Corporate tax

Practical and Practice issues for Professionals who practice in the area of taxation. Moral, social and economic issues relating to taxes, including international issues, the U.S. Internal Revenue Code, state tax issues, etc. Not for "tax protestor" issues, which should be posted in the "tax protestor" forum above. The advice or opinion given herein should not be relied on for any purpose whatsoever. Also examines cookie-cutter deals that have no economic substance but exist only to generate losses, as marketed by everybody from solo practitioner tax lawyers to the major accounting firms.
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JamesVincent
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Corporate tax

Postby JamesVincent » Fri Jun 28, 2013 11:03 pm

Not sure if this was the proper forum but anyways. Something I read earlier:

Corporations do not pay taxes ...

Corporations are comprised of people, and it's the people who pay the tax, not the corporation. The corporation's building does not pay the tax, the corporation's machine on the factory floor does not pay the tax.

The tax that "the corporation pays" is going to diminish the profitability because it is paid by shareholders in lower earnings which inhibit increasing dividends and also to reinvest in expansion to increase their value. Shareholders are one group who pay the tax.

A second group who pay the tax are the workers as money is not available to increase wages and benefits. A third group who pays the tax is you and I, the consumers, as the prices have to be increased in order to pay for that tax.

We can make huge strides toward developing financial sanity in our nation's budgetary process if we could get more people to understand that the corporate tax is really paid by shareholders, workers, or consumers.

Calling it a corporate tax is a political manipulation to make people believe that someone else is picking up the tab and it disguises who the real taxpayers are.

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Burnaby49
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Re: Corporate tax

Postby Burnaby49 » Sat Jun 29, 2013 12:34 am

It's a bit of a leap to baldy claim that workers would be paid more and consumers would be charged less if there was no corporate tax. Why? However no argument that shareholders would benefit but, given the current attitude against big corporations and their supposedly excessive profits, it would not be politically possible to eliminate corporate tax. Additionally the government would have to get the lost tax revenue from somewhere else which would inevitably be from individuals.
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notorial dissent
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Re: Corporate tax

Postby notorial dissent » Sat Jun 29, 2013 12:44 am

I have to agree with Burnaby49 here. I think doing away with the corporate tax would have the effect of making the big corporations even worse than they are now, and in the end, the actual taxes would be passed on directly to the shareholders in that they would get hit with not only the corporate profit tax, but then they would get hit with their own income taxes on top of it, and I can see where that could be really painful particularly for small investors.
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Re: Corporate tax

Postby BBFlatt » Mon Jul 08, 2013 11:52 am

If corporations don't pay tax, why do they spend so much money trying to minimize their tax bill? And why do spend so much time, money and effort fighting additional assesments?
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Re: Corporate tax

Postby Duke2Earl » Mon Jul 08, 2013 2:17 pm

When one says that corporations don't pay tax, it is an oversimplification. Yes, corporations are not people. Yes, corporations can pass on the tax bill to others and the payment of taxes by corporations lessens the amount to corporation could use for other purposes (including dividends to shareholders, lowering prices, or raising salaries). However, there is no assurance whatsoever that if there was no income tax the corporation would use the funds for any of these purposes... it might just horde them like Apple has done with very large cash flows.

But any corporate payment of tax is a cost to the corporation. They actually write a check to the government. Yes, they could pass it along, in effect, to customers... but they would rather not incur the cost at all. That is why they fight to lower their tax bill... simply to lower their costs like any other corporate efforts to lower costs... and therefore increase profits.
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Pottapaug1938
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Re: Corporate tax

Postby Pottapaug1938 » Mon Jul 08, 2013 2:20 pm

Burnaby49 wrote:It's a bit of a leap to baldy claim that workers would be paid more and consumers would be charged less if there was no corporate tax. Why? However no argument that shareholders would benefit but, given the current attitude against big corporations and their supposedly excessive profits, it would not be politically possible to eliminate corporate tax. Additionally the government would have to get the lost tax revenue from somewhere else which would inevitably be from individuals.


It's also very possible that salary, bonuses to CEOs and other senior company executives could get even worse if there were no corporate tax.
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notorial dissent
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Re: Corporate tax

Postby notorial dissent » Mon Jul 08, 2013 4:07 pm

Pottapaug1938 wrote:It's also very possible that salary, bonuses to CEOs and other senior company executives could get even worse if there were no corporate tax.

I'm not sure if your sarcasm mode was engaged here, but it certainly should have been. I don't think there is any question what so ever about it, and actually, I think the shareholders might just come out the worse for it.
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Re: Corporate tax

Postby Cathulhu » Mon Jul 08, 2013 4:13 pm

The singularly idiotic statement "corporations don't pay taxes" inevitably ticks me off. Where a partnership or LLC passes the income tax on to the individual owners, there certainly isn't any form of exemption for their employment tax or their excise taxes. A corporation that manufactures sporting goods would doubtless have an excise guy who could bend your ear for hours on the weirdness of the excise rules. Yet another example of a sloppy and downright stupid statement. Which is doubtless why the sovs say it so much.
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Burzmali
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Re: Corporate tax

Postby Burzmali » Mon Jul 08, 2013 7:25 pm

JamesVincent wrote:Thoughts?

Same as the sales tax, it's easier to collect it on the selling business side than from all the people that made purchases.

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Re: Corporate tax

Postby kochbidyut » Fri Aug 16, 2013 4:59 pm

Most large corporations are classified as C corporations and are required to file a federal corporate income tax return with the IRS every year. There are four basic rates—15%, 25%, 34%, and 35%—and two “bubble rates” of 39% and 38% which have the effect of taking away from high-income corporations the benefits of the lower rates.

If the corporation qualifies, it may elect to be an S corporation. These companies do not (with certain exceptions) pay corporate tax on income. Their income is instead passed through and taxed to shareholders. There are several requirements a corporation must meet to qualify as an S corporation, including having 75 or fewer shareholders and having only one class of stock. The reduction of individual income tax rates, passed in 2001 and accelerated in 2003, has greatly increased the number of firms that save taxes by organizing as S corporations.

In 2004, Congress enacted and the president signed the American Jobs Creation Act of 2004. It replaced the exclusion for extraterritorial income after that provision was ruled illegal by the World Trade Organization. Along with that tax hike, Congress passed a cornucopia of corporate tax breaks, most notably a cut in the top rate from 35% to 32% for “manufacturers,” broadly defined.

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Re: Corporate tax

Postby Arthur Rubin » Sun Aug 18, 2013 4:36 pm

Well-edited. I can't even guess what the ad is for.
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Re: Corporate tax

Postby Famspear » Sun Aug 18, 2013 6:45 pm

kochbidyut wrote:...There are several requirements a corporation must meet to qualify as an S corporation, including having 75 or fewer shareholders.....


The law was changed a while back, so that the rule is currently 100 or fewer shareholders.

EDIT: By the way, the change on the maximum number of shareholders from 75 to 100 was made back in 2004.

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