Obama team to propose corporate tax cut

[the DRIZZLE]

Isn't that peer partisan speculation on your part before any details of the proposal comes out of the WH?

I'll save you bandwidth....YUP!

Did you watch the State of the Union Speech? He said he wants to cut rates and reduce deductions and loops holes then in the next breath proposed a bunch of new ones. It's not speculation at all.

 

[Ausm]

Did you watch the State of the Union Speech? He said he wants to cut rates and reduce deductions and loops holes then in the next breath proposed a bunch of new ones. It's not speculation at all.

Please elaborate.

 

[the DRIZZLE]

Please elaborate.

Just read the article in the OP, it's all there.

 

[dank69]

...

Really, the corporate tax rate should not be higher than 15% if we want more businesses to come here.

This statement makes it look like you think that US corporations off shore because of tax rates rather than labor costs. Is this what you truly believe?

 

[Fern]

Effective tax rates for U.S. corporations average somewhere around 20%. Looks like this "tax cut" may actually end up being a huge tax increase.

No. Based on what I've seen from CFO-type surveys many are paying about 28% (already). Some industries like trucking are paying at the 35% level.

Fern

 

[Ausm]

Just read the article in the OP, it's all there.

So I am suppose to extrapolate an opinion off your vague comment??

 

[Fern]

Treasury Secretary Timothy Geithner will unveil a proposed business tax reform plan that would lower the corporate tax rate from 35% to 28%, the administration announced this morning.

The plan would make up lost revenue by eliminating tax loopholes and simplifying a business tax system that an administration statement called "uncompetitive, unfair, and inefficient."

President Obama's "framework for business tax reform" is designed to "enhance American competitiveness by simplifying the tax code and eliminating dozens of loopholes and subsidies; incentivizing job creation and investment here at home; and lowering the business rate while broadening the tax base," said an administration statement.

More vague political talk.

It wasn't said if it was revenue neutral, which I cannot imagine given his recent budget called for an impossible revenue increase of over a $ trillion $'s (IIRC).

We'll need to see some details before we'll have any idea of what they are promoting. Given the utter vagueness of the above announcement it could be almost anything.

Fern

 

[Hayabusa Rider]

No. Based on what I've seen from CFO-type surveys many are paying about 28% (already). Some industries like trucking are paying at the 35% level.

Fern

Toronto has an enormous number of businesses while NY state has lost. I saw an interview with a Canadian exec and when asked why he said his taxes are lower. Go figure.

 

[Ausm]

Toronto has an enormous number of businesses while NY state has lost. I saw an interview with a Canadian exec and when asked why he said his taxes are lower. Go figure.

Interesting link backing your post.

http://businessroundtable.org/uploads/studies-reports/downloads/Effective_Tax_Rate_Study.pdf

 

[homercles337]

Interesting link backing your post.

http://businessroundtable.org/uploads/studies-reports/downloads/Effective_Tax_Rate_Study.pdf

The main problem with this "study" is that corporations are allowed to file two tax reports. One goes to the US Government and another entirely different report goes to the share holders. In addition, the company that did this "report" (PWC) is some kind of international tax consulting firm. Hardly trustworthy or free of bias on this sort of thing. All the reports i have seen put the effective rate of US companies at ~15% while here they claim its 27.7%.

 

[Fern]

The main problem with this "study" is that corporations are allowed to file two tax reports. One goes to the US Government and another entirely different report goes to the share holders. In addition, the company that did this "report" (PWC) is some kind of international tax consulting firm. Hardly trustworthy or free of bias on this sort of thing. All the reports i have seen put the effective rate of US companies at ~15% while here they claim its 27.7%.

No, corporations don't file two 'tax reports'.

They file one federal tax return and one financial statement. The former calculates net income based upon the whims and budgetary needs as determined by Congress, the later based on agreed upon accounting standards (GAAP).

PWC is an international CPA firm. They are completely non-partisan, knowledgeable about the subject (something rather rare) and have zero reason for bias. Indeed, I can assure you they will be mightily striving for objective accuracy if only to uphold their top-notch reputation. Their results will have been checked and rechecked, traveling through several layers of CPA's and financial professionals to ensure their report is as error free as possible. They know their competitors will be examining the report and happily broadcast any errors (which would include bias, an anathema to the CPA profession.)

Notice their headlines:

Average Book Effective Tax Rates

It's the first such report I've seen specify that and it indicates to me, as a CPA, they actually know what they're talking about. ("Book" is another term used for GAAP financial statements.)

Fern

 

[PricklyPete]

misle, it's not really a change in direction once you figure out that while they're saying they want to lower the corporate tax rate from 35% to 28%, they're going to "eliminate loopholes" and simplify the tax system. Translation: "we're going to officially lower the rate, but eliminate deductions and other incentives such that in the end you're going to pay more than you do today".

Either sounds like a positive move to me...whether this was politically fueled or not...two things ultimately need to happen:

1) Taxes need to be simplified
2) Taxes need to be lowered

Even if this only takes care of step 1 and will in fact raise taxes for some...I'm ok with that. Hopefully the next administration can truly lower the rate.

 

[manimal]

When Obama and Tom Coburn agree on this its kinda scary.


Grover Nordquist must be poking all his vodoo dolls with pins right now..

 

[hal2kilo]

Either sounds like a positive move to me...whether this was politically fueled or not...two things ultimately need to happen:

1) Taxes need to be simplified
2) Taxes need to be lowered

Even if this only takes care of step 1 and will in fact raise taxes for some...I'm ok with that. Hopefully the next administration can truly lower the rate.

You'd think so, except Repubs only want the whole loaf. Bypartisan compromise? Well, maybe if they get the OK from Grover.

 

[WHAMPOM]

Link to story



I think this is probably a good thing, but I was surprised due to all the "corporations are evil" talk that has been going on. Seems like quite the change in direction for Obama's team.

The ten Largest corporations in the USofA pay no taxes, so is this about is closing loop holes and collecting 28%?

 

[Atomic Playboy]

This strikes me as being the epitome of centrist lawmaking.

Liberals: Corporations don't pay enough taxes! End the loopholes!
Conservatives: Corporations pay too much in taxes! Lower the rates!
Obama: I can combine those. How about we lower the tax rates but get rid of the loopholes?
Liberals: How dare you lower taxes on corporations you wolf in sheep's clothing!
Conservatives: Obama's hamstringing corporations by ending corporate tax credits for important things!

And thus we can see that compromise ends with everyone hating you.

 

[BoberFett]

You'd think so, except Repubs only want the whole loaf. Bypartisan compromise? Well, maybe if they get the OK from Grover.

Since when do Democrats want to simplify the tax code? They LOVE their ability to experiment on society with FUBARed tax incentives.

 

[soundforbjt]

The ten Largest corporations in the USofA pay no taxes, so is this about is closing loop holes and collecting 28%?

Actually nearly 33% of corps pay zero or pay a negative amount. If they paid 28%, it'd be a nice chunk of change.

 

[werepossum]

No. Based on what I've seen from CFO-type surveys many are paying about 28% (already). Some industries like trucking are paying at the 35% level.

Fern

As an engineering company, we pay 35%.

 

[zinfamous]

misle, it's not really a change in direction once you figure out that while they're saying they want to lower the corporate tax rate from 35% to 28%, they're going to "eliminate loopholes" and simplify the tax system. Translation: "we're going to officially lower the rate, but eliminate deductions and other incentives such that in the end you're going to pay more than you do today".

well, I heard that the end result is that the overall rate is effectively the same while they end the ridiculous loopholes.

Still disingenuous with how it is presented, but also not meant to drive business out.

 

[zinfamous]

This strikes me as being the epitome of centrist lawmaking.

Liberals: Corporations don't pay enough taxes! End the loopholes!
Conservatives: Corporations pay too much in taxes! Lower the rates!
Obama: I can combine those. How about we lower the tax rates but get rid of the loopholes?
Liberals: How dare you lower taxes on corporations you wolf in sheep's clothing!
Conservatives: Obama's hamstringing corporations by ending corporate tax credits for important things!

And thus we can see that compromise ends with everyone hating you.

+1

 

[Fern]

Here's a short yet decent article on US tax rates:

Arguments Have Loopholes, Too

The hue and cry over GE's nonexistent tax bill obscures important realities about corporate taxation.
Randy Myers - CFO.com | US

April 18, 2011

By statute, the federal government levies a 35% income tax on corporate profits. In reality, critics counter, companies pay less — often far, far less. The truth lies somewhere in the middle — but not in the part of the middle that companies would prefer.

This was brought home last month when it came to light that General Electric paid no federal income taxes last year, despite earning $12 billion on $150 billion in sales. Much of the media coverage noted that GE generates a substantial portion of its profits overseas, where it typically pays lower tax rates than those levied by the United States. Finger-waggers also noted that the company reinvests much of those profits offshore, avoiding U.S. taxes on those amounts until and if it repatriates them.

What was made less clear is that GE's tax bill, or lack thereof, was largely determined by the fact that it sustained nearly $32 billion in losses at its GE Capital subsidiary between 2008 and 2010.

"Nobody wants to lower their taxes by having real losses, and frankly that's what happened to GE," observes Mark Weinberger, global vice chairman of Big Four accounting firm Ernst & Young.

GE also noted that its effective tax rate of 7.4% — a figure reflecting what it paid at home and abroad — would have been about 15% absent the GE Capital losses.

A related media outcry was unleashed recently in response to research by New York University finance professor Aswath Damodaran showing that companies in some industries had astonishingly low effective income-tax rates in 2009: 4.5% for biotechnology companies, 5.6% for pharmaceutical companies, and 5.9% for Internet companies, to cite some examples. Damodaran's data, in fact, indicated that the average tax rate across all industries was just 14.7%.

But a fuller review of Damodaran's research reveals that the eye-popping numbers aren't as damning as they appear. As Damodaran tells CFO, those numbers reflect the average effective tax rate for every company in each industry he studied, including those that had posted losses and thus paid no taxes at all.

Throw out the losers, Damodaran explains, and the numbers are dramatically different. Updated for 2010, for example, his data shows that while the effective tax rate for all biotech companies was 5.7% last year, the average rate for those that actually made money was a much more substantial 26.9%. The effective rate for all 5,928 companies he studied was 15.3%, but for companies that finished in the black it was 29.8%.

As for the claim that big companies have the resources needed to exploit every loophole and drive their tax rates down whether they make a profit or not, a CFO analysis of companies in the S&P 100 found that those companies had an average effective tax rate of 28.5% last year.

As the push for reform intensifies (watch for a related story in CFO magazine in May), critics on both sides will have valid arguments to make. Here's hoping that when data is trotted out to support a point, it's presented in its full context.

I think the info and remark's from the NYU professor about his study demonstrates how articles etc on such studies can be misleading. We cannot expect companies with losses to show an INCOME tax rate at anything but zero. To average that in with profitable companies is misleading.

Personally, I was surprised to see that GE's low (or zero) tax rate was from losses. Previously I have read that it was (green) tax credits.

Fern

 

[homercles337]

No, corporations don't file two 'tax reports'.

Yes, they do.

http://www.pbs.org/wgbh/pages/frontline/shows/tax/

PWC is an international CPA firm. They are completely non-partisan,

Non-partisan? No they are not. They are selling a product, in an attempt to attract new customers. The very definition of bias? Also, why is their report at odds with every single other report on effective corporate tax rates?

 

[the DRIZZLE]

So I am suppose to extrapolate an opinion off your vague comment??

No, you are supposed to read the article in the op not ask me to spoon feed it to you.

 

[cubby1223]

misle, it's not really a change in direction once you figure out that while they're saying they want to lower the corporate tax rate from 35% to 28%, they're going to "eliminate loopholes" and simplify the tax system. Translation: "we're going to officially lower the rate, but eliminate deductions and other incentives such that in the end you're going to pay more than you do today".

What? This is a good thing.

The deductions and loopholes greatly favor the large businesses. If the gov't goes through with this, it should help level the playing field a little bit.