A Stitch in Haste

Just wait until the liberal screechmeisters get a hold of this gem:

Most companies in US avoid federal income taxes
Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.

The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.

Collectively, the companies reported trillions of dollars in sales, according to GAO’s estimate.

Question: If a business sells a pound of zoop for $1,000, then what tax should it pay?

Might the answer depend on whether it cost the business:

(a) $100
(b) $1,000
(c) $10,000

to produce the zoop that generated the $1,000 in sales?

We tax profits, not sales. I would hope that one need not be a CPA to grasp that most rudimentary concept. So why the just-plain-dumb muckraker line about “trillions of dollars in sales”? Do we file this story under “professional” journalism?

The GAO study did not investigate why corporations weren’t paying federal income taxes or corporate taxes and it did not identify any corporations by name. It said companies may escape paying such taxes due to operating losses or because of tax credits.

Having an operating loss — as in, “not having any income” — is indeed a clever way to “escape paying income taxes.” Such evil geniuses, those money-losing corporate bastards!

(Incidentally, one reason a business may have no profit upon which to levy a federal income tax is because that business has already paid so many other taxes — property taxes, sales taxes on inputs, payroll taxes for employees, fuel taxes, excise taxes, import duties, gross receipts taxes, etc., etc., etc. — that there is simply nothing left for the federal government to tax. Bummer.)

But of course there’s more:

An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called “S” corporations pay taxes under individual tax codes.

In these circumstances — as with partnerships and so-called “LLC” entities, the profits are most definitely taxed — just at the individual and not the corporate level. So this is even news, let alone a “scandal” — how?

Finally:

“It’s shameful that so many corporations make big profits and pay nothing to support our country,” said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich.
…
“It’s time for the big corporations to pay their fair share,” Dorgan said.

Let’s back away from Dorgan’s pandering-to-idiots histrionics and recall another pesky fact about business taxes. Businesses don’t actually “pay” taxes — they merely collect and remit them. Only people pay taxes.

Every cent our zoop merchant remits to a government in tax is a cent that would otherwise have gone to a person. Perhaps a customer in the form of a lower price for the zoop, perhaps to an employee who could have been paid a higher wage for making the zoop, perhaps to an investor who could have received more profit for selling the zoop.

These are the people — customers, employees, entrepreneurs, you — whom Dorgan so pompously insists are not “paying their fair share.”

Still share in his outrage?

More thoughts from Tax Policy Blog (times two), WindyPundit.

Previously: Exxon’s Record What?