Quote:
Originally Posted by SassySue
Your post still evades the fact that they pay no income taxes on their enormous profits and even get a billions of dollars in refunds from the IRS. Based on the fact that corporations are "not people". Maybe not in the legal sense of the word, but that is b******* and everyone knows it. That's how these huge multi-national corporations have gotten away with it so far. I think these practices should be against the law. I didn't realize about all the Clinton donations either. I do like Bernie Sanders as well. One way or another, I will vote democrat. If Bernie wins, then him. If Clinton wins, then her. Trump is a joke!
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Let me try to explain it to you in small words a socialist-government type can understand;
I'm going to start a business because I discovered a niche and have an idea on how to fill it. I go to the bank, credit union, rich father-in-law, or a loan shark and borrow some money. How much? Does it matter because I'm taking the risk especially with the loan shark and wife's father. She I borrow 100,000 dollars since you insist. Being smart, I go to the local politicians and present my idea. I'm telling them honestly that I will start with 10 employees and expect to hire another 50 within 3 years. I want a tax abatement from the city. That means I pay reduced or no taxes for my company. So I incorporate my company to give it legal standing and to protect my personal assets. I get the abatement for five years with zero corporate tax liability. My employees still pay their taxes based on their income and I pay myself out of the corporate holdings and I pay taxes on that.
My research says that the sweet spot for my product's price is $30. That is where I sell the most. The first year I sell 100,000 units for a gross of $3,000,000 from which I pay my employees an average of $45,000 a year ($450,000), I pay myself $100,000, my utilities run about $75,000, my mortgage (that's the loan) is about $150,000, my insurance (on the company) is about $75,000 and the insurance for my employees is about $100,000 (unemployment, health, and accident). My raw material costs are about $500,000 and production costs are about $100,000. Tranportation costs about $50,000. Marketing is another $50,000. This all comes to about half of what I grossed this year. I keep my word and hire another 10 employees, give bonues to the hot workers, and promote from within managers for production, HR, and marketing. All in all, my corporation ends up with about $100,000 pure profit. No corporate tax either.
So my next year begins;
Payroll: $900,000 + 2% pay increase ($9,000)
Managers: 3 X $60,000 = $180,000
Mortgage: $150,000
Myself: $100,000 No pay increase for me.
Insurance: Company ($80,000, a 6% increase), employees ($250,000 thanks Obamacare)
Raw material: $1,000,000
Production: $200,000
Transportation and marketing: $190,000
Remember that $100,000 of profit? I bought a converting machine for $80,000 instead of leasing.
I buy a company truck for $30,000.
Wear and tear on production site $100,000
Total for year two: Costs; $3,609,000
Happily profits go up by selling 150,000 units which increases raw material, production costs, and transportation. $30 X 150,000 =$4,500,000
Profit: (Remember this has been a good year) $891,000
Year three: The earlier $100,000 profit was spent on the converting machine and the truck leaving my $10,000 in the hole.
I hire 10 more employees for a total of 30.
Payroll: $46,818 X 30 employees = $1,404, 540 + $15,000 in bonuses
Managers: $185,400 (3% increase) + $6,000 in bonuses
Mortgage: $150,000
Myself: $120,000
Insurance: (company) $90,000, (employees) $450,000
Raw material: $1,500,000
Production: $300,000
Transportation and Marketing: $250,000
Purchase another converting machine for a different operation: $100,000
Legal fees: someone got hurt and I require a lawyer, $75,000
OSHA fine: totally accidental injury with no one to blame but still, $50,000
Maintenance: $120,000
Bought my own delivery trucks for local deliverys: 2 trucks = $90,000
Total expenses: $4,905,000
Sales are only up 20% this year. 30 units X 180,000 = $5,400,000
Total profit: $495,000....how did that happen? I've increased my production, increased my employees but my profit went down?
Year four: Hired 10 more employees as I promised though I don't need another 10.
Doing some of my own deliverys reducing the costs of transportation but I needed two drivers with a CDL. I have some raw material stockpiled since I didn't use it last year but I had to store it off site for storage costs.
Payroll: $47,750 ( 2% increase) X 40 employees = $1,910,500 + $20,000 in bonuses
Managers and office workers: Hired another five workers in graphic design, packaging, and another sales rep. (including the cost of an accountant and lawyer on retainer): $518,000 + bonuses of $8,000
Mortgage: $150,000
Myself: $140,000
Insurance: (company) $150,000, (employees) $600,000
Raw material: $150,000 (with $200,000 left from last year)
Storage: $25,000
Production: $210,000 (have two machines of my own)
Transportation and Marketing: $230,000
Maintenance of building, machines, and trucks: $300,000
Total expenses: $4,411,500
Economy is hurting. Sales are down by 10%. Gross profit: $4,860,000
Profit: $450,000
Because of the promise made to the city I hire 10 employees though my requirements haven't changed from last year.
Payroll: $2,387,500 no increase this year, bonuses, $20,000
Managers: $518,000 plus bonuses of $10,000
Mortgage: $150,000
Myself: $140,000
Insurance: (company) $180,000, (employees) $780,000
Raw material: $120,000
Storage: $30,000
Production: $220,000
Transportation and Marketing: $240,000
Maintenance and utilies: $350,000
Started a 401K fund with 4% matching to keep good employees: $120,000
Total expense: $5,534,500
Sales are back up 20%, a boom year, $5,832,000
Profit: $297,500
At this point in time the company has about $2 million in cash assets. Knowing that taxes are starting next year (libs are static and cons are dynamic) I restructure my mortgage by drawing $750,000 from the money to pay off the mortgage. No money owed to a third party but losing a tax advantage over time. Total assets: $1.25 million. I give myself a one time bonuses for working 18-20 hours a day for the past five years. $250,000 which leaves $1,000,000 for any unexpected eventuality which the government won't pay for, nor will the employees. If the building catches fire they still expect to get their paycheck even when the equipment is down.
Year six:
The projected taxes are 23% on the profit for the years after deducting salaries, maintenance, upkeep, and other expenses. Of course the real tax bite is based on the paychecks on the employees which is about $3,000,000 at 15% or about $450,000. The corporate tax will eat about $80,000 a year. The total tax (this is very simplified) is about $530,000 relying on this one company.
There is still a good demand for this product so the price will be increased (for the consumers) about 50 cents to $30.50 a unit. This increase, passed on to the costumer, pays for the corporate taxes imposed on the company.
America's Top Ten Corporate Tax Avoiders
