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ashear
Citizen
Username: Ashear
Post Number: 989
Registered: 5-2001
| | Posted on Friday, February 20, 2004 - 9:08 am: |     |
Anyone who saw Frontline last night discovered that Wachovia had $3.6 billion in profits, but paid no federal taxes (http://www.pbs.org/wgbh/pages/frontline/shows/tax/shelter/producer.html its in the last paragraph).
So I paid more takes than this huge company. How? Tax shelters. Absurd, byzantine schemes whose only purpose is to avoid paying taxes. While there is legislation pending to deal with this, there probably always has been, anyone think there is any chance of this changing? (But hey, we don't need to regulate corporations, we can just trust them to do the right thing. And be sure to send Jeff Skilling some soap on a rope.)
More here: http://www.pbs.org/wgbh/pages/frontline/shows/tax/ |
bobk
Supporter
Username: Bobk
Post Number: 4725
Registered: 5-2001
| | Posted on Friday, February 20, 2004 - 9:11 am: | |
Have they outsourced IS and customer service to India yet?  |
Grateful Straw
Citizen
Username: Strawberry
Post Number: 1968
Registered: 10-2001
| | Posted on Friday, February 20, 2004 - 9:12 am: | |
sure tax the cooperations to the point where they have to cut workers to pay the taxes. That's the way to go.
Look for awhile at the China Cat Sunflower proud-walking jingle in the midnight sun Copper-dome Bodhi drip a silver kimono like a crazy-quilt stargown through a dream night wind.
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tom
Citizen
Username: Tom
Post Number: 2016
Registered: 5-2001
| | Posted on Friday, February 20, 2004 - 9:47 am: | |
Corporations use the courts, require regulatory and legislative systems at all levels, ship on the highways, communicate over the internet, need police and fire services -- all of which cost money to build and run. Profits from corporations -- as distinct from operating expenses -- go to the shareholders and top execs. Why shouldn't these profits be taxed?
Somebody's got to pay for all this, and putting the burden on the consumer end is going to reduce demand. Is that really any better? |
Brett
Citizen
Username: Bmalibashksa
Post Number: 740
Registered: 7-2003
| | Posted on Friday, February 20, 2004 - 9:56 am: | |
I’m not %100 sure of all the facts but I believe that the total rise in share value was 3.6 B. So the Company would not pay taxes on that money because it’s not really money in the bank. The taxes come out of the profits that investors make when selling the shares. Wachovia would only have to pay taxes on money that the company kept as a whole, but most companies would give that to investors as dividends. The entire 3.6 was not taxed, only the amount those investors made last year. Also keep in mind that Wachovia merged with First Union last year so the profit numbers would be fuzzy.
Granted they may have a few tax loopholes here and there, but in the end the share holders pay the taxes not the company.
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sportsnut
Citizen
Username: Sportsnut
Post Number: 929
Registered: 10-2001
| | Posted on Friday, February 20, 2004 - 12:38 pm: | |
Ashear and others you are very quick to point out the corporations who go to large lengths to utilize tax shams, however the reality is that most corporations pay and especially many large corporations pay at a flat 35%. The only ones who get headlines are the ones who cheat.
I work in the industry. I've worked both sides of the issue (public accounting and now private). I see have seen proposals come across my desk from various accounting firms that make you shake your head and say thanks, but no thanks. Plenty to be mad about. Read Dick Thornburgh's report on WorldCom. Its enough to make you sick. However, if you raise the corporate tax rates they will raise prices to the consumers or worse reduce headcount to pay the additional taxes. Regulation will not work in most cases. What will work is enforcement of new and existing laws and substantial penalties on those who commit fraud. What WorldCom did was perfectly legal - how they did it was fraudulent.
To paint with such a broad brush is unfair. Its the same old rhetoric - big bad wealthy people and big bad corporations are to blame for our ills. True in some cases, but false in more.
The term tax loophole is disingenuous. We don't make the laws we just follow them. |
cjc
Citizen
Username: Cjc
Post Number: 961
Registered: 8-2003
| | Posted on Friday, February 20, 2004 - 12:49 pm: | |
tom...corporations aren't just going to sit there and take a tax hike without reacting by raising prices (hitting the consumer) and/or reducing employment (hitting the consumer).
You're probably of the belief that your employer pays 1/2 of your Soc. Sec. taxes. Dude -- you pay it ALL! It's figured into what it costs to hire you. Self-employed people know this all too well, as they pay the entire Soc. Sec. tax. Business says 'I'll pay you X' when they budget X+Y for your position. You just don't see Y cuz they send it to DC for that Ponzi scheme. |
tom
Citizen
Username: Tom
Post Number: 2022
Registered: 5-2001
| | Posted on Friday, February 20, 2004 - 1:36 pm: | |
Nobody mentioned a tax hike. Close the loopholes.
The money has to get raised somewhere, and sure ultimately it hits the consumer. But I'm sure you don't want it all to come out of YOUR income tax. Why not do it closer to the source? Why should I pay a higher rate overall?
I just want to pay on those things I actually consume. Let the folks who make Lear jets pay taxes on their take at the corporate level, I don't need it to be part of my share.
By the way, is it really all built in? Do you think that if your dream were to come true and Social Security were abolished tomorrow we'd all get a 4% raise immediately? You think some chicken factory owner in South Carolina is going to say, "hallelujah, now I can pay my workers more!"
Again, given that it's got to come from somewhere, what makes corporate revenue more sacrosanct than other sources? |
Earlster
Citizen
Username: Earlster
Post Number: 120
Registered: 8-2003
| | Posted on Friday, February 20, 2004 - 1:48 pm: | |
Did any of you pro business and tax shelter advocates actually read the article?
There are $20mill that go to Germany for Wachovia to save taxes here. This is money that is leaving the US economy, there is only disadvantage here for US citizens.
Being German I have to say: 'Gut gemacht, melk die US Kuh."
Paying taxes here, I have to say. Fix the system and the Republicans are not up to the task. |
ashear
Citizen
Username: Ashear
Post Number: 992
Registered: 5-2001
| | Posted on Friday, February 20, 2004 - 1:50 pm: | |
Tom is correct. The issue is not raising rates, its making sure everyone plays by the rules. If some companies pay taxes and others avoid them the later have an unfair advantage, forcing the honest companies to join them, cut wages or raise prices.
Sports - I'll take your word for your experiences but Frontline made a pretty convincing case that KPMG was mass marketing these scams. They were even cold calling people to try to sell them shelters. On the corporate end there was also some pretty compelling evidence that billions of dollars are involved.
Its amazing to me that conservatives can get up in arms when a poor person gets a few thousand dollars of EIC agaist the rules but billion dollar corporate scams are no big deal (and they are happy to paint the poor with a broad brush). |
cjc
Citizen
Username: Cjc
Post Number: 966
Registered: 8-2003
| | Posted on Friday, February 20, 2004 - 1:59 pm: | |
Sure....I'm all for corporate lawbreakers. I admit it. You caught me. |
sportsnut
Citizen
Username: Sportsnut
Post Number: 931
Registered: 10-2001
| | Posted on Friday, February 20, 2004 - 2:16 pm: | |
There is a judicial doctrine of "business purpose" that underlies all of these types of transactions. There is also a section in the IRC 269 that states that discusses the acquisition of assets of another corporation made for the purposes of evading income taxes the IRS has the authority to invalidate the transaction. However, if the taxpayer can show a "valid business purpose" for the transaction the transaction will be permitted. Minimizing state income taxes has been found to be a "valid business purpose." I don't know the facts surrounding the Wachovia transaction and I admit that when you see numbers like that you should be suspicious but there may be a valid explanation. Many times these types of transactions (similar to sale/leaseback transactions) are used in cases where net operating losses are set to expire and they need to be refreshed. That is a valid business purpose according to the courts.
Ashear - I don't deny that KPMG was shopping this around and I've seen other reports as to the dollar amounts involved. Typically these ideas start out with valid business purposes then morph into out of control greed. One of the main reasons I left public accounting was that they wanted me to become a salesman and pitch these kinds of ideas. You probably wouldn't be surprised to hear that KPMG was the tax advisor to WorldCom. All I'm saying is that before you rush to judgement about whether or not they are guilty is you need to have the facts.
To me it matters not whether we are talking about individuals who cheat to get the EIC or corporations who commit fraud. If the law is broken those involved should be punished. All I'm saying is that without the facts you cannot be sure that what Wachovia did was illegal. If it was, throw the book at them.
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ashear
Citizen
Username: Ashear
Post Number: 994
Registered: 5-2001
| | Posted on Friday, February 20, 2004 - 2:40 pm: | |
In the Wachovia deal discussed on Frontline they were leasing the sewer system of a german city and the city was leasing it right back. The investor had no involvement. There was nothing to the transaction except the tax break for the investor. |
sportsnut
Citizen
Username: Sportsnut
Post Number: 932
Registered: 10-2001
| | Posted on Friday, February 20, 2004 - 3:24 pm: | |
Did they mention whether or not this was a plan to refresh NOLs? Did it talk about what Wachovia's ROR was? Have you seen the memo's written by Wachovia's tax counsel to prove that it's primary motivation was the avoidance of tax?
Again, I agree it sounds bad, but without the all of the facts....
BTW, I am in agreement with you and Tom on this. Close the loopholes. Write better laws. If congress addressed these issues you wouldn't have to raise taxes. Enforce the ones we've got.
FYI, according to Thornburgh's report Worldcom "dodged" hundreds of millions of dollars in state taxes from 1998 to 2001. KPMG, while not implicated yet charged $9.2 million for the advice that it gave WorldCom. |
tom
Citizen
Username: Tom
Post Number: 2026
Registered: 5-2001
| | Posted on Friday, February 20, 2004 - 7:05 pm: | |
thanks, sportsnut, nice to in agreement across the aisle on something. If I might amplify the point by saying that, surely this isn't the most productive use of corporate assets, spending time finding and defending the loopholes. Seems it would be better for all if they stuck to their knitting, so to speak. |
sportsnut
Citizen
Username: Sportsnut
Post Number: 933
Registered: 10-2001
| | Posted on Saturday, February 21, 2004 - 8:56 am: | |
Tom, I guess that depends on your point of view. Its easy for me to say that it's well worth it because that is what I do for a living. Most companies have entire teams to do just that find different interpretations of the law. There does come a point where you have to ask whether what you are doing is ethical. Generally we will not take a position unless we feel that we have a 2/3 chance of winning in court.
They really need to go after the most egregious ones. Or like I said before hire smarter lawyers to draft the laws to make them more bulletproof. However, during my 15 year career the one thing I've learned is that no matter how cut and dry you think a statute is someone will see it differently. Its the nature of the business, nothing is purely black and white. |
Tom Reingold
Citizen
Username: Noglider
Post Number: 2174
Registered: 1-2003
| | Posted on Saturday, February 21, 2004 - 11:11 am: | |
sportsnut, ethics and the law are different. The 2/3 chance of winning speaks only of the law. Of course, I expect companies to make cost/benefit decisions like that. But is there a part of the process where someone asks if a proposal is ethical?
I was once at a facilities renovation when I worked at AT&T Bell Labs Research. Or maybe it was Lucent Bell Labs by then. In any case, it was around the time of the AT&T/Lucent split. We were converting wet labs into offices and had to do some toxic waste disposal. The facilities expert said we would use method A which was legal. A researcher requested that we use method B which was more expensive but cleaner and therefore more ethical. Well, the company was rich at the time, so the facilities guy said fine, without a fight. It was a refreshing thing. But look: it wouldn't have happened if the researcher hadn't made the request. Actually, he was angry that method B wasn't put on the table in the first place.
And I don't remember what methods A and B were.
Tom Reingold the prissy-pants
There is nothing
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ashear
Citizen
Username: Ashear
Post Number: 998
Registered: 5-2001
| | Posted on Monday, February 23, 2004 - 9:05 am: | |
Sportsnut - I appreciate your input on this subject. Maybe you can help me with something. One of the things said on Frontline was that there was legislation pending that would make illegal any transaction that had no legitimate buisiness purpose, but was engaged in soley for the purpose of avoiding taxes. From what you said above it sounded like this is already illegal. I'm confused. |
1-2many
Citizen
Username: Wbg69
Post Number: 844
Registered: 6-2002
| | Posted on Monday, February 23, 2004 - 3:36 pm: | |
it's true that many corporations are *just following the law.* the question is - why is the law written that way?
http://www.thecorporation.com/ |
sportsnut
Citizen
Username: Sportsnut
Post Number: 936
Registered: 10-2001
| | Posted on Tuesday, February 24, 2004 - 8:58 am: | |
Ashear - since I didn't see the frontline you are referring to this is only an assumption: Sects 269 and 482 give the IRS broad authority to essentially undo transactions or re-allocate items of income and expense if they feel that the results of them would be distortive to the "true" taxable income of the taxpayer.
Legislation has recently been passed to make taxpayers disclose certain "reportable" transactions on their returns. These reportable transactions are basically ones in which the taxpayer derives some tax benefit from engaging in the transaction, regardless of any additional "business purpose". Additionally "business purpose" is a judicial doctrine first discussed in Gregory v. Helvering. The IRS has always had that as a defense as that case was decided in the 30's (I believe). Frontline could be talking about codifying the business purpose doctrine, which has been proposed. As far as the doctrine goes it is pretty easy to show that a valid strategy has business purpose other than tax avoidance. Tax minimization is a valid strategy, tax avoidance is not.
1-2many why do you hate corporations so much? Do they not provide you the resources to live where you live? I could just as easily make a claim that all lawyers are blood sucking thieves but we all know thats not true. The same can be said for corporations. You focus on the truly bad ones and ignore all the good that have come from them. Try to lighten up a bit or better yet quit your high paying job in protest. |
1-2many
Citizen
Username: Wbg69
Post Number: 845
Registered: 6-2002
| | Posted on Tuesday, February 24, 2004 - 10:07 am: | |
ummm... I wish I could claim I was, but I'm not the one who wrote the book, or made the movie.
to paraphrase the premise: the corporation has been granted "person" status, but corporate law confers on these "persons" special rights and even duties, that conflict with the basic principles of "personhood". so, the authors conclude that, the law is structured such that corporations are, or become, psychopaths. it's an interesting and humorous analysis. and, helps us redefine the problem.
obviously, with any system, and as you note, there's good and bad. but there's merit to the argument that the bad outweighs the good when it comes to large corporations; that their legal duties to shareholders are inconsistent with them also being a responsible, law-abiding "person" or citizen. the result being in part that costs are externalized as much as possible - society at large bears them - while profits are internalized - shareholders keep them.
even if you disagree, it's an interesting analysis and food for thought. |
Tom Reingold
Citizen
Username: Noglider
Post Number: 2206
Registered: 1-2003
| | Posted on Tuesday, February 24, 2004 - 10:11 am: | |
Some things cannot be done without large corporations, because you need large amounts of capital. For instance, you can't build phone network with a bunch of small companies.
I tend to agree that too much power tends to accumulate, and there is a snowballing effect. That's why there should be government regulation. And such regulation should examine the forces 1-2many is talking about. There is a huge grey area between what is legal and what is ethical, and a corporation tends to ignore that fact.
Tom Reingold the prissy-pants
There is nothing
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1-2many
Citizen
Username: Wbg69
Post Number: 846
Registered: 6-2002
| | Posted on Tuesday, February 24, 2004 - 10:17 am: | |
respectfully, I disagree, Tom, as to your point re: large-scale projects needing corporations to be done.
you can certainly undertake large-scale projects without corporations. you certainly need large-scale organization, and capital, but the corporation is not the only means of providing this.
but, who knows, maybe there's hope for the corporation entity. if there is, it lies, in part, in changing the laws and corporations' obligations.
for example, repealing the 1995 Private Securities Litigation Reform Act (the ONLY bill Clinton vetoed, but the Republican Congress overrode that veto. All the economists at the time warned that this legislation was going to cause widespread abuse and accounting fraud. now we have Enron, Arthur Andersen, et al.). |
Tom Reingold
Citizen
Username: Noglider
Post Number: 2208
Registered: 1-2003
| | Posted on Tuesday, February 24, 2004 - 10:29 am: | |
Well, that's the way it's done traditionally, so there can't possibly be any other way. (That's sarcasm, of course, because you caught me thinking that way.)
Yeah, well I can imagine companies getting together to do something big, like Boston's Big Dig. OK, it can be done, and my instinctive response is, what if the companies don't have the same objectives? Well, then again, I've seen a lot of turf wars and redundant departments inside companies. I worked for AT&T and Lucent for twelve years. Sometimes, I think any successes these companies have is despite its organization, not because of it. A friend of mine likened it to a large heavy ball, with ants pushing it from all directions. It happens to move in one direction at any given time, and the ants can't be said to be helping or hurting the progress.
Tom Reingold the prissy-pants
There is nothing
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sportsnut
Citizen
Username: Sportsnut
Post Number: 937
Registered: 10-2001
| | Posted on Tuesday, February 24, 2004 - 12:35 pm: | |
"the result being in part that costs are externalized as much as possible - society at large bears them - while profits are internalized - shareholders keep them."
Nobody prevents you from buying shares and becoming a shareholder except you.
What Tom says is true the access to capital that a corporation has cannot be matched. That is just the way the system works. And you'll never convince me that the bad outweighs the good. Oh yes in the press it does but in reality it does not.
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1-2many
Citizen
Username: Wbg69
Post Number: 847
Registered: 6-2002
| | Posted on Tuesday, February 24, 2004 - 12:43 pm: | |
whether I am able to buy shares, is missing the point.
the costs of making those profits are externalized to society at large; why should anyone have to buy a separate ticket to participate in resulting profits? they shouldn't.
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sportsnut
Citizen
Username: Sportsnut
Post Number: 938
Registered: 10-2001
| | Posted on Tuesday, February 24, 2004 - 1:16 pm: | |
What exactly is your point besides hating all corporations? And since you do hate them all why do you work for one?
Don't consumers benefit in that goods and services are cheaper as a result of the economies of scale that corporations can take advantage of?
Are you implying that corporations should absorb all of the costs of making goods?
Are there things that need to be fixed? Absolutely. But to make sweeping generalizations like you do is detrimental to your argument. |
1-2many
Citizen
Username: Wbg69
Post Number: 848
Registered: 6-2002
| | Posted on Tuesday, February 24, 2004 - 1:59 pm: | |
my point is: see the movie. read the book. consider another point of view. |
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