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MindMover

(5,016 posts)
Mon Apr 9, 2012, 05:49 PM Apr 2012

Companies use popular provision to avoid income taxes

(Reuters) - More than two dozen Fortune 500 companies paid no U.S. federal income taxes in recent years partly because of a corporate tax break that is broadly supported by Republicans and Democrats alike, a consumer group said on Monday.

In at least half of the cases cited by the group, companies made use of accelerated depreciation, a tax provision that allows increased deductions in the early years of the life of an asset.

Citizens for Tax Justice, which advocates steeper corporate taxes, said it surveyed major U.S. companies and found that 26 on average paid no net federal income taxes between 2008 and 2011, among them General Electric and Duke Energy.

"This isn't fair to the rest of us," said Bob McIntyre, director of the left-leaning tax research group.

"Things do not get changed in the tax code unless someone asks," McIntyre said, blaming company lobbying for a failure to thoroughly overhaul the U.S. tax code in 25 years.


http://www.reuters.com/article/2012/04/09/us-usa-tax-corporations-idUSBRE8380TJ20120409?

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Companies use popular provision to avoid income taxes (Original Post) MindMover Apr 2012 OP
Nearly every company in the US uses accelerated depreciation dems_rightnow Apr 2012 #1
the dogma of financing "incentives" rather than "effects" is a big part of the problem. unblock Apr 2012 #2
Does it apply to equipment investments in foreign countries? exboyfil Apr 2012 #3

dems_rightnow

(1,956 posts)
1. Nearly every company in the US uses accelerated depreciation
Mon Apr 9, 2012, 05:58 PM
Apr 2012

It's not a "break" so much- it's mandated by the tax code. Yes, you can elect out. But it's the norm.

It's the bonus depreciation rules that save so much money to corporations. 100% writeoff of an asset in its first year. No restrictions at all in the amount that can be claimed.

unblock

(51,982 posts)
2. the dogma of financing "incentives" rather than "effects" is a big part of the problem.
Mon Apr 9, 2012, 06:07 PM
Apr 2012

or perhaps the fact that it has become dogma is a symptom of the problem of undue corporate influence.

accelerated depreciation is an "incentive" for businesses to buy equipment. it reduces the cost of buying equipment by giving them a big write-off early, rather than needing to spread it out over the life of the equipment. therefore, it gives them an incentive to buy equipment, which is good for the economy.

the problem is that in many, many cases, the decision to buy equipment would have been made regardless, so the government is just throwing money away.

the "effect" is that many companies get free money for doing nothing to change their behavior or help the economy relative to what they would have done anyway. only a few businesses would buy equipment they otherwise would have, and then only in cases where the decision was marginal -- i.e., perhaps they shouldn't have done it anyway -- the jobs produced are the ones most likely to be at risk if the business is marginal.



contrast this to any of a number of ways of providing additional assistance to the poor and lower middle class. increasing exemptions, standard deductions, lowering the first couple of tax brackets, increasing the earned income tax credit, or, outside the tax code, increasing food stamps, afdc, etc. these have politically bad "incentives", but great "effects".

the "incentive" is to make people (ever so slightly) less uncomfortable being poor, i.e., it discourages them from aggressively seeking to become richer by getting higher paying jobs (as if these were so easy to find, you need merely want them badly enough).

but the "effect" is that poor and lower middle class people SPEND nearly all of any additional money they get. that increased DEMAND is exactly what our DEMAND-STARVED economy needs.



but does washington think like this?
of course not. washington throws money pointlessly at business to reward them for doing what they were doing anyway. don't think i'm just making this up. think about the entire point of a lobbyist. businesses decide look at what they're already doing and pay a lobbyist to get congress to reward them for it. do you really think companies put say, gee, i'd buy more equipment if only the tax break were a tad better, let's put our plans on hold, go pay a lobbyist and make big contributions in the hopes that eventually we can get the loophole put in, and THEN take action accordingly? hardly. businesses move faster than that where there's profit anyway, and then get a lobbyist to help make it even more profitable.






exboyfil

(17,857 posts)
3. Does it apply to equipment investments in foreign countries?
Mon Apr 9, 2012, 06:10 PM
Apr 2012

If so then that should stop immediately. How about a requirement of a certain percentage of domestic content in the equipment to use the depreciation?

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