The “minimum book tax” on the reported income is the tax incentive for producing the actual reported income. Wall Street will fight it fiercely.
By Wolf Richter for WOLF STREET
I’m not a huge fan of Fed President Janet Yellen who oppresses interest rates with money, even though she raises interest rates and starts cutting the Fed’s balance sheet. But she now gets a huge brownie rating as Finance Minister for trying to deal with the overall disastrous corporate tax code, something I’ve been messing around since 2012:
Large corporations – and only a few dozen dozen or so to take on the proposal – should pay income taxes on the inflated and inflated income they report to shareholders under well-known accounting principles. Our GAAP instead of paying taxes. Or even receiving tax benefits from losses that they report separately to the IRS under the Tax Code.
Smaller companies like my WOLF STREET media mogul empire use the same accounting principles for income and taxes, or vice versa. We have no illusions and no reason to increase their income.
But Nike has reported $ 4.1billion in pre-tax income to shareholders over the past three years and has a negative 3-year tax rate of 18%, meaning the IRS pays a lot to Nike, which it calls Nike. According to the Tax and Policy Institute, there are 55 companies in the report.
Yellen’s approach is not as drastic as I think.Since 2012, I have argued, threw all the corporate tax codes and replaced them with taxes on the inflated and inflated income that companies report to their shareholders under GAAP.
Yellen doesn’t go there. Instead, she offers a minimum tax of 15% on “accounting income”, that is, the inflated income that companies report to their shareholders. This measure will be applied to “large companies reporting high profits. But there is little taxable income. ”The proposal is called “Minimum book tax”
“This minimum book tax is a targeted approach to ensure the most aggressive tax evasion is forced to bear a meaningful tax burden,” it said.
This is Item # 4 in the 7-item Make-Corporate-Taxes-Great-Again plan. … No kidding, I mean in the “Made in America Tax Plan” that comes with this chart that we’ve seen millions of times. This shows how the share of federal taxes paid by Labor has risen to 85% and how the share of federal taxes paid by companies is single digit:
Yellen’s proposal goes on to explain:
“In a typical year, about 200 companies report net income of $ 2 billion or more. Of these, many stocks pay zero or negative federal income taxes, even reporting hundreds of billions of dollars in profits to shareholders as a whole. This is because the major gaps in current tax laws, including the presence of improper incentives, keep large and profitable corporations.There are ways to reduce taxable profits – in many cases, to zero. “
Back in 2012, I introduced my article on our corporate tax evasion code this way and the problem remains the same:
Between 2002 and 2011, Boeing reported to investors that revenues were $ 31.8 billion. But the report is something completely different from the IRS and doesn’t have to pay income taxes. Instead, it received $ 2.06 billion in tax incentives, a real tax rate of -6.5%. Other companies were also agile. Bailed-out GE made $ 10.5 billion, paid zero taxes and received incentives. In the way of taxes, $ 4.7 billion ….
Probably none of these companies are illegal, they are using GAAP to show huge profits to shareholders, and they are using tax codes to show huge losses to the IRS. The tax code encourages them to do so.
Yellen’s proposal still lamented. (What I mourned in an obscure angle almost a decade ago):
Companies have two types of reporting rules. (Accounting and tax reporting) that provides various deductions that protect them from meaningful tax bills.
Companies can signal huge profits to shareholders and reward executives with these rewards, while citing the IRS that their revenues are so low that they should be freed from their tax burden. Federal
The proposal explains how it will work with the normal tax burden:
Large corporations reporting sky-high profits to their shareholders must pay at least a minimum amount of tax on those returns outside the scale. Under the offer, a minimum tax of 15 percent is levied on book income, typically the profits of such companies are reported to investors.Companies will make additional payments to the IRS for the excess of 15. The percentage of their account income is greater than their normal tax liability.
And the proposal states, “In recent years about 45 companies will have to pay minimum book tax under the President’s proposal,” and “this average company that is subject to taxes will see a minimum tax burden. That adds about 300 million dollars each year. “
Secondary Benefits: A more straightforward income report.
And here’s where the fun starts: If large corporations pay a minimum 15% income tax on their profits as reported under GAAP, it could bring honesty and truth to financial reports because under A minimum of 15% tax on accounting income. Inflated and inflated companies pay 15% tax on inflated and inflated income. This will reduce and increase income.
It would give the CFO a theoretical rethink, the GAAP financial statements could be more honest, threatened by paying taxes 15% on inflated income. And that could be a game changer – when there suddenly comes true tax incentives with financial reporting. And that’s why Wall Street will fight fiercely to sink this.
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