Many Americans are confused about how U.S. corporations can be making record profits yet not paying any federal income taxes. The way most of them do it is through the “pass-through.”
Sole proprietorships, partnerships, most LLC's, and Sub-chapter S corporations qualify for pass-through status.
http://en.wikipedia.org/wiki/S_corporation
Despite record high corporate profits, the vast majority of U.S. businesses do not pay any income taxes to the federal government whatsoever and the percentage of U.S. companies doing this is increasing.
The ones that still do pay federal income taxes employ accountants to take advantage of loopholes and to shield profits in complex tax shelters to reduce tax liabilities as much as possible but let's look at the ones that don’t pay any income taxes (often despite record profits).
These companies are called pass-throughs which are structured to shuttle company profits along to investors (e.g. other names for “investors” are “shareholders” and “owners”).
Pass-through companies use a special structure to pass along profits to investors who then are supposed to pay income taxes. Despite taxes for the wealthy being at historically low rates currently, they funnel this money into hedge funds and other tax sheltered vehicles.
Pass-throughs are legal and encouraged by Congress and state governments and the Wall Street Journal reports that 69 percent of U.S. corporations were organized as nontaxable pass-through businesses in 2008.
Contrast that with the year 1986, when non-taxable U.S. corporations only comprised 24 percent of all U.S. corporations.
The National Federation of Independent Businesses survey found that 75% of all U.S. small businesses pay zero federal income taxes.
The percentage of all corporations and businesses (including non-profits) aggregated, is that about 75% pay no federal income taxes anymore and their number is rising.
Large companies are often structured as pass-throughs, with an estimated 60 percent of U.S. businesses that have profits of $1 million or more comprising this category, the largest such percentage of nontaxable businesses in any developed country.
http://bottomline.msnbc.msn.com/_news/2012/01/10/10094176-companies-that-pay-no-federal-income-tax-on-the-rise
For the wealthiest Americans, this money often passes right through non-taxed "pass-through" businesses into their hedge funds where long term earnings are taxed at a maximum rate of 15%... far less of a percentage of income than the typical middle-class wage earner pays.
Our government also bestows money grants to these U.S. companies from public funds and process U.S. business applications to insource foreign workers which displaces American workers while permitting them to offshore and outsource American jobs, capital investment, and innovation to foreign countries and workers.
For example, though quotas do exist, in 2010 the U.S. government processed 422,228 employer applications requesting 851,556 foreign workers in 2010 so American corporations can give foreign workers American jobs right here on U.S. soil.
http://www.foreignlaborcert.doleta.gov
Much of the "job growth" we see in the news today is going directly to these insourced foreign workers and immigrants both legal and illegal.
The Center for Immigration Studies (CIS) was able to show that in Texas, for example, between 2001 and 2007 81% of all new job growth went to immigrant workers (both legal and illegal) instead of American natural born citizens.
http://cis.org/immigrants-filled-most-new-jobs-in-Texas
Our government also enables a broken U.S. immigration system that fostered the establishment of Spanish-speaking immigrant networks all over the Southwest that block American citizens from working in the U.S. as those jobs go directly to the friends and family of the immigrants bypassing American workers.
A UCLA study showed that a weak economy in the state of California was the result of more than two million Spanish-speaking immigrant workers who were receiving their pay off the books without paying taxes (yet using all of the social services and public education they could qualify for both for themselves and their children). These immigrant networks typically only hire other immigrants or their families.
http://www.sfgate.com/default/article/Weak-outlook-for-state-seen-Many-are-working-2567081.php
Our government makes the American middle-class and blue-collar workers pay the lion’s share of the country’s bills (the individual income tax has been the largest single source of federal revenue since 1950) while permitting most corporations and businesses operating in the U.S. to avoid paying federal income taxes of any kind whatsoever and, at the same time, engaging in trade practices and immigration policies that are wreaking economic havoc on the very people's bottom lines who are paying the lion's share of the country's bills.
And for those companies that still do pay federal income taxes, the tax codes of foreign countries are exploited.
January 24, 2013 update - A new report from the non-partisan Congressional Research Service (CRS) finds that U.S. corporations report a huge share of their profits as officially earned in small, low-tax countries where they have very little investment and workforce while reporting a much smaller percentage of their profits in larger, industrial countries where they actually have massive investments and workforces.
I hope you have found this informative and will think about the ramifications.
2013 Update: And, the gap between hourly compensation and productivity is the highest it's been since just after World War II. This divergence is one of the major drivers of the nation's growing income inequality and it's getting worse every year.
http://money.cnn.com/2013/03/07/news/economy/compensation-productivity/index.html
Sole proprietorships, partnerships, most LLC's, and Sub-chapter S corporations qualify for pass-through status.
http://en.wikipedia.org/wiki/S_corporation
Despite record high corporate profits, the vast majority of U.S. businesses do not pay any income taxes to the federal government whatsoever and the percentage of U.S. companies doing this is increasing.
The ones that still do pay federal income taxes employ accountants to take advantage of loopholes and to shield profits in complex tax shelters to reduce tax liabilities as much as possible but let's look at the ones that don’t pay any income taxes (often despite record profits).
These companies are called pass-throughs which are structured to shuttle company profits along to investors (e.g. other names for “investors” are “shareholders” and “owners”).
Pass-through companies use a special structure to pass along profits to investors who then are supposed to pay income taxes. Despite taxes for the wealthy being at historically low rates currently, they funnel this money into hedge funds and other tax sheltered vehicles.
Pass-throughs are legal and encouraged by Congress and state governments and the Wall Street Journal reports that 69 percent of U.S. corporations were organized as nontaxable pass-through businesses in 2008.
Contrast that with the year 1986, when non-taxable U.S. corporations only comprised 24 percent of all U.S. corporations.
The National Federation of Independent Businesses survey found that 75% of all U.S. small businesses pay zero federal income taxes.
The percentage of all corporations and businesses (including non-profits) aggregated, is that about 75% pay no federal income taxes anymore and their number is rising.
Large companies are often structured as pass-throughs, with an estimated 60 percent of U.S. businesses that have profits of $1 million or more comprising this category, the largest such percentage of nontaxable businesses in any developed country.
http://bottomline.msnbc.msn.com/_news/2012/01/10/10094176-companies-that-pay-no-federal-income-tax-on-the-rise
For the wealthiest Americans, this money often passes right through non-taxed "pass-through" businesses into their hedge funds where long term earnings are taxed at a maximum rate of 15%... far less of a percentage of income than the typical middle-class wage earner pays.
Our government also bestows money grants to these U.S. companies from public funds and process U.S. business applications to insource foreign workers which displaces American workers while permitting them to offshore and outsource American jobs, capital investment, and innovation to foreign countries and workers.
For example, though quotas do exist, in 2010 the U.S. government processed 422,228 employer applications requesting 851,556 foreign workers in 2010 so American corporations can give foreign workers American jobs right here on U.S. soil.
http://www.foreignlaborcert.doleta.gov
Much of the "job growth" we see in the news today is going directly to these insourced foreign workers and immigrants both legal and illegal.
The Center for Immigration Studies (CIS) was able to show that in Texas, for example, between 2001 and 2007 81% of all new job growth went to immigrant workers (both legal and illegal) instead of American natural born citizens.
http://cis.org/immigrants-filled-most-new-jobs-in-Texas
Our government also enables a broken U.S. immigration system that fostered the establishment of Spanish-speaking immigrant networks all over the Southwest that block American citizens from working in the U.S. as those jobs go directly to the friends and family of the immigrants bypassing American workers.
A UCLA study showed that a weak economy in the state of California was the result of more than two million Spanish-speaking immigrant workers who were receiving their pay off the books without paying taxes (yet using all of the social services and public education they could qualify for both for themselves and their children). These immigrant networks typically only hire other immigrants or their families.
http://www.sfgate.com/default/article/Weak-outlook-for-state-seen-Many-are-working-2567081.php
Our government makes the American middle-class and blue-collar workers pay the lion’s share of the country’s bills (the individual income tax has been the largest single source of federal revenue since 1950) while permitting most corporations and businesses operating in the U.S. to avoid paying federal income taxes of any kind whatsoever and, at the same time, engaging in trade practices and immigration policies that are wreaking economic havoc on the very people's bottom lines who are paying the lion's share of the country's bills.
And for those companies that still do pay federal income taxes, the tax codes of foreign countries are exploited.
January 24, 2013 update - A new report from the non-partisan Congressional Research Service (CRS) finds that U.S. corporations report a huge share of their profits as officially earned in small, low-tax countries where they have very little investment and workforce while reporting a much smaller percentage of their profits in larger, industrial countries where they actually have massive investments and workforces.
I hope you have found this informative and will think about the ramifications.
2013 Update: And, the gap between hourly compensation and productivity is the highest it's been since just after World War II. This divergence is one of the major drivers of the nation's growing income inequality and it's getting worse every year.
http://money.cnn.com/2013/03/07/news/economy/compensation-productivity/index.html
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