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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

#351

Post by imtringued »

varispeed wrote: post #127
Guthur wrote: post #81

Earlier quoted context omitted.

Everyone they employ already pays tax. Everyone that gets a dividend pays tax. Everyone that enjoys capital growth pays tax. Just looking at the direct corporate tax rate is grossly myopic.

> Everyone they employ already pays tax. But this is their tax they pay on the money _they_ earned. Not sure why this is okay for corporations to appropriate this tax as theirs. > Everyone that gets a dividend pays tax. In my country dividend tax has a lower rate. You have this insanity where a person making money out of their hard work pays more tax than a person living off dividends and doing nothing.

>In my country dividend tax has a lower rate. You have this insanity where a person making money out of their hard work pays more tax than a person living off dividends and doing nothing.

You have to put this into perspective, there are ways to obtain profits from capital gains without doing any work whatsoever, without employing employees at all. Dividends are quite harmless, because those people living off of dividends give people jobs who are then doing productive work. Compare that to getting rich off a stock market bubble, where literally nothing productive was done and no jobs were created.

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

#352

Post by imtringued »

koshnaranek wrote: post #336
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.

Netflix makes a lot of money in Europe. Most of that profit would move to the US... even more than it currently does.

From the perspective of the US this is an argument against corporate taxes. There is a global corporate tax race to the bottom and some European countries are taking advantage of that.

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

#353

Post by gamblor956 »

bmj wrote: post #138
refurb wrote: post #114

Earlier quoted context omitted.

Student loans interest is deductible at lower incomes. You can deduct mortgage interest (investing in long term housing). You can defer taxes on income through a 401k. It’s not like individuals don’t have mechanisms to save on taxes.

This isn't really equivalent. The current maximum deduction for tuition is 4000$, and that gets phased out at incomes above ~150000$ if you are filing jointly. I have no idea what the limit on a corporation carrying forward losses is, but I'm sure the percentage is significantly greater. Yes, individuals can save on taxes, but can most of us get an effective tax rate of 1%? And, many of the common deductions (mortgag…

There are all sorts of limitations on carrying forward corporate losses.

There was a 20-year cap on corporations carrying forward losses.I had clients that actually timed-out on using carried-forward losses because they had insufficient profits to use their losses against. However, since 2017, losses can be carried forward indefinitely, but in any given year may only offset up to 80% of taxable income. (As a result of the CARES Act, losses between 2018 and 2021 are not subject to the 80% limitation.)

There are section 382 limitations on losses of acquired companies. (In a nutshell, the idea is to discourage a company from being acquired so that the acquirer can use those losses to offset their own taxable profits.)

There are other limitations on loss carrying as well but they tend to be pretty esoteric.

Yes, individuals can save on taxes, but can most of us get an effective tax rate of 1%?

Yes, you can get a 0% (combined tax rate) as an individual if your income is primarily municipal bonds or other tax-free government bonds, even before taking into account deductions. And wage-earners can get single-digit combined tax rates if they are below the poverty line (the exact threshold varies from state to state).

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

#354

Post by imtringued »

asdff wrote: post #340
hntrader wrote: post #94

Earlier quoted context omitted.

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 share price is higher? The lemonade stand, or the identical lemonade stand with a huge bag of money kept beneath the table? If you are a shareholder you only care about one thing.

If the first lemonade stand did a stock buyback it would be worth just as much as the second lemonade stand. If the first lemonade stand issues a dividend and holders of the stock automatically buy more stock, then the share price will also be exactly the same as the second lemonade stand.

Why do companies do dividends or stock buybacks? Because they think investors can do better investments elsewhere with the money.

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

#355

Post by gamblor956 »

throwaway667555 wrote: post #103
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…

Adding one thing: in the past, mega-companies spent money on tangible assets which were depreciated over time as they produced income. Now mega-companies spend money on intangible assets but they can expense immediately, so tax is deferred and they can grow without that tax friction. Dollars spent are the same, but expensing is accelerated, shrinking tax and unleashing growth, and the cycle continues. It’s kind of a…

Now mega-companies spend money on intangible assets but they can expense immediately, so tax is deferred and they can grow without that tax friction.

Acquired intangible assets must be amortized (aka depreciation for things that don't physically exist) over 15 years, not immediately (some intangibles can be amortized over a 3-5 year time frame). And self-developed intangible assets cannot be amortized at all.

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

#356

Post by imtringued »

valuearb wrote: post #269
SavantIdiot wrote: post #193

Earlier quoted context omitted.

> 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…

Actually behavior rebuts your theory. Apple has paid hundreds of billions of dividends to shareholders the last few years. It's borrowed money to do it because it would be taxed if it repatriated funds to pay dividends with. If the corporate tax rate was reduced to zero it would have zero reason to keep foreign profits offshore, it would just repatriate them and pay dividends directly.

>Apple has paid hundreds of billions of dividends to shareholders the last few years. It's borrowed money to do it because it would be taxed if it repatriated funds to pay dividends with.

Yeah, the reason why this strategy works is because Apple can pay dividends today and just wait for the inevitable tax holiday that comes when a republican president enters the white house. Similar schemes work with cryptocurrency in Germany. Holding onto Bitcoin for one year grants you tax exemption from capital gains. So you just borrow against your Bitcoin for one year.

Corporate taxes have been gamed so much they are purely cosmetic at this point, with some harm done to smaller companies. A better tax code is needed.

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

#357

Post by imtringued »

SavantIdiot wrote: post #306
valuearb wrote: post #269

Earlier quoted context omitted.

Actually behavior rebuts your theory. Apple has paid hundreds of billions of dividends to shareholders the last few years. It's borrowed money to do it because it would be taxed if it repatriated funds to pay dividends with. If the corporate tax rate was reduced to zero it would have zero reason to keep foreign profits offshore, it would just repatriate them and pay dividends directly.

/china enters chat/ Right. That's great: the richest employees of apple get richer, and the people doing the worst labor live in dorms and work 18 hour days. > If the corporate tax rate was reduced to zero it would have zero reason to keep foreign profits offshore, Again, you seem to be ignoring the abundant evidence. Trickle down has never worked. Corporate tax rates are the lowest they've EVER been (down from >80%…

I don't think the argument is trickle down economics. The argument is that there is a race to the bottom and simply opting out from the race is the only way to win.

Trickle down doesn't work because republicans love pumping the supply side of the economy even when it is fully saturated. The days of a weak US economy are long gone. The real problem is that savings exceed investments. You either let the government create viable investments for the private market, or you just let the government invest directly.

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

#358

Post by imtringued »

FpUser wrote: post #134
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.

The easy ( yeah right ) fix would be single universal sales tax. You buy something - you pay. Does not matter corporation or person. No expense claims on that either. This will also eliminate need to count assets as the taxes has already been paid on those. Tax can be progressive with the possibility of rate going negative for low income people.

The easy fix would be to have a land value tax that pays for everything. You can trivially dodge sales taxes by not declaring them. There are legal ways and illegal ways to not declare them.

Meanwhile with land value taxes, you either own the land and you pay, or you don't own the land and you don't pay. The only way you can dodge this is by not owning assets in the US and by not living in the US. Landlords pass the land value taxes onto renters (individuals and companies) who then end up paying their fair share of the US taxes.

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

#359

Post by asdff »

imtringued wrote: post #354
asdff wrote: post #340

Earlier quoted context omitted.

What share price is higher? The lemonade stand, or the identical lemonade stand with a huge bag of money kept beneath the table? If you are a shareholder you only care about one thing.

If the first lemonade stand did a stock buyback it would be worth just as much as the second lemonade stand. If the first lemonade stand issues a dividend and holders of the stock automatically buy more stock, then the share price will also be exactly the same as the second lemonade stand. Why do companies do dividends or stock buybacks? Because they think investors can do better investments elsewhere with the money.

What about a third lemonade stand that took their huge sack of cash and instead paid their employees six figures? This would be the stand that is worth less to the shareholder, as that money in the sack has left the lemonade stand entirely and is now being spent by the employee elsewhere in the economy with a portion of it used for different taxes. This is also the stand that is worth the most to the public, as this sack of cash is no longer kept under a lemonade stand and is instead being used to pay sales taxes, property taxes, and income taxes. The fallacy is that many believe corporations are like this third stand, when really they are much more like the first or the second, where it is better for the shareholder and worse for the public to keep as high of a portion of money out of taxable pockets as possible and to pay as little as possible for labor.

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

#360

Post by smaryjerry »

Retric wrote: post #345
smaryjerry wrote: post #334

Earlier quoted context omitted.

Principle is not at all “in effect deductible” in the slightest. If you spent money on expenses that is deductible whether you borrowed that money or not and has absolutely nothing to do with principal. On the second point accelerated depreciation is NOT a subsidy in the slightest either and not at all related to government debt. Depreciation is already a delayed acknowledgment of expenses. Without depreciation someo…

> Depreciation is already a delayed acknowledgment of expenses. Without depreciation someone would deduct the entire amount of a cost immediately and pay much lower taxes. No, if a company buys say land they can’t deduct anything because land retains value until the point of sale. The same is true buying stock or other items that maintain value over time. The general rule is something is a deductible expense at the p…

Your comment again makes no sense. Land is NOT depreciable and neither is stock. Depreciation is not an exemption of taxes. You must realize that selling something that has been depreciated results in you selling it for a profit and thus is taxable. Depreciation reduces the cost basis. I’m not sure if at this point you are trolling by your comments always saying the opposite of the actual tax laws.
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