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

#341

Post by algo_trader » Mon, Apr 05, 2021, 6:26 PM UTC

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…

> deductions for property transactions.

Can u give an example for this? Especially in the context on a large, growing tech firm.

I understand the basic stuff like accelerated depreciation, location arbitrage, etc

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

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Post by asdff » Mon, Apr 05, 2021, 6:33 PM UTC

Guthur wrote: post #239

varispeed wrote: post #127

Earlier quoted context omitted.

> 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 a corporation who is this "they", employees? (paying taxes), c-suite? (paying taxes), stockholders (paying taxes) The problem, there is no "they".

That's the whole problem, the finger pointing ends in everyone pointing at eachother equally. It's why corporations can do atrocious deeds to human life or the environment and people end up with bonuses instead of handcuffs.

But imagine you are some unethical person looking to ensure as little of of your hard earned cash goes to things like a subsidized meal to a hungry person as possible. Your company is raking in millions and you want that money, but you know Uncle Sam is going to take his cut. Maybe you set your personal salary at minimum wage, and have the corporation own your nice house and nice car instead, and use the corporate card for your airfare and dining. IIRC, setting up a corporate trust similar to this was how Jeffrey Epstein was able to get Les Wexner's multimillion dollar Manhattan townhouse for nothing at all on paper. The Trump foundation also got into similar trouble for misuse of funds a few years ago. No doubt a lot of people in this world are abusing the tax advantages offered for corporations towards personal gain, and no doubt they lobby lawmakers to keep things this way.

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

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Post by imtringued » Mon, Apr 05, 2021, 6:35 PM UTC

b112 wrote: post #61

tomrod wrote: post #42

Earlier quoted context omitted.

Flaw in argumemt: real wages not improving for several decades. Can you please provide sources where corporations were the primary tax vehicle?

See my reply to my original post. Tax rate changes are well known, but here's an example. Click on 'max' for a decades long look. https://tradingeconomics.com/canada/corporate-tax-rate In terms of 'real world' wages not improving, that's a somewhat arbitrary term. If you mean 'pre-tax', wages HAVE improved over time pre-tax. We're talking over 50+ years here. 'post-tax', they did improve, but that was before the grea…

> Since that time, since 'free trade' was a 'good thing', they have fallen steadily.

There is a savings glut and free trade definitively did contribute to it but it's not the only factor. There are dozens of other factors that play a role as well.

Here is how the loop works. China buys dollars with yuan to maintain a certain rate. China ends up with excess dollars. The dollar gets stronger and people stop buying from USA. The Yuan gets weaker and people buy more from China. China buys US treasury bonds with the USD, which is equivalent to saying that the US government can manage the money better than China (China is probably saving for pensions). The only way the US government can access the money is by issuing debt. If the US government doesn't issue debt then there are excess savings. Savings are deferred consumption and since consumption is paying the wage of a worker it is also deferred employment. If the US government refuses to spend the money then you get unemployment. The truth is that this isn't where it ends. If the US government does issue debt, then it can invest it into infrastructure, education, housing and so on. The US ends up both with infrastructure and low unemployment. It could be worse, Americans would otherwise have to spend their days working in factories and there wouldn't be any time left to build infrastructure.

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

#344

Post by gamblor956 » Mon, Apr 05, 2021, 6:40 PM UTC

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.

LTCG is simply any capital asset held for longer than 365 days. It makes perfect sense to tax gains on assets held for a year or two.

Moreover, capital assets include real estate and other items that appreciate faster than inflation. It absolutely makes sense to tax those assets, since those assets are generally not held for productive use. (See, for example, all the empty storefronts in NYC. Those properties are held with an eye toward making money on the eventual sale of the building without regard to ongoing income; the finances work out as long as incoming cash flow from rents in other units covers debt service payments.)

Indeed, not taxing long-term capital gains would be the biggest subsidy to the wealthy that the world has ever seen. It would encourage the wealthy to acquire assets en masse, hold them without use for long periods, and then sell them at appreciated and untaxed values despite having done nothing to earn the appreciated value.

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

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Post by Retric » Mon, Apr 05, 2021, 6:40 PM UTC

smaryjerry wrote: post #334

Retric wrote: post #291

Earlier quoted context omitted.

> Companies can’t deduct principal payments either. The initial cost would be tax deductible and could rollover across multiple years, therefore in effect the principle is deductible even if the specific payments aren’t. The way the deduction actually works is actually better than simply deducting principle payments from the loan due to time value of money. The issue with accelerated depreciation is it’s a subsidy. T…

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 point of destruction or sale not purchase.

Depreciation is therefore an acceleration of that process. Companies for example used printing presses for a hundred years meanwhile during much of that time the actual value increased above it’s purchase price due to inflation. It’s surprisingly common for companies to sell something for a profit that they have already fully deprecated.

> I don’t understand the point you are making on communism

All specific tax exemptions for business are communist in nature because they replace market forces with government choices. It’s very obvious in the case of farm subsidies for example, but it’s a generalizable rule that government subsidies reduce market efficiency by incentivizing inefficiency.

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

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Post by asdff » Mon, Apr 05, 2021, 6:44 PM UTC

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.

That's if you faithfully operate your corporation. You can set yourself up a corporation and pay yourself from that a very small salary on paper, while enjoying the funds through other means. Trump can't be on the board of any charities in the State of New York anymore after similar misuse of funds with his Trump Foundation nonprofit.

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

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Post by exabrial » Mon, Apr 05, 2021, 6:46 PM UTC

matwood wrote: post #151

exabrial wrote: post #84

I don't really have an issue with this. 1% tax is more than sufficient to run this country. The first step to a balanced budget is to stop impulse spending on dumb stuff. My only gripe is I'm not allowed to pay a 1% tax, as I should be.

> The first step to a balanced budget is to stop impulse spending on dumb stuff. The problem is that 'dumb stuff' is different for everyone when it comes to country level expenditures.

We can generally agree, paying $5 for a desk is dumb. Sorry, typo, that's $5k, not $5. https://www.forbes.com/sites/adamandrzejewski/2015/10/01/epa...

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

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Post by gamblor956 » Mon, Apr 05, 2021, 6:46 PM UTC

clairity wrote: post #284

fractionalhare wrote: post #174

Earlier quoted context omitted.

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.

The interest on personal loans is also deductible, if used for (a) education, (b) buying a residence, or (c) for business activities of the individual.

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

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Post by thehappypm » Mon, Apr 05, 2021, 6:50 PM UTC

browningstreet wrote: post #331

thehappypm wrote: post #297

Earlier quoted context omitted.

Corps would find a way around it. They always do. Maybe Netflix could spin off one of its studios into a $999M business, of which Netflix conveniently owns a 51% stake in.

> Netflix annual revenue for 2020 was $24.996B, a 24.01% increase from 2019. Would they go to the trouble of making themselves 25 different companies? There might be a way for lawmakers to figure this out... -- https://www.macrotrends.net/stocks/charts/NFLX/netflix/reven...

Even splitting off 1 company, and shielding that $999M in revenue from the higher tax burden, would make sense for Netflix.

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

#350

Post by thehappypm » Mon, Apr 05, 2021, 6:52 PM UTC

FpUser wrote: post #313

thehappypm wrote: post #296

Earlier quoted context omitted.

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. I…

You're missing the point. You still need to buy servers, right? You still pay for electricity to power those servers, right? You buy hard drives, right? Those would all be taxed transactions. Whereas Microsoft's startup would use Microsoft's existing infrastructure. Even Microsoft's hardware costs are pennies on the dollar compared to yours, so their sales tax revenue would be also.