Any accountant will tell you the only thing more complicated than the U.S. individual tax system is the U.S. corporate tax system. To make matters worse, businesses must essentially maintain two sets of books, one intended for investors based on logical Generally Accepted Accounting Principles, and a second based on millions of pages of illogical politician rules written over hundreds of years. The goal of the first is to provide comparable, predictive information on a company’s financial performance, called “book income.” The goal of the second is to minimize the amount of money stolen by the government, called “taxable income.”
Since the two systems use vastly different rules, it distorts the effective rate a company is paying in taxes. For example, say a company loses $1 billion in 2021. No tax is due because there is no income to tax. Now say in 2022 the company earns $1 billion. Existing tax rules allow you to use the 2021 loss as a credit against 2022 income, so no tax is due. This makes sense since if you add the two years together, the company broke even. So in 2022, the “book income” is $1 billion, while the “taxable income” is zero. This is where the economically illiterate leftists scream, “See! Capitalism sucks! A corporation makes $1 billion and pays zero in taxes!!!”
The Manchin-Schumer “Inflation Reduction Act” imposes a 15 percent minimize tax on corporate income. So what the hell is this going to mean in practice? In the above example, a company that broke even would be paying $150 million in taxes, unless of course they put in more exceptions, phaseouts, brackets, credits, and other IRS bullshit. This is also where they bury loopholes in 3000-page bills to make sure their buddies pay nothing more, while the honest, productive companies get screwed and overall business efficiency drops again. But hey, at least they can brag on the campaign trail how they made the rich pay their “fair share.” And of course, this massive spending bill will decrease inflation. 👌🙄
