Do Corporations Pay Tax??

[Nashville]

Much of the political posturing is built around half-truths and partial information. This is happening in agendas from BOTH parties, so it is not my intention to start a partisan political debate.

One of the sound-bytes from conservative sources claim that U S Corporate taxation rates are the highest in the world. On the surface, that may be true, but real-world is these rates are being largely avoided. However, the liberal sources counter with the claim that "Two-Thirds of US corporations pay ZERO income tax..." It is this latter contention that I would like to focus on.

My question (if anyone knows) is whether this "two-thirds" includes Subchapter S corporations. It is reasonable to think that corporations with losses are not paying any income tax, but if these sources are including ALL corporations, let's stop and think about how misleading this is.

What percentage of corporations are S corps? Half, maybe? I dunno. Obviously an S corp pays zero tax by design. There are also public corporations, non-profit corporations, foundations which are corporately-chartered, etc.

Can anyone reflect on this with reasonable statistical representation? This thread borders on the political, but as preparers we often get sucked into these conversations and it would be nice to know the truth, as we will not get it from the biased sources.

[another such topic was the infamous IRS blocking of tea party applications, when the truth was that, unlike 503(c) nonprofits, no such entity was prevented from filing a tax return with exempt status. This is another story and we don't have to go there]

[TAXNJ]

Could be hot

Yes, it could be either a hot topic depending on the reader. So with that in mind, below are government statistics for one's reading and own conclusion. Also, there are many articles on this topic depending on one's view.

Some tax specialists will provide the best tax savings stategies (reduce tax liabilities) for their clients available under the law. Some may think differently and may not. It's a great country when one can choose their option available under the law.

Keep in mind that if one wants to give more than what they owe in taxes that option is available to them. So it might be a "win-win" for either option you choose.

http://www.irs.gov/uac/SOI-Tax-Stats-Corporation-Tax-Statistics

[Nashville]

Thanks, but.....

Thanks for your response Jersey, but I would like a little plain English.

...because finding any answer on the link you provided is hopeless for a dummy like me. As a response, links are OK but often the reader has to research to find anything relevant and even then the language is so stilted that it can't be interpreted by us ordinary people. This one is like walking into the Library of Congress and having someone tell you "yessir, we've got it in here somewhere..."

I do appreciate your response and trying to help. This probably makes me sound ungrateful and that wasn't the intent.

[JohnH]

Corporations don't pay tax.
Their customers and clients pay the corporate taxes which are bundled into the prices of the corporations' goods & services.
The corporation is just a middle man/billcollector for the government, and a convenient whipping boy for politicians of all persuasions.
(Yes, this is also bordering on the political, but I'm an equal-opportunity critic of all politicians)

[jsamans]

Corporations don't pay tax.
Their customers and clients pay the corporate taxes which are bundled into the prices of the corporations' goods & services.
The corporation is just a middle man/billcollector for the government, and a convenient whipping boy for politicians of all persuasions.
(Yes, this is also bordering on the political, but I'm an equal-opportunity critic of all politicians)

John, I see your point, but I'm skeptical of your reasoning: by the same token, there is no cost for any service aside from the prices paid by end-users (who necessarily pay rates that shoulder all burden), but of course there is flexibility among consumers in most cases as to whether they actually will pay those higher rates. Only in price-setting circumstances is it actually the case that a corporation can necessarily build whatever taxes are presented to it into its prices, and such conditions exist only in two cases: consumers flatly require what the corporation sells, or the cost is identical to all corporations offering substitutes. Because corporate taxes are graduated, this isn't the case.

To the original question, the typical argument that corporations pay no tax cites examples of large conglomerate entities, so no, it's not about S-Corps. It's about deductions and credits, and especially special carve-outs that allow companies to take deductions and credits for eliminating or offshoring jobs. The anger regarding whether or not corporations pay taxes is closely linked to the claims that virtually every benefit afforded to working people has to be reduced or eliminated because "we can't afford it," and when you think about, this argument -- made by the wealthiest nation in the history of humanity -- is pretty silly.

But none of this really has much to do with anything, does it? We just try and figure out how to apply the tax policy that others create.

[Jiggers]

Corporations don't pay tax.
Their customers and clients pay the corporate taxes which are bundled into the prices of the corporations' goods & services.
The corporation is just a middle man/billcollector for the government, and a convenient whipping boy for politicians of all persuasions.
(Yes, this is also bordering on the political, but I'm an equal-opportunity critic of all politicians)

Same as Sole Proprietors and Partnerships. They cover their taxes in their prices. Otherwise, how would they survive. If they made no profit and paid no taxes, they wouldn't have anything to live on.

Now another subject would be the tax rates. Are they too high?

[kathyc2]

Corporations don't pay tax.
Their customers and clients pay the corporate taxes which are bundled into the prices of the corporations' goods & services.
The corporation is just a middle man/billcollector for the government, and a convenient whipping boy for politicians of all persuasions.
(Yes, this is also bordering on the political, but I'm an equal-opportunity critic of all politicians)

Wouldn't this theory then also apply to all business- S-corp, partnership, and SP? Implicit in the statement is that only if taxes were lower, prices would be lower. Do you know of any company that lowered prices/fees due to Bush tax cuts?

What type of response to you think you would have received if you suggest to a business if they could lower prices since they are paying less tax?

[TAXNJ]

Be non partisan

Wouldn't this theory then also apply to all business- S-corp, partnership, and SP? Implicit in the statement is that only if taxes were lower, prices would be lower. Do you know of any company that lowered prices/fees due to Bush tax cuts?

What type of response to you think you would have received if you suggest to a business if they could lower prices since they are paying less tax?

Now this should not turn out be political. You should have included in your post reply question, vs. the current president's tax increases, so to be non partisan and fair.

Also, as mentioned in prior post reply, you can pick your option as noted below:

Some tax specialists will provide the best tax savings stategies (reduce tax liabilities) for their clients available under the law. Some may think differently and may not. It's a great country when one can choose their option available under the law.

Keep in mind that if one wants to give more than what they owe in taxes that option is available to them. So it might be a "win-win" for either option you choose.

[kathyc2]

Now this should not turn out be political. You should have included in your post reply question, vs. the current president's tax increases, so to be non partisan and fair.

Also, as mentioned in prior post reply, you can pick your option as noted below:

Some tax specialists will provide the best tax savings stategies (reduce tax liabilities) for their clients available under the law. Some may think differently and may not. It's a great country when one can choose their option available under the law.

Keep in mind that if one wants to give more than what they owe in taxes that option is available to them. So it might be a "win-win" for either option you choose.

Nothing political. I just don't think there is a strong relationship between tax rates and prices charged.

[kathyc2]

Thanks for your response Jersey, but I would like a little plain English.

...because finding any answer on the link you provided is hopeless for a dummy like me. As a response, links are OK but often the reader has to research to find anything relevant and even then the language is so stilted that it can't be interpreted by us ordinary people. This one is like walking into the Library of Congress and having someone tell you "yessir, we've got it in here somewhere..."

I do appreciate your response and trying to help. This probably makes me sound ungrateful and that wasn't the intent.

This may be the "nutshell" answer you are looking for: http://www.irs.gov/pub/irs-soi/12Cor...nsOneSheet.pdf