Comment by cs702 | Hacker News Reader

Comment by cs702 | Hacker News Reader

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Unlike small businesses and individuals, most S&P 500 companies, like Facebook, pay less in income taxes than the official corporate income tax rate of approximately 35% implies, by doing things like booking profits abroad in specially created subsidiaries domiciled in jurisdictions like Ireland and Singapore, and never repatriating those profits, thereby deferring tax payments forever.

A couple of years ago the NY Times published an eye-opening interactive chart showing the actual tax rates paid by S&P 500 companies: http://www.nytimes.com/interactive/2013/05/25/sunday-review/... (Related article: http://www.nytimes.com/2013/05/26/opinion/sunday/who-will-cr... )

Regardless of whether you think corporate income taxes should be higher or lower, it's dysfunctional to have a system in which large companies and super-wealthy individuals can avoid paying headline tax rates but small companies and individuals don't have a choice.

The IRS, understandably, wants to stop this charade.

Great links and good perspective here. I agree completely that it is unfair that big companies can perform these maneuvers while small-businesses (and even profitable start-ups) would struggle to. There are so many scale-asymmetries in business, but this is a particular egregious modern example.

I've read that similarly for individuals American real income tax rates are roughly flat, since richer people tend to make use of more exemptions.

Facebook paid a 36% income tax rate for Q2 2015 to Q1 2016 (I didn't look up the most recent quarter). $7.31b in income before tax, and $2.64b in income tax.

That's very high compared to most of the world. The only other corporations I'm aware of that pay such a high rate, are oil companies like Exxon and Chevron.

SP500 companies don't pay anything while Joe in montana whom gets by with his family on 40K a year pay 35% or whatever the bracket is.

law is the law and they are not breaking it but its time the IRS crackdown on this practice.

40K pays an effective rate of 11%, in case you were wondering.

11% effective federal, some state taxes, some property taxes, some sales taxes, etc... I'm not saying it is by any means 35% but just quoting 11% is not entirely true.

Does that vary by e.g. family size?

Somewhat. Dependency deduction is relatively small.

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