It's a perfectly legal way for corporation to avoid paying federal and/or state corporate income taxes. No tax lawyers or tax shelters needed. The political left calls it "corporate welfare." However, a Wall Street Journal article reports that these firms have been granted legal immunity from tax liability.
The reason?
To encourage these corporations to locate and/or expand in areas where jobs will be a boon to the economy or to keep these corporations from exporting facilities (and jobs) elsewhere.
The facts?
- In 1986, 24% of the nations' corporations were nontaxable. In 2008, 69% were nontaxable. Some estimates indicate that 60%+ of the nation's corporations with profits of $1M+ are structured as pass-throughs. This is the highest rate among developed countries.
- In 1952, this "tax-exempt status" explains why federal corporate tax collections were 6.1% of the nation's gross domestic product (GDP). But, by 2010, they dropped to 1.3% of GDP.
Complain about this phenomenon all they want, one reason the nation's corporations take advantage of this status is that Congress is more than willing to provide it, given that the nation's corporate tax rate is 35%. That's one of the highest in the world. In addition, the federal government taxes capital gains resulting from corporate operations and distributed among the corporation's owners (e.g., shareholders). Even worse yet, non-tax-exempt corporations pay a "double tax" on net income and capital gains.
In view of this punitive tax environment, what sane corporation would not take advantage of "pass throughs"?
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With the Democrats controlling both houses of Congress for most of the past five decades, it seems to The Motley Monk that the political left should be chastising its representatives who aided and abetted the expansion of corporate welfare.
Let the discussion begin...
To read the Wall Street Journal article, click on the following link:
http://online.wsj.com/article/SB20001424052970203733504577026361246836488.html?reflink=barrons_redirect
Right, because they're the job creators.
ReplyDeleteThere are only so many job openings for butlers, maids and chauffeurs, though.
WHO ARE JOB CREATORS??? CORPORATIONS??? Y-E-S
ReplyDeleteThem Dems and GOP are bought and paid for by business but the Dems have mastered the ability to make the masses think they represent the common man.
The Dems have NO PROBLEM throwing big business, banks and their version of "the rich" under the bus when it is convenient. They:
Pose with the Unions and 'stand against business'
Patronize OWS and tell them they are 'victims'
Pander to illegals
Make minorities think welfare stimulates the economy
Increase taxes and call them 'investments'
Increase bureaucracy to increase 'safety'
Increase regulation to 'protect'
In the meantime, we have a bloated government that wastes money, increases the cost of doing business, establishes and oppressive tax code, selectively enforces regulation and serves ITSELF... not the People!
The Dems and GOP have both sold out to big business. Tax REFORM is needed. Government REFORM is essential!