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[bupkus]

This message was self-deleted by its author (bupkus) on Fri Sep 28, 2012, 07:01 PM. When the original post in a discussion thread is self-deleted, the entire discussion thread is automatically locked so new replies cannot be posted.

[Doctor_J]

1. They're part of the 47% that Romney hates so much

[porphyrian]

2. . n/t

[marions ghost]

3. Go to the PDF --gives the actual numbers

The list:

Pepco
General Electric
Paccar
PG & E
Computer Sciences
NiSource
CenterPoint Energy
Tenet Healthcare
Atmos Energy
Integrys Energy Group
American Electric Power
Con-way
Ryder System
Baxter International
Wisconsin Energy
Duke Energy
DuPont
Consolidated Edison
Verizon
Interpublic Group
CMS Energy
NextEra Energy
Navistar International
Boeing
Wells Fargo
El Paso
Mattel
Honeywell Intl
DTE Energy
Corning

[joeglow3]

4. Misleading information

I understand the sentiment, but as a Corporate tax accountant, I HATE it when these organizations prey on people's ignorance and put out misleading information. I will try to explain this in a semi-simple manner:

Companies are required to follow generally accepted accounting principles (GAAP) when preparing their financial statements. Taxable income is calculated with a different set of accounting standards. Most of these differences lead to the same income over a period of time, but shift the recognition periods. For instance, under GAAP, a company is required to calculate what percentage of their accounts receivable will be uncollectable and record a bad debt expense for it. Tax does NOT allow this deduction (until the account is proved to be uncollectable) and requires an addback in that year's taxable income calculation. When those accounts actually become uncollectable in a later period, the deduction is allowed for tax.

As an example, lets assume this company made a million dollars and included in that was a bad debt expense (accrual) of $100,000. Due to the tax laws, the company would have taxable income of $1,100,000, resulting in a tax expense of $385,000 (assuming the 35% Federal rate). Under the methods used by this "study", we would tell everyone they had a tax expense of 38.5% (the taxes paid divided into book income of $1,000,000). However, for GAAP purposes, the company would have recorded a "Deferred Tax Asset" recognizing that they are entitiled to a tax deduction they did not get this year at some point in the future (most likely in the next year for bad debt). Thus, the company would set up an asset of $35,000 (the value of the tax on that $100,000 deduction) and record deferred tax INCOME of $35,000. The result is that the company ends up recording income tax expense of 35%, which makes sense since that is the statutory rate.

Now, assuming the concept of deferred taxes is understood, Congress has passed "bonus depreciation" rules the last decade (they have gone in and out of law and at different rate - 30%, 50% and 100%), allowing a quicker acceleration of deductions for tax than you would get for tax. This has led to huge tax deductions that the company will pay back in future periods (as they have to add back all book depreciation and have little tax deprecation left to take). Thus, the company has set up huge "deferred tax liabilities" and recorded deferred tax expense, agains resulting in a total tax rate of 35%.

I picked four random companies listed on their list and checked the income tax footnote in their 10-k filings on the EDGAR database (Fedex, American Electric Power, Duke Energy & Computer Sciences) and found that all four of them had statutory rates close to 35%, but that they had received huge bonus depreciation deductions, resulting in timing items that will flip out in the next 3-5 years. And yet, a search of the article mentions neither "bonus" or "depreciation". What this "study" did was ignore the GAAP concept of deferred taxes and divided CURRENT tax expense into GAAP income. This is a misleading and irrational ratio for the reasons outlined above.

Now, an honest discussion of the topic would discuss the concept of bonus depreciation, what the benefits/costs of it are, why it was enacted, who supported it and should it continue (the current bonus depreciation deduction of 50% is set to expire at the end of this year). Instead, we once again get a misleading "study" that has ZERO interest is educating our populace and instead seeks to spread misinformation to further their cause (even if their cause is just).

[joeglow3]

6. I agree with you. I just want an honest discussion

I hardly think educating people and seeking an honest discussion is a tactic of rMoney. I am surprised you do.

[bhikkhu]

7. Agreed - the information is bogus and poorly researched

and fairly easy to refute. I understand the sentiment too, and agree that the corporations pay too little in taxes, but I wouldn't want to see our side trotting around lies and distortions without checking the facts (like a certain person we know who is running for president, very badly).

If you want to see actual information, go to any corporation's annual report, look on what is usually called the "audited earnings statement". Near the bottom there will be a line for "earnings before taxes", a listing for tax payments, and a line for "earnings after taxes". Fairly easy to do.

[bhikkhu]

10. Pick any company on the list and I'll look up ten years of data for you

I don't have endless amounts of time, but I'd be happy to look up one.

I've done GE before, so I'd suggest one other than them (they've averaged 15% taxes paid on profits over the last ten years).

[bhikkhu]

12. So, to look at that, you go to "Audited Financial Statements" here:

http://www.ge.com/ar2010/pdf/GE_AR10_Fin_Statements.pdf

That's from the 2010 Annual Report, which every public company is required to make public, and which is scrutinized by the SEC and well-audited for accuracy.

Down the page a little way there is Total Revenue, in millions, 150,211. Expenses are listed at 136,003, and then Earnings From Continuing Operations Before Taxes is 14,208. Taxes are a deduction from the net, of 979 million.

That shows a tax of 6.89%, which figures correctly with what the article says.

One thing that I was trying to emphasize is that all this stuff is easy to find, and it is public information when we are talking about publicly traded companies. The SEC is very good at regulating the basics of the "corporate marketplace", and anyone who has even a little familiarity can tell you in a few mouse-clicks whether a claim is true or not. So its worthwhile to do a little research and stick to factual claims - and it is an undeniable fact that corporations pay too little in taxes.

[bhikkhu]

14. The basics being the information required in the annual reports to stockholders

That is one of its primary jobs. I think its very much taken for granted in the markets that factual and accurate information is available, and that is because the SEC does a pretty good job there.

"Trust is the air we breath" is a saying that means you hardly notice it, but the whole thing would collapse in its absence.

Of course there are notable failures, and of course monitoring and regulating trading itself is much harder.

[bhikkhu]

16. It does a pretty good job of verifying the annual reports of corporations

...the financial statements of which are verified by independent auditors as well. If there is "anger out there" based on bogus figures written by people who didn't bother to look up the publicly available information, I'm not impressed. That addresses directly the content of the OP.

As far as the rest of it, you have a very good point.

[KamaAina]

8. Thank you

I'm working with an anti-poverty, pro-tax fairness group here in the Bay Area. Two of our upstanding corporate citizens , PG&E and Wells Fargo, are on the list.

Speaking of PG&E, why are there so many utility companies on the list? I count 11 out of 30! Plus, why does PG&E, which operates in only one state, need to spend nearly as much on lobbying as GE, which is not only a multinational conglomerate but a major defense contractor?

[SickOfTheOnePct]

18. The number of energy companies jumped out at me as well n/t

[KamaAina]

17. Why isn't there an Alternative Minimum Tax for corporations?

The AMT is in place to make sure that upper-income earners pay more than a pittance in tax, no matter how many deductions they pile up. Come to think of it, we need an AMT for capital gains (*cough*Rmoney*cough*), too.