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Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

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Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#191

Post by bradleyjg »

leetcrew wrote: post #179
bradleyjg wrote: post #156

Earlier quoted context omitted.

I understand why the rule exists. What I don’t understand is why a similar rule doesn’t exist for people. Here’s another example of where it could help. Take two men, one earns $75k/year (let’s say inflation adjusted) for thirty years as a bus driver. The other plays in the NFL for 1 year makes $2MM and thereafter only makes $250k over the next twenty five years. They’ve made the same amount of money over their lifet…

that's not really the same thing. the football player didn't realize a loss in any of those years, at least not in the same way that a company can. they just made less money over time. the real difference here is there are no marginal brackets for taxes paid by a company. it makes sense that companies are taxed differently than individuals. corporate revenues and assets ultimately end up in the pockets of real people…

> it makes sense that companies are taxed differently than individuals. corporate revenues and assets ultimately end up in the pockets of real people, either as wages or capital gains.

But only some of those real people are subject to the jurisdiction of the country taxing the corporation. So while some corporate income is subject to double taxation some is not.

> the real difference here is there are no marginal brackets for taxes paid by a company.

Companies can smear revenue out over time to optimize the taxes they face. People cannot. The marginal part is orthogonal.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#192

Post by bzbarsky »

bradleyjg wrote: post #110
hnmullany wrote: post #52

Netflix recorded a worldwide income tax accounting expense of about 13.7% last year ($438M on $3.2B of Net Income). It also paid cash taxes of $292M (cash taxes differ from accounting taxes because of timing issues - just like revenue is not the same as cash-in). A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally bec…

> A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally become profitable, they're allowed to roll forward those losses (within limits) to offset their profits. Human beings cannot do the equivalent. Spend the entirety of your 20s making very little money because you are investing in growth and then make $800k as an ort…

> Human beings cannot do the equivalent.

They can to some extent, actually... See IRS publication Publication 536, "Net Operating Losses (NOLs) for Individuals, Estates, and Trusts".

> Spend the entirety of your 20s making very little money because you are investing in growth

To actually do the equivalent you would need to spend your 20s _losing_ money. And if you do (in the NOL sense per publication 536) then you can in fact keep rolling the losses forward to offset future income until the losses are exhausted.

Now one issue is that things like medical school tuition are not considered "losses" for individuals. So in that sense there is a definite asymmetry here.

But businesses can't "go back and use all the unused 24% bracket", not least because US federal corporate income tax does not have brackets. What they can do is that _if_ they have negative taxable income (i.e. revenues - deductible expenses is negative) then they can roll the "unused" part of the deduction into future years to offset future revenues, which is exactly how NOL works for individuals. The primary difference between businesses and individuals here is in what counts as "deductible expense". The business definition is much wider in general, not just for purposes of NOL.

> You also can’t deduct the interest on the loans you took to finance that growth.

Well, you can until you start making that $800k/year. And only up to a limit, etc. Just like so many other things in the personal tax code, there's an income phaseout and a cap for student loan interest deductions...

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#193

Post by SavantIdiot »

hntrader wrote: post #94
ocdtrekkie wrote: post #77

Earlier quoted context omitted.

Well, one problem is this just encourages companies to collect and never disburse funds to employers or shareholders. Companies in some cases are holding onto hundreds of billions in cash offshore. Your idea would make that money free to keep out of the economy and out of employee's hands.

What would be the incentive for this? The whole point is for stakeholders to eventually get paid in a taxable event; either shareholders through a capital gains taxable event or employees through an income taxable event. Some tech companies are hoarding cash but I don't believe this is due to incentives created by taxation, although I could be mistaken.

> What would be the incentive for this?

Greed, son, greed. That is why 5 people in the US have more money than the bottom 100 million. They didn't work hard to become that rich, they stole it by not paying wages, health care, benefits, or sharing the wealth. Because they do not have to, nothing prevents them from keeping it and paying low wages in an economy where the ONLY jobs are working for them. (Look at the most recent jobs reports, delivery and couriers grew by double digits, most everything else fell: what do you do when there literally are no other jobs except delivering goods to people and peeing in bottles because you don't get a break?)

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#194

Post by bradleyjg »

mmcconnell1618 wrote: post #189

Scott Galloway made an interesting point in this Land of the Giants podcast about Amazon. He points out that Amazon convinced Wall Street it doesn't need to show profits and can reinvest more capital into growth than their competitors. Walmart and Target are expected to show profits to their investors on a quarterly basis while Amazon (and Netflix in this case) get to invest more cash that isn't taxed yet. This gives…

If GAAP earnings were the same as taxable earnings at least a company would have to go convince Wall Street. As it stands a company can tell Wall Street its wildly profitable and the IRS it makes nothing.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#195

Post by Erlich_Bachman »

londons_explore wrote: post #135
hnmullany wrote: post #52

Netflix recorded a worldwide income tax accounting expense of about 13.7% last year ($438M on $3.2B of Net Income). It also paid cash taxes of $292M (cash taxes differ from accounting taxes because of timing issues - just like revenue is not the same as cash-in). A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally bec…

I wonder what would happen if an entirely new approach to taxation were tested. A jury of 12 random people would inspect a companies accounts, assets etc and decide if the tax paid is "fair". The jury would have no training in tax matters, but would be presented documents produced by the government and the company to argue their cases. If the tax paid is found to be unfair by the jury, the company gets nationalised w…

That is just a very terrible idea.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#196

Post by Erlich_Bachman »

bradleyjg wrote: post #97
chaoxu wrote: post #62

I actually don't get why corporation should pay taxes. When the profit of the company is distributed, or paying the employees, the employees/shareholders will be taxed on that money.

What about the benefits that flow to foreign shareholders? You can’t effectively tax their capital gains.

Why not just tax any sale of a stock or a divident payout in the country of the company, - not the country of owner of said stock? These operations have to go through country of company anyway...

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#197

Post by _wp3r »

isbvhodnvemrwvn wrote: post #106
varispeed wrote: post #80

Earlier quoted context omitted.

> Progressive taxation has the exact opposite function to what you're suggesting. It's a mechanism designed to reduce economic inequality and the poverty among the low income workers. I am not advocating that low income workers pay higher taxes - in fact they should be exempt. I am saying that if you are from such family, progressive tax ensures you'll stay in your lane. > That figure is misleading, because it includ…

> Progressive tax ensures that person from poor background will stay poor. How so? With progressive tax there is no point at which you make less money than if you had less income.

This statement becomes less true if you take into effect entitlement and assistance programs in the US atleast.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#198

Post by Erlich_Bachman »

episteme wrote: post #87
pinky1417 wrote: post #78

One aspect I haven’t seen mentioned in the comments or in the article: double taxation. One of the drawbacks of structuring a business as a c-corp is that you have double taxation: once, at the corporate rate then again at the individual income tax rate if the corporation distributed earnings to shareholders. An advantage of that, however, is that if you’re investing for the future, double taxation can be more effici…

This is always brought up but it isn't double taxation, the individual is paying income tax and that has nothing to do with the corporation tax.

The government takes tax from the same amount of money twice. How is that not well described by the term "double taxation"?

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#199

Post by JumpCrisscross »

sumtechguy wrote: post #183
gbrindisi wrote: post #101

Earlier quoted context omitted.

Really wealthy people are probably not paying much income taxes to begin with

Let me introduce you to the HELOC. Wealthy people do not take out mortgages. They borrow cash against their existing wealth. They then buy things with that. Then pay back against the loan. Writing it off too (as per tax law). The 'rich' have sold everyone a bill of goods how they are redoing the tax system for 'the people'. When the reality is they are writing a bunch more exemptions for themselves. You can do the sa…

> Let me introduce you to the HELOC

Home equity loans are predominantly used by middle income households [0].

The rich can borrow against securities at the call money rate, currently 2% [1]. Much cheaper than borrowing against real estate [2]. The less rich swap it to a fixed rate for added security; the richer take the rate risk. (They likely have natural hedges.) The super rich seek to borrow at or close to the SOFR [3], typically having Treasuries or similar structured products for the purpose. (If they have a business with float, that could be even cheaper than SOFR.)

[0] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.574...

[1] https://www.bankrate.com/rates/interest-rates/call-money.asp...

[2] https://www.bankrate.com/home-equity/heloc-rates/

[3] https://apps.newyorkfed.org/markets/autorates/SOFR

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#200

Post by [deleted] »

bradleyjg wrote: post #110
hnmullany wrote: post #52

Netflix recorded a worldwide income tax accounting expense of about 13.7% last year ($438M on $3.2B of Net Income). It also paid cash taxes of $292M (cash taxes differ from accounting taxes because of timing issues - just like revenue is not the same as cash-in). A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally bec…

> A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally become profitable, they're allowed to roll forward those losses (within limits) to offset their profits. Human beings cannot do the equivalent. Spend the entirety of your 20s making very little money because you are investing in growth and then make $800k as an ort…

[deleted]
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