Corporate taxes fall to 12.1 %

[ugonow]

online.wsj.com/article/SB10001424052970204662204577199492233215330.html " --With Tax Break, Corporate Rate Is Lowest in Decades
. BUSINESSFEBRUARY 3, 2012, 1:02 P.M. ET.With Tax Break, Corporate Rate Is Lowest in Decades .
BY DAMIAN PALETTA WASHINGTON—U.S. companies are booking higher profits than ever. But the number crunchers in Washington are puzzling over a phenomenon that has just come into view: Corporate tax receipts as a share of profits are at their lowest level in at least 40 years.
Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That's the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008.
Corporate income-tax receipts typically fall during recessions, ..."

[Savoir Faire-Demogague in NJ]

BY DAMIAN PALETTA
WASHINGTON—U.S. companies are booking higher profits than ever. But the number crunchers in Washington are puzzling over a phenomenon that has just come into view: Corporate tax receipts as a share of profits are at their lowest level in at least 40 years.

Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That's the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008.

Corporate income-tax receipts typically fall during recessions, ...

The article did not provide any analysis of why tax receipts have fallen. As a knee-jerk reaction I would toss out that prior year losses are still being carried forward, but I cannot say for sure.

An analysis by industry sector would be helpful. For example, in NY State, and NYC, both govt entities get 20% of their revenue from the financial sector. When that sector imploded the state and city were in dire straits.

[Savoir Faire-Demogague in NJ]

Incidentally the percentages quoted, 12.1% and 25.6% are very misleading. What are the raw numbers.

[billisonboard]

Feb 3, 2012 15:45:56 GMT -5 Savoir Faire-Demogague in NJ said:

Incidentally the percentages quoted, 12.1% and 25.6% are very misleading. What are the raw numbers.

Misleading or have a stronger emotional appeal than the raw numbers are likely to have?

[ugonow]

Losses carried over could have something to do with it, true. But after tax profits as a whole have been pretty durn good .Hopefully, sustainable.

[Savoir Faire-Demogague in NJ]

Many sites turning up in google referred to the wsj article, but I found this:

www.huffingtonpost.com/2012/02/03/corporate-profits-tax_n_1253007.html

As a percentage of ever-growing profits, corporations are paying less in taxes than they have in decades.

Thanks in part to federal tax breaks, corporations paid out just 12.1 percent of their 2011 profits in taxes, according to the Congressional Budget Office. That's well below the country's top marginal corporate tax rate of 35 percent -- and as The Wall Street Journal notes, it's the lowest percentage corporations have paid since 1972. During the two previous decades, a period that included the economic prosperity of the 1990s and the housing boom of the George W. Bush administration, corporations were paying an average percentage almost twice as high.

The CBO's numbers undercut a popular conservative claim -- that the United States places a higher tax burden on its corporations than almost any other first-world nation -- and arrive at a time when national politicians are engaged in a fierce rhetorical battle over how much wealthy institutions and individuals should pay to the government.

Corporations reported a combined $1.97 trillion in profits in the third quarter of 2011. As recently as June, they were also believed to be sitting on more than $2 trillion in cash hoardings. Most of that money has not been touched by taxation, even though the federal government has experienced budget shortfalls of more than $1 trillion for each of the past four years, and is scrambling to cut back on staff and services as a result. Meanwhile, the money isn't going to employees either, as real wages for most Americans declined in 2011 in spite of strong corporate balance sheets.

There are any number of methods available to a firm looking to avoid paying the full tax rate. Companies can take advantage of industry subsidies, restructure their operations so as to sidestep certain taxes, and offer workers payment in the form of stock options, which then allows the company to claim a greater deduction. Many companies also move assets overseas where they can't be taxed. In 2008, 2009 and 2010, thirty major U.S. corporations, including General Electric, Boeing, Verizon and Wells Fargo, used so many tax-avoidance techniques that they ended up paying no income taxes at all, according to a report last year from Citizens for Tax Justice.

President Obama has denounced low corporate taxes in specific instances while at the same time downplaying the importance of raising the corporate tax rate itself. The president is said to be planning a major revision of the corporate tax code sometime in February.

Meanwhile, much of the country continues to struggle financially, with nearly 13 million people looking for work, 49 million people officially in poverty, and almost half of households lacking the kind of savings they would need in an emergency.

[Deleted]

"But the number crunchers in Washington are puzzling over a phenomenon that has just come into view: Corporate tax receipts as a share of profits are at their lowest level in at least 40 years."

Perhaps the number crunchers could look at the numbers???

I'm guessing loss carrovers plus the above-referenced tax breaks, aka stimulus. I think the gov't passed laws that allowed immediate depreciation of certain capital expenditures. That will reduce taxes collected in the year the investment is made, but increase taxes collected in future years by an equal amount. And technically, if those tax breaks encouraged investments that would otherwise not have been made, the gov't will see a net increase in tax revenues.

[Deleted]

"Many companies also move assets overseas where they can't be taxed."

This statement is so misleading it is essentially false. A company can't make money in the US, move that money overseas, and magically avoid paying taxes on that profit.

-----------------------------------------------------------
"In 2008, 2009 and 2010, thirty major U.S. corporations, including General Electric, Boeing, Verizon and Wells Fargo, used so many tax-avoidance techniques that they ended up paying no income taxes at all...."

This is also so misleading that it is essentially fals. It also completely ignores the affect of losses and losses carried forward on taxes paid.

By the way, I'm still carrying forward losses on investments from 2008. It's pretty common.

-----------------------------------------------
"... according to a report last year from Citizens for Tax Justice."

Let me guess. A biased orgainization with an agenda?

[rockon]

"Corporations reported a combined $1.97 trillion in profits in the third quarter of 2011. As recently as June, they were also believed to be sitting on more than $2 trillion in cash hoardings. Most of that money has not been touched by taxation, even though the federal government has experienced budget shortfalls of more than $1 trillion for each of the past four years, "

These people must live in a different world them mine. Taxation is normally based on profit regardless whether it is spent, divided or put in the bank. Speaking of banks... do some people actually think the corporations have vaults full of cash where they hoard their money? This money that is not spent is normally deposited in to banks where a large percentage is then used to fund loans to others.

[Deleted]

"Most of that money has not been touched by taxation"

More highly misleading statements. If this money was profit in a previous year, it has already been taxed. But hey, let's just take all this money and apply it to the budget deficit. It will eliminate last year's deficit, but will completely destroy the economy. Sounds like a good tradeoff. Also sounds like the Huffington Post is highly biased. Not to mention stupid.

[AgeOfEnlightenmentSCP]

The article did not provide any analysis of why tax receipts have fallen. As a knee-jerk reaction I would toss out that prior year losses are still being carried forward, but I cannot say for sure.

Beat me to it. That was going to be my guess as well.

[fairlycrazy23]

I think it is more evidence that we need to just throw out income tax and move to a consumption tax, then at least all this confusion would be eliminated.

[Deleted]

"I think it is more evidence that we need to just throw out income tax and move to a consumption tax, then at least all this confusion would be eliminated."

I'm not saying I'm necessarily opposed to that change, but there'd be less confusion if people simply told the truth.

[rockon]

The confusion is largely from the complexity of the laws and the way the laws are used to manipulate behavior or how certain special interests can influence them. Not sure where the tax is applied would help that part.

[Deleted]

Sort of. It's loss carryovers that are the most mis-represented. And loss carryovers is a pretty simple concept.

[usaone]

Taxes were the problem in 1981. They are not the problem in 2012.

[formerexpat]

But the number crunchers in Washington are puzzling over a phenomenon that has just come into view:

This isn't a fucking puzzle.

(1) Companies earn more of their profits overseas, pay taxes to overseas jurisdictions and therefore get a credit on their US tax return
(2) Companies are still using capital loss carry forwards for the blood bath they took in 2008 and 2009

Can someone read a fucking tax note or two in some financial statements please??

[AgeOfEnlightenmentSCP]

Message deleted by PalmBeachPaul.

[AgeOfEnlightenmentSCP]

Feb 3, 2012 21:43:57 GMT -5 AgeOfEnlightenmentSCP said:

Feb 3, 2012 18:41:36 GMT -5 fairlycrazy23 said:

I think it is more evidence that we need to just throw out income tax and move to a consumption tax, then at least all this confusion would be eliminated.

YES!



www.fairtax.org

[AgeOfEnlightenmentSCP]

Feb 3, 2012 20:01:21 GMT -5 usaone said:

Taxes were the problem in 1981. They are not the problem in 2012.

The income tax, and the tax code have been the problem since 1913.

[AgeOfEnlightenmentSCP]

Of course the real problem with this story is that it is false. Corporate tax rates haven't changed at all. All corporate income is taxed at the same rate. The corporate tax rate hasn't gone up, or down.

[billisonboard]

Feb 4, 2012 0:51:40 GMT -5 AgeOfEnlightenmentSCP said:

Of course the real problem with this story is that it is false. Corporate tax rates haven't changed at all. All corporate income is taxed at the same rate. The corporate tax rate hasn't gone up, or down.

Corporate tax receipts as a share of profits are at their lowest level in at least 40 years. (from the OP)

Which "story" are you talking about? This thread is about what is in the quote, not rates.