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

#311

Post by skybrian » Mon, Apr 05, 2021, 4:09 PM UTC

valuearb wrote: post #253

bradleyjg wrote: post #110

Earlier quoted context omitted.

> 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…

If you spent your 20s making money, little or no, you didn't have losses. If you spent your 20s conducting losing trades in the stock market, you accumulate capital gains losses that you can only apply $3,000 per year against your regular income. If at age 30 you made $800,000 in capital gains you are able to apply all those unused losses against those gains. So "human beings" aren't much different.

A difference is that just about everything a business spends money on is a business expense, while many of the things people spend money on aren’t treated like business expenses. Travel is an example where buying exactly the same thing can have very different tax consequences depending on whether it’s considered for business or not.

To some extent this is made up for with the standard deduction and various other deductions, but you can’t carry it forward if you made less than the standard deduction, even if you actually are spending more than you make.

The idea of carrying forward losses is unintuitive to most people because we mostly don’t get to do that.

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

#312

Post by reducesuffering » Mon, Apr 05, 2021, 4:10 PM UTC

TheJoeMan wrote: post #301

foobarian wrote: post #14

Earlier quoted context omitted.

> and research and development tax credits ($113 million). This is why you fill out your timesheets people!

It seems wild to me that this R&D credit is probably targeted towards new technology that will improve the world, and not Netflix working out how to reduce video lag by an additional 0.2%

Have you ever heard of Chaos Monkey?

https://netflix.github.io/

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

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Post by FpUser » Mon, Apr 05, 2021, 4:12 PM UTC

thehappypm wrote: post #296

FpUser wrote: post #134

Earlier quoted context omitted.

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.

I used to think this was a good idea but it ends up really, really favoring big corporations. Startup A wants to get into a market and it buys Zoom licenses, GSuite, AWS servers, etc and pays a hefty tax bill. Microsoft wants to get into that market? They don't have to buy any of that stuff, they already own everything. No tax dollars, lower cost to the incumbent.

I am a startup among the other things. So far I feed myself and was for the last 20 years ( startup of course is not that old ). I host my own servers and also rent dedicated servers elsewhere. I have no need for GSuite and Zoom. I talk using Skype which is free. I use vertical scalability and my servers are C++ so this infrastructure serves thousands requests per second without breaking sweat from a single server. In the end my current app serves tens of thousands of clients with very little monthly costs.

Microsoft and other do own their infrastructure but if they're not renting it to clients it wastes money as it has ongoing costs so not, them using their own infra is anything but free.

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

#314

Post by valuearb » Mon, Apr 05, 2021, 4:21 PM UTC

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%…

The vast majority of Apple dividends are paid to investors, not employees.

The "worst labor" are jobs that are so much better than typically brutal Chinese rural labor jobs that thousands of applicants stand in line for hours to get them. And Apple audits its labor practices, unlike solely owned Chinese companies.

And the corporate tax rate has never been 80% in the U.S. it was 40-46% in the 1980s and highest ever was 53% in late 1960s. And corporate tax rates were lower than todays rates for the first 163 years of U.S. history, they were first raised above 20% in 1940 to help fund the war.

And even though the current corporate tax rate is historically low, it's still an impediment to returning foreign profits. Repatriating foreign profits costs a minimum of 21%, more with state taxes. For companies it's still cheaper (and legal) to keep the profits in their foreign subsidiaries and wait for a repatriation window, or borrow against some of the deposits to pay dividends.

You should try studying history as well.

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

#315

Post by valuearb » Mon, Apr 05, 2021, 4:25 PM UTC

skybrian wrote: post #311

valuearb wrote: post #253

Earlier quoted context omitted.

If you spent your 20s making money, little or no, you didn't have losses. If you spent your 20s conducting losing trades in the stock market, you accumulate capital gains losses that you can only apply $3,000 per year against your regular income. If at age 30 you made $800,000 in capital gains you are able to apply all those unused losses against those gains. So "human beings" aren't much different.

A difference is that just about everything a business spends money on is a business expense, while many of the things people spend money on aren’t treated like business expenses. Travel is an example where buying exactly the same thing can have very different tax consequences depending on whether it’s considered for business or not. To some extent this is made up for with the standard deduction and various other dedu…

Personal expenses are just that, personal. While some have a limited effect on your ability to earn a living, most are just consumption.

Business expenses are almost always only the costs of actually generating revenues. Thats why there are strict limits on travel & entertainment deductions. Of course there are always exceptions, does the company need that private jet? But their accountants have to justify private jets, etc to ensure the company doesn't face tax fraud charges.

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

#316

Post by hntrader » Mon, Apr 05, 2021, 4:25 PM UTC

SavantIdiot wrote: post #193

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 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…

I don't understand this.

If I'm a greedy shareholder, then I want dividends and cap gains, which are both taxable outside of company tax.

How does hoarding cash inside a company, which is out of my personal reach, help me to satisfy my greed? I can't buy a yacht with it until I get the money out.

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

#317

Post by rrrrrrrrrrrryan » Mon, Apr 05, 2021, 4:25 PM UTC

thehappypm wrote: post #293

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…

Controversial opinion: companies with zero profits should be encouraged, not vilified. A company that isn't profitable means every dollar that flows into the company flows out. It flows out to other companies, to payroll, to R&D, to charities. That's where the real economic engine is -- money flowing, investment happening. And plenty of taxes come from it, too. Companies pay taxes when they start hoarding profits ins…

Companies with lots of cash on the balance sheet aren't necessarily just lazily "hoarding profits." Having cash on hand lets them nimbly acquire smaller companies, them lets them lock in lower interest rates on any debt, and helps them make it through rough spots without government aid (like the recent pandemic, for example).

I'd argue that these are also "good things". There's a reason corporate income taxes aren't tremendously popular among economists (even many economists on the left). Companies are capable of deciding how much cash to keep on their balance sheet, and any government nudges via tax policy are probably introducing some distortions. If we want to tax piles of stagnant wealth, we should tax the wealth directly: estate taxes and land value taxes don't introduce many distortions. If we want to tax companies, we should look at VATs (which are relatively non-distortionary), or perhaps heavy pigouvian taxes to offset negative externalities (e.g. a carbon tax).

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

#318

Post by leetcrew » Mon, Apr 05, 2021, 4:27 PM UTC

dragonwriter wrote: post #309

leetcrew wrote: post #294

Earlier quoted context omitted.

I posted elsewhere that it would make sense to allow individuals to apply some smoothing to their yearly income to reduce the impact that progressive brackets have on highly variable incomes. so let me rephrase my statement about capital gains. it doesn't make sense to treat LTCG as income unless we first make significant changes to the way we assess income tax in the first place. obviously this would be a lot more c…

> so let me rephrase my statement about capital gains. it doesn't make sense to treat LTCG as income unless we first make significant changes to the way we assess income tax in the first place. I disagree. LTCG as income without smoothing makes exactly as much sense as taxing regular income without smoothing does. Yes, there’s a strong case for smoothing. There’s, independently, a strong case for not structurally fav…

> I disagree. LTCG as income without smoothing makes exactly as much sense as taxing regular income without smoothing does.

> Yes, there’s a strong case for smoothing. There’s, independently, a strong case for not structurally favoring capital income and not structurally disfavoring labor income. While it is desirable to address both of those (and doing so simultaneously would be a good idea since there is no conflict), there is no dependency between them.

in theory yes, in practice no. the current system treats the common case where wages slowly increase pretty well. people with highly variable income get screwed, but it's much more common to get a yearly 2-5% salary bump.

in contrast, assets are much more likely to be sold in chunks. I haven't realized any capital gains over $100 in the last five years. but soon I will have to liquidate a large portion of my holdings for a down payment on a house. having those gains taxed at my highest marginal rate would be far worse than the fact that I can't smooth out my yearly raises. it would almost double my taxable income for the year.

aside from that, I agree with what you wrote. I would certainly vote for your solution.

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

#319

Post by dont__panic » Mon, Apr 05, 2021, 4:31 PM UTC

bradleyjg wrote: post #169

andruby wrote: post #162

Earlier quoted context omitted.

Can you deduct the interest paid on student loans in subsequent years? I think this is possible in some countries (iirc Belgium always deducting certain interest payments for personal taxes)

There’s a low cap ($2500) on the amount of interest that can be deducted and if the tax payers income gets too high ($85k for a single filer) you can’t deduct anything.

Not to mention that unless you're taking losses from other investments or doing fairly complicated things with your income, the standard deduction is likely high enough that you don't benefit at all from student loan interest deductions. So other people without interest get the same deduction as you anyway.

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

#320

Post by ysavir » Mon, Apr 05, 2021, 4:33 PM UTC

castlecrasher2 wrote: post #302

ysavir wrote: post #286

Earlier quoted context omitted.

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.

I see your point, but who would benefit most from making loans function the way you're suggesting? It obviously would be businesses.

True, but I think the sentiment isn't "make individual loans work like business investments" so much as it is "make business investments work like individual loans". In other words, if individuals are expected to pay taxes, businesses should be expected to pay taxes as well (rather than being allowed to minimize them due to earlier losses).

It's not black and white, of course, and I'm not an accountant, so my knowledge is limited and most likely filled with holes and misunderstandings. But I imagine there's also a matter of scale that's at play here, with tax laws meant to make things easier on small, privately owned businesses in their early years, having unintended consequences to the benefit of companies already behemoth in size investing in getting even bigger. Bigger in ways only made possible in the new digital, globalized world.