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

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

#211

Post by _wp3r » Mon, Apr 05, 2021, 1:28 PM UTC

darkarmani wrote: post #185

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…

That's the price of using a fictional entity to shield one from liability.

Both entities provide liability protection. And the taxes are simply differed not omitted.

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

#212

Post by bzbarsky » Mon, Apr 05, 2021, 1:29 PM UTC

cies wrote: post #26

varispeed wrote: post #12

This is crazy how economy is tilted in favour of these big corporations. If you are a worker, it is not uncommon to pay over 40% of tax and if you work on your own small business you can pay even more and have very little left to reinvest. Then you have progressive tax that is preventing you from saving much - if you want to save for a deposit to buy a house, spend time on education and getting a better job, you'll g…

Dont forget: consumers also pay the taxes of the companies as they are factored into the costs of products and services. What matters here is the relative incentive/disincentive that taxation signals. 40% on income from labour shows: dont get income from labour! Small percent on income from property (dividents, etc) show that that's the best place to get money from. Almost zero percent on pollution signals: go for it…

More precisely: corporate income tax incidence is split between consumers (higher prices), shareholders (lower dividends) and employees (lower salaries). The exact split is a topic of hot debate in the economics literature, and likely depends on the exact market conditions facing that specific company...

Similarly, the incidence of things like the employer half of FICA is somewhat split between the employer and the employee (in the form of lower salary for the latter). Here, as I understand it, the general consensus is that the incidence falls mostly on the employee, except in cases of binding constraints like the minimum wage.

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

#213

Post by _wp3r » Mon, Apr 05, 2021, 1:30 PM UTC

Erlich_Bachman wrote: post #198

episteme wrote: post #87

Earlier quoted context omitted.

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"?

The government also collect payroll tax on the employee income from the employer. So it double-taxation+

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

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Post by frockington1 » Mon, Apr 05, 2021, 1:31 PM UTC

frankbreetz wrote: post #125

pessimizer wrote: post #108

Earlier quoted context omitted.

Needing the equity payment from your acquisition, untaxed, to put a down payment down on a house is not what the vast majority of people would think of as desperation. You're going to get enough tax breaks and subsidy for buying the house anyway.

What kind of tax breaks and subsidies are available for home buying?

The big one is deducting interest paid. It greatly reduced the amount of money the government takes from me every year

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

#215

Post by drdec » Mon, Apr 05, 2021, 1:31 PM UTC

verbify wrote: post #63

nvarsj wrote: post #37

Earlier quoted context omitted.

In pretty much every western European country your tax rates can easily hit 60%+ (like the 100k 60% cliff in the UK). The budgets of these governments are all largely funded on the backs of middle class income tax - 40% of all receipts in the UK, plus another 10-15% from VAT - compared to a lowly 9% from corporation tax [1]. You have to wonder how the economy can ever evolve given everything is geared towards suppres…

The 60% effective tax rate is only on earnings between 100k and 125k, and only because of the loss of certain tax benefits. After 125k it drops back to 40%. It's really silly that it exists, but isn't representative of UK tax rates, it is just a weird side effect of the loss of the personal allowance. And I reckon most earning between 100k and 125k would avoid that 60% by contributing to their pension, so I don't thi…

Surely you mean marginal tax rates and not effective rates? Or is it true that at 124K you pay ~74K but at 126K you pay less, ~50K?

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

#216

Post by bzbarsky » Mon, Apr 05, 2021, 1:32 PM UTC

drdec wrote: post #207

areyousure wrote: post #83

Earlier quoted context omitted.

For (single) self-employed people making between ~$85k and $137k, the marginal federal tax rate they face is a little under 40%, with 24% from your link, ~12% from Social security, and ~3% from Medicare. This excludes the effect of phaseouts of various deductions (eg, student loan interest), which can easily drive that higher while remaining within the context of federal taxation only.

Everybody forgets about Social Security and Medicare. Writing out the federal marginal rates for the different income brackets with SS and Medicare included is very eye-opening.

The other thing people forget are means-tested aid programs each of which is seemingly designed without considering interactions with the other ones. There are various places in the 0-$40k income range where people face >100% marginal rates due to the combination of actual taxes and benefit phaseouts...

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

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Post by TheCoelacanth » Mon, Apr 05, 2021, 1:32 PM UTC

cjpearson wrote: post #73

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.

Corporate taxes allow governments some level over control over corporate policy by incentivizing certain behaviors through deductions/credits etc. Also, dropping the corporate tax rate to 0 would probably be politically impossible, even an identical amount was then taxed on the individuals who benefit.

Corporate taxes should be structured more like usage fees instead of being a tax on profits. Want to emit carbon? It costs $X/ton. You shouldn't get away with doing bad stuff for free just because you did it unprofitably.

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

#218

Post by mistrial9 » Mon, Apr 05, 2021, 1:35 PM UTC

II2II wrote: post #109

b112 wrote: post #39

Earlier quoted context omitted.

Yes, but... Decades and decades ago, corporations paid most of the tax. People paid very little. Then things shifted. Instead of taxing corporations, people were taxed. Said people, with less money in their pocket, required raises. And so, over time, tax shifted from corporate to personal, but with people in the end taking home approximately as much as they had before. For example, you have $60k pretax, $50k take hom…

With corporations paying more for labour, they start looking for cheaper labour costs. They look for jurisdictions where there is a greater supply of labour and lower labour standards. This reduces the negotiating power of labour in regions with higher taxation, resulting in the stagnation or reduction of wages. In turn, this results in lower tax revenues which results in higher taxation or cuts to government spendin…

Slavery (in many forms) continues to be very attractive for business purposes

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

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Post by Rebelgecko » Mon, Apr 05, 2021, 1:35 PM UTC

varispeed wrote: post #133

Erlich_Bachman wrote: post #10

Is that calculation really correct? Does it count tax for all the employees? Does it count all specialized tax for things like gas or VAT, for all the things Netflix buys in their operation? What about all the media that Netflix buys and produces? What about all the taxes levied there on salaries and other activities? The article also talks about "income" and not "revenue"...

> Does it count tax for all the employees? Why do you think it is okay for a corporation to appropriate the tax employees pay as theirs? Employee pays this tax, not the corporation.

That's not how payroll taxes work in the US. The employee only pays a fraction of their taxes.

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

#220

Post by gsnedders » Mon, Apr 05, 2021, 1:37 PM UTC

Ceezy wrote: post #126

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…

So Amazon is loosing money is the US? Starbucks is loosing money in UK and Disneyland is loosing money in France? Please shifting profit is not normal there is no reason a company can do it and average people can't.

In many industries it's hard to quantify the value of imports from the parent company.

What is the value of the software engineering services Amazon US provide to Amazon UK, maintaining amazon.co.uk? Because, rationally, that's an expense of the UK company.

How much in the Starbucks brand worth? How do you distinguish a franchise from a subsidiary? If Starbucks split in two, with Starbucks Corporation maintaining only the trademarks and associated IP, and sold all the actual stores it owns to a second company Coffee Shop Corporation which started off as a franchise (and there exist franchised Starbucks stores today), which then paid licensing fees to the franchisor, would that be any different?

Like, there's definitely questions to be had about international accounting, but some of the complexity is because national subsidiaries rarely operate in isolation, and valuing much of what they get from their parent organisation is exceptionally hard.