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Boeing Paid No Federal Income Tax Last Year: Analysis

Yes, I got that, the poster was trying to poke fun at what many complain to be a high rate, but, when applied to Boeing amounts to nothing. I got it..



Well C Corps are only attractive if you want to go public, ie. if you absolutely need to be a C Corp, until then the C Corp is the absolute worst tax structure to be in in the US. I'm not sure how this question even makes sense. I mean you're asking, "How can shareholders be shareholders without a corporation to be a shareholder of?"

Sure, I mean, they would be unit holders in an LLC or shareholders in an S Corp and I can assure you there are methods of ensuring that the money earned in an LLC or S Corp can flow to the shareholders/unit holders/managing members/owners, whatever you want to call them.



No its very apt actually. Many people contribute to the 401(k) with the express intent of deferring taxes on the funds places into the 401(k). The government created a tax vehicle which creates positive incentives to do this and sure enough people do it. People don't say, "Gee, Richie Rich paid less taxes because he took advantage of the 401(k) loopholes". The same logic underpins Boeings actions. The government wants Boeing to make these investment and creates tax incentives, in this case a similar deferral scheme, for them to do so. Shocker, they do and now people are complaining that their current tax liability is zero. All I can say is that they should then remove it and find out if Boeing still finds the activity lucrative enough to engage in.



Well, its the objective if you think a soft command economy is the way to go. It isn't. The corporate income tax shouldn't exist and given that it does the deferral shouldn't either. BUT, the fact is it does exist, so when the government does create the equivalent of subsidies don't be surprised when people take them up on it. But make no mistake about it, what you have is a ridiculous distortion of how our scarce resources should be allocated.

Yes, I got that, the poster was trying to poke fun at what many complain to be a high rate, but, when applied to Boeing amounts to nothing. I got it..
••OK


Well C Corps are only attractive if you want to go public, ie. if you absolutely need to be a C Corp, until then the C Corp is the absolute worst tax structure to be in in the US. I'm not sure how this question even makes sense. I mean you're asking, "How can shareholders be shareholders without a corporation to be a shareholder of?"

Sure, I mean, they would be unit holders in an LLC or shareholders in an S Corp and I can assure you there are methods of ensuring that the money earned in an LLC or S Corp can flow to the shareholders/unit holders/managing members/owners, whatever you want to call them.
••I was referring to the pass through aspect. If each year the shareholders received the money, there would be no capital for growth. The idea of the C Corp is to provide a way to retain earnings.


No its very apt actually. Many people contribute to the 401(k) with the express intent of deferring taxes on the funds places into the 401(k). The government created a tax vehicle which creates positive incentives to do this and sure enough people do it. People don't say, "Gee, Richie Rich paid less taxes because he took advantage of the 401(k) loopholes". The same logic underpins Boeings actions. The government wants Boeing to make these investment and creates tax incentives, in this case a similar deferral scheme, for them to do so. Shocker, they do and now people are complaining that their current tax liability is zero. All I can say is that they should then remove it and find out if Boeing still finds the activity lucrative enough to engage in.
••You may have misread my post. I am in agreement with you. I was just kidding about the value of your 401K although I hope you have billions.


Well, its the objective if you think a soft command economy is the way to go. It isn't. The corporate income tax shouldn't exist and given that it does the deferral shouldn't either. BUT, the fact is it does exist, so when the government does create the equivalent of subsidies don't be surprised when people take them up on it. But make no mistake about it, what you have is a ridiculous distortion of how our scarce resources should be allocated.
••I'd appreciate a bit more explanation.
 
The last time I checked most small businesses and your average joe don't have the ability to off-shore money or other massive tax saving loopholes and take advantage of things only a large team of corporate tax accountants could do. What they they are doing could very well be illegal.
Bingo.
 
It should just be eliminated altogether though. There already exist two pass thru entities in the US, the S Corp and the LLC, why do we make C Corps so unattractive. In this particular circumstance, Boeing simply gets to defer taxes so that their current liability is less than 0. The loophole here is actually an activity that the US Government wants Boeing to engage in. This isn't quite a loophole, what's happening here is that the government is saying, "Hey, Boeing, if you want you can pay what the law requires and that'll be the end of it, OR, if you do what we want you to do, we'll let you defer taxes"

And sure enough Boeing took them up on the offer because now that investment became more attractive to undertake.

What on earth are you talking about? (psst.... you and I both know that you don't know, but I won't tell anyone). This is not about Boeing, in particular. These "loopholes" are available to all multi-nationals, regardless of industry. The core multi-national loop hole is transfer pricing, which gives companies the ability to almost assign costs and revenues to particular country units that give you the best tax treatment. It allows companies to show much lower profits from US activities than is the reality.

We need to drastically tighten transfer pricing rules and enforce them.... then we can lower the top marginal rate to about 25% ... resulting in greater tax receipts and a more fairer allocation of tax burden between the multi-national and domestic corporation.

What is really interesting is that corporate tax receipts account for less and less of federal tax receipts.... In fact, the largest part of tax receipts now is from payroll taxes. You know, the tax that 47% that supposedly pays no taxes, actually pays.

Tax Revenue - TypeTaxVsRevenue.jpg
 
Well, its the objective if you think a soft command economy is the way to go. It isn't. The corporate income tax shouldn't exist and given that it does the deferral shouldn't either. BUT, the fact is it does exist, so when the government does create the equivalent of subsidies don't be surprised when people take them up on it. But make no mistake about it, what you have is a ridiculous distortion of how our scarce resources should be allocated.
••I'd appreciate a bit more explanation.

OK, the end result of the deferral in the case of Boeing is that Boeing engaged in an action and the tax consequence simply reduced the current cost of engaging that behavior. I'm not on Boeing's Board of Directors or a C-level executive so I can't be certain if the tax consequence was the difference that made the difference or not, honestly you'd have to ask them, but no matter how you slice it the government's impact on that decision made the decision chosen cheaper relative to whatever opportunity cost was presented to Boeing. General rule is that you really shouldn't be distorting prices like that, it results in less than optimal allocations.
 
What on earth are you talking about? (psst.... you and I both know that you don't know, but I won't tell anyone).

I have an MBA in finance, I know what I'm talking about.

This is not about Boeing, in particular.

But this thread is about Boeing.

These "loopholes" are available to all multi-nationals, regardless of industry.

Well, I'm not sure what Boeing took, but whatever it was it warranted a tax deferal.

The core multi-national loop hole is transfer pricing

That's not a loophole though, that's tax evasion, its illegal actually. There may be some wiggle room on the margin of course, but by and large costs and revenues should be allocated where geographically appropriate and when corporations deal with affiliated entities in other tax jurisdictions, pricing should be arm's length pricing. And if they don't, that's illegal.

which gives companies the ability to almost assign costs and revenues to particular country units that give you the best tax treatment. It allows companies to show much lower profits from US activities than is the reality.

I understand what it is and how it works, but that's not what this thread is about.


We need to drastically tighten transfer pricing rules and enforce them....

The rules don't need tightening, they exist. The enforcement is difficult. Drugs are illegal too, heroin/cocaine/marijuana are all grown abroad and then imported into the United States. Enforcement? Have fun at the UN. And I mean that, because unless foreign countries are going to let the IRS/FBI in to perform investigations on corporate subsidiaries, or for that matter, parent corporation with US subsidiaries, good luck.....There's also the flip side to it too which is that publicly traded companies need to report earnings and those stock prices are dependent on those earnings.

then we can lower the top marginal rate to about 25%

You're worried about the larger corporations of course, but who cares really? I mean even if we doubled the physical take on the C Corporations, we're talking 1-2% of GDP. The problem is the disincentive created to even becoming a C Corp. I'll never do it and there are many small/medium sized businesses who just will never become a C Corp, they will never raise capital to grow their businesses because to do so puts them in the double taxation regime. I would never become one, I'm never going to take a 35% haircut off the bat just in case I might grow by going public and raising capital. No thanks, I'm well enough off now in S Corp/LLC land to not bother.

... resulting in greater tax receipts and a more fairer allocation of tax burden between the multi-national and domestic corporation.

I'm a conservative, I don't care about maximizing tax receipts. I want the government to command as few of our nation's resources as humanly possible. The government is a minimization problem. Nevertheless, in the pass thru structures, I pay tax on those of course, just on my individual return. Just get rid of the C Corp tax, reallocate the army of tax accountants to other various service industries, and let the chips fall as they may. You'll see an exposion in entrepreneurship emanating from the current crop of small/mid sized business looking at the palisades imposed by the C Corp double taxation regime and saying 'No thanks'

Its no small amounts, you can google it too, we're talking trillions of dollars here though.

What is really interesting is that corporate tax receipts account for less and less of federal tax receipts....

Profits vary, believe it or not corporate income is at a nominal record, but really historically Fortune 500 isn't that profitable actually, their average margin is like 5-6% and in these years of higher profitability its 7 cents off a dollar in profit.

In fact, the largest part of tax receipts now is from payroll taxes.

Of course they are, labor is what? 20% of gross sales in most businesses. Do you realize that the payroll taxes paid by Walmart exceed the profit attributable to the shareholders? I mean, when you spend a dollar at Walmart or on a corporate product in the Fortune 500, more of that dollar goes to the various governments than to shareholders, and that's a fact actually.

You know, the tax that 47% that supposedly pays no taxes, actually pays.

Of course, Romney was discussing income taxes of course, but while the brightline off the cuff test doesn't work well, fact is there are relative makers and relative takers. We're all makers and we're all takers and that includes Romney's use of the roads. In politics of course you need a short snippet that the 50% of the population with below average intelligence can understand and discussing relative burdens, a political discussion the US really should be having as it ages demographically is a lost cause.
 
Why is the Huff~n~puff post complaining about "deferred" taxes?
 
I have an MBA in finance, I know what I'm talking about.



But this thread is about Boeing.



Well, I'm not sure what Boeing took, but whatever it was it warranted a tax deferal.



That's not a loophole though, that's tax evasion, its illegal actually. There may be some wiggle room on the margin of course, but by and large costs and revenues should be allocated where geographically appropriate and when corporations deal with affiliated entities in other tax jurisdictions, pricing should be arm's length pricing. And if they don't, that's illegal.



I understand what it is and how it works, but that's not what this thread is about.




The rules don't need tightening, they exist. The enforcement is difficult. Drugs are illegal too, heroin/cocaine/marijuana are all grown abroad and then imported into the United States. Enforcement? Have fun at the UN. And I mean that, because unless foreign countries are going to let the IRS/FBI in to perform investigations on corporate subsidiaries, or for that matter, parent corporation with US subsidiaries, good luck.....There's also the flip side to it too which is that publicly traded companies need to report earnings and those stock prices are dependent on those earnings.



You're worried about the larger corporations of course, but who cares really? I mean even if we doubled the physical take on the C Corporations, we're talking 1-2% of GDP. The problem is the disincentive created to even becoming a C Corp. I'll never do it and there are many small/medium sized businesses who just will never become a C Corp, they will never raise capital to grow their businesses because to do so puts them in the double taxation regime. I would never become one, I'm never going to take a 35% haircut off the bat just in case I might grow by going public and raising capital. No thanks, I'm well enough off now in S Corp/LLC land to not bother.



I'm a conservative, I don't care about maximizing tax receipts. I want the government to command as few of our nation's resources as humanly possible. The government is a minimization problem. Nevertheless, in the pass thru structures, I pay tax on those of course, just on my individual return. Just get rid of the C Corp tax, reallocate the army of tax accountants to other various service industries, and let the chips fall as they may. You'll see an exposion in entrepreneurship emanating from the current crop of small/mid sized business looking at the palisades imposed by the C Corp double taxation regime and saying 'No thanks'

Its no small amounts, you can google it too, we're talking trillions of dollars here though.



Profits vary, believe it or not corporate income is at a nominal record, but really historically Fortune 500 isn't that profitable actually, their average margin is like 5-6% and in these years of higher profitability its 7 cents off a dollar in profit.



Of course they are, labor is what? 20% of gross sales in most businesses. Do you realize that the payroll taxes paid by Walmart exceed the profit attributable to the shareholders? I mean, when you spend a dollar at Walmart or on a corporate product in the Fortune 500, more of that dollar goes to the various governments than to shareholders, and that's a fact actually.



Of course, Romney was discussing income taxes of course, but while the brightline off the cuff test doesn't work well, fact is there are relative makers and relative takers. We're all makers and we're all takers and that includes Romney's use of the roads. In politics of course you need a short snippet that the 50% of the population with below average intelligence can understand and discussing relative burdens, a political discussion the US really should be having as it ages demographically is a lost cause.

A very intelligent response.... I do not agree with each point, but its so rare to actually get someone that understands what they are talking about on DP that I certainly wanted to salute it. Thank you. I will respond to this when I can.
 
The last time I checked most small businesses and your average joe don't have the ability to off-shore money or other massive tax saving loopholes and take advantage of things only a large team of corporate tax accountants could do. What they they are doing could very well be illegal.

That's not true at all.

Let's say that you bought a rental property in 1980 for $100k and now it's worth $1.5M. You can sell that property and purchase another rental property while deferring the $1.4M gain until you sell the replacement property. Like Thomas said, everybody uses the same tax code.
 
A very intelligent response.... I do not agree with each point, but its so rare to actually get someone that understands what they are talking about on DP that I certainly wanted to salute it. Thank you. I will respond to this when I can.
The first thing I did was search for Boeing income sheet. A large tax liability is recognized, but differed. People should be careful believing the way journalists from places like the Huff~n~puff post frame things. They are almost always twisting the truth.

The deferrals will be reconciled. It may take time, but Boeing will likely pay at least most of the amount.
 
I guess they should bend over and take it in the ass right?

They should be forced out of business and the airline industry should be run by the government.
 
The last time I checked most small businesses and your average joe don't have the ability to off-shore money or other massive tax saving loopholes and take advantage of things only a large team of corporate tax accountants could do. What they they are doing could very well be illegal.

Blame the government for writing the tax code. Do you take credits and deductions when you do your taxes?
 
They can probably defer taxes for decades. Yes, very much like recapture of depreciation. Interestingly, depreciation is not an option. I tried to have my CPA not depreciate my rentals because I have some large tax credits and the depreciation doesn't benefit me. You MUST take the depreciation. I was trying to keep the capitalization up so my heirs would have the higher amount as the original value. My CPA said that the houses capitalization will be based on market value at the time of my death, not on the actual original investment. But I was still stunned that it was MANDATORY for these deductions to be taken.

So Boeing is actually following the law. Go figure.

I'm stunned, too. Sounds to me like your CPA was telling you that so you didn't take it in the shorts.
 
OK, the end result of the deferral in the case of Boeing is that Boeing engaged in an action and the tax consequence simply reduced the current cost of engaging that behavior. I'm not on Boeing's Board of Directors or a C-level executive so I can't be certain if the tax consequence was the difference that made the difference or not, honestly you'd have to ask them, but no matter how you slice it the government's impact on that decision made the decision chosen cheaper relative to whatever opportunity cost was presented to Boeing. General rule is that you really shouldn't be distorting prices like that, it results in less than optimal allocations.

Corporate taxes make up 10% of Federal Tax Revenue. There is a good argument that they cause far more problems than solutions. I'd like to see some penalty for outsourcing jobs that could realistically be done by Americans, customer service comes to mind as an employer of many semi-skilled workers. It would probably stimulate something, they could pay their workers more and the Feds can take it out on the workers.

So yes, give it up and save all that paperwork.
 
Using taxes to protect workers or oppose out sourcing is a tax on customers, and can ultimately lead to competing businesses with lower price points for profits by another country. It's a noble cause but will not work no matter how hard you try.

I'd rather eliminate corp taxes and impose a national sales tax. The more companies produce and sell the more taxes we get.


Corporate taxes make up 10% of Federal Tax Revenue. There is a good argument that they cause far more problems than solutions. I'd like to see some penalty for outsourcing jobs that could realistically be done by Americans, customer service comes to mind as an employer of many semi-skilled workers. It would probably stimulate something, they could pay their workers more and the Feds can take it out on the workers.

So yes, give it up and save all that paperwork.
 
Using taxes to protect workers or oppose out sourcing is a tax on customers, and can ultimately lead to competing businesses with lower price points for profits by another country. It's a noble cause but will not work no matter how hard you try.

I'd rather eliminate corp taxes and impose a national sales tax. The more companies produce and sell the more taxes we get.

The more money people have to spend the more taxes we get. So we'll eliminate the corporate tax in exchange for everyone getting a 10% raise. Then they can go on a tear buying all that stuff they produced.

Meet me halfway and we can get this done by Summer.
The-Numbers-Jan-2012-Fig1_1.gif
 
Simple solution...end all corporate/business taxes.

Give American companies an edge in the global economy.
 
Most people fail to realize that corporate taxes are built into the products and services they buy so everyone pays them. The companies are just tax collectors. That makes corporate taxes very regressive. The left should hate them. It really gets down to how big the government should be and there is certainly to consensus there.
 

the corporate tax rate is too high for those that pay it. the bigger players can find ways around it.

the individual rates are a bit too low, especially for those who make most of their living investing. we should cut our corporate rates below Europe, collect those rates from all corporate entities, return to the 1990s rates for individuals, and tax investment income as income above a cap.
 
They should be forced out of business and the airline industry should be run by the government.

Yeah, they could man all planes with Air Force pilots! "Off we go into the wild blue yonder, climbing high into the sun; Here they come zooming to meet our thunder, at e'm boys give 'er the gun...."
 
The last time I checked most small businesses and your average joe don't have the ability to off-shore money or other massive tax saving loopholes and take advantage of things only a large team of corporate tax accountants could do. What they they are doing could very well be illegal.

Actually it is pretty simple and completely legal for an individual to incorporate to protect assets. Happens all the time. There comes a point when you figure out that no amount of complaining is going to change it and learn to use it to your advantage. Not doing so is simply ignorant.
 
Simple solution...end all corporate/business taxes.

Give American companies an edge in the global economy.

I'd agree with that. Most other countries are helping / supporting their companies compete in the global market in some way or ways, with the understanding or result that doing so brings money from overseas earning back home, which in turn expands the business's domestic entities.

Isn't that what we really want? Strong domestic business growth. Lots of domestic jobs because it is a business advantage to the businesses' domestic entities?
 
Yeah, they could man all planes with Air Force pilots! "Off we go into the wild blue yonder, climbing high into the sun; Here they come zooming to meet our thunder, at e'm boys give 'er the gun...."

It would settle the tax problem. Companies that don't make a profit don't pay taxes. Amtrack doesn't pay taxes and the Libbos don't mind.
 
From the article:


Boeing is the employer of 170,000 workers in the US. Generally, their wages seem to be at least $20-$30 per hour, which won't get you into the Country Club but allows a modest middle class lifestyle.

Now, do these huge corporations have tax laws passed that are convenient for them? Sure. Our politicians will do anything for money. But I don't care if they pay taxes IF they are hiring American workers.

IMHO, I would like to see the outsourcers pay double the taxes and the domestic employers pay none. That might just bring some fairness back to the situation.

Boeing 787’s problems blamed on outsourcing, lack of oversight | Business & Technology | The Seattle Times
 
IMHO, I would like to see the outsourcers pay double the taxes and the domestic employers pay none. That might just bring some fairness back to the situation.

First off, everybody outsources. Outsourcing has taken on a pejorative term and in its unqualified use obviously refers to importing things. So what? The average workers goes to work, specializes in that job, gets paid and then uses those wages to buy everything else that he or she needs. All of those things are outsources, many of them are imported. Particularly consumer goods of course.

They're going to outsource paper and will buy trucks and do other things as well.

Ultimately you can't say that companies outsourcing should pay 'double the tax' because obviously those laws would violate trade agreements.
 
Boeing is not the bad guy; they didn't write the tax code. There is only one tax code applicable to all individuals and businesses.
It does seem amusing that "average Joe" deserves to take every advantage and properly use the tax code, to avoid tax fees, but businesses are the bad guys when they follow the same laws.
Take it up with Congress.

Logic is often elusive to some

Thom Paine

Yes, but to flip that the people (or the 47% according to Romney), are the bad guys to many conservatives. So the hypocrisy works both ways.
 
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