

Who said that? Not Obama. Look it up.

Yep if you are not a minority try to get you one of those SBA loans, GOOD LUCK with that!!!

Of course I would.

Unlikely given the degree of political polarization that exists currently, but seeing I have no way to contest your statement, I will have to accept this answer at face value.

Thanks for responding.

AND, he never said that we owe it all to him or the government. He said that government has a “part” in infastructure and the research that was done for the internet. He never said that your business success was because of him. F A C T. The hype has been taken out of context once again. People don’t listen anymore. They hear one word or sentence and start spewing hatred.

Obama’s whole speech in Roanoke:
http://www.youtube.com/watch?v=XATy4qhxMUY

Re-elect Obama so he can create more jobs?
He’s had 4 years, where are the jobs?
Republican Privatization of Social Security will break promises to seniors?
Duh, I think the Democrats have already done that by raiding our SS funds.
The Republican promoted Privatization would allow people to control their own accounts. If they are stupid and don’t want to do that, they could still let the Government control their destiny.
When our President succeeds, our Nation succeeds? Only if success means giving up our Freedom (what little we have left).

Hitler would have loved that crowd.

Regardless of your defense of Obama, he spoke stupidly! He had no business going down this road unless except to add fuel to his fire of class warfare. He is insulting and mean spirited! He is an enemy of the USA

He is working diligently to divide our nation and as angry as I am right now, I’d say he is doing a pretty damned good job at it.

Too bad the only thing he is good at is destroying America and our great brotherhood and courtesy towards all men and women.

BTW, before you insult where I choose to get my news information, perhaps you should take a good look at the lack of information your networks report. Your president has never been vetted by the press, if this were Bush, people with your mentality would be out with pitchforks calling for his head on a spike.

Your president has an agenda and it is not good for the only free country left in this world.

If we could not exist and prosper without the innovations of Big Government, Alex, then why do they need to pillage our coffers? Why don’t those wizards of economics create their own wealth?

That was supposed to be a direct reply to Alex. I don’t know why it wound up here.