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Tax Peculiarities Mean Facebook Paid No Net Taxes For 2012
Frosty Piss writes "Despite earning more than $1 billion in profits last year, social media juggernaut Facebook paid zilch when it came to federal and state taxes in 2012. In fact, the website will actually be getting a refund totaling $429 million thanks to a tax reduction for executive stock options. In the coming years, Facebook will continue to get monster tax breaks, totaling about $3 billion. 'The employees cash in stock options, and at that point there is tax deduction for the company,' Robert McIntyre, of watchdog group Citizens for Tax Justice, said. 'Because even though it doesn't cost Facebook a nickel, the government treats it as wages and they get a deduction for it.'" (That's not to say that Facebook employees' salaries didn't get taxed.)
This is normal in that generally, in the US tax code, you can defer paying taxes by paying employees more, by making investments, etc. Only if that dollar you collect becomes profit do you generally pay taxes on it.
It's not a rich vs poor thing either. Poor people get tax benefits in the form of the EIC and the personal deduction. Middle income earners get to deduct health care expenses and certain job expenses (uniforms, union dues, sometimes use of a vehicle).
The point is that everyone gets tax breaks and the reason why is that our tax code is crazy complicated. Facebook will pay their share eventually, but it's just not going to be on their 2012 return.
in the US tax code, you can defer paying taxes by paying employees more, by making investments, etc. Only if that dollar you collect becomes profit do you generally pay taxes on it.
I believe Facebook and other companies eliminate their profits by paying "licensing" fees to a shell subsidiary. This not an investment in any way, just rerouting the profits somewhere else to avoid taxes.
The point is that everyone gets tax breaks and the reason why is that our tax code is crazy complicated
In practice, it turns out that you get better tax breaks when you have a dedicated team of lawyers who can route your profits across international borders. I suspect I'd get higher tax breaks if I had headquarters in Dublin and a couple of subsidiaries in Cayman Islands.
Just like the equality in politics. Everyone can lobby the politicians -- but lobbyists get paid to do it full time and the rest of us have to take time off from our job. The amount of resources behind you make a big difference in practice, even if "everyone can do it"
The article should be: "Clueless lawmakers who have never done and honest day's work and are clueless as to how businesses actually operate wrote laws so bad and full of holes that Facebook posts billions in profits and payed zero taxes."
Please. Quit blaming the companies. They do exactly what they are supposed to do. It is 100% the fault of the lawmakers.
When you see wind farm tax breaks, do you get upset about wind power generation companies taking advantage of tax laws? All companies try to take advantage of all tax breaks. That is the way the world works. It is a fundamental truth. The tax code is somewhere in the neighborhood of 70,000+ pages. Larger companies have larger budgets for tax planning and have a greater ability to take advantage of tax breaks.
Simplify the tax code. Life for everyone will become easier. You'll put 100,000 tax consultants out of work. Perhaps they will go off and build something instead of making lots of money helping companies minimize taxes.
Selling "services" between fictional corporations to justify not paying a fair share to society. You are a true patriot my friend.