These 27 profitable S&P 500 companies paid no tax last year


#1

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#2

But this is a Good Thing, the trickle-down effect is totally valid!!!


#3

I’m willing to bet it’s mostly due to accelerated depreciation, and if that’s the case, there’s no connection between profit and tax credits at all. Does that make me a pawn of The Man?

Example: My company spent $800 last year, and earned $1,000, for a $200 profit. So tax the profit, right?

But we also borrowed $10,000 and bought a new money-making machine, maybe an awesome 3d printer because we’re hipsters like that. Now I get to deduct this year’s $500 interest payment, plus about 40% of the cost of the machine - $4,000. There goes my profit, in fact, now I’m showing a $3,800 loss. If there’s a tax credit for 3d printers, my tax bill could easily go negative - even though I’m profitable.

Is that evil? We could abolish the tax credit, and even the depreciation, and industry would stop spending on capital equipment and loads of manufacturing jobs vanish and a whole new recession gets going. But I would pay my $70 tax.


#4

But some companies manage the tax-free status it for years (or even decades). The whole “no profit after deductions” is a loop-hole easily abused (why run a business if it’s never profitable?).


#5

Well, that helps temper some of the rage for me. I guess like anything, you have to analyze and figure out what causes them to have negative taxes. What if some of those got tax credits for reducing green house emissions? etc.

Though the tax code in general is waaaay too complicated, way too many loop holes, and there are companies that game the system. I really think we need to basically wipe it clean and start fresh.


#6

How about changing the tax laws so that any company that hasn’t made a profit in a time period immediately becomes bankrupt? Make it something like 10 years, unless someone can come up with a really good reason why a successful company would legitimately be unprofitable in that time.


#7

The German tax code knows something similar: if you’re running a business without the intention to make profit (Gewinnerzielungsabsicht) the tax office can define it as hobby (Liebhaberei) and all tax benefits for companies/freelancers (VAT handling, deductions, loss carried forward etc) are null and void.

But afaik this is only used for small businesses, enterprises using tax shenanigans are ignored (in the 80s/90s BMW used “The Zero Tax Company” for investor marketing).


#8

I remember being in awe in my tax class. It suddenly made so much more sense how these companies could weasel out of paying taxes. Now that I’m an auditor, I encounter head banging stupid regarding the way folks do their books for maximum gain all the time.

I’m a gamer, so it reminds me of a D&D rules lawyer that tries to float a loophole, or who intentionally misreads something to get what they want.

My favorite? The head school districts financial head (who was an architect, by the way) that kept arguing that Generally Accepted Accounting Principles (GAAP) was only generally accepted, and he didn’t have to follow them. For the non accounting folks, those are the professional guidelines accounting lives by.


#9

GAAP accounting ≠ tax accounting


#10

Yeah something is trickling down…


#11

Does not compute. Why would you hold off on equipment investments that increase your profitability, even along with associated tax burden? You are suggesting that unless you can have your additional profit free of all taxes you would not pursue it? Hogwash. This is a fallacy often advanced around these questions, and it does not even come close to holding water.

Abolish the tax credits, at least for larger profitable corporations. Here is a perfect example of where we can give a small business an advantage.


#12

Does “trickle down” mean that they are pissing on us and claiming it is a rain?


#13

The article says Level 3 and Continental had carryover losses from prior years (profitable).

GM paid $1 billion in taxes in the US but had a credit in Europe.

It’s like the people writing the article don’t know what words mean.


#14

Are you arguing against creative destruction? Careful lest the economic fundamentalists hear you speaking that way - your lack or orthodox kowtowing will not go unpunished.

Also … “industry would stop spending on capital equipment and loads of manufacturing jobs vanish” reminds me ever so much of this …

“Oh noes - if we tax those patriotic job creators they’ll patriotically shut up shop and patriotically move overseas!” Congratulations, you just made yourself the subject of a TtDB :smiley:


#15

I sure feel trickled down upon, don’t you?!


#16

Not at all. I mean to say very often an investment will be profitable with a boost from the tax code, but not profitable without. Capital investment in general tends to work that way. Also, small business gets all kinds of nice advantages, so your wish is granted.


#17

You don’t really think I was saying that, do you? I was saying that if companies quit buying machines - which pretty much happened in 2001 - then the other companies that make the machines will lay off a ton of workers - which happened in 2001.

Personally, I’m in favor of Eisenhower-era tax rates. Bur corporations do count on tax breaks to make those machines affordable. Does that make sense?


#18

Very often? That’s wishful trickling if I’ve ever heard it…


#19

The problem with your example is that for many S&P companies it doesn’t work that way,

A better example:

Your company spent $800 last year, and earned $1,000, for a $200 profit. So tax the profit, right?

Except that you created an off-shore subsidiary in Barbados and transferred your intellectual property to it. That includes your company name. And the software you wrote in-house - even though none of your programmers ever set foot in Barbados.

You never made that $200 profit, because you had to pay $200 to your off-shore subsidiary for the use of your company name and software. And so you don’t pay taxes on it. You wholly own the subsidiary, but it’s in a tax haven so you’re not taxed on it.

Now when you want that 3D printer you borrow money from the subsidiary. And you claim the interest (which really, you’re paying to yourself) on your taxes. Once or twice a year you visit your mail-drop in Barbados to keep it legal, and the subsidiary pays for the “business trip” and a luxury hotel.

Meanwhile your smaller competitors are paying full taxes to do the same business. Assuming you don’t drive them under with your competitive (tax) advantage.


#20

I’ll take those Eisenhower era tax rates if it means taking the whole of Ike’s tax code. Top to bottom. Including all the deductions and credits circa 1956, with brackets adjusted for inflation since then.