Targeting tax cuts to mostly benefit small businesses which do the most hiring and investing would be one way to increase jobs. Truly helping the middle class would include an idea like allowing Millennials to deduct the interest they are paying on college loans. In short, the tax cuts need to be better targeted with serious consideration given to not blowing up the US deficit.
On April 18, 2017, Christopher Helman of Forbes penned the following, “What America’s Biggest Companies Pay In Taxes.”
“Who would benefit the most from corporate tax reform? The biggest taxpayers of course. With the help of FactSet Research Systems, FORBES statistics editor Andrea Murphy took a look at the tax situations of America’s biggest corporations — those 30 outfits with annual revenues greater than $80 billion. All told, in the past 12 months those companies have recorded income tax expenses totaling $117 billion — representing an average effective tax rate of 26.7%.
Microsoft in the year ended June 2016 had $20.1 billion in foreign income and a domestic loss of $300 million. Microsoft’s income tax expense was $3.3 billion, for an effective rate of 16.5%. Alphabet, the parent company of Google, posted a $4.7 billion tax expense, or 19%. Such “avoision” will continue as long as foreign income is subject to lower rates than domestic.
The U.S. continues to employ a so-called worldwide tax system. That means that earnings made overseas are only taxed when they come back to the U.S. Other nations use a territorial system, which does not tax overseas earnings of companies headquartered there. Candidate Trump proposed a one-time 10% levy on repatriated capital and adoption of the territorial system. Socialist Bernie Sanders, in contrast, favors requiring U.S.-based companies to pay higher U.S. tax rates on all the income they make worldwide.”
“Among the 30 megacorps, there were three companies that didn’t record any new income tax expense in 2016. General Electric earned $10 billion last year, but recorded a tax benefit of $400 million for a 12-month tax rate of -4.5%. Now before you get outraged, keep in mind that the income statement tax expense is just an accounting creation. Forbes contributor Peter Reilly explains that our convoluted tax laws enable industrial companies like G.E. to depreciate equipment for tax-deduction purposes more quickly than they can for book purposes. So cash paid for taxes can regularly be less or more than amounts recorded on the income statement as a tax expense. Defending G.E. tax status against attacks, CEO Jeff Immelt, wrote, “We pay billions in taxes, including federal, state and local taxes.”
“ExxonMobil, because of the collapse in oil prices, had an odd income statement in 2016, with EBIT of $4.2 billion, net income of $7.8 billion, and a $406 million income tax benefit. That would imply that Exxon paid no taxes in 2016. But again, it depends on how you look at it. ExxonMobil’s cashflow statement shows $4.2 billion in cash income taxes paid. The company says that in the decade to 2015 it made $82 billion in net income and paid out $110 billion in U.S. taxes.”
“President Trump has promised tax reform. The trouble is, after the GOP’s failure to repeal Obamacare, tackling taxes looks to have been pushed back to fall, at the earliest. Even if Trump joins with House leaders Paul Ryan, Kevin Brady and others to push for their vision a once-in-a-generation tax code overhaul, there’s a risk their efforts could stall out. There’s talk of bundling tax reform together with a grand overhaul of the funding mechanism for Social Security (and even doing away with FICA payroll deductions). It would be excruciating for tax reforms to be held hostage to a national debate over the future of how to fund Social Security. That would make the Obamacare repeal misadventure look like nothing.”