Dividends and Corporations paid 11.3% in taxes last year

As investors, you invest in corporations and hope to generate income and capital gains, in makes you a little bias towards corporations not paying too much tax. The President decided to cut taxes for corporations and some of the wealthy,

In an article by Jeff Stein and Christopher Ingraham of the Washington Post, a report by the Institute on Taxation and Economic Policy, examined 400 of America’s largest corporations and their average tax rate was 11% of their profits. The 11% is roughly half of the official rate established under President Trump’s 2017 tax law.

Similar to individuals, corporations receive deductions, tax breaks to lower the bill. Included in the 400, were 91 corporations which paid no federal income tax. One of the effects of not collecting tax is the federal deficit rose to nearly $1 trillion. In October, the US Treasury Department announced the deficit had grown $205 billion or 26% in the past year, even though their was strong economic growth. Corporate tax revenue fell from $300 billion to $204 billion in 2018.

For investors, much of the extra capital went into record stock buybacks, which helps increase share prices without requiring new investment or hiring. .

There were a few companies such as Activision Blizzard which makes video games received a refund, they had $447 million in profits and received a tax refund of $243 million of an effective tax rate of -54.4%. The US Treasury noted negative corporate tax rates can occur because a corporation carries back excess tax deductions and/or credits to an earlier year or years.

Linking to dividend paying stocks, as investors you want the company to make a profit and pay dividends. As a citizen you want the company to make profits to pay a reasonable share of taxes, outside your tax bill will tend to go up. There should be some sort of balance, perhaps the balance is tilting too much towards corporations, but with this data, you need to see what will happen next year.

There are more questions than answers, till the next time – to raising questions.

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