aside What Are The Rate Of Taxes That Big Businesses Really Pay?

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BERKSHIRE HATHAWAY 2016 SALES: $223 BILLION/ EBIT: $36 BILLION
Every independent study of the republican President Donald Trump’s tax cuts proposals benefits mostly the very wealthy. Right now, the wealthy have been the big winners with a booming stock market. The truth is that the US cannot afford to increase the deficit that targets most of the tax cuts to the rich.
The major corporations are sitting on tons of cash while avoiding making major investments. Additional tax cuts for these companies will do nothing to create jobs. Incidentally, the largest businesses pay much less than the advertised 39 % tax rate. Decreasing the rate to match reality while closing off loopholes would be a point to consider.

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.

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JOHN FLANNERY CEO/ SALES 2016: $120 BILLION/ EBIT $10.2 BILLION
Here’s the rest of the story as to much big businesses really pay in taxes…
As per 8/18/ 2016 taxfoundation.org report,  “The worldwide average top corporate income tax rate, across 188 countries and tax jurisdictions, is 22.5 percent. After weighting by each jurisdiction’s GDP, the average rate is 29.5 percent. By region, Europe has the lowest average corporate tax rate, at 18.88 percent (26.22 percent, weighted by GDP). See: Corporate Income Tax Rates around the World, 2016 – Tax Foundation

On April 18, 2017, Christopher Helman of  Forbes penned the following,  “What America’s Biggest Companies Pay In Taxes.”

Excerpts:

“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%.

WAL-MART SALES: $485 BILLION / EBIT: $22 BILLION
“The biggest taxpayer was the most profitable: Apple, which reserved $15.8 billion for income taxes on $59 billion in operating income. Apple reports its effective tax rate as 25.8%, which is a bit lower than the statutory 35% rate. The iPhone giant (like many tech companies with a lot of intellectual property) has become famous over the years for deploying legions of accountants to devise offshore tax avoidance mechanisms with names like “double Irish with a Dutch sandwich.” Why book profits in the U.S. if you don’t have to? Unfortunately for Apple, its pot of Irish gold appears to have evaporated. Last year the European Commission presented Apple with a $13 billion tax bill, payable to Dublin, on the grounds that Apple’s tax structure had benefited from “state aid,” a no-no. CEO Tim Cook has called it “total political crap.
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EXXON-MOBILE / 2016 SALES: $198 BILLION/ EBIT: $4.2 BILLION

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.”

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“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.”

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2016 SALES: $136 BILLION BOLLARS/ EBIT: $4.4 BILLION

“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.”

See the whole list of tax bills for America’s 30 biggest companies here. 

6 comments

  1. Gronda, companies have been sitting on cash. Giving them more won’t trickle down as much as believed. This is s reason I invest more in high dividend payers.

    Warren Buffet said taxes and regulation have never gotten in the way of making a good investment. I have heard a small business owner say the same thing, I found many CEOs are sand baggers, which is a golfing term for those who report to high a handicap. They blame regulation, the ACA, taxes as obstacles. So, if they fail to meet objectives, they have something to point to. Fellow CEOs on their Board give them a hall pass because they do the same thing. To me the 80/20 rule applies to CEOs as well, with only 20% earning their true value.

    Just a few more thoughts. Keith

  2. Dear Keith,

    Great analysis! I would not have a problem to reduces tax rates to what corporations actually pay on average which is around 27% if loopholes or outdated subsidies like for the oil companies are ended. I want the carried interest and the pass through companies’ loopholes fixed. There should not be an estate tax break beyond what already exists.

    Steve Mnuchin has been arguing that there is no way to do a tax cut without benefiting the wealthy. Which planet does he think “we the people” live on that he thinks this con will work?

    • Gronda, someone may want to remind Mnuchin when the Bush tax cuts expired, because of the recession, Obama and Boehner restored them on the masses and not the wealthy. Keith

  3. Sadly, one can argue that the corporate tax rate cannot be raised b/c in a global economy, companies can simply relocate overseas. And that’s exactly what happened over the past two decades, with US manufacturing dropping to the lowest point. Tax receipts are diminishing any way you look at it… which is why Trump (erroneously) is pushing for more corporate tax cuts and creating better business environment for companies – at the expense of climate change, pollution, more crony capitalism and corruption. This is Reaganomics 2.0 – the little guy always pay more!

    • Dear !EarthUnited,

      Because of the US deficit, we simply cannot afford tax cuts for the wealthy. I can see targeting tax cuts to those US companies with a rate that most pay now which is not close to the advertised 35% as well as ending loopholes like the carried interest and the pass through corporations and subsidies that don’t add a benefit like the oil company subsidies.

      Tax cuts should be targeted to small US businesses which do invest in equipment / expansion/ better benefits and personnel and the middle class to poor folks because they would spend the monies.

      Hugs, Gronda

      • I agree with your very rational suggestions, which is why it will never happen. Repubs are by nature beholden to the rich. Hence more tax cuts for wealthy/ corporations and more tax burden/ social cuts placed on the middle & lower classes. *Sigh* 😦

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