People are upset that large corporations like GE are not paying taxes. It doesn’t seem fair or right that a large company should “get away with free money.” Is this truly the case?
Do corporations really “get away” without paying taxes? Not surprisingly, there is more to the story.
First, let’s discuss corporations and different types of taxes.
Every large corporation started as a small one. So why form a small corporation? The two primary reasons for incorporating are
1) to reduce risk of shareholders and
2) to qualify for some tax deductions not allowed to sole proprietors or partnerships
It’s important to realize that one of the reasons for forming a corporation is to get some tax advantages.
The tax advantages are not as great as might be expected. The majority of the tax breaks come in the form of allowed deductions and deferred taxes. Some of these are available to sole proprietors and partnerships but not all. One notable deduction is the interest paid on a credit card. The IRS does not want people to run up credit card bills so they do not allow personal credit card interest as a deduction. Corporations are granted some leeway in this area.
Well this isn’t always the case. A corporation has ways to defer income and distribute profits in order to reduce the net income to zero, if the accounting firm is doing their job. In reality, if a corporation pays corporate income tax at all, it usually means something went wrong in the planning.
There are several ways. Here are just a few.
Oh yes they certainly did. Just not in Corporate Income Tax. In 2013, it is estimated that GE paid over $400 million in employee withholding taxes alone. This doesn’t include filing fees, tangibles, intangibles and impact fees.
Ask yourself that question. Why does anyone say anything in the public arena? Usually they have some personal or political agenda to promote. But if you think GE didn’t pay taxes, then think again. Also, consider this: without corporations there would be very few non-government jobs. If all jobs were with the government, well wouldn’t that be communism? No? Then what else would you call it?