Tax Code Blocks Jobs

Tait Trussell is a national award-winning writer, former vice-president of the American Enterprise Institute and former Washington correspondent for The Wall Street Journal.


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Other corporate tax experts testified that the U. S. corporate tax rate is 15 percent higher than the average of OECD countries (the 30 high-income foreign industrial companies). The witnesses pleaded for a “level playing field” with foreign companies for taxation purposes.

In some cases, confusion arises and critics come to erroneous conclusions because of the difference between book accounting and tax accounting. It may be confusing to the naïve. But the difference is exploited by the political attack dogs.

As Tax Foundation Economist David Logan explains: Most activities accounted for on a corporation’s financial statement use the accrual method. When a firm receives payment for a product or service, it is immediately taxable income in the eyes of the IRS. But on the corporation’s financial statement, differing corporate accounting standards are set by the Independent Financial Accounting Standards Board (IFASB). These are known as Generally Accepted Accounting Principles (GAAP).

As a simple example, a magazine publisher sells a year-long subscription and receives $60. To the IRS, this is immediately taxable income in the current year. But for book accounting purposes the publisher, uses Generally Accepted Accounting Principles to insure uniformity of accounting. The publisher needs the subscription money to pay for the cost of producing each issue. So, there’s a difference between book and tax profit.

Likewise, when accounting for inventory, two principal methods are used for book and tax purposes: last-in, first-out (LIFO). And first-in, last-out). IRS says businesses using LIFO to account for inventory on tax returns must also use LIFO for reporting taxable income on financial statements, whereas U.S. GAAP allows business to claim income using either LIFO or FILO. U.S. corporations must keep two sets of books: one to comply with Generally Accepted Accounting Practices (which accurately convey the history, health, and prospects of a business), while IRS wants to collect revenue. Often the two methods produce different figures. But it doesn’t mean a business is skirting its taxes due.

Barack Obama’s consistent solution to addressing the federal deficit is higher taxes. This in spite of what industry analysts say. For example, in the case of the standard whipping boy—the petroleum industry, increasing taxation on the petroleum industry, by taking away what the Administration calls “subsidies” would cost thousands of jobs, perhaps as many as 120,000 by 2014.

Those who delight in higher taxes inevitably want to end “tax subsidies” for oil companies. But these aren’t special breaks just for oil companies. All companies have “ordinary and necessary” tax deductions. Liberal Democrats see big oil as the donkey that should always have a tax “tail” pinned on it.

Now, any large corporation is automatically becoming a tax-dodging villain when taxes policies must be changed to create more work in our job-limp economy.

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  • sylviaharrell

    Unemployment numbers are comprised of those that are in the job market for the past 30 days. It does not include those that have not been in the job market in the last 30 days: people who have given up looking; those that have gone off unemployment because it has run out. One solution to unemployment is "High Speed University" check it out

    • davarino

      In other words unemployment is much higher than what is reported.

  • davarino

    The tax rate is higher than 30 other nations, and there are nations where the wages are unfairly held down and we still trade with them. How did China ever get permission to start trading with non communist nations?

    • StephenD

      There is no end to what you can accomplish with forced labor.

  • Texasron

    Our government is the reason why jobs have left the country and why jobs are not being created. There are too many regulations and the corporate tax rates are too high. These issues will be solved when democrats are voted out of office.

    • Dee

      It's amazing how many people don't get this texasron. Business people are sick of all of this extra accounting work and then living in fear of some other regulation that could land you in jail. Its just overwhelming. Who the hell would want to run a business in the states anymore? You have to be nuts. Obamas missing in pitting people against people has worked to the detriment of this country.

  • Shery

    I guess Obama gets all his "facts" from this group!

  • Raymond in DC

    It's in the very nature of the tax code that some activities are "more equal than others", as the government seeks to drive the economy in ways the market would not. Such market distortions results not only to inefficiencies and favoritism (e.g. crony capitalism) but to political demagoguery. That's how liberals can, at the same time, insist that subsidies and tax breaks for ethanol, solar and wind facilities, and electric cars are deemed worthy while those for oil/gas production or other industrial endeavors they don't care for are deemed unfair if not "evil".

  • mrbean

    Progressives and Liberals be afraid, be very afraid. If Obama is re-elected, the wealthy and the valuable producers will pick up and leave America altogether. There is a big world out there begging them to come. Places like Hong Kong, Singapore, Australia, New Zealand, Monte Carlo, Belize, Costa Rica, Panama, Bahamas, and Cayman Islands are low-tax havens that appreciate business owners and their sacrifices. They welcome wealthy ex-patriots. They celebrate individual achievement. They reward instead of punish business owners and financial risk-takers. They are wonderful places to live and are aggressively pursuing Americans daily.