The “minimum tax on reported profits” would be a tax incentive to produce realistic income statements. Wall Street will fight fiercely.
From Wolf Richter to WOLF STREET.
I was not a fan of printing money, repressing interest rates, President Janet Yellen, although she raised interest rates and began to reduce the Fed’s balance sheet. But now she’s getting huge points as finance minister to try to deal with the disastrous corporate tax code by including something I’ve been mistaken for since 2012:
Large corporations – and there are only a few dozen that would be covered by the proposal – should pay income taxes on the inflated and inflated income they report to their shareholders according to our glorious GAAP accounting principles, instead of paying any taxes or even taxes. receiving paid tax relief on losses, which they report separately to the IRS under the Tax Code.
Small corporations, like my empire of media mogul WOLF STREET, use the same accounting principles for profits and taxes, or vice versa, and we have no illusions and no reason to inflate income.
But Nike reported $ 4.1
Yellen’s approach is not as radical as mine. Since 2012, I have been arguing, throw away the entire corporate tax code and replace it with a tax on inflated and inflated income that companies report to GAAP shareholders.
Yellen doesn’t go there. But she proposed imposing a minimum tax of 15% on “accounting income” – namely the inflated inflated income that corporations report to their shareholders. This measure would apply to “large companies that report high profits but have low taxable income”. The proposal calls it a “minimum book tax”.
“This minimum book tax is a targeted approach to ensure that the most aggressive tax evaders are forced to incur significant tax liabilities,” it said.
That was element № 4 in the 7-element plan Make-Corporate-Taxes-Great-Again … no, I’m kidding, I mean in the American-Made Tax Plan, which came with this chart that we’ve seen a million times, showing how the share of federal taxes paid by labor has risen to 85% and how the share of federal taxes paid by corporations has shrunk to single digits:
Jelena’s proposal goes on to explain:
“In a typical year, about 200 companies report a net profit of $ 2 billion or more. A significant proportion of them pay zero or negative federal income taxes, even though it accounts for hundreds of billions of dollars in shareholder profits. This is because significant gaps in current tax legislation, as well as the availability of offshore incentives, provide large and profitable corporations with many ways to reduce profits exposed to tax liabilities – in many cases to zero.
As early as 2012, you presented your article on our corporate tax avoidance code in this way – and the problems remained the same:
Between 2002 and 2011, Boeing reported to its investors that it had earned $ 31.8 billion. But he reported something completely different to the IRS and did not pay income taxes. Instead, it received $ 2.06 billion in tax breaks, an effective tax rate of -6.5 percent. Other companies were just as nimble. The rescued GE earned $ 10.5 billion, paid zero taxes and received $ 4.7 billion in tax breaks ….
These companies are probably not doing anything illegal; they simply use GAAP to show huge profits to their shareholders and use the tax code to show huge losses to the IRS. The tax code encourages them to do so.
Yelen’s proposal continues to be complained about (what I complained about in my vague corner nearly a decade ago):
Corporations have at their disposal two types of reporting rules (book and tax reporting), which provide for different quotas that protect them from significant tax accounts.
Corporations can both signal large profits to shareholders and reward executives with those returns, while arguing with the IRS that income is so low that they should be exempt from any federal tax liability.
The proposal explains how it will work in relation to regular tax liabilities:
Large corporations that report cloud profits to shareholders will have to pay at least a minimum amount of tax on such large amounts. Under this proposal, there will be a minimum tax of 15 percent on accounting income, the profits that such companies typically report to investors. The companies would make an additional payment to the IRS for more than 15 percent of their accounting revenue over their regular tax liabilities.
And the proposal says, “In recent years, about 45 corporations would have paid a minimum tax debt at the president’s suggestion.” And “the average company facing that tax will see an increased minimum tax debt of about $ 300 million each year.”
Secondary compensation: fairer income statements.
And here’s the fun: If large corporations have to pay a 15% minimum income tax on their profits, as reported under GAAP, this can bring some honesty and reality to the financial statements, as the minimum 15% corporate income tax who inflate and inflate their income will have to pay 15% taxes on this inflated and inflated income. This would be an expensive incentive to increase and increase income.
This would make CFOs think twice. In theory, GAAP’s financial statements could become more honest, controlled by the threat of having to pay 15% taxes on inflated income. And that can change the game – when suddenly there are tax incentives to be realistic with financial reporting. And that’s why Wall Street will fight fiercely to sink this thing.
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