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History explains that it happens. The reason why is that the people responsible for the ad adhered to your application of property rights with respect to nutritional labels: they placed ads which were legal though not truthful. The burden of adjudication was placed on the uninformed majority, who got it wrong in the end (as per usual). Come election time, seniors were worried how they were going to pay for expenses they were exempt from. Advertising doesn't have to lie to order to lie. Merely hiding pertinent facts is sufficient to perpetrate a fraud.Originally Posted by KillerAim
That's not a very good description of the process as it's practiced in real world situations.
Effective corporate tax rates are lower than 35%.
Compare the income tax expense with net profit as reported to shareholders. A true 35% tax rate would result in $35 in taxes for every $65 of net income to shareholders: a 53.8 ratio. A look at SEC filings shows different ratios.
Microsoft's ratio ranges from .213 to .333. It's an effective tax rate of 17% to 25%. BP (of oil spill fame) has an effective tax rate of around 27% when it makes a profit and around 25% when you combine multi-year window averages. GE is a loophole finding machine. In 2009, it's effective tax rate was -10%. Yes, it had a negative tax rate despite over $11 billion in US revenues. That tax revenue paid for the corporate taxes GE owed to foreign governments. For 2010, the effective tax rate was around 7-8% and for 2011 it was around 28%. Walmart is at a pretty steady 32% effective tax rate.
What about some Bain Capital affiliated companies?
HCA's annual effective tax rate was just over 30% in 2009 and is currently at 24%. Burger King Holdings 2011 tax rate was 27%. Clear Channel Media 2011 tax rate was a negative number, but they also lost money during the same period. Domino's Pizza is in the 36% to 41% tax range - I'm really curious why it's so high. Dunkin' Donuts are clearly doing some accounting voodoo. Their tax rates vary from a low of -30% to nearly 100% (probably as a result of past and current tax fraud investigations and settlements).
Also, corporate tax rates are not a flat 35%. The tax rate for corporations vary from 15% to 35%, though any profits in the 6+ figure range have an on-paper tax rate in the 30s.
Corporations receive numerous tax benefits not available to individuals.
Corporations are only taxed on profits, not income (revenue). Just for comparison, Microsoft's 2011 tax rate of 24% would be considered an effective income tax rate of 9.4% according to IRS Form 1040. And that's from a high profit margin company. BP would have a 2011 effective tax rate of 3.3%. Walmart would have an effective tax rate of 1.8%. I wonder if Romney's private jet is paid for by Romney or by one of his corporations. Same thing with cars. Houses. Lawyer. Accountant. Vacations. Clothing. Insurance. With enough corporations involved, very few day to day expenses can't be expensed to one of them. In essence, most of the goods and services bought by the uber rich are a tax deductible expense on one corporation or another.
Corporations have this nifty benefit called loss carryback and loss carryforward. Losing money one year reduces tax liability or previous years and in later years. All kinds of accounting shenanigans occur to maximize this benefit. A company can have a real net income but still show a net loss on paper. Alternating years of loss and profit (reminder - purely on paper) really help take advantage of other tax breaks found in the over 10,000 pages of the tax code.
To borrow from a popular meme: It's the deductions stupid.
Tax rate, by itself, is a useless barometer for these discussions. There are no rates without deductions. Deductions alter the final outcome as much as, and often more than, the initial rate. Income tax rates for highest earners are supposed to be 35%. However, if that income can be classified as a source listed on schedule D, the tax rate is reduced from 35% to 15% (and sometimes even less). What would the tax rates of point 6 look like without deductions for capital gain income? Different. Very very different.
I like this line from the 2012 corporate tax instructions:
"The fact that a corporation has an unreasonable accumulation of earnings is sufficient to establish liability for the accumulated earnings tax unless the corporation can show the earnings were not accumulated to allow its individual shareholders to avoid income tax."
Corporations whose profits stem from investing in other companies (hello Bain Capital) avoid that clause simply by investing the "unreasonable accumulation of earnings" into another company. Ergo, current tax law allows individual shareholders to avoid income tax merely by the existence of a corporation acting on the individual's behalf. I'm not going to claim that Romney and Bain engaged in this behavior, but such behavior is possible (and sometimes legal) under the current tax code.
Throw out misleading numbers like 35% tax rates. Use actual tax rates. What's Romney and/or Bain's actual tax rate? According to the Romney campaign, his tax rate for 2010 was 13.9%. How does that happen if the lowest tax rate is supposed to be 15%? Answer: published tax rates are irrelevant.
Maybe later we can talk about how part of Romney's $21.6m 2010 revenue is derived by companies which paid no corporate income taxes because they didn't show a profit. If there is no first dip, there is no such thing as double dipping. Tax laws enacted to avoid double dipping shouldn't come into play without the first dip. After that, we can talk about triple dipping (dividends received decuction) that isn't.
90 year old grandmothers are children of the depression. I can't help my grandfather with those activities because he refuse to let anyone else help make those decisions. It's a cultural issue. Revoking his driver's license involved breaking and entering and grand theft auto. Despite decades of type 2 diabetes and the resulting nearly complete numbness from the waist down, he stopped driving only when his children took the car and car keys.
The point though, is that many people don't want to have to make a decision on vouchers. If given a choice between vouchers and letting someone else worry about the problem at a later time, which side do you think will win? Receiving a gift (benefits of a governmnet program) of suffering the loss of theft (balancing the budget) trigger emotional responses strong enough to override rational thought more often than not, when considered on a national level.
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