Some Corporations Pay a Lot More Taxes Than Others (opens in new tab)

If shareholders do not demand the money as a dividend and prefer instead to have it kept in the company's control, then so be it.

Shareholders in Apple want Apple to be able to make big investments or acquisitions and are willing to let the money sit there rather than take it as a dividend. This would not be true for most firms.

Taxes would still get paid on capital gains when Apple's stock price goes up. As long you raise the capital gains tax to compensate for getting rid of the corporate income tax, that scenario doesn't cause any problems.

They paid income tax on the profits (at least the profits earned in the USA). Apple was the number one tax payer on the list by a wide margin. Are they supposed to be taxed on their bank balances also?

they're already doing it, so this isn't much of a 'what if'. the problem is that money is kept offshore and never spent, because it's at risk of getting taxed immediately upon repatriation.

> I've always thought that the answer was to have wealth taxes

Oh, I totally think this is where we should be going, too! Income seems like such a weird thing to tax; the wealthiest people don't necessarily have income, and high earners aren't necessarily that wealthy. In terms of "tax the rich", I think wealth taxes are more along the lines of what people envision.

It would simplify things so much, too; you don't have to worry about capital gains vs. ordinary income, or gifts, or the so-called "death tax". Businesses don't need to withhold taxes.

It seems like a simple, low, flat wealth tax, over a certain cut-off, would be best. If would counteract the march to aristocracy and dynastic families, unless the children are similarly able to provide value with their assets. Otherwise their wealth will dwindle over time and others will have a shot.

I think the two negatives I can think of are: 1) dealing with liquidity - you might be "worth" millions, but does that mean you can afford your tax bill? and 2) off-shore havens storing the wealth. But neither seem insurmountable.

I'd love to see any discussions of pros-and-cons of this approach to taxation. I know Islam proscribes a wealth tax, Zakat, but I'm not sure how it works in practice.

Well the problem is that you just create a loophole.

You can already avoid paying any corporation tax by taking money out of a company as salary.

In the UK you have dividend tax credit so effectively when you take a dividend you get the tax back that has already been paid (as corporation tax).

So both those reasonable ways of extracting money from a company allow you to not pay any additional tax above what income tax would be.

However if there was no corporation tax then the loophole / incentive would be to move money out of the jurisdiction and extract the dividends in a zero tax country.

This is effectively what the big multinationals do via transfer pricing etc but not having any corporation tax would no doubt make it a lot easier for more companies to do that.

There are several issues that are all relevant, I think:

- Corporate taxes reduce the competitiveness of a jurisdiction and create a market for tax havens like the Caymans which add no value.

- Companies' tax avoidance schemes are massively complex and create an incentive to hide earnings and obscure profits, making this information less transparent to markets.

- A company's share price should reflect company performance only, not the performance of the company's accountants in the realm of tax minimization.

- Offshore tax avoidance schemes reduce government revenues. Google avoids taxes by running such a scheme. Why shouldn't Google pay the same fair share as a tiny startup that lacks the budget to set up such a scheme? Why should governments lose out on the revenues?

- By simply taxing the money when it is income or capital gains, governments can get the proper amount of revenue. Suppose Google evaded $10B in taxes via its offshore scheme. This $10B would instead have been collected from shareholders and employees via capital gains and income taxes.

Why don't we switch to a system of zero corporate tax? The firms like Google that have invested heavily to set up an offshore tax avoidance system are quite happy with the result. They get to be insulated from smaller competitors who do not have the budget to set up their own scheme.

Larger firms like WalMart are cash cow businesses that are not doing enough R&D to offset the profits. Investors in WalMart are OK with this and the shares are priced accordingly. If WalMart paid no corporate tax, the dividends would be higher and the revenue could be captured by capital gains tax and income tax.

Estonia takes an interesting approach - profits are only taxed when they are taken out as dividends. There is thus essentially no corporate tax, as companies can accumulate profit and not have it taxed until it is distributed to shareholders.

It would be easy enough to pass a law requiring tax payments on dividends paid out to be sent in by the firms, and for such payments to be required regardless of the nationality or location of the investor, in much the same way that firms are required to collect income tax payments on behalf of employees.

I didn't think you could spend revenue directly on assets without booking it as profits and paying tax on it. My understanding was you can discount part of the cost of an asset each year against revenue but not all at once.

> I'm going to spend the profits on those assets

If you make profits you pay tax - Amazon doesn't pay tax because it doesn't make profits. It invests a lot of its operating cashflow true but that is different.

The most surprising thing about Amazon lately is that it suddenly is showing some profits. Normally, Bezos has every single dollar that looks like it might be a profit re-invested in something or other.

> Startup stock options, if you exercise before a liquidity event, are given a cap gains tax based on the de facto market cap.

That's not really the same thing. ISOs are taxed (as income) because you're purchasing something for below-market price, so the difference between the market price and the price you pay is income. If you hold onto it for long enough, you may then be able to qualify for capital gains tax when you sell it, but that's different.

And in addition, that's the individual who's being taxed on it (the value of their own income).

If you think of how this works similarly for publicly-traded companies, it's easier to understand.

Right - that's a completely different topic though. That's an individual paying taxes on a gain that they've realized. Not a company paying taxes based on other people's gains.

Bombing civilians and giving weapons to terrorist organizations really helps to support civilian governments and the rule of law.

Seems bizarre to only think taxes go into the Military Industrial Complex. I mean, sure they take their cut--but I'd like to think that our taxes go towards maintaining our civil society as well!

Edit: Seems very much cutting off your nose to spite your face, if one is 'happy' a corporation isn't paying taxes

What's not fair? They are following the law.

Amazon can't escape paying Medicare and Social Security taxes. So, they are definitely paying into that, along with everyone else who pays payroll taxes.

So, if you exclude those two things from the budget [0], you'll see that military expenses and interest on debt greatly outweigh education and NASA and etc.

Now I personally think Amazon is a great source of good in this world, compared to Lockheed Martin or Halliburton [1]. So if those guys aren't paying anything in taxes, I am biased, they should be paying more, not Amazon.

[0] https://media.nationalpriorities.org/uploads/total_spending_...

[1] they make missiles and weapons that kill people wholesale.