Talk:Corporate tax in the United States

message: I propose the following:
*Delete "Criticism" section: the few parts of this that are not entirely political statements are discussions of economic theory where there is no clear concensus. I don't believe Wikipedia articles should be a forum for discussing personal views.
*Expand the introduction and add a "basic principles" section
*Split tax base and rates into two sections: taxable income and tax rates. Enhance the former.
*Add a section on corporate events (formation, reorganization, liquidation)
*Revise discussion of dual level of tax, adding a section for taxation of shareholders
*Get rid of POV that appears in several spots
*Add discussion of deduction limitations, consolidated returns, AMT, state taxes, and tax returns
* Correct graph with effective tax rates, effective tax rate of Germany is around 30% not 7.2%
*The list of tax rates by country show Japan as having the highest corporate rate (http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates), but this page says that the US has the highest rate.  — Preceding unsigned comment added by 173.14.255.109 (talk) 05:13, 14 March 2013 (UTC)
thread_title:  Proposed modifications 

message: After a 2 week comment period on the above, I have posted significant enhancements to the article. Oldtaxguy (talk) 19:35, 10 May 2010 (UTC)
thread_title:  Revision posted - see above 

message: To DMahalko, I disagree with your changes:
*Few states have an AMT, but several have alternative tax bases (e.g., New York has an alternative corporate tax based on subsidiary capital, NJ has an alternative minimum assessment based on gross margin or gross revenue, etc.). Thus, using AMT in referring to the states is incorrect.
*The original version of AMT was an alternative tax on certain tax preferences, and had nothing to do with income levels (other than not kicking in until a certain point). That evolved over the years to the present 1986 act AMT, and inflation and rate creep did a job on that. A statement that the goal was to make high income taxpayers pay tax does not match the legislative history.
I will wait (until mid-week) for rationale for your changes, and if none is forthcoming, will undo your changes .Oldtaxguy (talk) 04:50, 3 July 2010 (UTC)
thread_title:  Proposal to undo inaccurate changes to introduction 

message: I have deleted the statement "Through various tax breaks specific to the petroleum industry, capital expenses of petroleum companies, including the costs of oil field leases and drilling equipment, are taxed at an effective rate of nine percent, lower than the rate of virtually any other industry.ref New York Times, 2010 July 3, 'As Oil Industry Fights a Tax, It Reaps Subsidies,' http://www.nytimes.com/2010/07/04/business/04bptax.html?_r=1 ". The NY Times article's similar statement, a minor point in the article, is not supported by the Congressional Budget Office study it quotes. The relevant portion of the NYT article stated, "According to the most recent study by the Congressional Budget Office, released in 2005, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry."
The study in question was a 2005 CBO paper analyzing the impact of the U.S. tax system on "capital income" as opposed to "labor income" as a means of exploring alternatives to an income tax, such as value added taxes. The analysis is based on a theoretical construct of an "effective tax rate". The 9 percent quoted by NYT is from Table 1 in the paper which compares calculated "effective tax rates" for theoretical income from various types of assets. The table states a rate of 9.2% for "Petroleum and natural gas structures" which includes pipelines. The paper states that the analysis excludes consideration of any intangible capital, such as costs of oil field leases. It is not clear in the paper whether drilling equipment is included in the petroleum category, or if it is in construction (drilling activities are categorized as construction in most economic analyses) or ships (the Deepwater Horizon was a drilling ship). The NYT article quotes its source wrong on a material item, and assumes another material item that may be wrong. It is unreliable.
The following few paragraphs discuss the details of the CBO paper, for those interested. If you're not interested, skip to the part after the formulas describing how "effective tax rate" is determined for the paper.
The CBO paper was not an analysis of taxes actually paid, but rather an economic calculationof "effective tax rates" based on investor-anticipated rates of return. An analysis such as that in the CBO paper, computing aggregates across broad lines of business, must either use completely theoretical models or weight data in some manner. The authors of the paper apparently chose the theoretical approach. The CBO paper states:
Effective tax rates are commonly used as a metric to evaluate the potential distorting effect of taxes on economic activity. The effective tax rate combines statutory tax rates with other features of the tax code into a single tax rate that applies to economic income over the life of an investment. In the context of capital income, the effective tax rate framework is applied to marginal investments; that is, prospective investments that are expected to earn just enough before taxes to pay taxes due and the return that savers anticipate receiving. (footnote 15: This paper generally follows existing conventions in constructing its effective tax rates but expands on those conventions in its treatment of saving incentives. Existing conventions capture major features of the federal tax code and investment environment, but they abstract from many other features, such as the estate tax and international capital movements. See Appendix A for details of the calculation and Appendix B for an analysis of alternative assumptions.) (emphasis added)
"Effective tax rate" as used in the paper has a different meaning than the phrase when used in tax literature or ordinary language. Non-economists would view imposition of any non-zero statutory tax rate as imposing a non-negative effective tax rate. The CBO paper, however, states "the effective tax rate on debt-financed corporate capital income is negative" and explains various reasons therefor. This statement may have economic validity, but for non-economists it is likely misleading, implying that the government is giving a taxpayer cash, which is not the case. The statement further reinforces the view that the effective tax rates on capital used in the paper do not represent actual taxes paid by companies, as the NYT article alleges. One of the CBO paper's conclusions states, "Eliminating individual-level taxes on capital income and allowing businesses to expense new investments would produce an effective tax rate of -15.1 percent because of the continued deductibility of interest by businesses and homeowners. Thus, instead of taxing the return on capital investment, the tax system would, on balance, subsidize it." The paper also states:
The effective tax rates were computed assuming the currently observed mix of debt and equity financing in the corporate sector. ... The effective tax rates were computed under the assumption that the tax rate on dividends matters in proportion to the fraction of after-tax profits that are paid out as dividends (57 percent). Effective tax rates computed under an alternative view, which gives less weight to the dividend tax rate and more to the capital gains tax rate, are presented in Appendix B."
The paper defines "effective tax rate" in its Appendix. In that definition, it determines "real" returns with and without tax, and applies the difference as the "effective tax rate". Footnotes in Appendix A state:
The real return (that is, the return net of inflation) required by investors—r—can be expressed as a weighted average of the real interest rate and the real return on equity. The real interest rate is measured here as the market interest rate less the inflation rate.
: r = f • (i – π) + (1 – f) •E
 Where:
: f is the fraction of the investment financed by debt,
: i is the market interest rate,
: π is the inflation rate, and
: E is the real return on equity.
The real before-tax rate of return covering the costs discussed in the text can be expressed as:
: ρ = (r′ + ς )(1 – uz ) ⁄ (1 – u ) – ς
 Where:
: r′ = f • [i(1 – u ) – π ] + (1 – f ) • E is the corporate discount rate, which reflects the deductibility of interest.
: u is the corporate tax rate,
: ς is the rate at which the economic value of the asset depreciates, and
: z is the present value of tax-depreciation allowances measured as a share of investment.
 Other terms are as defined in the previous footnote.
The expression is the cost of paying the investor’s return and recovering capital. The expression adjusts those costs for the value of tax depreciation. Their product divided by gives the profit that must be earned before tax to cover taxes, investor return, and cost recovery. Subtracting limits the profit to just that needed to cover investor return and corporate taxes.
The NY Times in this case is clearly not a reliable source, as it significantly misinterprets the primary source. This points out, rather conclusively, one thing I have argued lately: even sources that are normally reliable in reporting events may be completely unreliable when reporting technical topics. Reporters are human, and will use convenient materials to demonstrate their points. However, they may not fully understand the technical aspects of what they report. I would therefore caution about using the popular press as a source for tax articles. To this end, I deleted the edit citing this NYT article. Oldtaxguy (talk) 01:13, 1 October 2010 (UTC)
thread_title:  Deletion of unreliable material, unsupported in primary source 

message: I have made several changes to the table of state tax rates. These include:
*Adding a general note and changing the first note (was (a) ) to in-line with the general note, with deletion of redundant material
*Adding footnotes for graduated rates, local taxes, alternative taxes
*Enhancing items on a few states with special regimes
I think the table would be better as two sets of columns, to reduce the length on the page. Should it be moved to the state tax section also? Oldtaxguy (talk) 00:44, 30 November 2010 (UTC)
thread_title:  Changes to state tax table 

message: I have reverted a statement supported by an article in today's online NY Times. The few facts cited in the lengthy opinion piece were inaccurate, and used out of context. The statement that corporate income taxes were 30% of the total in the mid-50s is at best misleading: per Federal budget historical tables, the percentage was 30% or more only in 1942-1945 and 1952-1954, war years. Most years it was much lower. Other "facts" in the times article are also demonstrably false. That rather inflamatory article is not a reliable source. Oldtaxguy (talk) 00:02, 26 March 2011 (UTC)
thread_title:  Wildly inaccurate NY Times article is not reliable 

message: I was hoping the history section (Corporate_tax_in_the_United_States#History) would have some material on this interesting topic - but it is not there (or anywhere else in the article?) Ottawahitech (talk) 01:52, 22 November 2011 (UTC)
replies: text: Corporate tax rates in the USA are at nearly their lowest level since the 1920s. When I started working in tax, in the late 70s, the Federal corporate rate was 48%, and several states had rates above 10%. In years before 1976 there was a regular tax and a surtax (together 48%). The rate was lowered to 34% in 1987, and increased to 35% in 1993. For many years, the USA had the lowest corporate tax rates in the developed non-communist world. I'm opposed to historical tax rate tables. They can be lengthy and add little value. Oldtaxguy (talk) 04:38, 22 November 2011 (UTC)

text: * The information you provided is extremely interesting to someone like me who knows very little about the topic. However, in order to incorporate it into the article there should be some supporting evidence somewhere? Ottawahitech (talk) 23:22, 22 November 2011 (UTC)
thread_title:  Have corporate taxes in the US always been this high? 

message: The chart is incorrect in every material respect when presented in the context of corporate tax. The data in the chart " was never meant for public policy debates," and such use by the NY Times was criticized by the the attributed source, Dr. D. The chart was based on a spreadsheet of aggregates and agrees with the effective tax rate column in the company data downloaded by Dr. D from a data service.
The company data includes 7,036 businesses, with an average effective tax rate on the full set of 14%, as per the chart. Of these, 3,897 are assigned a 0.00% effective tax rate. Many of these zero rate companies had positive income tax provisions and positive current tax provisions, according to financial statements I had previously read. Thus, the 14% overall effective tax rate (ETR) clearly did not reflect rates disclosed in financial statements. The 0.00% rate used by Dr. D. must have been adjusted for something not in the data. I noted that some of the zero rate entities were partnerships. Thus, the 14% rate wasn't even a corporate tax rate.
It gets worse. To try to see what was off, I picked a small industry (railroads) and read financial statements. [Almost half of the railroad companies] in the data either were not railroads (misclassified) or were foreign, so I picked another small industry (coal). I compiled my readings in [this data on 23 companies]. The source data for the chart includes 21 companies. Only 14 of the 21 companies should have been included in a comparison of corporate tax rates for the coal industry among SEC filers in the USA. Of the included companies, 3 were partnerships, 2 were not coal companies, and 2 companies were counted twice. The second countings were included as a zero rate, which would further distort the average.
It gets even worse. The effective tax rates for the companies in the data bore no resemblance to information in the SEC filed financial statements for ANY of the coal companies. How were effective rates computed? What adjustments were made? In the data, there were about 150 companies assigned a 60.00% effective tax rate, with none at a higher rate. Was this a cap? None of these questions are addressed in anything accompanying the chart or the articles. Also, there were numerous partnerships, about 150 REITs, and a very hard to determine number of mutual funds, none of which are taxable. Their inclusion distorts any corporate rate calculation, but would be valid for many financial performance measures.
The Treasury/White House study cited above and struck through presents much different results than the chart, casting further doubt on the chart's validity.
Using the chart based on this data to present effective tax rates by industry is at best very misleading. No amount of wording changes to the description can make false information nonmisleading. The data clearly do not show effective tax rates under any normal use of the term. They do not reflect financial statement data, and by law could not reflect tax return data.
There are even further problems with the chart, as pointed out above. The chart and data do not include data on 1.8 million non-public companies, which likely would materially change average tax rate results. The chart was published in an opinion piece by a journalist writing about politics, and advocated a position. The purportedly validating articles were all the same day, and either by the same writer or on a blog by an author who [describes the blog] as "an opinionated blog on economic policy, collapsing banks, cap and trade, health care reform and pretty much anything else you can attach a chart to. His blog points to the hottest policy ideas on the Web and provides his own up-to-the-minute take." Blogs are not reliable sources, neither are opinion pieces. "Editorial commentary, analysis and opinion pieces are reliable for attributed statements as to the opinion of the author, but are rarely reliable for statements of fact."
BTW, I did not and do not state that there is something wrong with Dr. D's data or that he is not an expert in his fields of corporate valuation and finance. The ETR is but one ratio among over 30 calculated and presented in his full range of datasets. Dr. D stated that his data was computed for use in valuation, and the use by the Times as inappropriate. I do state that the NY Times chart and the interpretation of the data are clearly, demonstrably in error, and therefore the chart is not a reliable source. WP policy does NOT require disseminating false information just because a usually reliable source said it. I will delete the chart. Oldtaxguy (talk) 15:19, 12 May 2012 (UTC)
thread_title: Smoking gun

message: I am stunned by the article's rating of start class. I believe the rating in WikiProject:Taxation heading should be B class, but I cannot do this rating as I contributed significantly. Rating by someone knowledgable requested.Oldtaxguy (talk) 20:48, 11 August 2012 (UTC)
replies: text: I've updated it, but feel free to rate articles as you see fit, with exception to peer review ratings of GA, A, & FA.  These lower ratings are determined by the project members for our own use in applying resources to tax articles.  Here is the scale if you wish to review it. Morphh  (talk) 02:58, 12 August 2012 (UTC)
thread_title:  Article rating 

message: What is this about? The graph is hardly OR, per WP:CALC and WP:OI. You get the exact same graph if you go to FRED and ask for corporate taxes divided by the sum of corporate taxes and profits, which is exactly what the Wordpress author said they did, except monthly instead of yearly. This is exactly specific to the U.S. and exactly specific to corporate taxes irrespective of public sector size, unlike the CP/GDP table discussed above. I've replaced it. —Cupco 00:04, 22 September 2012 (UTC)
replies: text: It looks like the Fed is getting into the speculative data business. The graph appears to purport to represent data through 2011, but actual statistics (from the IRS) have not yet been released. So how did the Fed get its purported data? Note that it is a criminal offense for the IRS to release tax return data in other than statistical form except upon court order or in furtherance of tax treaties. The latest corporation data available is 2008. I have previously criticized the NY Times for using purported data before the date the data could exist (in that case, before returns were even due). This purported data from the Fed is disturbing. Further, it very loosely uses a term "corporate profits" without specifying if it is corporate taxable income or something else. There seems to be either very little understanding or intentional manipulation by the press, and now the Fed, of these tax statistics. Corporations report worldwide income of themselves and all affiliated companies on their financial statements. Is this the number the Fed is using? Many (but far from all) corporations reporting to the SEC report book income by geographic segment in their financial statements. All those organized in the USA report their current and deferred tax provisions split between Federal, state, and foreign, if the pieces are material. Is the Fed using current provision? Again, the level of misunderstanding or manipulation is very disturbing. See discussion above.Oldtaxguy (talk) 00:47, 22 September 2012 (UTC)
replies: text: The Fed's FCTAX comes from Commerce's BEA/NIPA which appears per  to have early access to summaries of IRS forms 1120, 1165, and Schedules C, E and F. —Cupco 03:24, 22 September 2012 (UTC)
replies: text: It appears you have misread the source you cite. NIPA estimates, the BEA measure, do not use IRS data at all. Rather, they are econometric estimates based on surveys (statistical samples) conducted by BEA. The survey data on consumption and capital is used in making chain-type calculations of quantity and price indices. These indices are then applied to base year benchmarks (again not from IRS data) to arrive at estimated amounts.  See the description of updates to the process on pages 1-3 and the formulas used, in Appendix I, page 25. I would also point out that the St. Louis Fed "data" appears to purport to relate to a period for which tax returns had not yet been filed. No amount of "early access" (which doesn't exist) can possibly provided data that does not yet exist. Again, very disturbing. Oldtaxguy (talk) 00:54, 24 September 2012 (UTC)
thread_title:  Effective rate graph 

message: Substituted at 12:18, 29 April 2016 (UTC)
thread_title: Assessment comment

message: whether the sentence from the lede
:"The United States has the third highest general top marginal corporate income tax rate in the world at 39.1 percent (consisting of the 35% federal rate and a combined state rate), exceeded only by Chad and the United Arab Emirates .[1]"
should be removed or not.  Although it is a very popular conservative talking point, I believe that it has very little relationship to reality.  Also, if someone could point me to a good definition of "general top marginal corporate income tax rate" I will send them a "Thanks."  Anyway, I am considering removing that sentence and will do so in a few days if there is no reply.  Einar aka Carptrash (talk) 18:43, 21 July 2016 (UTC)
thread_title:  I have been trying to determine 

message: Hello fellow Wikipedians,
I have just modified 4 external links on Corporate tax in the United States. Please take a moment to review my edit. If you have any questions, or need the bot to ignore the links, or the page altogether, please visit this simple FaQ for additional information. I made the following changes:
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thread_title:  External links modified 

message: I was checking the source number 2 that support the following last sentence in the article introduction :
"However, the average corporate tax rate in 2011 dipped to 12.1%, its lowest level since before World War I, largely due to the great recession and a bonus depreciation tax break.[2]"
The reference and the link is the following:
""With Tax Break, Corporate Rate Is Lowest in Decades" Wall Street Journal, February 3, 2012
"
Since you need to pay to see the article, I'm not entirely sure whether it remains a valid source, as many people won't be subscribed to the Wall Street Journal, not allowing them to confirm the source. What are your thoughts? Eliijahh (talk) 13:35, 26 April 2017 (UTC)
thread_title:  Average effective corporate tax source not accessible 

message: Hello fellow Wikipedians,
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thread_title:  External links modified