Twitter Tax Controversy Explained In Cartoon Form

theodp writes "If you prefer to digest your news in a cartoon format, you'll be happy to know that the Twitter tax controversy has gotten the Next Media Animation TV treatment. In the NMAtv clip, Twitter co-founder Biz Stone cuts a tax break with San Francisco Mayor Ed Lee and ascends a ladder to 'Tax-Free Haven' where he's high-fived by execs from GE and Google. If you insist on reading the news, IBD has an account of the payroll tax break, which critics are calling corporate welfare." A hilarious, but true, story. Please remember, when you see 'haven' instead of 'heaven,' that English isn't everyone's first language.

Comments

i think haven was a pun

[retchdog]

admittedly it's a bad pun, but would it really be surprising that the taiwanese media have a better grasp of english than slashdot editors?

Re:i think haven was a pun

[MobileTatsu-NJG]

admittedly it's a bad pun, but would it really be surprising that the taiwanese media have a better grasp of english than slashdot editors?

It wouldn't be if you had a lower UID.

Re:i think haven was a pun

[Asclepius99]

Tax Haven isn't a pun, it's an actual term. Remember, English isn't the first language of all the /. editors.

Tax Haven

Re:i think haven was a pun

[Jon Stone]

"Tax haven" is a common term in UK English. Is the term not common in the US?

Re:twitter makes money

[MrEricSir]

No, but they still have to pay their employees, therefore they must pay a payroll tax.

What sparked this is their impending IPO, since stock options would have been taxed.

English audio version

[mailman-zero]

English audio for those who don't like reading subtitles. http://www.youtube.com/watch?v=Jh1evfTk58o

Tax heaven

[pablomme]

Please remember, when you see 'haven' instead of 'heaven,' that English isn't everyone's first language.

Interestingly, the expression for "tax haven" in Spanish is "paraiso fiscal" (tax heaven), which I'm pretty sure was a mistranslation in the first place. Ok, ignore the "interestingly"..

Fucking Bullshit

[cosm]

I understand it's SOP, but I do think it is motherfucking bullshit that I pay a higher percentage of my income in taxes than these companies. And I guarantee my net is six to seven orders of magnitude less than what they bring in, which is probably true for most Americans as well. But its the welfare state that is bankrupting us they say!

Re:Fucking Bullshit

[ub3r n3u7r4l1st]

The company did not pay, but the company executives foot their shares via personal income tax.

Re:Fucking Bullshit

[Anonymous Coward]

Okay, remember, that every corporation on the planet is a tax collector, never ever has one of them paid taxes. They pay taxes, out of the money that that somebody paid them. Ultimately, all of those taxes are paid by shareholders, employees, or customers (either in the lack of dividends/profits/prices, lower salary/benefits, or the cost of goods and services respectively).

The problem you have is that you want to be ignorant of the taxes you pay. If you made every penny of tax be paid hidden from you, and have you "pay" zero taxes, it'll just be money funneled through a dozen different hands before it was used to pay taxes (and likely be taxed every time it changes hands). Personally, I'd prefer that I personally pay all my taxes, and I'd prefer that every man, woman and child in this country pay taxes, and be the only entity that does (currently most folks under a certain wage pay an effective 0 or negative tax rate in that they get more benefits from the gov't than they pay in payroll, at least directly, indirectly I'm not sure). Hopefully at that point, we could avoid the class/culture wars, and everyone could realize just how much taxes actually cost them. The folks benefiting from taxes are generally gov't employees and their friends (both high level like senators, or low level like folks that are overpaid and underutilized).

Re:Fucking Bullshit

[Americium]

There are taxes paid on on every salary of every employee, including the CEO's and other exceutive's salaries, which are probably all in the highest bracket. Gains on stocks are taxed, and dividend payouts are taxed as income.

Profits the company makes and doesn't pay out in dividends or salaries is used for company expansion. Why tax that? That's the exact problem we have in the USA, and we already have the highest corporate tax rate in the world. Of course these international companies are doing everything they can to get around it. Would you rather them just move their entire company offshore? It's hard to compete when your international competitors have such a large tax advantage.

The sad fact is that the US government is making (taxing) more money from these companies than any CEO is, and more than corporate profits are. Taxing creators of jobs isn't an incentive to expand your business. Including state corporate taxes, it's around 40% in the US, imagine how much faster companies could expand with a 67% increase in profits (0% tax).

Re:Fucking Bullshit

[corbettw]

Pretty much, yeah. Any thing of value you receive from another party during the year, unless it's specifically a gift (and then that's limited to $10000) counts as "income" and is subject to taxation.

Of course, there are different kinds of income that get taxed at different rates (for instance, bonuses and short-term capital gains get taxed the most, long-term capital gains and dividends the least, to encourage people not to speculate in the stock market). But Uncle Sugar always gets his cut.

Re:Fucking Bullshit

[corbettw]

I do think it is motherfucking bullshit that I pay a higher percentage of my income in taxes than these companies

First off, the tax in question here is a payroll tax which comes out of the employees' salaries and stock options. So this is a good thing for workers at Twitter.

Second, you only pay income tax on your net income. Of course, when people piss and moan about corporations "not paying their share", they only look at their gross income. Companies can have enough expenses in a year that they essentially have no or little income, and you have to keep that in mind when looking at their tax burden.

Third, a company that is successful and hires lots of workers is going to pay into Social Security and other tax schemes through payroll taxes. So whether the corporation itself pays taxes or not, the government is still getting money from them. No one gets out of paying completely, it just doesn't happen.

Re:Fucking Bullshit

[geezer nerd]

Oh yes. Benefits that an employee receives are given a value and will be taxed if they exceed certain numbers that are relative to all employees. I never received enough benefits for this to be a serious issue for me. About the only time it bit me even a little was that I often took advantage of purchasing subsidized life insurance through the company, and if the subsidy was big enough I got hit up for taxes on it. The amount was reported in the W2 as I recall. (I am retired now, and it was a few years ago that I am remembering.)

I spent my entire working career in the US, paying usually both federal and state taxes. Just like everyone else, I did not like paying taxes, but I never felt that the tax rates were too high or punitive. The only times it got me were when I failed to plan ahead.

Even today, being retired and living in a different country, I don't mind paying US taxes. What I don't like is the tortuous complexity of the US tax system, with all the different types of income and different exclusions and deductions. It approaches the insane.

Re:Fucking Bullshit

[ShakaUVM]

>>I understand it's SOP, but I do think it is motherfucking bullshit that I pay a higher percentage of my income in taxes than these companies

You know what's bullshit? San Francisco's tax laws. Combined with California's tax laws. That's why there's this controversy in the first place. They have one of the most business-unfriendly environments in the US.

My company pays 1.5% of its profits to the state of California. You know what's bullshit about it? It's an S-Corp, so there are no profits, technically - all money passes through to the shareholders, who pay personal income tax on the money. But you get the privilege of paying 1.5% anyway, on top of the taxes you get to pay for personal income, simply because you have a corporation. If your profits are not that high, you get to pay a minimum tax of $800 anyway. Which can work out to a lot more than 1.5% of your income, if you're a small operation. Hey, that's fair, right? Mom and Pop start a $20,000/year candle business, and so California taxes them a bonus 4% for the privilege. (And people wonder why corporations are leaving the state.)

C-Corps (that retain earnings) get to pay corporate taxes (unless you're rich enough to buy a loophole) on top of the taxes that the owners pay when they eventually draw money out of the corporation. That's double-bonus awesome, right?

Twitter was going to be charged a bonus 1.5% taxes on all money it spent on payroll (i.e. personnel expenses), on top of all the other bullshit. That's the San Francisco Treat right there, and why they were going to move to San Jose. Twitter is big enough and famous enough to get an exemption from the SF government though. Smaller corporations just have to take it or leave. (Guess which companies are hard to relocate? That's right, small businesses.)

Even more fun: if you're a corporation grossing over $100,000 a year, you get to pay California sales tax on all purchases of durable goods bought outside of California. (http://www.boe.ca.gov/taxprograms/usetax/index.html) How's that for being fair? And if you don't keep records for your "exemptions" (i.e. purchases from companies like Newegg that charge CA sales tax already), you get to pay sales tax twice. Lucky you, eh? Oh, and after they enroll your corporation for Use Tax, it's retroactive for the past four years, taxes and penalties due immediately.

You're right about the corporate tax code being bullshit, but the reality isn't exactly what you think it is for anyone not rich enough to buy off the legislature.

Re:Fucking Bullshit

[bennomatic]

You know another way you could increase profits for corporations? Raise the minimum income required for taxes much higher--say, to $50,000--and put the money back in the hands of the people who spend basically every penny they have. The real incentive to expand and create jobs comes from greater demand for products and services. Just cutting the taxes means, for a lot of corporations, bigger bonuses for the e-team. But if all of a sudden they get 30% more demand because their target market has 30% more money to spend...

Re:Fucking Bullshit

[Anonymous Coward]

So, why did you start an S-corp if you don't like the laws governing them?

Let me guess -- because you wanted to take any losses on your personal income tax, and gain the ability to claim things as business expenses. Seems like you're getting consideration in this deal too.

Re:Fucking Bullshit

[Keen Anthony]

This should be modded up, but I'll reiterate it since the poster was an AC. The parent wanted to gain the ability to claim business expenses. Having been an S-corp myself, I know the hassle of filing quarterly taxes and then doing personal on top of it. But I still came out ahead. I love the concept of an S-corp. I love that I get business expense deductions, not to mention the limited personal liability in the advent of my company being sued. I wouldn't say California is not business friendly. Many businesses thrive in California. I will accept some alternative reasons though such as: life is hard, paying taxes is a bitch no matter where you live, things cost more in California, and my favorite the Franchise Tax Board seems to be run by incompetent monkeys that really make the experience rougher than it has to be.

Re:Fucking Bullshit

[Jah-Wren Ryel]

That's a canard designed to appeal to the people who think they are smart but are in fact ignorant of how corporate taxes work in practice.
Much of the time it is loopholes, not actual expenses, that result in corps "not paying their share" - double-taxation is practically a myth under the current system.

Here's a short discussion of the myth with a table of companies that had negative or near-zero taxes but still reported significant profits and paid significant dividends in the same year.

Re:Fucking Bullshit

[Synn]

>Companies can have enough expenses in a year that they essentially have no or little income

And if you have good accountants, this happens every year, all the time, no matter how profitable you are.

Re:Fucking Bullshit

[Bruce_Nash]

Your argument begs an obvious question: If things are so terrible, why did you (or the company's founders) choose to set up as an S-Corp? I wouldn't presume to guess at your particular reasons, but choosing the structure of a company is a set of trade-offs between protecting yourself from liability, providing a means to raise outside investment, giving the owners and employees a way of sharing profits, addressing tax issues, and so on. Setting aside the tax _rates_ for a moment, the tax _code_ is mostly designed to allow people to set up companies that address those kinds of issue while stopping people from avoiding paying taxes using the same mechanisms.

So, to take a small example, a small businessperson might think it's worth paying California $800 a year to limit their personal liability from their business's operations. They could choose not to limit my liability by operating as a sole proprietor and save the $800.

Much as we like to moan about these things (don't get me started on how self-employment taxes punish small businesses), as a business owner one does get to choose how one is incorporated and taxed, which does have its benefits. Once you've made those choices, you do have to accept the trade-offs, I think.

Re:Fucking Bullshit

[thePowerOfGrayskull]

First off, the tax in question here is a payroll tax which comes out of the employees' salaries and stock options. So this is a good thing for workers at Twitter.

TFS is a bit ambiguous as are all the left-leaning sites that are bouncing this around everywhere as a fine example of corporate greed.

The workers pay a wage tax but the Payroll Expense Tax is an additional 1.5% tax that the company must pay on the sum of its wages for the year. It's independent of the worker wage tax.

Sad part is, this has been in place since about 1970 - yet in 2011, even with this tax and a host of others, they're STILL in the red by 40-some million dollars a year.

Other than the one point of fact, I agree with you 100%

Roblimo isn't a native English speaker?

[MartinSchou]

Seriously?

Please remember, when you see 'haven' instead of 'heaven,' that English isn't everyone's first language.

What the fuck? Now you're mocking people for using the term "haven"? A perfectly acceptable word when talking about tax-free locations.

Dictionary.com definition of "haven"

ha ven [hey-vuhn]

-noun
1. a harbor or port.
2. any place of shelter and safety; refuge; asylum.

-verb (used with object)
3. to shelter, as in a haven.

Now, as a person for whom English is his 3rd language, allow me to dumb down my judgment of Roblimo's IQ and knowledge of English to a level that even he should be able to understand, despite it having three syllables: Imbecile.

You may also want to look up the term "walking on cloud nine".

Re:Roblimo isn't a native English speaker?

[MikeBabcock]

I was thinking almost exactly the same thing, except I am a native English speaker.

I've never heard a tax haven described as anything but a tax haven because that's what its called.

Tax heaven lol. Sigh.

Re:Roblimo isn't a native English speaker?

[hldn]

he made the comment about tax haven because in the scene with the sign that says "tax-free haven" the execs are climbing up into the clouds, implying a "tax-free heaven." obviously the tax haven is the correct usage, but the question posed is if the video creator knew that haven and heaven do not have the same meaning.

whether this is a pun or a mistake on the part of a non native english speaker is not certain.

Re:Roblimo isn't a native English speaker?

[Paul Jakma]

It's quite obviously a visual pun on "haven" (the normal and correct term used in "tax haven") and "heaven". Which makes it clear that either Roblimo is being super-ultra-ironic, or he has failed to realise that the cartoon authors have a better grasp of english than himself.

Re:Roblimo isn't a native English speaker?

[adamofgreyskull]

Indeed...two apropos quotes:

"Never try to argue with an idiot, he'll drag you down to his level, then beat you with experience"

and

Tell an idiot a truth he doesn't believe and he'll think you are the idiot.

Oh and one more for good measure: "If you are going to try to correct someone, at least have the good sense to make sure you're right."

Re:Fuck IBD, the corporate whores

[Anonymous Coward]

It's funny how in your world everybody but the government has to justify their "share."

Seems to be a popular opinion of late.

Re:Fuck IBD, the corporate whores

[AK Marc]

I'm betting it's an AC who made up numbers he thinks proves his point. I'm not an AC. With income at $100,000 in a year, I was at 10% federal income tax, and about 20% for the sum of all taxes I paid (SS, Medicare, sales, state, local, property - multiple properties, and all that). It would be hard to reach 40% in the US. Though some people manage it, like those hit with AMT and other such weirdness. Or those who pay both halves of SS themselves (contractors) but he specifically said "salary" so that doesn't count.

Re:twitter makes money

[hairyfeet]

While I hate corporate welfare I really don't know if you can call it that in this case. In fact what they got Twitter to agree to is to build new offices in a scummy slum part of town, which of course will now cost Twitter in extra security and such, in the hopes that they can renew the area and get businesses to move back which will also get the same break if they move into scum town.

Now considering this neighborhood is probably "welcome to the jungle" you are gonna have to offer something for any business to take the risk, and I'm sure there will be employees that will turn down an offer from twitter because they'd have to go into and out of such a rough area.

So while I think bullshit like GE paying almost no taxes by pulling crap like the double dutch IS bullshit and needs to be stopped ASAP, giving a company a break for taking increased risk by moving into bad areas in the hope of fixing them up is just smart. The same was done several years ago in my own state with the river market area, and whereas before the place looked like Beirut, what with all the bombed out looking buildings and garbage everywhere, now it is a really nice neighborhood with little shops and a thriving gay community.

Everything there is clean and nice with plenty of foot paths and nobody is afraid to walk there anymore, so I'd say the tax breaks the city gave were money well spent. If by giving them a tax break the city of SF can do the same to one of their slums why not? Better than just letting the buildings fall apart and become fire hazards like Detroit.

I don't post too much but

[itsphilip]

When I watched this my head nearly exploded. The mayor had to do what he had to do to keep Twitter in his city. Consider this: if they had just let Twitter move somewhere else, lots of jobs would be terminated. These are all employees who live in the city, purchase things and pay sales tax, pay income taxes and a whole host of other taxes levied. All of the equipment, much of which is probably purchased locally, would be purchased elsewhere. Contractors who service their equipment would have fewer clients, their office space would be unoccupied, and so on and so on and so on. Over all, it's probably a net gain for the city. $22 million a year less in revenue. Big deal in the grand scheme of things. Twitter is big, and it's getting bigger. Kudos to the mayor for being so forward thinking.

Taiwan: quit trolling and mind your own fucking business.

Re:I don't post too much but

[ShakaUVM]

>>The existence of a corporation is supposed to be contingent on the public good.

I think keeping a thousand people employed in your city is a public good, right?

>>Leash the damn corporations already and stop this race to the bottom.

Leash the tax-hungry legislators that caused this mess to begin with.

The controversy was over the extra-special 1.5% of *expenses* "San Francisco Tax" Twitter would be paying over what they'd pay if they relocated 45 minutes south to San Jose. Hopefully the SF city council will realize that their hostile environment to businesses is bad for the city as a whole, and repeal the damn law.

Re:I don't post too much but

[PhunkySchtuff]

Consider this: if they had just let Twitter move somewhere else, lots of jobs would be terminated.

So don't let it move. Leash the damn corporations already and stop this race to the bottom. The existence of a corporation is supposed to be contingent on the public good.

Sorry, but just how can you stop a corporation (or anyone for that matter) from getting up and moving somewhere else?

Re:I don't post too much but

[micheas]

They were threatening to move to Brisbane (about five miles away) , It would not have resulted in a significant amount of employees moving.

This is penny wise pound foolish move on the part of the Board of Supervisors. They are trying to save $18 million a year in tax revenue from twitter. When all is said and done this will cost the city about $100 million when all the fallout is factored into it.

The building twitter is moving into was just bought by the Shorenstein Group, a politically connected real estate company that has one of the lowest vacancy rates.

The Shorenstein Group is the biggest beneficiary of this, as otherwise they would have had to drop the rent to get twitter in.

Re:I don't post too much but

[Hognoxious]

I think keeping a thousand people employed in your city is a public good, right?

Line up, everybody! Odd numbers get a slingshot, even numbers grab a sheet of glass & some putty. Now get out there and make our city great again!

Re:I don't post too much but

[Antisyzygy]

Totalitarianism?

Re:Fuck IBD, the corporate whores

[timeOday]

No doubt the parent is using somebody's calculation of total tax burden. Estimates vary. This estimate claims poor people pay about 20%, working its way up to 30% for everybody with average income or above.

Re:Fuck IBD, the corporate whores

[ShakaUVM]

I'm betting it's an AC who made up numbers he thinks proves his point. I'm not an AC. With income at $100,000 in a year, I was at 10% federal income tax, and about 20% for the sum of all taxes I paid (SS, Medicare, sales, state, local, property - multiple properties, and all that). It would be hard to reach 40% in the US. Though some people manage it, like those hit with AMT and other such weirdness. Or those who pay both halves of SS themselves (contractors) but he specifically said "salary" so that doesn't count.

http://www.paycheckcity.com/NetPayCalc/netpayCalcResult.asp

At $100,000 a year, you will lose 35% of your paycheck before deductions and writeoffs. Throw in the 10% state sales tax in California, and there you go.

Communist China

[zanian]

"maybe not paying taxes is a sign that you've made it as a company in the US."

Made me chuckle coming from China. Somebody over there must have had a good sense of humour for that one

Re:Communist China

[urusan]

Good thing it's coming from Taiwan, not China then.

Re:Fuck IBD, the corporate whores

[ub3r n3u7r4l1st]

Rolling stones gather no moses. You move around, you lose money. Especially I live close in a major midwestern U.S. city.

That's why I study for a PhD.

Re:Fuck IBD, the corporate whores

[AK Marc]

An AC without details asserting some percentage is more likely lying by having taken some calculator like that and just calculating the worst case. Real people invest in things like 401(k)s and such that reduce taxes. Or have families. Or mortgages with lots of deductible interest. But yes, if you were a self-employed single programmer still living in his mom's basement, then you might have some issues.

Re:Fuck IBD, the corporate whores

[AK Marc]

I most certainly have an agenda;

Yeah, it's obvious. You make up numbers to prove a point, indicating that your point is unsupportable. A "normal" American family pays less than half your worst-case assertion. And your assertion changes every post. Why not just do what I did, post your gross and federal income tax. $100,000, and $10,000 (well, $9,800-something). There, that was mine. What's yours? And no, not making up something that could be some worst-case.

I don't get my money's worth and I want to pay less.

So you must be Republican. You want to borrow and spend, rather than actually pay for things. You do realize that just the military and interest on the debt alone exceed the receipts from federal income tax. If all welfare, Medicare, SS, education, science, were eliminated today, firing all non-military federal employees, we still couldn't balance the budget. Since no one is seriously arguing that we should cut the military or default on our debt, that means that you are getting more than your money's worth. Your money may be going to Afghanistan, Iraq and China in wars and interest, weakening the dollar and bankrupting the country. But it's not an issue of a billion here or there for Planned Parenthood or all that. The budget couldn't be balanced if we closed everything but the military.

So, what do you want done when we can't pay the bills now? I'm all for eliminating the standing army, but the "fiscal conservatives" are also the same people that enjoy wasting trillions on foreign wars, so there's no one out there that has even tried to pretend that the budget could be balanced since Clinton.

Re:twitter makes money

[Runaway1956]

"white and republican"

How very narrow minded. Basically, if you don't beat the liberal drum and agree that gay is an "alternative lifestyle" they you must be white and republican. And, you call people who disapprove of homosexuality narrow minded? Phhht.

Sodom didn't have a damned thing to do with homosexuality? I guess - there are plenty of liberal minded (and other) people who are rewriting the Bible these days. You can read any version of events that you wish. Since you've stated YOUR personal preferences, then I'd much rather that you didn't mention the Bible at all, than to quote or misquote adulterated versions of the Bible, thank you very much.

Re:The explanation is easy

[makomk]

Bullshit. Corporations pay for their additional burden on local utilities... by paying for the extra utilities. At power rates in California about 5x higher than the US average.

Except when they go bankrupt with bills unpaid. One of the extra benefit of being a corporation is that, when the business fails, the owners can just walk away from the bills. It's exactly this that ShakaUVM was complaining about paying an extra 1.5% tax to get - if he or she wants to avoid the extra tax, there are other ways to structure the business, but they involve personal liability for corporate debts.

Re:twitter makes money

[hairyfeet]

Sorry, meant aren't. The religious scumbags really piss me off as I have a gay kid, he is the sweetest most gentle creature you would ever want to meet, literally wouldn't hurt a fly, and I have seen knuckle draggers drag their kids across the street rather than let them come anywhere near him.

It took three janitors to keep me from bitch slapping the fuck out of a fifth grade teacher who brought a bible into her fifth grade class to speak about "Sodomite and idol worshiping heathens "(his brother is Catholic). I would have loved to sue the whole fucking town out of existence, but unfortunately my sister who gave me the boys to raise when she found out her illness was terminal, didn't want the last year of her life to be a circus.

Oh and those "Xtian values" that bitch rallied for? We home schooled the boys after that and now the oldest is in pre-med, the youngest is deciding whether to be a graphic artist or a chef, meanwhile the kids in the class they were in are 2/3rds junkies or dropouts INCLUDING the bitches little bitch who got knocked up and became a meth whore.

As for those villages being sterile? Easy way to fix that, there are TONS of kids growing up in the system right now that could use a loving stable home, but the bigots won't allow that. Isn't it funny how they rally against abortion but then don't want a damned thing to do with the offspring nobody wants, except to tell everyone else THEY can't have them either? Last I checked something like 40%+ of the kids dumped in the system that aren't infants will NEVER be adopted, and instead be bounced from one facility and foster home to another. I wonder what the crime rate for those kids turned adults are? I bet pretty high as being told nobody wants you from an early age must destroy their self esteem.

I know plenty of gay couples that would be happy to open their homes to a couple of kids nobody else wants, too bad knuckle dragging bigots will NEVER allow it to happen. Instead the gays have found a way around it, with the gays and lesbians working out deals where the lesbians are artificially inseminated by the gays and then either keep the child themselves or give the child to the gay couple. Just shows that yet another stupid pointless law hurts nobody but the most vulnerable.