I read an interesting column in the newspaper today that discussed how a number of corporations pay no federal tax, and how some actually show a negative federal income tax percentage (meaning, they receive tax subsidies). The column was based on a recent study by a group called, The Center for Tax Justice. I honestly don’t know what this organization is, and only heard of it for the first time today.
The study is entitled, “Twelve Corporations Pay Effective Tax Rate of Negative 1.5% on $171 Billion in Profits; Reap $62.4 Billion in Tax Subsidies”. It begins as follows:
“To better inform the public and lawmakers about how successful many American corporations have been in reducing or eliminating their federal income taxes, Citizens for Tax Justice is releasing a preview of its forthcoming major study of Fortune 500 companies and the taxes they paid — or failed to pay — over the 2008-10 period. Today’s release details the pretax U.S. profits, federal taxes paid and effective tax rates of (in alphabetical order): American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell International, IBM, United Technologies, Verizon Communications, Wells Fargo and Yahoo. CTJ’s full corporate report is scheduled for release this summer.”
The entire report is linked here, (in case anyone is bored):
Corporations, or any other type of business (sole proprietorship, partnership, whatever) do not pay taxes. Oh, they’ll write a check, but it’s simply from funds they collect from one of three sources.
Their customers, 2) Their investors (in a sole proprietorship, that is the business), 3) their employees. There is no other source for the corporation/business to get the tax money. Only people can pay taxes.
It’s known as “Tax Incidence” in economist circles and it has been and issue since the first taxes on business were levied. “Who actually pays this tax?” The business can’t. So who does?
In the case of employees it means there will be fewer employees. (Don’t pay the employee, pay the tax man. Can’t spend the money twice.)
I do not know if BNSF writes a Federal Income Tax check or if its owner, Berkshire Hathaway, writes the check. I do know that niether one actually pays the tax because it is impossible to actually tax a corporation/business.
Corporate taxes are a hidden tax on us. They’re not direct, they’re hidden in the price of the goods and services we buy. They are deceit on the part of our government.
In college-level Economics curricula, about the 2nd course usually includes an examination of this. The effect varies depending on whether the industry is fully competitive, a monopoly, or someplace in between. As best as I can recall, the theory is that taxes assessed on a monopoly or an oligopoly - only a few large firms (sound familiar ?) - should be borne by the firm (= investors and employees), not the customers - but I could be wrong. And whether that theory corresponds to the real world at all is another question entirely.
Why the curiosity about BNSF ? Since it’s now privately owned, there may not be much public release of that info, except for the annual R-1 report to the STB. If the effective tax rate seems low, it might be more useful to inquire why - is it because of the 50-year ROW depreciation ? Carry-forward of past losses ? Accelerated depreciation and tax credits from new investments ? Oil or coal depletion allowances from its natural resources holdings ? (if any anymore ?)
greyhounds seems to be advocating that businesses should not have to pay any tax, unless I am misunderstanding his point (which is entirely possible). If so, then I disagree. Paying something the same as everyone else forces the business to internalize those costs and trade-off with other options, to minimize the total costs to society. If they didn’t have to pay taxes, there would be an incentive for businesses to use more of that resource and/ or no incentive to use less - whatever it might be - because it’s free to them, while the rest of us subsidize it. By extension, one could argue that businesses shouldn’t have to pay for their gas, fuel, or electricity, or even their employees. Where does that argument end on a principled basis ?
Two pretty good responses with lots of information from Paul North and Greyhounds.
As you may be aware the US Tax Code is huge, and involved and convoluted by years of legislation and the ins and outs provided by Congress.
The above link is the IRS website for Business Tax info. Suggest that you start there and get your info straight from the horses mouth (or any other apropriate orifice you might name.[banghead]
Another suggestion is buy stock in BNSF via Berkshire Hathaway and then you will get the information as it is sent out to Corp stockholders. [:-,]
In all probability BNSF will not pay any federal income or other taxes. Its tax burden will be paid by Berkshire Hathaway in its consolidated federal income tax return.
From an accounting point of view taxes are a business cost. As a rule businesses first attempt to pass any taxes (federal, state, local) on to their customers in the prices of their products and services. If they cannot be passed on to the customers, then they will be worn by the owners (stockholders) and in some instances employees.
Business taxes are hidden in the sense that most people don’t take the time to learn about them. However, in the case of public corporations, at least, the tax information is available in th
No reason. I just chose them because they’re prominent where I live. I suppose I should have made the thread topic more generic to cover UP and CSX too. In my late evening stupor when I started the thread I also forgot that BNSF is no longer a public company ( [oops] ), so they represent a special case. Oh well, interesting info being posted. Wish I’d taken more econ classes in college.
A tax is just another cost of doing business. The reason corporations can pass tax on to the consumers of their products is that a tax falls equally on all corporations. Therefore, their competitors cannot out-compete them due to their added cost of the tax. There is no competition between corporations over the added cost of a tax. So all widget makers can just raise the price of widgets uniformly.
However, there might come a point where consumers find an alternative to widgets, or simply decide they can do without widgets. In that case a new tax on the widget makers can put them all out of business.
Some folks attempt to make the case that corporations never really pay taxes, but just pass them on down the line. If corporate taxes were so unimportant to them, however, why do corporation pay a lot of money to lobbyists to get deductions, credits etc. for their corporate returns? Why bother if they won’t really pay anyway? Rather a moot point anyway, as many of them pay $0 on their returns or even get a credit.
Contrary to a previous post, corporations don’t always pay the same taxes. They may be able to avoid the taxes for a variety of reasons, i.e. exemptions, credits, etc. For example, an electric utility gets certain research and development credits that are not always available to substitute energy suppliers, i.e. natural gas, oil, etc. This is one of the reasons a company will employ advocates to argue for or against a tax. In this case, a natural gas supplier could argue that the same credit be made available to gas companies or not granted to electric utilities. If electric utilities get a credit that is not available to natural gas competitors, the substitution advantage is lost. And natural gas is a substitute for electric energy in some situations.
Another reason corporations will argue for lower taxes or tax exemptions is because they are not just competing with U.S. corporations. Many large corporations compete on the world stage. If they are tax disadvantaged by the U.S. Tax Code, they are at a competitive disadvantage with overseas competitors. This is one of the reasons that U.S. corporations have located a significant portion of their operations overseas, all of which has been done legally.
U.S. corporations wear one of the highest effective corporate tax burdens of any country in the world. In 2009 the average effective corporate tax burden was 27.7% of net income, which was substantially higher than all but a handful of other countries. M
Nobody ever said taxes weren’t important to corporations or other types of business. They’re critical. What is true is that the business doesn’t really pay the tax. But that doesn’t make the tax unimportant.
If a company or an industry can get a “Targeted Tax Cut” (which are really bad things), it has an advantage. Their costs are lowered so they can sell their products at a lower price while maintaing the same margin of revenues over costs. A lower price will mean they sell more (you know, that pesky supply and demand thing.) But, since they have the same margin on each sale they increase their profitability.
Aparently, the future of the United States now depnds on the depreciation schedule for private jet aircraft. Accelerating the depreciation of these planes was a “Targeted Tax Cut” in some so-called 2009 stimulus program. This tax scheme reduced the cost of acquiring such a jet and thereby increased the sales of such jets. All the while maintaing manufacturer profitability, increaseing employment in the private jet manufacturing plants, and employment in related fields such as aircraft maintenance.
But why favor private jets over other things, such as machine tools for factories? It makes no sense to “Target” private jets. I can’t find out why they did that. Dick Durbin is not taking my phone calls.
Taxes are not really paid by businesses, but they affect businesses
I’m going to come back on this because I’m mad about it.
The original question concerned how much the BNSF paid in Federal taxes. I replied, truthfully, that since BNSF is a corporation/business, it doesn’t really pay taxes. It just collects the taxes and passes them on to the government. That’s reality.
Then it gets twisted around and misrepresented as “If corporate taxes were so unimportant to them, however,”. Niether I nor anyone else said the taxes were “Unimportant”. They’re a cost that has to be covered by people such as customers, investors, or employees. Those are the only possible sources of money to cover the cost.
Why the misrepresentation? Why the deliberate, willful, misrepresentation of what was being said?
So if someone disagrees with your pet points, you get mad and accuse people of various things, including misrepresentations. Perhaps the irony was overlooked. I really don’t know. I’ll try again.
If I weren’t going to pay any income taxes anyway, but could just pass them on to others, I guess I (or anyone else) would not think them very important, only to the extent I needed to calculate them. If I could pass them on, why bother to spend millions of dollars lobbying for and protecting existing beneficial provisions in the tax code? The answer is that, of course, they are important because I do have to pay them and I want to reduce the burden on myself.
Is that more clear? And is it possible for you to exhibit a little less of your condescending tone to those of us with “economic ignorance”?
True, it was #6, according to the Tax Foundation (which is not a liberal think tank). Japan and Germany were ranked #1 and #5, with rates of 38.8% and 27.9%. Even #20, the Philippines, had a rate of 24%. However, only 6.6% of US tax revenue comes from corporations (down from 30% in the 1950s).
General Electric paid $0 federal tax in 2010, although they had total profits of $14.2 bil., $5.1 bil of it from domestic (US) operations and got a tax benefit of $3.2 bil.
You can hurl insults all day for all I care. Taxes are an important matter to corporations because they do pay and they do attempt (paying millions of $ to do so) to legally avoid as much of the burden as possible. Period. Misrepresentation? Your own words, once again:
“Corporations, or any other type of business (sole proprietorship, partnership, whatever) do not pay taxes. Oh, they’ll write a check, but it’s simply from funds they collect from one of three sources. 1) Their customers, 2) Their investors (in a sole proprietorship, that is the business), 3) their employees. There is no other source for the corporation/business to get the tax money. Only people can pay taxes.”
I think PDN correctly examined your notion already. And i think your real point is pushing your anti- government agenda, in your favorite hobby horse of how the ICC screwed up the transportation industry and in this thread. And I’ll quote your words, so there can be no “misrepresentation” here:
“Corporate taxes are a hidden tax on us. They’re not direct, they’re hidden in the price of the goods and services we buy. They are deceit on the part of our government.” [my emphasis]
Paul, are not energy costs and salaries and wages of employees a part of the essential cost of doing business? I do not see that these expenses are in the same category with taxes, for the energy companies incur expenses to provide their wares, and employees prefer not to work for a “Well done!” even if the business is a family business.
As I recall, when governments began levying taxes upon corporate profits, the corporations felt it necessary to increase the cost of their wares so that their stockholders (whether public or private) could be kept happy with their earnings; after all, stock is usually held with the view of sharing in the earnings of the issuing company (at least, that’s my view of owning stock).
"…Once again, this is an example of two German words that mean almost the same thing in English, but not exactly. Here are some guidelines to help you decide when to use schlecht and when to use schlimm:
The notion that GE paid no taxes in 2010, which was reported on a Sixty Minutes broadcast, is subject to verification. GE’s 2010 corporate tax return is not complete. And it will not be verified by the IRS for months. In GE’s case, as was true for the Fortune 250 corporation that I worked for, it could take up to five years for the tax return to be finalized.
GE paid no federal income taxes in 2010, assuming the assertion holds, because of the large loss carry forwards sustained by GE Capital, which GE’s major financial arm. It suffered from the financial melt down just like the investment and commercial banks.
If a business sustains a major loss, it can carry the loss forward for X number of years. Had it not been for the loss carry forwards from GE Capital, GE would have paid federal income taxes in 2010.
According to GE’s 10K, its net income in 2010 was $11.4 billion on revenues of $149.1 billion or a Trialing Twelve Month (T
A tax on business is not actually paid by the business. It is either paid by the customers, the employees or the investors (capital). Those all are people.
None of these three possible payment options has a good result. If the tax goes trhough to the consumers it results in higher prices. That’s