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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

#281

Post by manigandham »

merpnderp wrote: post #243
gfiorav wrote: post #223

Earlier quoted context omitted.

Individual humans don’t employ large groups of people and don’t move forward the economy like a company does. I don’t understand why we want to equate rules for companies to rules for individuals? People say “it’s not fair”? Who’s going to employ people? The government can’t produce your salary, companies do that. Btw, many countries should regulate companies more IMO, but that’s not to say companies shouldn’t be enc…

But the example you're responding to does employ people. A surgeon will have to hire a whole host of employees to run his outpatient clinic. Or if she works in a hospital, an entire team will be built around her. Plus there is the fairness issue. Corporations are just groups of people working together. So why does a single surgeon not get to be treated as the economic growth engine she is, but two surgeons can incorp…

None of that makes sense. The corporation they work for employs people, and you can start a company by yourself.

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

#283

Post by eric_b »

dragonwriter wrote: post #267
eric_b wrote: post #257

We have progressive taxation for individuals - why not for corporations? I don't have an army of accountants to avoid the corporate tax rate for my small business. So as a percentage I pay vastly more taxes than the multinationals. Why can't we have varying rates depending on the size of the business?* Bigger businesses have a bigger tax rate. This would also incentivize organizations to stay small. *Calculating the…

> We have progressive taxation for individuals - why not for corporations? Because corporations are, by nature, arbitrarily divisible, so progressive taxation for corporations just encourages division of corporations into units that pay the minimum tax rate. There are business forms that allow businesses (often, but not exclusively, small businesses) to avoid corporate taxes entirely (S corps and passthrough LLCs), w…

This isn't true practically though. Most multinationals consist of dozens of sub-entities but the books all still roll up to the parent. If Google wanted to "get smaller" they would literally have to break apart, which is the same thing that the anti-trust folks want them to do. This seems to solve it neatly in my mind.

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

#284

Post by clairity »

fractionalhare wrote: post #174
ysavir wrote: post #136

Earlier quoted context omitted.

> That's not equivalent. An equivalent example would be a person who makes a large amount of money in their 20s, but spends the majority of it on things that could conceivably appreciate, such that their income artificially represents a loss. Then all of a sudden, whatever they spent money on becomes extremely profitable in their mid 30s. Like someone getting a $150k student loan to go to college and/or post-college…

No, because that's a loan rather than an R&D expenditure from income. I guess that probably sounds flippant, but the mechanics are different. If a business received a loan, the tax prospects wouldn't be as favorable as expenditure either.

loans are different for corporations due to the interest being deductible (colloquially called 'tax shields'). along with the carryforward provision, that can so valuable that it's the principal reason why a given company is bought. personal loans have no such leeway and value.

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

#285

Post by dragonwriter »

leetcrew wrote: post #276
dragonwriter wrote: post #272

Earlier quoted context omitted.

So, new brackets or not, tax capital gains, gifts, and inheritances as regular income to the recipient. Also, apply taxes (and corresponding benefit eligibility) equivalent to payroll/self-employment taxes to that income. At the same time, allow corporations to expense disbursements: you are taxing individual income fairly, corporate tax just is a tool to prevent indefinite tax-free deferral of income.

it doesn't really make sense to tax long-term capital gains as income, especially under a progressive system. if I hold an asset for ten years and then sell it, a significant part of the nominal gain will be due to inflation (though this is also a problem with the existing cap gain rules). but conceptually, an LTCG is not a sudden windfall, and should not be taxed as such. it is the result of one or more years' appre…

> it doesn't really make sense to tax long-term capital gains as income, especially under a progressive system.

Yes it does.

OTOH, it doesn't make sense to not have a means of spreading out irregular income by recognizing it for tax purposes over several years in advance of realization if it can be anticipated, or deferring it over several years otherwise, in a progressive tax system. Which is why you should provide that, too (it applies to some subset of LTCG, especially that earned by the middle class, if taxing LTCG as income, but it would apply to lots of non-capital income, too—the income pattern for say, a novelist eho sends several years writing each book thar is a hit isn’t flat or steadily growing year-to-year, but spiky, and ir should be possible to smooth it for tax purposes.)

You don’t have to structurally preference capital income to deal with the fact that, as is true for other income, some capital income is the result of processes that the taxpayer can’t expect the same realized gain from year-to-year.

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

#286

Post by ysavir »

fractionalhare wrote: post #174
ysavir wrote: post #136

Earlier quoted context omitted.

> That's not equivalent. An equivalent example would be a person who makes a large amount of money in their 20s, but spends the majority of it on things that could conceivably appreciate, such that their income artificially represents a loss. Then all of a sudden, whatever they spent money on becomes extremely profitable in their mid 30s. Like someone getting a $150k student loan to go to college and/or post-college…

No, because that's a loan rather than an R&D expenditure from income. I guess that probably sounds flippant, but the mechanics are different. If a business received a loan, the tax prospects wouldn't be as favorable as expenditure either.

Different how? Different in practice or in tax law?

The point of the thread is that the two are essentially the same in practice (investing current monetary influxes towards future revenues) but the tax law differences favor one over the other.

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

#287

Post by clairity »

browningstreet wrote: post #282

Might be time for a gross revenue tax for companies pulling in more than $B

yes, and instead, it should be a smooth function on size to avoid discontinuities (like the $1B threshold) that encourage exploitation.

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

#288

Post by valuearb »

According to the article most of their write-offs were from the exercise of ISOs, which is treated differently in tax caclulations than in GAAP accounting. So the company reports a different profit to it's public shareholders than it does to the IRS.

When Sarah the employee gets options to buy 1,000 shares of company stock at $10, and the stock is trading at $10, those options have value. GAAP has the value estimated based on standard options pricing models (Black Scholes presumably), ie. the volatility of the stock implies how often the options will vest with value. So the company takes a GAAP expense for Sarah's options grant, lets guess $2 per option which would reduce reported profits by $2,000 total that year.

But the IRS doesn't allow this expense for tax calculations. For taxes the company has to wait until the employee exercises the option, then it is required to deduct the difference between what the current stock price is and what the employee paid. So a years later when the stock is at $100, Sarah exercises her options for a windfall of $100,000 in stock that only costs her $10,000, the company gets a tax deduction of $90,000.

The site (in a linked essay) points out how much larger these tax deductions are than the actual GAAP expense and tries to spin this as some sort of tax dodge (even though companies are required by law to follow tax accounting and GAAP rules). But here is the problem with their perspective.

What if the stock price went down? If Sarah does not ever exercise her options, the company never gets any tax expense for them, even though the OPTIONS CLEARLY WERE A COST TO THE COMPANY. The author is making the old have your cake and eat it too argument. In reality only if the company is successful is the tax code treatment of options beneficial, when it's not successful the treatment is unfair.

Note: If you don't think out of the money stock options are valuable, go to your broker and demand some September Tesla $1,000 call options for free because they "aren't worth anything yet" and see how far that gets you.

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

#289

Post by crispyambulance »

listenallyall wrote: post #49
crispyambulance wrote: post #15

It would be perfectly fine for corporations to pay comically low taxes--- IF they also had NO ability to fund large-scale lobbying operations and were not allowed to put unlimited amounts of money into political campaigns. That's NOT ever going to happen. But now is the best time for the tax part to change. The economy has been floated by unprecedented government pay-outs, narrowly avoiding a deep depression that wou…

>> It would be perfectly fine for corporations to pay comically low taxes No it wouldn't

I am just trying to highlight the fact that corporations have a double advantage: Low-to-no taxes + oversized political influence.

It would be an almost level playing field if they had only ONE of those advantages.

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

#290

Post by clairity »

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…

we really should do away with tax-advantaging corporations. those regulations have done the work they were designed to do, which is not, strictly speaking, to 'encourage investment', but rather to juice the american economy into global competitiveness. now what we need is to more widely disperse capital to again encourage competitiveness, an edge we're losing rapidly as capital stagnates in the west (as opposed to the vibrancy of the east and global emerging markets).
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