All of us want to pay as little in taxes that we can legally do because all of us dislike taxes.
As a teen I first discovered taxes when, to my horror, I learned not everything earned by me came to me in a paycheck. Back then, it felt like someone was picking my pocket and today that feeling hasn't changed.
Later, an accountant named Warren W Young did my taxes, and from him I learned a lot about tax intricacies. Warren never listened much to my complaining about the size of tax bills. I believe the reason for his nonchalance was that he was involved but not committed in the payment of my taxes. You know, it's like the chicken and the pig at breakfast. The chicken is involved but the pig is committed. With the IRS, the taxpayer is committed.
I learned years ago the easiest way to increase your business net income is to cut taxes by using the tax code to its fullest potential. Whatever the tax rate for business at any particular time, then if you could legally find a way to pay less tax on the same amount of income, then your shareholders' profits would increase proportionally by the size of the savings. It's very hard to increase profits in a business, but business owners paying taxes understand the concept of using the tax code to their advantage.
And truthfully, so do each of us. Actually all of us, as individuals, do the same thing at tax time on our personal income taxes. The savings are generally less but the principle is the same.
Let's take a look at Social Security. The money collected for SS is taken from two sources: 7.5 percent from your wages and 7.5 percent from your employer. There is no government money in this "entitlement" as you and your employer paid everything into the system. Congress merely administrates the oversight and ground rules for SS.
Someone asked me the other day "since you are older than 65 years and 10 months do you take your SS benefits?" I said I did because I paid into the system and it's my money. Why in the world wouldn't I take advantage of the payback?
In the case of a sole proprietorship, the money paid for SS is twice what an average wage earner puts in. The sole owner is taxed like everyone else on their income but the business also has to kick in its half. If it sounds like a case of double taxation, it is.
SS is just an interest free loan to the government. I have paid in for about 50 years and, according to the actuarial tables, I will probably draw the amount in my "account" over only 20 years. I won't get all of my money back and you probably won't either. The difference between SS and your bank account is that upon your death, the government keeps your unspent SS balance.
Sen. Carl Levin, who has done an absolutely wonderful job of funneling our own taxes back to the Alpena Combat Readiness Training Center and the Thunder Bay National Marine Sanctuary, was complaining in a column recently that Apple was not paying enough taxes. He should have included General Electric as well. Neither pays much federal tax. Levin said this is a problem that needs fixed because our national government has a huge deficit. He said the CEO at Apple said Apple paid 100 percent of the tax it owed to the feds.
Levin's complaint seems to be the administration has overspent its income by something like $6-7 trillion and it's the fault of corporations not paying as much as the spenders would like. It's a problem linked to a 6,000 page tax law with lots of loopholes for businesses to find. Well, who wrote the tax law? Surely we didn't elect GE and Apple to perform that task.
The elected officials who wrote the document with the loopholes and piled layer upon impenetrable layer on top of the original document must bear the responsibility for the fact that business merely analyzes what is written and then pays as little legally as required.
You and I do the same. As individual taxpayers we don't give up interest, mortgage, dependent and other deductions on our federal tax forms either. Heck, except for the size of the tax returns, we act just like GE and Apple.
It's not just what business guys do Carl, we all do it. GE and Apple just do it better. My hat is off to them.