
IRS budget cuts cost $34.3B in lost revenue from big business - mars4rp
https://www.accountingtoday.com/news/irs-budget-cuts-mean-34-3b-in-lost-revenue-from-big-business
======
gok
Reading the actual study [1], the headline is a bit deceptive. The study
looked at audits between 2000 and 2010, a period during which funding to the
IRS increased, and found that generally more funding for audits led to more
money recovered from audits (duh). But that $34.3B figure is over 10 years, so
it's a tiny fraction of a percent of overall federal revenue, and it's not
offset by the amount of more money the IRS would have taken to run those
audits.

Also unmentioned is the very real negative externalities that IRS audits
cause. Audits disproportionately affect poor people [2], who are also the
least able to spend time dealing with them. The United States already has
extremely low tax evasion rates [3]. Rather than spending money to catch more
of the very few cheaters by audits, other country's tax authorities have found
"nudge" letters were found to be similarly effective and vastly cheaper.

[1]
[https://www.aaajournals.org/doi/abs/10.2308/accr-52520?utm_s...](https://www.aaajournals.org/doi/abs/10.2308/accr-52520?utm_source=15-kelley-
research-on-irs-budget-
cuts&utm_medium=email&utm_content=How+do+IRS+resources+affect+the+corporate+audit+process?&utm_campaign=ag)

[2] [https://projects.propublica.org/graphics/eitc-
audit](https://projects.propublica.org/graphics/eitc-audit)

[3] [https://www.researchgate.net/figure/Size-and-development-
of-...](https://www.researchgate.net/figure/Size-and-development-of-tax-
evasion-in-of-GDP-in-38-OECD-countries-accounting-for_tbl2_256040463)

~~~
cm2012
The latest IRS changes prioritize low income over high income audit targets:
[https://www.google.com/amp/s/www.forbes.com/sites/rachelsand...](https://www.google.com/amp/s/www.forbes.com/sites/rachelsandler/2019/05/21/why-
are-the-super-rich-getting-audited-less/amp/)

~~~
rsynnott
This seems absolutely insane.

> For those making less than $25,000, the audit rate fell 0.02% (to .69%) from
> 2017 to 2018.

Frankly, for it to be significantly above 0 seems grossly inefficient. I would
assume that average rate of return for public money spent on auditing a
millionaire is... a fair bit higher than that spent auditing someone earning
25k.

~~~
refurb
It’s not insane at all. Note that’s AGI - _adjusted_ gross income.

If we stopped auditing those with AGIs less than $25,000, then all I’d have to
do is take enough deductions (retirement contributions, unreimbursed business
expenses, medical expenses, loss from property sales, tuition, etc) to get my
AGI below $25,000 and I’d never have to worry about being audited.

Ever.

One way to significantly reduce your taxes is to lower your AGI. So if
anything, the lower AGIs would be a good place to start looking for tax
cheats.

~~~
MyNameIsFred
That's an alarming equation. The harder you lie, the less likely you'll be
called out on it.

What else in life works that way?

~~~
clarkmoody
Politics ;-)

------
Spooky23
The GOP direction has been to break the IRS since the 90s. None of the
administrations were willing or able to take a stand against it, and this
administration is actively trying to break the executive branch overall.

A good friend was a specialist in a few tax evasion schemes used by real
estate developers and a few other more obscure areas with similar methods.
Basically, there were about 50 people nationally doing this in the early 90s,
but the program was defunded over time and when he retired, there were 4. He
spent about 60% of his time flying all over the country to testifying in
court. Today there is nobody, the last guy retired last year.

By my friend's reckoning, his direct work accounted for $100M in recovered
revenue per year. Some big cases were multiples of that. They have models that
show the deterrent effect that enforcement has -- that $100M in recovery may
deter $1B in undetected fraud. That is money being stolen from the treasury.

~~~
humanrebar
To be fair, large portions of the GOP (current presidents nothwithstanding)
has also been advocating for simplified tax schemes that would make a smaller
IRS more than capable enough for the job.

~~~
dlp211
Show me the bills that they have brought to committee/the floor that actually
simplify the tax code to make auditing & enforcement simpler. Don't confuse
rhetoric with action.

------
pmoriarty
And yet some people manage to whip themselves in to a righteous frenzy over
someone collecting welfare or immigrants getting a microscopic bit of state
aid.

Such people really need to get a sense of proportion.

The destitute, despised, downtrodden guy who slaves away to support their
family by mowing your lawn, picking apples for you, driving you somewhere, or
serving you your burger is not your enemy.

~~~
davinic
Last week I saw a person on Facebook sharing an anecdote patterned after the
"welfare queen" trope and arguing against food stamps.

I noticed from her Facebook page that she owned a ranching operation, so I
searched her name in the EWG Farm Subsidy Database and saw that she and her
husband had received $18k in subsidies in 2018, and nearly $250k since 1995.

~~~
adventist
I'm against people living off of food stamps also, and if there is a subsidy
out there for the taking, then i'm going to take it. I agree that government
should not be involved in either of those things, but promoting certain kinds
of businesses might be worth the subsidy for some people.

~~~
SketchySeaBeast
Would you be against other people getting the subsidy?

I'm just trying to figure out if it's hypocrisy or selfishness.

~~~
nerdponx
Why not both?

------
ptero
IRS budget cuts seem to be thrown around a lot, but to me this is just a
symptom of the real problem -- a tax code that is way too complex. Years of
congress pandering to special interests, fixing minor issues with pages of new
tax rules and no implementation accountability (implementation and enforcement
is dumped on IRS) brought US tax code to a state that can overwhelm any
staffing levels.

Simplifying tax code will go much further than trying to staff up IRS. My 2c.

~~~
asciident
Simplifying would be great, but it's not really possible to do because you
won't get the exactly same tax distribution with a simplified set of rules. So
politicians will frame it as "why do you want to raise taxes on single moms?"
and "why are you taking away the deduction for teachers?" and "this bill hurts
vulnerable people who have been hit by natural disasters." So any suggestion
to simplify the tax code is a no go.

~~~
SkyBelow
It feels like voters are voting for pouring lighter fuel on the wood and
throwing lit matches at the wood but vote strongly against having a bonfire.
They want politicians to fix problems that they wanted the politicians to
create and then don't want the actual fixes to the problems they want fixed.

~~~
fooey
Everyone is selfish

Everyone wants to lower their own taxes by raising everyone else's taxes.

100 people in a room will have 100 different way to change the tax system, and
every proposal will have 99 votes against it.

~~~
sgift
There's a reason business owners fear unions: They understand fully well that
the wide majority of people have a different interest than them and if that
majority are allowed to come together and realize that they will ask for
things benefiting the majority to the detriment of the minority. Same with
elections. Hence the age old strategy of divide and conquer.

------
berbec
The act of reducing the manpower of the IRS needed to enforce the laws may
have a greater effect than all the tax cuts combined. If a business is fairly
certain an audit isn't coming, their effective tax rate is whatever they want
it to be.

~~~
danenania
Also important is what happens to a business that gets caught. If the
punishment is 'pay back taxes plus a moderate penalty, and here we'll even set
up a convenient payment plan for you', then cheating on taxes is effectively a
free roll. You have a 95% chance of saving a ton of money, and 5% chance of
paying only a bit more than you would have paid anyway if you followed the
laws.

That said, the absurd complexity of the tax code is also a problem here, since
you don't want the government doling out bankruptcy-inducing penalties on
businesses that might just be making an honest mistake. The whole system
clearly needs an overhaul. It should be simple enough that when a business
severely underpays, it will be very likely that they did so on purpose, and
therefore a large, deterrent-worthy penalty can be justified.

~~~
cptskippy
The complexity is by design to make it harder to audit and easier to hide
cheating.

Given clear and straightforward code/laws, it becomes hard to cheat.

~~~
xadhominemx
That is absolutely not true. Much of the complexity of the tax code is present
in order to clearly prescribe rules in edge case situations in order to reduce
judgement calls that would inevitably tilt in favor of the filer.

~~~
cptskippy
The complexity isn't driven by the IRS, they've been pushing for
simplification but lobbyist for businesses push for rules changes, and
lobbyists for the tax filing industry push for rules to solidify the need for
their industry.

Just like Healthcare and Gun control, there are industries and 3rd parties
with vested interests in keeping the system complicated and hard to track or
enforce so they can profit.

------
sbochins
From reading the comments, I really wonder how many HN Users are tax evaders.
I see the top two comments are “the tax code is too complicated, we shouldn’t
be going after tax evaders” and “this isn’t actually a big problem.” If the
government is getting more money collecting unreported taxes than it costs to
fund the collecting of said taxes, what’s the problem?

~~~
slantaclaus
The tax code is too complicated, which, so NPR tells me, is mostly Intuit’s
fault

------
numakerg
Just one of the many sectors where budget cuts are going turn into huge losses
down the line. The consequences of cutting healthcare and education are
(going) to be much worse.

~~~
abtinf
When have healthcare or education ever been cut?

Edit: A lot of downvotes, but no examples. Such cuts are always talked about
as if though they have factually happened. To my knowledge, I’ve never
actually seen such a cut in the United States at the federal, state, or local
level. Sometimes, there have been attempts to limit the rate of spending
growth, but those seem to always fail too.

~~~
sdinsn
The governor of Alaska just signed a bill that cut 41% off the state budget
for higher education.

~~~
abtinf
Thank you for the example. However, it appears that the governor reversed
course just yesterday: [https://news.yahoo.com/alaska-governor-reverses-
course-contr...](https://news.yahoo.com/alaska-governor-reverses-course-
controversial-032522288.html)

I've noticed this is a frequent occurance--one faction will try to score
political points by appearing to take an action, only to capitulate at the end
when fewer people are looking.

~~~
sdinsn
Partially revered course. Now it's just ~8%, but its still significant.

~~~
zanybear
That's the Art of the Deal. Set the initial position much higher than desired
and retrench to actual one on push back.

------
mrnobody_67
I don't get why countries always under-invest in tax collection... as long as
it's ROI positive, shouldn't budgets be getting increased?

~~~
corybrown
There's a faction of US politicians that are philosophically against (most)
government and taxes. It's not about ROI, it's about their goals.

~~~
RyanAF7
Interesting. A faction you say? You mean like the faction that drafted the
Articles of Confederation?

~~~
SimbaOnSteroids
No, the contemporary one that learned nothing from that folly.

~~~
RyanAF7
Oh! The one that found success with the Laffer Curve. Right.

Freedom isn't an idea. It's an actual place. In terms of kingdoms a free
peoples kingdom is a Freedom; and you don't have to pay someone for the right
to exist.

Oddly enough we agree, there is a faction in the US pursuing its own agenda.

~~~
corybrown
> The one that found success with the Laffer Curve

Care to explain? The most recent tax cuts that were supposed to pay for
themselves haven't. So where are we on the Laffer Curve right now?

~~~
microcolonel
Hard to measure both over long and short timescales, since so many factors
affect the willingness of people to invest personal effort and risk toward
earning.

You might have more success looking at the amounts while attempting to control
for more factors; but of course, you could make it worse, because statistics
is hard!

------
devoply
> IRS is auditing fewer tax returns from corporations because it has fewer
> people and resources available to identify potential errors and follow up on
> questionable tax returns

On one hand I do want businesses to pay their fair share. On the other hand I
don't want to encourage massive tax agencies which must justify their numbers
by auditing and harassing as many people as possible. Often small businesses
that don't have to resources to defend themselves like large corporations.
Very similar to police departments who justify their existence by writing
tickets and have quotas set up to encourage cops to harass people. Does not
seem much more than a shakedown.

~~~
Spellman
Generally they don't harass people unless something seems amiss and there is a
large enough discrepancy to justify it.

And there's eventually a marginal tipping point where more money spent in
audits won't net more recovered revenue. Generally the smaller the fry, the
less you can recover from them.

~~~
txsoftwaredev
Unless you were a conservative group a few years back.

'The controversy began in 2013 when an IRS official admitted the agency had
been aggressively scrutinizing groups with names such as "Tea Party" and
"Patriots."'

[https://www.npr.org/2017/10/27/560308997/irs-apologizes-
for-...](https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-
aggressive-scrutiny-of-conservative-groups)

~~~
luckydata
because they were abusing their tax exempt status. But that's the part you
probably don't like to say out loud.

~~~
wuliwong
Do you have a source for this?

------
ausbah
Biggest ROI the government can get, invest in the fucking IRS. Something like
a 1:15 or 1:20 return if I remember correctly.

------
rayiner
The article is rather misleading. Here is the underlying article, which will
be published this year but was actually received in September 2016:
[https://www.ntanet.org/wp-
content/uploads/proceedings/2016/1...](https://www.ntanet.org/wp-
content/uploads/proceedings/2016/158-nessa-schwab-stomberg-towery-irs-
resources-paper.pdf) (follow the link in the article, which lists the receive
date as September 30, 2016).

The article mentions the Tax Cuts and Jobs Act of 2017 (Trump's tax cuts). But
the IRS budget cuts discussed in the article are actually from 2015, stemming
from the kerfuffle over the IRS allegedly targeting conservative groups for
increased scrutiny.

Separately, the article fails to address the nature of the additional revenue
that could hypothetically have been collected. Pages 26-27 of the article
address the study's finding that "the IRS collects a larger portion of
proposed deficiencies when it has fewer resources." In the authors' view, that
could be because "the IRS focuses on weaker taxpayer positions when its
resources are limited." In other words, a larger enforcement budget leads the
IRS to go after cases where the IRS is less certain it will win because the
facts are more debatable. The authors do not assess the merits of those cases
or whether it would be socially desirable to pursue them.

------
turc1656
What does the last sentence mean exactly? _" The IRS is fundamental in
preventing businesses from engaging in transactions that aggressively reduce
their tax liability."_

It's not clear to me what is actually being said here because engaging in
transactions that reduce tax liability is legal.

------
aaronbrethorst
There was an excellent podcast interview with Jesse Eisinger from ProPublica
on this subject back in February. It goes into quite a bit of detail on the
problem: [https://www.nbcnews.com/think/opinion/can-we-tax-rich-
jesse-...](https://www.nbcnews.com/think/opinion/can-we-tax-rich-jesse-
eisinger-explains-ncna970581)

------
todipa
Taxpayer service defunding is another problem:
[https://www.treasury.gov/about/budget-performance/budget-
in-...](https://www.treasury.gov/about/budget-performance/budget-in-
brief/bib19/16.%20irs%20fy%202019%20bib.pdf)

------
londons_explore
I'd like to see better treatment of those who fill in tax forms mistakenly
wrongly, but still end up paying the right amount of tax.

We currently punish those people badly, which is wrong IMO

------
SubiculumCode
You call it revenue, I call it inflation reduction.

------
alanwil2
Amazon doesn't pay taxes despite being worth $793 billion. How can I do this?

~~~
spamlord
Amazon pays taxes, not sure how anybody still believes this piece of
misinformation. You do realize it is Congress who creates the tax rules to
begin with, so if anyone is at fault for the tax 'loop holes' these companies
leverage, it's corrupt legislators.

"In 2017, Amazon paid close to $1 billion in income tax. In 2018, the amount
jumped to $1.18 billion, accounting for local, state, and international
taxes."

[https://www.forbes.com/sites/stephaniedenning/2019/02/22/why...](https://www.forbes.com/sites/stephaniedenning/2019/02/22/why-
amazon-pays-no-corporate-taxes/#1118762c54d5)

~~~
smileysteve
> "In 2017, Amazon paid close to $1 billion in income tax. In 2018, the amount
> jumped to $1.18 billion, accounting for local, state, and international
> taxes."

Your quote glaringly leaves out federal....

~~~
icelancer
It leaves it out because it isn't relevant. Amazon pays no federal tax (or
close to none anyway) but it pays a shitload in other taxes.

Amazon reinvests revenue into the business which is discussed tons on this
site. It also has the effect of eliminating certain types of taxes... and
massively increasing taxes in other areas (like sales, use, B&O, payroll,
etc...). Somehow I don't see discussion of how payroll tax at Amazon is
exploding, though.

------
m000
"budget cuts"

------
citilife
How much was made up from the tariffs? I suspect it was the roughly the lost
revenue.

~~~
dlp211
Zero. The lost revenue is still lost. It can only be made up by funding and
staffing the IRS. The existence of new taxes does not negate this outcome.

------
Kapura
Greed is winning in America. Any person or political party that is trying to
reduce staffing for a tax collection agency is trying to get away with tax
fraud or they are working for somebody who is. It is far past the time to
recognise this.

~~~
nostromo
“Anyone opposing more police officers and equipment is looking to break the
law.”

Just as I don’t want a bored cop on every street corner, I also don’t want the
IRS to be staffed to maximize revenue.

It’s a balance.

~~~
vkou
That's because when cops have nothing better to do, they harass and assault
people for all sorts of subjective made up infractions.

I do not expect a properly staffed tax agency to.

~~~
utopian3
The IRS has (this decade) targeted specific institutions by their
affiliations:

[https://en.m.wikipedia.org/wiki/IRS_targeting_controversy](https://en.m.wikipedia.org/wiki/IRS_targeting_controversy)

(Read the fourth paragraph of this page)

~~~
vkou
And? Why are audits targeted to a type of organization a problem?

If doctors started forming non-profits to do financial engineering to get tax-
exempt status, I'd sure as hell hope that the IRS would devote a bit more
scrutiny than usual to practitioners of that profession.

Political groups started doing financial engineering to get tax-exempt status.
The IRS started auditing them a bit more closely. I don't see the issue.

~~~
vageli
> And? Why are audits targeted to a type of organization a problem?

> If doctors started forming non-profits to do financial engineering to get
> tax-exempt status, I'd sure as hell hope that the IRS would devote a bit
> more scrutiny than usual to practitioners of that profession.

> Political groups started doing financial engineering to get tax-exempt
> status. The IRS started auditing them a bit more closely. I don't see the
> issue.

The country's inspector general deemed it unlawful. Given the report that came
out from the investigation, there seems to be more to the audits than neutral
scrutiny that is not performed on the basis of ideology.

------
abtinf
The paper itself is locked behind a paywall. No mention of the methodology in
either the linked article or the paper's abstract. No indication of the
overall economic effects.

This is non-knowledge.

~~~
mtmail
[https://webcache.googleusercontent.com/search?q=cache:r_DDSE...](https://webcache.googleusercontent.com/search?q=cache:r_DDSEsGOqMJ:https://aaapubs.org/doi/pdf/10.2308/accr-52520+&cd=2&hl=en&ct=clnk&gl=de)
has the full content

------
rhacker
I'm going to keep saying this in every goddamn tax thread I see here - We need
to switch around the way we are taxing from the US level getting the largest
pie to the state. I'm not saying I figured it out - but right now there are
enormous issues with the way we tax.

1\. We have a system where the fed. government holds states hostage for money
when it wants to bully things around. (emergencies, etc..).

2\. The current system is actively encouraging people to domicile in TX, FL,
WA, SD, etc... (income tax free states) and not actually live there, hoping to
play the tax lottery (or move around so much they can't be convicted).

3\. The "sales tax" system in the US is ridiculous. It's egregiously illegal
according to our tax-once rule. If we can get a tax break on all sales tax we
paid, that would be one thing, but we can't.

4\. Ind. contractors are taxed in extremely unfair ways, often have no
recourse to get discounts or tax breaks on health insurance.

My solution -

I say it's time to start having states collect that 25% and the feds are
hands-off of taxing individuals. Beyond that it would make sense for people to
declare a state of residence (one that they most want roads repaired at,
police hired, etc..). Get rid of sales tax completely - it's a massive waste
of time if states are getting a fair amount. Move MOST fed employees to the
state level and remove major govt. contractors that are bilking the public (in
the long run companies like Northrup Gruman etc.. are paying the heads
billions each - there's no oversight.). Remove the national army and start
creating state-armies. Re-write the constitution that changes how states
operate within the federal level, and completely change the role of the
federal government to be allowed to make laws that are scoped towards fairness
across states. Make the fed. government in charge of analytics and cross-state
environmental regulation. States would then have the right to make laws that
apply to the people.

Some might say this is ridiculous but in a time where we getting to the "end
of capitalism" a MASSIVE re-write to how money is moved around is damn fucking
necessary.

------
ryanmercer
Abolish all of the tax code, pass a federal sales tax, almost entirely do away
with the IRS, much more efficient - the end.

~~~
dlp211
This would be the absolute fastest way to shift the federal tax burden from
the top 20% to the bottom 50% and would likely cause consumer spending to
plummet resulting in a recession. It's also a very nice way to punish lower
through upper middle class savers.

This may be an ideal solution in theory, but it would likely be devastating in
practice.

~~~
ryanmercer
>This would be the absolute fastest way to shift the federal tax burden from
the top 20% to the bottom 50%

Bezos bought a 65 million dollar jet... at 20% federal sales tax that would
have been 13 million dollars in revenue. He would pay more in taxes in one
purchase than I'll earn in gross income in 10-13 lifetimes.

I paid a bit over $8000 in w2 employment taxes last year (21.8% of my gross
income, with a 20% sales tax I'd have MORE money and yes, I would buy less
crap I don't need and use once), in one purchase Bezos would have paid 1974x
what I paid last year.

Never mind that under most federal sales tax proposals, a flat-rate rebate is
issued monthly, quarterly or annually to everyone which greatly softens the
blow for the lowest earners.

------
tathougies
The Obama administration proved that tax agencies can be used as agents of
political censorship. The power of government to censor political speech
should be opposed at all levels and at all points of the political spectrum.
One easy way of doing this is to reduce the size of these governmental
agencies.

[https://www.npr.org/2017/10/27/560308997/irs-apologizes-
for-...](https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-
aggressive-scrutiny-of-conservative-groups)

~~~
tlmchncl
It's worth noting that an FBI investigation found no evidence that the IRS was
targeting conservative groups, and that the apology was issued by the Trump
Administration, who might have a vested interest in making the IRS look bad.

"In January 2014, James Comey, who at the time was the FBI director, told Fox
News that its investigation had found no evidence so far warranting the filing
of federal criminal charges in connection with the controversy, as it had not
found any evidence of "enemy hunting", and that the investigation continued.
On October 23, 2015, the Justice Department declared that no criminal charges
would be filed. On September 8, 2017, the Trump Justice Department declined to
reopen the criminal investigation into Lois Lerner, a central figure in the
controversy.[1]

In late September 2017, an exhaustive report by the Treasury Department's
inspector general found that from 2004 to 2013, the IRS used both conservative
and liberal keywords to choose targets for further scrutiny."

[https://en.wikipedia.org/wiki/IRS_targeting_controversy](https://en.wikipedia.org/wiki/IRS_targeting_controversy)

~~~
wuliwong
The government did wind up settling. [https://www.courthousenews.com/justice-
department-settles-te...](https://www.courthousenews.com/justice-department-
settles-tea-party-suits-irs-scrutiny/) It does seem that this could be argued
as just a political move b/c the settlement occurred under Trump and the
accusations are against the IRS during the Obama administration. I guess it's
left to the reader if they would rather believe the results of the federal
government investigating themselves or one party condemning the actions of the
other.

------
tasty_freeze
Taxing businesses at all has been objected to as double taxation: the business
is taxed, then the residual profits are distributed to shareholders, who are
taxed. It isn't a fringe idea: in 2015, many of the Republican candidates in
the running for President stated they thought making corporate tax rates 0%
would not only "boost the economy", it would essentially remove all tax laws
from the books, greatly simplifying things.

Superficially it sounds reasonable. But it isn't. The US military spends
$700B+ every year, often times very pointedly protecting the interests of US
businesses. The state department has untold people spending billions more
opening markets and making trade favorable for US businesses. By and large,
the benefits to individuals is an afterthought -- what is good for US business
is good for US citizens is the thinking. Large swaths of the government
function is spent optimizing conditions for business activity.

So, to get to the point: why should I pay higher tax to protect the business
interests of Grumman, and GE, and farmers, and Apple, etc? Apple derives far
more benefit and far more directly than I do. Why aren't they paying their
portion of the taxes to support it? If part of the cost of doing business is
running overseas bases so we can exert influence, that cost should be built
into the business expenses as taxes, instead of being externalized to John Q.
Public.

The answer is, of course, the super wealthy have captured government and a
large part of the media which promotes their interests.

~~~
nybble41
> So, to get to the point: why should I pay higher tax to protect the business
> interests of Grumman, and GE, and farmers, and Apple, etc?

You'll end up paying those taxes regardless. When companies are taxed directly
then those taxes are baked into the prices of everything they sell, just like
every other business expense. This functions like an inefficient and
regressive sales tax except that, unlike normal sales taxes, buyers don't see
it as a separate line-item on the bill.

~~~
tasty_freeze
Thank you for replying instead of simply downvoting.

That isn't true. If the assertion is that if Apple has to pay $10B/year more
in taxes, than they will raise the price of their products $10B/year and keep
a fixed profit, that assumes there is complete price elasticity.

In reality, they might raise the price of their products some, but that is
fine -- the people who use the products and benefit from the government's
expenditures to promote Apple's business interests are exactly who should be
paying for them.

I don't buy Apple products, so I shouldn't be subsidizing their products via
taxes.

As for calling it a regressive tax, the costs of production of the product
should be built into the product price. If it is abnormally low because Apple
isn't paying their share of taxes, that is a market distortion. It is
regressive if you only stop at first order thinking. Apple's prices would go
up, which hurts some consumers, but they would also be paying significantly
more in taxes, which helps consumers.

Let's pick another example. Would it be OK with you if the government decided
to donate $5B/year of crude oil to Exxon? Hey, it would make Exxon's bottom
line look great. I don't think anyone (except Exxon) thinks that would be
right, yet that is exactly what is being done in kind: Exxon not paying
much/anything in taxes, and $B spent every year globally to keep the supply of
oil flowing. (As for $5B, I just picked a number out the air).

~~~
nybble41
> If the assertion is that if Apple has to pay $10B/year more in taxes, than
> they will raise the price of their products $10B/year and keep a fixed
> profit, that assumes there is complete price elasticity.

No, I'm not assuming that. The quantity sold will decrease, of course, if the
price increases. That is a hidden cost paid by prospective buyers who must now
do without the good, complementing the more visible cost paid by those who
continue to purchase the good at the higher price. A company's profitability
(ROI), on the other hand, is relatively fixed—in the end all investments tend
toward zero economic profit, or equivalently a level of accounting profit
equal to the opportunity cost of the investment, assuming even a moderately
competitive market. Higher-than-average profitability invites competition,
while on the opposite side if profitability is low then investors put their
money elsewhere and the business closes. There is some variation due to
factors like brand recognition, other natural or artificial monopolies, and
risk, but generally speaking a corporate tax won't be paid from the company's
bottom line as most people imagine. There just isn't much flexibility in that
area to begin with.

> Exxon not paying much/anything in taxes, and $B spent every year globally to
> keep the supply of oil flowing.

This is not a subsidy to Exxon, it's a subsidy to the people consuming oil-
based products. If you want to stop subsidizing oil, fine; but that is a
completely separate policy decision from where to levy the tax. Anyway it's
not like you're proposing to tax Exxon _specifically_ for the cost of keeping
the oil flowing, which would defeat the point of the subsidy. A corporate
income tax would spread that cost across all products, even ones that have
nothing to do with oil, and be paid primarily by people who spend most of
their earnings on corporate-produced goods (i.e. not the rich, who tend to
spend a larger share on investments).

~~~
tasty_freeze
On the first point, the company I have worked for for the past 15 years has
had wildly different ROIs during different phases of its life. Assuming that
ROI is a fixed quantity will lead to a wrong conclusion.

On the second point, yes, free oil to Exxon will lower the price of gas, and
that is a benefit to the consumer. But you assume 100% of that benefit is
given to the consumer. In reality, corporations keep as much of the profit as
they can and either keep it in their war chest, acquire assets, or distribute
it to shareholders.

~~~
nybble41
I did say that there is short-term variation in ROI, in particular based on
risk. However all economic ventures in a competitive market do tend toward
zero expected economic return, i.e. an expected ROI (including factors like
risk) commiserate with their opportunity cost. Corporations obviously try to
maximize their profits but they don't operate in a vacuum. If they
consistently earn higher-than-normal profits then that will attract
competition, pushing prices (and profits) back down toward the margin.

