Filthy Rich, Owing No Taxes (Demo)

• For years, tax hawks have railed about companies finagling statutes to whittle down their bill to Uncle Sam — to no effect.
• The difference now is the atmosphere of populist politics. “Rising global activism is forcing companies to reassess the balance of obligations between shareholders and stakeholder, and when highly profitable companies like Amazon pay zero taxes it undermines confidence in the broader system,” Bruce Mehlman, a leading political and corporate lobbyist, tells Axios.  

No one suggests that anyone is violating tax laws. But paying or not paying taxes becomes an issue when few ordinary people are afforded the chance to escape taxes, and there is less and less money to fix crumbling infrastructure and struggling schools.

By the numbers:

• GM is claiming a $104 million refund on $11.8 billion in 2018 profit.
• Goodyear is seeking a $15 million refund on $693 million in profit.
• Halliburton will pay $19 million in U.S. income taxes on $1.6 billion in profit.
• Netflix filed for a $22.1 million refund on $845 million in profit.
• U.S. Steel is claiming a $303 million refund on $957 million in profit.

After its HQ2 debacle in New York, Amazon has been under the most intense scrutiny of all — and now over its tax bill. In a report last week, the Institute on Taxation and Economic Policy said the e-commerce giant is seeking a $129 million refund on $11.2 billion in profit.

• It’s Amazon’s second straight year owing no tax: In 2017, Amazon filed for a $137 million refund on $5.6 billion in profit.
• Amazon is not a passive player in tax law, says the institute’s Matthew Gardner, who researched and wrote the Amazon report. “Amazon in particular has shaped tax law in its own image. They made the laws by lobbying so persistently and effectively,” Gardner tells Axios.

How they are doing it: Companies already were able to chip away at their effective tax rate when the top rate was 35%. The new rate of 21% approved under the Trump-backed legislation got them much lower, and then loopholes take effect.

• One windfall for companies cited by the institute is a new provision allowing for the immediate expensing of capital investments.

Some say the issue is overblown. Chester Spatt, a finance professor at Carnegie Mellon, tells Axios, “I don’t think a company should be paying more taxes than it owes and in fact it has an obligation to its shareholders not to pay taxes it doesn’t owe.”

• “Is there reputational risk? Would I advise a company to pay a bunch of taxes to avoid that? Probably not. But messaging is kind of important. Companies need to be more sensitive to explaining.”

Yet the optics for Amazon may be brutal. Richard Edelman, CEO of the global Edelman public relations firm, points to a PR blow suffered by GE in 2011 when it reported $14.2 billion in profit for the prior year, and filed for a $3.2 billion federal income tax refund.

• “Part of trust is transparency in how you do what you do and understanding that you have certain societal obligations,” says Edelman, whose consultancy produces the Edelman Trust Barometer.

https://www.axios.com/rich-companies-owe-no-taxes-6703e01a-4daa-44ce-9459-096c361a9c8d.html

Gary Reber Comments:

I think we should close all tax loopholes and raise the corporate income tax to at least 90 percent but make full earnings dividends payouts tax deductible to enable corporations to avoid paying taxes and double taxation by their owners. The owners would pay according to their personal income levels.

This would eliminate retained earnings, which does nothing to create new capital owners. Instead, corporations would issue and sell new stock, which would then be purchased by workers and citizens using insured, interest-free capital credit, repayable solely out of the future earnings of the corporation, without the requirement of past savings.