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Chipmaker only receives a financial slap on the wrist for alleged threats and kickbacks

Is Intel Corp.'s days in the antitrust doghouse finally over?  A settlement has come in one of the last antitrust cases against the world's top maker of personal computer CPUs.  The settlement may close an important chapter in Intel's history -- one that saw it consolidate a dominant position, yet be universally criticized for what numerous parties called blatant antitrust violation.

I. "Cheaters" Finish First 

In the middle of the last decade CPU maker Intel Corp. (INTC) has been accused by governments worldwide -- and its competitors -- of using threats and kickbacks to convince computer makers to hang on to its dominant position.  The allegedly anticompetitive tactics paid off; Intel was bought the time to rejuvenate its product line.  The chipmaker went from lagging behind Advanced Micro Devices, Inc.'s (AMD) Opteron and Athlon 64 designs to coming back strong solidifying its lead during the new core war.

Intel reportedly threaten to cut shipments to computermakers who used AMD chips too, and offered payments and discounts to those who complied.  It also reportedly sought to pressure retailers to fix the price of its CPUs in some regions.

AMD Opteron Denmark
Intel is accused of using anti-competitive tactics to hold off AMD and NVIDIA during the Pentium 4 era. [Image Source: "LanParty"/WiFTech Forums]

While few would argue that the tactics weren't worth it from a pure financial perspective, Intel has paid somewhat for its approach, fined €1.06B ($1.45B 2009 USD) by the EU [source].  In 2009 it also paid $1.25B USD to AMD to settle a U.S. antitrust lawsuit.  In 2010 the U.S. Fair Trade Commission only gave it a tiny fine, but as part of the settlement forced Intel to sign an agreement to play fair in the future or face stiff fines.  And in 2011 it paid $1.5B USD to NVIDIA Corp. (NVDA), a graphics rival, whom it also allegedly harmed.  

The settlements may not amount to a legal admission of guilt, but they do offer a strong indication that Intel acknowledged it was doing at least some of the anticompetitive and underhanded tactics its smaller rivals and government regulators alleged.  If Intel was truly playing fair, it would undoubtedly have fought the charges more vigorously.

For Intel the settlements may have tarnished its reputation, but they hardly hurt its bottom line -- the company made $12.94B USD in 2011 alone, up from

II. "Naughty Boy" Settles Last Case

Now it has cleared out one final lingering antitrust lawsuit -- the New York state's case against it.  The case was filed in November 2009 by then-Attorney General Andrew Cuomo.  The case was filed in Delaware Federal District Court, as Intel is incorporated in Delaware, despite having its headquarters in Santa Clara, Calif.

Andrew Cuomo
The New York case was first filed by Governor Andrew Cuomo, back when he was Attroney General. [Image Source: AP Photo/Mike Kroll]

Mr. Cuomo would go on to become the governor of New York.  His successor, Eric Schneiderman, did his best to diligently pursue the lawsuit.  But his campaign was dealt a huge setback when U.S. District Judge Leonard Stark said that the state could only pursue offenses that occurred from 2007-2009, not 2004-2009 as the AG had hoped. 

The decision essentially meant that the state could not prosecute Intel on the primary years where appeared to have committed abuses.  The ruling frustrated Governor Cuomo, who had long argued that emails obtained from Intel showed long-time CEO Paul Otellini was aware of some of the anticompetitive tactics.  Governor Cuomo's perspective was that it was clear this was not some rogue effort within Intel -- it was a concerted anticompetitive game the company was playing.

But the federal judge also ruled out the state pursuing triple damages against Intel.

Between all of these court-imposed limitations, the New York Attorney General's office begrudgingly settled with Intel.  

The resulting payout of $6.5M USD represents roughly the amount of income Intel makes in five hours.  In other words, to quote former U.S. Senator-turned-sex offender Larry Craig, "it's a slap on the wrist, it's a bad boy... you're a naughty boy."

Intel's General Counsel Doug Melamed was very pleased with the settlement, stating, "We have always said that Intel's business practices are lawful, pro-competitive and beneficial to consumers."

Intel sign
Intel was pleased to settle the case for a trivial sum. [Image Source: ModMyI]

CEO Paul Otellini -- a vocal critic of the EU fine -- did not comment on the settlement. But likely even he would have been satisfied with this outcome.

If there's any consolation to AMD, NVIDIA, and the other players allegedly harmed by Intel abuses, it's that the chipmaker is now confined by stricter rules in the U.S. and abroad.  

And while Intel currently enjoys a healthy process lead, with its 22 nm 3D FinFET chips launching in two months, Intel is now being forced to watch its back.  A coalition of chipmakers using ARM Holdings plc.'s (LON:ARM) wildly successful RISC microarchitecture is preparing to invade the PC CPU and server spaces.  One of the top ARM competitors leading the charge?  NVIDIA -- one of the companies Intel alleged abused; some might call it karma.  

III. Side Note: Tax Sheet

Intel is among the fortunate few who has received big tax breaks under President Obama and the bipartisan Congress.  While far from the worst corporate offender (Intel paid well above the "average" corporate tax rate among Fortune 500 corporations [source]), when it comes to cash-for-tax holidays, it's still interesting -- and a bit alarming -- to see how Intel has successfully steered the federal tax policy over the past decade.

Intel only paid effective tax rates of 24 and 28 percent in 2010 and 2011 [1][2], significantly lower than the 34 to 35 percent any small-to-midsize busines making over $335,000 USD per year in profit must pay. 

The tax break came thanks to a special "research and development" tax credit, which legislators applied to Intel a handful of other privileged friends.

In the last three (2006, 2008, and 2010) election cycles, Intel's PAC blanketed Congresspeople with $1.02M USD in campaign finance gifts [source].  The awards were relatively bipartisan and closely mirrored whoever was gaining political momentum, e.g. in 2006 and 2010 the Republicans were favored in House donations, while Democrats came out slightly ahead in 2008.

Congress bribes
Intel has paid a lot of money to federal politicians and received tax breaks in return.
[Image Source: Wikimedia Commons]

In other words, Intel and others have mastered the public's cyclical sentiment, giving them the illusion of choice.  But whichever candidates the majority was supporting, were in the end supporting Intel (and Intel is far from being alone in this clever strategy).

Barack Obama received $228,000 USD from Intel employees [source] in his successful 2008 campaign.  This election cycle he has received $22,000 thus far [source], over twice as much as the $10,250 USD that top Republican rival Mitt Romney has received [source].

Barack Obama has been a good friend to Intel, appointing its CEO to his jobs council, which "advises" Congress and the President on corporate tax policy.

Intel, like many corporations use a "PAC" to avoid the appearance of impropriety.  The political action committee (PAC) lobbies employees to donate, often offering them a matching or greater kickback for their troubles.  In that essence the contribution is "launder" (in a colloquial, not a rigid legal sense), through private donors, although it is steered by the corporations.  The PAC isn't free -- it often bloats the contribution costs to the corporation several times.

But while several million in campaign finance efforts may not seem like a lot of money for a company whose profits measure in the billions, Intel's big tax breaks are evidence of the phenomena noted by the University of Kansas School of Business -- that for every $1 USD spent lobbying, a company receives an average of $222 USD of tax breaks.  

It seems both polticial parties in Washington, D.C. are more than willing to play the game.  And it seems the elected officials -- or their staffers, more likely -- are very good at knowing who the "check goes to" in terms of tax breaks.  Ultimately small-to-midsize businesses and individual taxpayers are left paying the check in the form of higher taxes, while these fortunate special interests enjoy record profits.

Sources: Intel, NPR/University of Kansas [$1 Lobbying = $222 Tax Breaks]



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Intel is a convicted corporate criminal
By Beenthere on 2/11/2012 7:51:47 PM , Rating: 2
Time and time again Intel has been convicted on three continents, of habitual violation of anti-trust laws - for huge profits. Until the CEO and execs at Intel are imprisoned and the company is fined $500 Billion dollars, they will continue to violate law because it's profitable. This ain't rocket science. Crime pays big for Intel so why would they stop?

As far as Intel paying U.S. taxes, in addition to not paying their fair share like small business does, Intel have been convicted twice of U.S. tax fraud.

When it comes time to spend your money as a consumer you can vote with your wallet and send a message to criminal corporations or those who use slave labor in China.




RE: Intel is a convicted corporate criminal
By Motoman on 2/11/2012 8:44:59 PM , Rating: 2
This is why I haven't bought an Intel CPU...or sold a machine with an Intel CPU, except when unavoidable, since the early 00s.

The problem is that consumers can't be bothered to care. They can't be bothered to care that Intel was being wildly abusive on this issue, and they can't be bothered to care that Apple is wildly abusive on other issues.


RE: Intel is a convicted corporate criminal
By tayb on 2/11/12, Rating: 0
RE: Intel is a convicted corporate criminal
By bupkus on 2/12/2012 2:13:33 AM , Rating: 1
My, we are sensitive, aren't we. Couldn't be that you feel just a little guilty of NOT GIVING A SHIT about PEOPLE providing your toys?


RE: Intel is a convicted corporate criminal
By tayb on 2/12/12, Rating: -1
RE: Intel is a convicted corporate criminal
By Scrogneugneu on 2/12/2012 9:33:55 PM , Rating: 3
quote:
This article is about Intel and Intel anti-trust issues from earlier this century. It isn't relevant to Apple in any way, shape, or form.


Agreed.

quote:
You Android fanboys obsess much??


... wait, what?


RE: Intel is a convicted corporate criminal
By Solandri on 2/12/2012 2:33:10 PM , Rating: 4
quote:
The problem is that consumers can't be bothered to care.

I disagree. This is not a consumer issue. Unlike most other quasi-monopolies which lock consumers in and make it difficult to move (Windows, iOS, Quickbooks, etc), you can quit using an Intel CPU in favor of an AMD at any time with pretty much no consequences. All your software will still work, your hard drives, fans, case, power supply, and in most cases your memory will still work. It's just the motherboard and CPU you have to swap.

CPU pricing is also not based on a binary state - you do not have or not have a CPU. You can pay a lot for a fast CPU, or pay a little for a slow CPU. This is in contrast to the other quasi-monopolies. Either you have Windows or you don't. Either you have iOS or you don't. Either you have Quickbooks or you don't. So with the quasi-monopolies, demand is inelastic and price fixing results in larger profits for the monopolist.

But CPU demand is to a large extent elastic. If Intel were the only CPU manufacturer and priced their CPUs high, all that would happen is that people would buy slower CPUs. Their sales and revenue wouldn't change much. Profit would increase due to lower manufacturing costs, but having competitors means that raising prices will result in losing market share to AMD, thus making this a dubious strategy for raising profits.

So unlike other quasi-monopolies, Intel can't really use their dominant position to extract more money from consumers. And if you look at the cited cases, they reflect this. Intel wasn't fined for harming consumers. They were fined for harming competitors. They weren't making more money by overcharging consumers. They were making more money by unfairly stealing market share from competitors.

So this isn't a consumer issue. While consumers like you certainly can choose not to buy Intel to punish them for this behavior, this isn't really something which affects consumers' pocketbooks (at least not until AMD goes bankrupt). This is a regulatory issue, and it falls upon government regulators to punish Intel for harming competition.


By Ringold on 2/12/2012 5:16:38 PM , Rating: 1
Excellent post; some of the others grasped in the right general direction but were blinded by political dogma, but you laid it out exactly as it is.


By Motoman on 2/13/2012 3:13:32 PM , Rating: 2
You're wrong in every way. Because the vast majority of consumers are either:

1. Unaware and don't care what the CPU is in their computer
2. Under the impression that something other than Intel is an "off-brand" of some kind and maybe Farmville won't run correctly on it.
3. Simply under the sway of "Intel Inside" advertising...especially considering the utter lack of AMD advertising. And I don't mean in PC Week magazine - I mean during CSI on TV.

Intel nearly sunk AMD with this. Your entire argument is invalid.


RE: Intel is a convicted corporate criminal
By cmdrdredd on 2/13/2012 7:05:17 PM , Rating: 1
The difference between Apple and Intel is simple and you are a retard to not understand it.

Intel innovates and actually makes products that kick the shit out of the competition without question. Apple makes shit with clever names using tech ideas stolen from other places.


By Motoman on 2/14/2012 9:34:56 AM , Rating: 1
Oh, I understand it just fine. But in this sense, Intel consumers behave like Apple consumers.

quote:
Intel innovates and actually makes products that kick the shit out of the competition without question. Apple makes shit with clever names using tech ideas stolen from other places


You are, of course, 100% correct. Well...you're giving Apple too much credit.

The point is that AMD would be in a wildly better market position now, and in the past, if it wasn't for Intel's criminal actions that forced the OEMs to *not* buy AMD products. The fact of the matter is that Intel didn't have to do that - there's no reason Intel couldn't have prevailed simply by honestly competing with AMD.

But that's not what they did. They chose instead to become criminals. As a general rule, I don't support criminals. Seems like a reasonable position to have, no?


RE: Intel is a convicted corporate criminal
By semo on 2/12/12, Rating: 0
RE: Intel is a convicted corporate criminal
By Allio on 2/12/12, Rating: -1
By BSMonitor on 2/13/2012 9:16:10 AM , Rating: 4
quote:
AMD had a commanding lead in price/performance (and more often than not, outright performance) from the desperate paper launch of the Pentium III 550/600 in 1999, all the way until Core 2 arrived in 2006.


Typical romantic historical view of AMD.

Pentium III and Athlon's were on par performance wise, until you include SSE in the argument. This was also true of the early P4. Benchmarkers of the day like to show a bunch of dated benchmarks to prove the dominance of the Athlon against a P4. Now, however, SSE-like optimization in hardware are almost always included in software to the point no one mentions it.

Fast forward to Athlon 64 days, and those same benchmarkers were quick to point out how forward thinking AMD was for making the Hammer line 64 bit. Even though, at the time, there was no Windows 64-bit OS, no 64-bit driver support, no 64-bit driver software, and literally none of that until long after the original Athlon 64 was an afterthought. I promise, no one who bought the original Athlon 64 is using it for a legit reason as a 64-bit machine.

AMD's real shining moments:

1) Athlon outlasted Pentium 3 in the GHz race. (But quickly became an inferno by Athlon 1300 and 1400 MHz versions.)
2) Hammer integrating the Memory Controller years before Intel. Giving Athlon 64 and 64x2's a 30-40% instant boost in performance over Intel's data starved P4's and PD's.

As a wise man once said, you can only integrate the memory controller one time. Then what do you do?? Intel chose to wait and by the time they released their own IMC, the Core 2 cores without IMC were already more efficient than their Athlon counterparts. Give Intel another 30% and their efficient cores and you have what we have today. Intel on top. By a lot.


By stimudent on 2/14/2012 1:06:16 AM , Rating: 2
This computing device come with ethics violations inside.


Weak case
By Hector2 on 2/13/2012 10:20:18 AM , Rating: 3
"Cheaters" Finish First ? Hardly. NY settled because it became obvious that they didn't have a case under US law. The fact is that rebates are lawful here and it's something that's practiced all the time by all markets, not just semiconductors..

Both Intel & AMD regularly report high margins in the 40%-60% range. Either can cut prices dramatically and still sell above cost. That's what this all comes down to.

Intel has always had superior manufacturing and process technology to keep AMD in check even when AMD's architecture had the advantage.




really ?
By Hector2 on 2/13/2012 2:20:38 PM , Rating: 2
It seems to me that the author is trying really hard to find reasons to attack Intel.

quote:
chipmaker is now confined by stricter rules in the U.S. and abroad

Actually, no. The same US rules and laws apply. No laws have changed. Intel has said that their business practices remain the same and there is nothing in the settlement specifying anything that Intel hasn't already been doing.

quote:
Intel only paid effective tax rates of 24 and 28 percent ... significantly lower than the 34 to 35 percent any small-to-midsize business

That's really reaching. How does Intel's tax rates differ from any other semiconductor manufacturer who owns fabs ? The industry is very unusual in that it requires an enormous amount of R&D money to continuously invest in new technology and facilites to remain competitive and to continuously lower costs --- which has been benefiting consumers for 40 years. How many of these small & medium businesses (or even big corps like Apple) need to purchase $3B-$7B worth of new equipment every 2 or 3 years ? This is part of the cost of doing business and, as such, are written off -- lowering taxes. In the recent quarter, Intel said they need to spend $12.5B this year in R&D to fuel new factories and equipment. That's a pretty big chunk of the total $50B revenue they made in 2011.




Corporate tax rates
By Just Tom on 2/11/12, Rating: -1
RE: Corporate tax rates
By JasonMick (blog) on 2/11/2012 7:55:54 PM , Rating: 2
quote:
If Intel is steering American tax policy it needs a better driver because there is no evidence it is paying anything less than any other company in its position would pay, and perhaps may be paying more. Just as an aside the GE paid no US federal income tax story has been repeatedly debunked.
True, like I said, the numbers indicate the Intel is hardly the worst offender -- in fact, it pays well above the average. My point wasn't to hold Intel up as a worst case scenario in terms of campaign finance.

My point is simply that it -- like others -- pays campaign finance contributions in exchange for some measure of tax exemption, a perk SMBs and individual taxpayers typically do not enjoy.

I think it is significant to emphasize this relationship wrt tax rates and public policy, whenever possible, as it helps the American people understand how their government tax system, elected officials, and their nation's corporations work.

While I'd have to spend more time digging into it, I would be willing to be that the companies that were receiving lower tax rates, in turn spent more lobbying.

The article you sent claimed a 12.1 percent average corporate tax rate. I think we can both agree, that's staggering considering how much the rates on individual taxpayers and SMBs are.


RE: Corporate tax rates
By Reclaimer77 on 2/11/2012 9:09:42 PM , Rating: 1
quote:
My point is simply that it -- like others -- pays campaign finance contributions in exchange for some measure of tax exemption, a perk SMBs and individual taxpayers typically do not enjoy.


I don't know many "individual taxpayers" who generate billions of dollars of tax revenue. I'm not talking just corporate taxes, but all of the income taxes and everything else. I'm pretty sure Intel is doing their "fair share" in that department.

Tax rate is divisive because it ignores the gross. The total dollar amount of tax revenue businesses like Intel generate is staggering. In 2010 Intel accounted for $4.6 billion in income taxes. That's JUST income taxes. Their tax rate is 28%! I mean, how much higher do you really think it should be? And how would that be better for our economy?

I just really don't understand why you and a lot of people keep banging this drum. It reeks of class warfare when companies paying billions in taxes are singled out and made to be the scapegoat for everything that's wrong.

Our Government is spending roughly 40% more than it's taking in. And our unemployment is really bad. If the idea to fix this is squeezing our largest job creators AND tax contributors for even more tax revenue, well I think we all know how that little story ends. They'll be less jobs due to more outsourcing and less economic growth, higher prices on goods, and less tax income across the board coming in.

Now a Democrat will say we should cut federal spending AND increase taxes. Except that's the biggest little white lie in all of politics. Because when they say "spending" they mean the increase in spending over last year. In other words, real spending doesn't get cut. The INCREASES in spending will just get cut.

Personally I don't want to hear anything about campaign donations and corporate taxes until I start hearing about real and significant cuts in Government spending and size. Not 5 years from now, not a cut in spending increases, but real cuts right now.


RE: Corporate tax rates
By Just Tom on 2/11/2012 9:26:59 PM , Rating: 2
What I would like to see is a lowering of tax rates and a radical cut in tax credits and deductions. The current system invites gaming the system, is uncompetitive with the rest of the world, and favors those corporations that are able to hire legions of tax lawyers.


RE: Corporate tax rates
By Reclaimer77 on 2/11/2012 9:42:21 PM , Rating: 2
So we went from a country that declared war over taxation to one who declares war on it's largest tax payers?

Everyone with money hires tax lawyers. You would be stupid not to. This class warfare leftist attack that suggests the duty of every rich person and corporation is paying as much taxes as humanly possible is unAmerican and fundamental fraudulent. Especially when they then tell the other half of the country that it's okay if they essentially pay NONE.

The Government needs to prove it can spend the massive amounts of taxes it already gets responsibly before they ask America for even more. That's our problem right now.

You need to understand that those in charge are simply NOT interested in paying down anything. The debt or deficit. They simply want more money, more power, more influence. I say no. The eventual result of a Government this large, with this much spending power, is a socialist country and a ruined economy. That's where we're heading, and where we'll end up if it's not stopped.

"The problem with socialism is that eventually you run out of other peoples money"

-Margarette Thatcher-


RE: Corporate tax rates
By Mint on 2/12/2012 6:24:59 AM , Rating: 2
Massive amount of taxes?

The federal tax burden is at the lowest level it's been for 60+ years. It's way lower than every other developed nation on the planet.


RE: Corporate tax rates
By Just Tom on 2/12/12, Rating: -1
RE: Corporate tax rates
By Mint on 2/12/2012 10:37:13 AM , Rating: 2
That rate is just a paper number, though. As your link above noted, it's 12.1% overall.


RE: Corporate tax rates
By Just Tom on 2/12/2012 10:48:56 AM , Rating: 2
Exactly! That is the point. The rest of the world has lower marginal rates but higher payments. The reason is our system is full of carve outs for special interests. Flatten the rate, eliminate most credits and deductions and we'd be more competitive and efficient. I'd rather Intel make more and better chips than more and better tax attorneys.


RE: Corporate tax rates
By Solandri on 2/12/2012 12:23:14 PM , Rating: 5
quote:
The federal tax burden is at the lowest level it's been for 60+ years. It's way lower than every other developed nation on the planet.

That's because most other developed nations don't have state, county, and municipal taxes added on top of their federal taxes.

The number you want to be comparing is total tax burden, not federal.


RE: Corporate tax rates
By Jakeisbest on 2/13/2012 1:53:36 PM , Rating: 2
Actually looking at US taxes as a % of GDP shows that the US, while having high statutory rates, has low effective tax rates.

http://www.taxpolicycenter.org/briefing-book/backg...


RE: Corporate tax rates
By Reclaimer77 on 2/13/2012 2:22:32 PM , Rating: 2
I'm not sure why anyone would compare taxes as a percentage of GDP unless they were trying to advance an agenda. So many factors go into that it's almost dishonest trying to make a correlation. Currency rates, interest, etc etc.

Anyhow instead of playing the game of how "high" our taxes are, I'm going to cut that off at the pass and take the "radical" stance that higher taxes are NOT something to be proud of or desired. And that, if in fact our taxes are lower than other "industrialized" nations, good. That's a good thing.

Since when was the name of the game to pay as much taxes to a large centralized Government as humanly possible?


RE: Corporate tax rates
By Jakeisbest on 2/13/2012 8:03:06 PM , Rating: 2
quote:
I'm not sure why anyone would compare taxes as a percentage of GDP unless they were trying to advance an agenda. So many factors go into that it's almost dishonest trying to make a correlation. Currency rates, interest, etc etc.


Government revenues divided a countries gross domestic product is the broadest measure of tax burden across nationalities. Major economic institute: Cato, Brookings, ect, uses it when comparing effective tax rates.

quote:
Since when was the name of the game to pay as much taxes to a large centralized Government as humanly possible?


The name of the game is to use accurate information to develop an informed opinion. You seem to be confusing the information I provided with your opinion that taxes should be lower.

My comment provides information you interpreted that information as being hostile to your point of view.


RE: Corporate tax rates
By Ringold on 2/12/2012 5:21:41 PM , Rating: 2
quote:
It's way lower than every other developed nation on the planet.


I can name more than half a dozen advanced economies from all around the world with lower tax takes off the cuff, no Google needed. Stop getting your facts from the comments section at Huffington Post.


RE: Corporate tax rates
By retrospooty on 2/12/12, Rating: 0
RE: Corporate tax rates
By Reclaimer77 on 2/12/12, Rating: 0
RE: Corporate tax rates
By Camikazi on 2/12/2012 11:22:15 AM , Rating: 3
$2000 in taxes when you are making $12000-$14000 a year is A LOT of money. Might not seem like much overall but I can guarantee you that the amount hurts the person who is paying it and is not nothing to them.


RE: Corporate tax rates
By Solandri on 2/12/2012 12:37:39 PM , Rating: 2
To have $2k in taxes deducted from your paycheck while earning $12k-$14k, he must be counting is FICA taxes (Social Security + Medicare + unemployment), and either screwed up his W-2, or been working for a corrupt business.

The standard deduction has been at about $5k for the last decade. So that leaves $9k taxable income. The lowest tax rate is 10%, or $900. FICA comes out to a bit below 7% (varies by state) but most people don't know that they only pay half their FICA taxes - their employer pays the other half. 7% of $14k is $980. So if you count these as taxes for yourself, an equivalent amount also counts as taxes paid by businesses.

So that's $1880 in taxes (counting FICA as taxes, rather than as retirement investment and health/unemployment insurance). He must've been living with his parents not to qualify for the earned income credit (where the majority of low income people who pay little or no taxes get their tax credit). He probably screwed up his W2 or the employer entered it wrong in the payroll computer. The most common mistake is failing to claim yourself as a dependent. This results in too much tax being withheld, but is corrected in April in the form of a tax rebate check.


RE: Corporate tax rates
By Keeir on 2/12/2012 2:10:00 PM , Rating: 2
I am curious...

2,000 when your making 14,000 is alot

So

whats

25,000 when your making 100,000

or

100,000 when your making 300,000


RE: Corporate tax rates
By BSMonitor on 2/13/2012 9:18:35 AM , Rating: 2
Do the rest of the math donkey.

If you pay $100,000 in taxes, you have $200,000 left. You could buy 3 houses that the person making $14,000 can barely afford.

Grow up


RE: Corporate tax rates
By retrospooty on 2/13/2012 9:26:11 AM , Rating: 2
Someone on AT forums posted this a long time ago, but it still makes me giggle. I am sure its not exact word for word, but the jist of it is the same.

"Despite the clear advantages, you don't see a whole of of rich people clamoring to become poor to take advantage of the lower tax rates"

I do think that the more you make the more tax you should pay. The simple reason, the rich are getting far more benefit out of the American way of life than the poor are. Its a privilege that comes at a cost. I have no problem with that, as long as its not a ridiculous rate.

The problem is not taxation, its overspending. Our govt. Reps and Dems alike have been overspending since the early 1980's (if not longer) and it has to stop. They are too inefficient to do anything at a reasonable cost.


RE: Corporate tax rates
By ebakke on 2/13/2012 1:34:17 PM , Rating: 1
quote:
The simple reason, the rich are getting far more benefit out of the American way of life than the poor are.
I'm not sure how much I agree with that. Poor people in America, for example, are far better off than poor people in Haiti.


RE: Corporate tax rates
By Keeir on 2/14/2012 11:12:22 AM , Rating: 2
quote:
If you pay $100,000 in taxes, you have $200,000 left. You could buy 3 houses that the person making $14,000 can barely afford.


This is a strange statement. Consider the implications carefully.

One of the important beliefs of the USA is that everyone is "equal". Yet we punish those who work hard by insisting they give greater and greater percentages of their labor to support the Federal Government.

In the case of someone who contributes 2,000 while making 14,000 (a figure that is just wrong today, it would be likely 0-1,000), the person contributes 6 hours of their week to the Federal Government and the rest is up to them to make the best of they can

In the case of someone who contributes 100,000 while making 300,000 (a good figure today), the person contributes 13 hours of their week to the Federal Government.

Since the person making 300,000 probably invested large amounts of money, time, risk, and effort into making such a salary AND they are contributing large percentages of their weekly labor which they improved pretty much on their own dime, I don't get this feeling that they really don't deserve more.

Last year the Federal Government spent ~6,000+ per person in the Federal Budget (Excluding SS and Medicare). Most of this benefit is spread fairly evenly across everyone. (Unless you view a "rich" persons life as somehow more valuable than a "poor" persons, or a "rich" persons happiness as somehow more valuable than a "poor persons") Yet we think a rich person should contribute larger and larger amounts of their weekly labor to support this... its a strange concept to me.

I think its a fundamental disconnect. Money is a stand-in for labor. That's really all it is... taking someone's money is the same thing as taking their labor and time. "Poor" people in the US get to keep huge fractions of their labor... and lets face it, the US's school system allows anyone to work hard and improve their human capital.


RE: Corporate tax rates
By retrospooty on 2/12/2012 12:41:31 PM , Rating: 1
"Wow $2,000 in taxes huh? Look out Donald Trump! :P"

Hey, it wasn't bad money for an 18 year old in 1990... And $2000 out of $12,000 is a large chunk. That is just federal, not state, and not Social Security.

I am still having a hard time believing the #'s linked by ebakke below. It seems that the primary people that aren't paying taxes are married with children middle class couples and elderly retirees, not the poor. OK, well, I am married middle class with children, somewhere between middle and upper middle. Coming from virtual poverty, then lower class, then through the years making more and more and now I own 2 homes (just bought the 2nd one last December). At no time did I ever pay no federal, or "essentially" no federal. I have always paid a ton of federal. Is this a play on words meaning, they pay no federal when they file, becasue they pay out of each paycheck? That is still paying.


RE: Corporate tax rates
By Keeir on 2/12/2012 2:05:56 PM , Rating: 2
I am confused...

You remember paying ~15% in taxes... so rich people ought to pay more than ~30% in taxes...

is that your point?

Sorry. I am curious. Just missing what your personal experience in 1990 have to do with tax policy for the entire nation in 2010s.


RE: Corporate tax rates
By retrospooty on 2/12/12, Rating: 0
RE: Corporate tax rates
By ebakke on 2/12/2012 10:43:15 PM , Rating: 2
quote:
I am just saying I do not believe the claim that 1/2 the country pays zero federal Taxes.
As others here have stated though, this is federal *income* taxes. So, your federal witholding (and your federal tax bill in April) still includes the payroll taxes that are separate. And at 7.5% paid by you (don't forget about the second 7.5% paid by your employer), that's still a decent chunk of money. So even if an individual isn't paying federal income taxes, they may still be paying federal payroll taxes. The stat from the Tax Policy Institute which was reiterated on just about every major news outlet was that 47% don't pay federal *income* taxes. It's 18% of people that pay no federal *income* taxes and no federal *payroll* taxes (though, presumably their employers are still on the hook for their 7.5%). Further, and probably unsurprisingly, more than half of that 18% is elderly people who more than likely don't work anymore.

And of course, all of this is completely separate from state taxes.

All of that being said, the stats I linked to aren't claims. They're facts.


RE: Corporate tax rates
By retrospooty on 2/13/2012 7:02:19 AM , Rating: 2
"47% don't pay federal *income* taxes. It's 18% of people that pay no federal *income* taxes and no federal *payroll* taxes (though, presumably their employers are still on the hook for their 7.5%). Further, and probably unsurprisingly, more than half of that 18% is elderly people who more than likely don't work anymore."

Thanks for the explanation. This makes more sense now. 18% including elderly sounds about right.


RE: Corporate tax rates
By ebakke on 2/13/2012 10:45:37 AM , Rating: 2
quote:
Thanks for the explanation. This makes more sense now. 18% including elderly sounds about right.
No prob.

Though, I'd argue that 18% including elderly is about 18% too much. Everyone ought to be on the hook for something.


RE: Corporate tax rates
By retrospooty on 2/13/2012 11:39:36 AM , Rating: 2
Well, that assumes they are retired, and therefore not making any actual income. They are living off of some combo of their 401k, Savings, Social Security.


RE: Corporate tax rates
By ebakke on 2/13/2012 1:27:07 PM , Rating: 3
Yeah, and I think taxation based on income is a bad way to do things. I'd much prefer taxation on consumption. Everyone, regardless of age or income utilizes the services provided by the government. As such, everyone should have some skin in the game.


RE: Corporate tax rates
By Reclaimer77 on 2/13/2012 12:15:05 PM , Rating: 2
quote:
Thanks for the explanation. This makes more sense now. 18% including elderly sounds about right.


So yeah, I'll be taking that apology any time now Retro :D


RE: Corporate tax rates
By Just Tom on 2/12/2012 10:24:19 AM , Rating: 2
Half the country pays no federal income taxes. Anyone with a legit job pays federal taxes. If you are sincerely doubtful about the income tax part I can find citations, but it has been pretty well written about.


RE: Corporate tax rates
By ebakke on 2/12/2012 11:21:22 AM , Rating: 2
RE: Corporate tax rates
By Keeir on 2/12/2012 2:13:35 PM , Rating: 2
Well... since payroll taxes really pay for your Social Security Retirement and Medical Insurance... paying no income taxes means you make no contribution to -rest- of the national spending.


RE: Corporate tax rates
By Ringold on 2/12/2012 5:24:12 PM , Rating: 2
quote:
Who are these 1/2 that pay no taxes, because I don't believe I have ever met one and this claim is that 1/2 of the US paid none. I call BS on this claim from the right.


The claim is 1/2 pay no INCOME taxes. Many get money back; the earned income tax credit. Everybody pays the others, obviously.


RE: Corporate tax rates
By Just Tom on 2/12/2012 8:57:09 AM , Rating: 2
Exactly where in my post did you see any declaration of war on tax payers? I am curious because I specifically said I want to lower tax rates.

Of course everyone with money hires tax lawyers. So what? It is a waste of resources to do so and the only reason it is done is because the tax code is so inefficient and riddled with special interest carve outs. Lower overall corporate tax rates is a good thing. It is marginal tax rates that matter not overall tax rates. Hell, I'd be ok with 0% corporate tax rates since the corporate taxes primarily come from worker compensation and dividends.

I fail to see anything leftist in my post. It is also the position of the Cato Foundation, the Heritage Foundation, and Arthur Laffer, and if they are socialists I missed the memo. Most conservative economists believe in flattening tax rates and eliminating most deductions and credits because it is more efficient.


RE: Corporate tax rates
By Mint on 2/12/2012 5:41:16 AM , Rating: 3
quote:
I don't know many "individual taxpayers" who generate billions of dollars of tax revenue.
That is a pretty inane argument. Intel has 100,000 employees. It's pretty easy to find 100,000 people that generate billions of dollars of tax revenue. That's why corporate tax has become such a small part of federal revenue. You think that just because they all work under one entity that we can compare it to a single individual?

quote:
If the idea to fix this is squeezing our largest job creators AND tax contributors for even more tax revenue, well I think we all know how that little story ends.
What, a balanced budget? More spending power for the middle class? A stronger economy? Oh, the horrors!

Let's get one thing straight: Corporate taxes do not harm employment, because salaries are deducted from companies' taxable income. If your company is taxed at 35% and projected to make at least $100M pretax profit over the next 10 years, you could be thinking it's a good idea to hire 100 people at $100k/yr to build some IP or other asset as opposed to taking in $65M in net income. If you're given tax breaks to make it 15%, the latter decision now pays $85M. That tax break is effectively the gov't paying your company $20M to NOT hire those people.

America's strongest growth and lowest unemployment happened when the tax rates were sky high compared to today.

You can go rant about subsidies, EV tax credits, overpaid unionized gov't workers, etc. but the fact is that they add up to small part of the budget, and the free market has failed to provide enough jobs, pensions, and health insurance to the people. That's why the majority of the federal budget is spent on unemployment, welfare, SS, and medicare. You can't cut any of those without completely f***ing over the poor, and tax breaks for corporations aren't going to do anything for jobs as I explained above.

This "unfairness to the rich" BS from the republicans has to stop. Automation and globalization made us more productive and finding general labor less useful, widening the wealth and income gap. That's fine, but there's nothing unfair about taxing them "more" to compensate (which is still less than 30-90 years ago), especially when they refuse to spend or hire.

Business only hire when they have demand for more production, and that's not going to increase with lower gov't spending in this economic climate. If unemployment gets below 6% again, then go ahead and cut back.


RE: Corporate tax rates
By Just Tom on 2/12/2012 10:37:08 AM , Rating: 2
quote:
America's strongest growth and lowest unemployment happened when the tax rates were sky high compared to today.


Yeah, correct, at least if you are talking the latter half of the 20th century. But Western Europe, the Soviet Union, and Japan were in ruins at that time so America basically had no competition and the built in demand of rebuilding whole economies.

quote:
Let's get one thing straight: Corporate taxes do not harm employment, because salaries are deducted from companies' taxable income. If your company is taxed at 35% and projected to make at least $100M pretax profit over the next 10 years, you could be thinking it's a good idea to hire 100 people at $100k/yr to build some IP or other asset as opposed to taking in $65M in net income. If you're given tax breaks to make it 15%, the latter decision now pays $85M. That tax break is effectively the gov't paying your company $20M to NOT hire those people.


That is wrong. Marginal tax rates matter. Since wages are a deduction and not a credit taxes each dollar spent on compensation 'saves' only 35 cents in taxes. This has been fairly well established in economic literature. The following quote is from a KC Fed working paper.

quote:
III. THE EFFECTS OF STATE CORPORATE TAXES
Empirical analysis shows that corporate taxes reduce wages, and the magnitude of this effect increases over time. The results also find that high-skilled workers bear a larger burden from the corporate income tax than low-skilled workers.


http://www.kansascityfed.org/Publicat/EconRev/PDF/...

Corporations do not pay taxes. The taxes they pay result in lower compensation and decreased dividends. They also lead to inefficiencies as tax units try to minimize the tax bill as much as possible. Corporate taxes are one of the worst ways to raise revenue imaginable.


RE: Corporate tax rates
By Mint on 2/12/2012 11:16:25 AM , Rating: 2
quote:
That is wrong. Marginal tax rates matter. Since wages are a deduction and not a credit taxes each dollar spent on compensation 'saves' only 35 cents in taxes.
You're not proving me wrong in the least. If you reduce the rate from 35% to 15%, then that saving goes from 35c to 15c. If you're buying something and the discount goes from 35% to 15%, you're less likely to buy it.

Why on earth would wages be a credit? Profitable companies are getting something out of the labor, so it shouldn't be free. In my example, the company isn't sacrificing $65M in income for nothing. It's expecting to build assets/goodwill (resulting in an increase in market cap) worth, say, $80M. If, however, you reduce the tax rate, then it's not worth hiring to build that asset. It's better to just take the $85M in income.

quote:
Corporations do not pay taxes. The taxes they pay result in lower compensation and decreased dividends.
Lower dividends? Cry me a river. Lower compensation? Corporations are always trying to pay as little compensation as they can for a given amount of labor, and the decision to hire will depend on what a worker can build for them.

Like I said before, corporate taxes are a disincentive to avoid reinvestment (wages or equipment). It's a "use it or lose it" philosophy. You take away that disincentive, and they're happy to pocket the profits. Hence today's record profits amidst multi-decade high unemployment.

I'm not saying raise the rate above 35%. I'm saying it should be more than 12%.


RE: Corporate tax rates
By Just Tom on 2/12/2012 12:54:48 PM , Rating: 2
Investment is NOT consumption. I will try to make it easier for you by plugging in numbers. I will avoid inflation and financing costs to make it easier.

Lets invest 1B in a plant, the tax rate is 35%. We get to depreciate that investment over 20 years at an yearly tax benefit of 17.5M or 350M over the life of the plant.

Said plant produces a ROI of 5% or 50M per year. Viola, the tax bite is 17.5M per year and the tax incentive completely pays negates the taxes for the revenue incurred we end up making 0 over the life of the plant, (50M/year - 0Taxes/yr)*20 - 1B.

Lets keep the same assumptions but lower the tax rate to 10%. We get an yearly tax benefit of 5M or 100M over 20 years. Once again we make 50M per year, for a tax bite of 5M per year. The tax deduction negates the taxes and once again we end up making 0 over the life of the plant.

Now, lets change the ROI to 10%. Our yearly revenue is 100M at 35% taxes eat up 35M. Our tax benefit is still the same at 17.5M, so our yearly taxes are 17.5M. Over the life of the plant we will realize 650M (100M/YR-17.5)*20-1B.

Now, keeping the 10% ROI but using a 10% tax rate. Our yearly income is 100M, at 10% rate taxes eat up 10M. Our tax benefit is 5M, so our yearly taxes are 5M. Over the life of the plant we will realize 900M (100M/YR-5M)*20-1B.

I could continue with higher ROI or lower tax rates but the curve is pretty easier to imagine. The only scenario tax deductions for investment is better than a lower corporate tax rate is when ROI is very low. The higher the return on investment the more important the marginal tax rate is when compared to the value of the tax deduction.

quote:
Lower dividends? Cry me a river. Lower compensation? Corporations are always trying to pay as little compensation as they can for a given amount of labor, and the decision to hire will depend on what a worker can build for them.


Yes, this is right. But so what? There is empirical evidence that higher corporate tax rates depress compensation. The reason is simple: decisions on hiring/investment is done on the margin. And the higher the marginal tax rates the less likely companies are too hire workers or invest capital.

As far as dividends go, the biggest beneficaries of divend payments are large pension funds. The lower the dividends paid the less money available for pensions.


RE: Corporate tax rates
By Mint on 2/12/2012 2:54:17 PM , Rating: 2
You're subtracting the wrong initial investment. At 10% ROI and 35% tax, your investment earns $1650M, but the initial cost wasn't $1B, it was $650M, as that's the net income you would have earned without investing. At 35% tax, the $1.9B total income came from a true initial cost of $900M. As I said above, "use it or lose it". In both cases, the marginal advantage of investing was $1B.

But you are right about one thing: When ROI is low, a high tax rate encourages investment more than a low tax rate. Today's ROI is pretty low, and 10% is a dream right now. That's why the gov't is able to borrow at a rate less than inflation, and the fed can't implement QE through the banks despite them offering loans at rock bottom rates. There's no shortage of investment capital.

(You also used a tax credit instead of a tax deduction, but the trends are still the same.)
quote:
decisions on hiring/investment is done on the margin. And the higher the marginal tax rates the less likely companies are too hire workers or invest capital.
That's not a rational decision, as explained by my post above. The higher the marginal tax rate, the higher the relative value of a new hire. Imagine if you had a 90% tax rate. Would you pay $900M to the gov't and only keep $100M, or would you rather pay $1B to workers to build you something of value? Sure, that asset will also be hit with a capital gains tax, but that's lower. That's a huge incentive to employ. If you have 10% tax, then it's going to be a lot harder to come up with a reason to employ as opposed to taking profit.


RE: Corporate tax rates
By Mint on 2/12/2012 3:21:43 PM , Rating: 2
(Wait, ignore that second correction regarding the deduction. You did indeed calculate the tax benefit correctly.)


RE: Corporate tax rates
By Just Tom on 2/12/2012 5:13:31 PM , Rating: 2
quote:
(You also used a tax credit instead of a tax deduction, but the trends are still the same.)

No, I use deductions. A tax credit would imply that no matter what the tax rate was the tax benefit would always be 1B.Investments for capital goods are subtracted over a 20 year depreciation schedule. Allowing for 'costing', taking the full tax benefit of an investment in one year, of investments would make the tax deduction more valuable but would not change the basic premise. This is taught in every business and economic school in the country. Imagine two scenarios: Deductions for investment but 90% tax rates and no corporate tax rates at all. On any but the most miniscule ROIs companies would keep more profits with the zero tax rate. Lower tax rates spur investment for the simple reason that it allows people to keep more of the money that is earned.

Whether you take my word for it or not the fact that higher corporate tax rates, ceteris paribus, lowers compensation and investments is supported both empirically and through theory. Read the previous link I posted. Or this one which is an interesting analysis of the interplay between tax policy, tax rates, and investment.

http://research.stlouisfed.org/publications/review...


RE: Corporate tax rates
By Mint on 2/14/2012 10:12:28 AM , Rating: 2
Why did you ignore the rest of my post? I know I made a mistake with that statement, and acknowledged it right above your post.

quote:
Lower tax rates spur investment for the simple reason that it allows people to keep more of the money that is earned.
We're not talking about external investment. We're talking about internal reinvestment by a company. You repeatedly ignore the other side of the equation: Lower tax rates make profit-taking more attractive than investing/hiring.

Let me be more explicit with your example by separating the opportunity cost. A company has $1B in pretax profits, and is thinking about building a plant with 7% ROI.

At 10% tax rate:
Choice A: Take $900B profit, buy some safe 3% bonds. After 20 years, it has $900B + 20 * 3% * $900M * (0.9) = $1.386B
Choice B: Invest, and after 20 years, the company has $1.36B (same calcs you used).
The decision is to forget the headache of a new plant, as you'll make more money the easy route anyway. Investing is a $26M marginal loss.

At 35% tax rate:
Choice A: Take $900B profit, buy some safe 3% bonds. After 20 years, it has $650B + 20 * 3% * $650M * (0.65) = $903.5M
Choice B: Invest, and after 20 years, the company has $1.26B.
The decision is to invest, as it is a $350M+ marginal gain.

Make sense now?


RE: Corporate tax rates
By Ringold on 2/12/2012 5:43:51 PM , Rating: 2
quote:
Today's ROI is pretty low, and 10% is a dream right now. That's why the gov't is able to borrow at a rate less than inflation, and the fed can't implement QE through the banks despite them offering loans at rock bottom rates. There's no shortage of investment capital.


10% is hardly a dream. A quick search of various public firms shows ROI, ROC, etc. well above 10%. If a firm can't figure out how to beat 10% then it should reconsider its core competency.

As to the government being able to borrow, there's a weak connection between ROI and interest rate. Perhaps over the long term, yes. Short term, the developed world is practically on fire. Investors are concerned about return OF capital, not return ON capital in many cases. The US and Germany therefore are reaping the benefits. If it weren't for extreme risk aversion, then the obvious choice would be to simply buy the S&P500 index, as it has a higher yield with potential for asset growth. Some of its irrational, though only 'some'. If Greece exits the Eurozone, and the markets force Portugal, Spain and Italy out, then German bunds and American treasuries are about the only things people do trust to be paid at par. Thats why the Germans managed to sell some bunds at a negative interest rate and why the Treasury is starting to put the mechanisms in place for negative rate auctions here as well.

Transmission of QE to the wider economy has also got other problems, like banks that are trying to grow core capital through profits to boost safety margins or deleverage rather than lend every dime they can.


RE: Corporate tax rates
By Ringold on 2/12/2012 6:02:03 PM , Rating: 2
To reinforce my point about government bond yields, the headline at CNBC a few minutes ago was "Central Athens Ablaze as Parliament Passes Austerity Bill", but now I see they've toned it down. Still, fires raging throughout the Greek capital. The Eurozone house of cards could fall apart at the drop of a hat, THATS why the Fed (and Germans) can finance itself so cheaply.


RE: Corporate tax rates
By Mint on 2/14/2012 10:35:48 AM , Rating: 1
quote:
If it weren't for extreme risk aversion
You're ignoring risk? What kind of BS ROI figures are you looking at if you're not weighting risk?

10% ROI is not easy at all. Companies and individuals would not holding onto $10T+ of public debt - much of which is earning LESS than inflation - if they could earn 10% by investing instead. By comparison, the entire US stock market is worth $14T, so there's a lot of rich people having trouble finding 10%.

If you could give me 10% average ROI, I'd give you a 4% kickback. Of course, 90%+ of the people saying that they can get 10% are full of shit.


RE: Corporate tax rates
By Keeir on 2/13/2012 4:36:26 AM , Rating: 2
quote:
Corporations do not pay taxes.


100% true.

A Corporation is a non-corporeal entity. As such, it can provide no labor to anyone. (Money after all when you get right down to it is a stand-in from labor)

Any and all "taxes" that a Corporation pays are taken either from its customers, its workers, or its investors. People in favor of higher corporate tax rates try to sell you on the concept it comes from the investors. Since the investors are typically in control of the company though... I have trouble believing this is reality.

In truth, corporate taxes come from each of the three buckets. But are used to justify in part the significant reduction of tax rates on dividends and other types of investor income. I think the US would be better off if we had 0 corporate tax rate, but enforced a proper income tax scale on Dividend and Capital Gains.


RE: Corporate tax rates
By Ringold on 2/12/2012 5:31:54 PM , Rating: 2
quote:
If you're given tax breaks to make it 15%, the latter decision now pays $85M. That tax break is effectively the gov't paying your company $20M to NOT hire those people.


I could scour the internet for the rest of the day and fail to find someone that means what they said that much and yet was so totally wrong in their logic. Where on Earth did you learn an economic theory that lays that out? I don't even see how you can link taxes explicitly to a "invest or pay dividends to shareholders/owners" decision. I think anyone that took a first year econ class at anything other than a Marxist/arts college can see that if a company sees an opportunity for strong future growth and has 65m cash, it'll invest it if the projected returns on capital or equity justify it. Likewise, if they have 85m and the projected returns justify it, they'll invest the 85m.


RE: Corporate tax rates
By Reclaimer77 on 2/13/2012 2:44:05 PM , Rating: 1
Liberals don't use economic theory. They sorta just wing it and go with whatever feels best at the time. Or gets them more votes.


RE: Corporate tax rates
By Mint on 2/14/2012 11:02:32 AM , Rating: 1
You're free to try to disprove my math and logic. Unlike you, I'm not hiding behind talking points and handwaving bullshit. The example is right there for you to pick apart.


RE: Corporate tax rates
By Mint on 2/19/2012 10:40:58 AM , Rating: 2
Who's the coward that rated me down? Go ahead and disprove my example. The numbers are right there. Low corporate taxes encourage profit taking and discourage reinvestment.


RE: Corporate tax rates
By Mint on 2/14/2012 10:53:58 AM , Rating: 2
I'm sorry, did I break your brain with that math? Pay more attention and prove me wrong with logic and math rather than your appeal to fabricated authority.

Only idiots fail to see the link. I know plenty of business owners that make the same decision: My company is having a good year, and I could take X in profit, but then I'd have to pay Y in taxes, so I'd rather put X+Y back into the company. The smaller Y is, the weaker the argument becomes.

If $100M in labor can build $80M in assets, then hiring that labor makes sense for a profitable company with tax rate over 20%. If the tax rate is under 20%, then you lose money with that hiring, so you don't do it.


RE: Corporate tax rates
By toyotabedzrock on 2/13/2012 6:17:51 PM , Rating: 2
Intel moved its factories back to the US.


Do some digging
By mojo_hk on 2/11/12, Rating: -1
RE: Do some digging
By Beenthere on 2/11/2012 10:29:19 PM , Rating: 2
NO Mojo -

Intel needs to play by the same laws as all companies, pay their proper taxes and not violate anti-trust laws.

Those Fabs/jobs you talk about tend to be in other countries not in the U.S. If Intel can't operate their business legally they don't deserve to be a leader in the electronics or any other industry, especially at the expense of reputable companies who they've tried to eliminate via violation of anti-trust laws.

Supporting a criminal corporation is not only ignorant it's costly to all consumers.


RE: Do some digging
By Reclaimer77 on 2/12/2012 10:00:23 AM , Rating: 2
See? Anything less than an extreme anti-business position is voted and shouted down here. I don't know who this Mojo guy is, but he doesn't have a history of being a corporate shill or something.

quote:
Those Fabs/jobs you talk about tend to be in other countries not in the U.S.


Because they CAN'T be in the U.S. Intel's CEO already spoke about this. He would love to build a major fab here, but it would cost over a billion dollars more to build one here as apposed to oversees. And the regulatory mess involved means taking years just to get all the approvals and permits and environmental impact studies done just to get permission to build it. Intel can't wait years and pay billions more when there are better options.

We've regulated ourselves out of being competitive. Stop blaming the companies, blame yourself for supporting it.

quote:
Supporting a criminal corporation is not only ignorant it's costly to all consumers.


Oh please. Are you an AMD fanboi or something? You break laws, you pay a fine, life moves on. There's nothing "criminal" about Intel, stop being so goddamn dramatic.


RE: Do some digging
By retrospooty on 2/12/2012 12:45:10 PM , Rating: 2
"Because they CAN'T be in the U.S. Intel's CEO already spoke about this. He would love to build a major fab here"

Intel is building a major fab here in Arizona right now. They have 2 and are building another. It is currently the largest commercial construction project on Earth, and its in Chandler AZ.


RE: Do some digging
By Reclaimer77 on 2/12/2012 2:57:19 PM , Rating: 2
"I can tell you definitively that it costs $1 billion more per factory for me to build, equip, and operate a semiconductor manufacturing facility in the United States," Otellini said.

This is what Intel CEO Paul Otellini said in 2010. So I'm just going on the assumption that he knows more about running Intel than I do.

However that's great news! Do you know what kind of facilities they'll be and what AZ sweetened the pot with?


RE: Do some digging
By retrospooty on 2/12/2012 3:25:57 PM , Rating: 2
free heat ;)


RE: Do some digging
By ilt24 on 2/13/2012 11:09:08 AM , Rating: 2
I'm not sure where your quote come from, but Intel currently has two factories (wafer fabs) under construction, both in the U.S. (OR and AZ). They announced plans to build the OR factory in 2010. The one in AZ they said would cost $5B.

see...

http://newsroom.intel.com/community/intel_newsroom...

http://newsroom.intel.com/community/intel_newsroom...


RE: Do some digging
By Reclaimer77 on 2/13/2012 7:02:02 PM , Rating: 2
It came from his own mouth. You think I'm making this stuff up? Google it.

I don't think he was saying Intel couldn't build here. I think he was trying to make a point about the economic conditions here and why our manufacturing is so poor. Intel can afford to spend $5B to build here, but so so many cannot or would simply choose not to.

Ninety percent of that additional cost of a $4 billion factory is not labor but the cost to comply with taxes and regulations that other nations don't impose.


RE: Do some digging
By ilt24 on 2/14/2012 9:06:46 AM , Rating: 2
I was accusing you of anything, you didn’t provide where your quote came from and I was pointing out that in 2010 Intel did announce and start to build a factory in the U.S. so it seems as you said his statement was more of a point than a statement on what Intel was doing.

I think he was trying to make a point about the economic conditions here and why our manufacturing is so poor” while I think that is true with most types of manufacturing, I’m not sure about leading edge semiconductor manufacturing. The cost to produce leading edge wafers is mostly the depreciation on the manufacturing tools. Costs for labor, taxes, power, water and other consumables are dwarfed by the depreciation.

Intel’s factories are in the U.S. (6), Ireland (1), Israel (1) and China (1). Other than China you are looking at similar taxes and regulations in the other countries. I have seen articles that say the reason Intel built in China was because the Chinese government provided very significant grants for the factory; which is limited to 65nm by technology export rules and a good number of the manufacturing tools were relocated from some of their other factories that were being upgraded to newer processes.


RE: Do some digging
By stadisticado on 2/12/2012 4:00:41 PM , Rating: 2
This is also technically incorrect. Intel is also nearing completion on an identical fab to the AZ one in Hillsboro, OR.

Both of these plants are targeted at absolute bleeding edge tech (14nm, 10nm and 450mm wafers eventually) and will generate 3000+ direct full time jobs.

Now, the tax benefits they're receiving from the localities is a really interesting question. But, you've got to imagine that Intel jobs provide a better boost to the economy than say, yet another city funded stadium.


RE: Do some digging
By Beenthere on 2/12/12, Rating: 0
RE: Do some digging
By Reclaimer77 on 2/12/2012 3:25:46 PM , Rating: 2
When you use terms like "slave labor" you come off as a radical with an axe to grind. Got no time for that bud.


RE: Do some digging
By Ringold on 2/12/2012 5:56:29 PM , Rating: 2
Right, people blame Foxconn for offering jobs that were apparently good enough to get those people to move off the rice paddies where they were before, and blame Foxconn for their own governments failures in other areas, like treating migrant workers as 2nd class citizens in the cities, refusing them health care and access to education for their kids. Easier for the left to demonize companies -- while using their iPhones.


RE: Do some digging
By Beenthere on 2/12/12, Rating: -1
RE: Do some digging
By Reclaimer77 on 2/12/2012 6:58:33 PM , Rating: 2
I thought when Westerners forced our outlook on the rest of the world, we were being "imperialists"?

As an American, the worker protections and labor laws, or lack thereof, in China are appalling of course. However it's simply rhetoric to call it "slave labor". And, of course, China isn't America.

quote:
ANY company that uses Chinese slave-camps should be boycotted by consumers.


These are some of the best jobs in China. To us they might be slave camps, but again, in China they aren't. Stop forcing your view on the rest of the world.

You make it seem as if the Commies at Foxconn drive a truck into your village and force you into a job at gunpoint. If Foxconn is so terrible by their standards, why are they flooded with applications at their job fairs? Yes, gasp, they hold JOB FAIRS. Not concentration camps.

Here's a hint. Slaves and "labor camps" don't take applications. People are forced into it. Until you stop using emotionally driven rhetoric and debate this logically, you sound like a loon with an axe to grind.

quote:
Why do you think over 250,000 people have already signed a petition for Apple to supply an ETHICALLY produced iPhone?


250,000 idiots who want their toys but just don't want to be reminded at the scale of economics involved in making millions of iDevices a month.

There will never be an "ethically" produced iPhone because there's nowhere else on the planet the iPhone can currently be made and still satisfy the extreme demands from the consumers. The entire supply chain is in China. If you want to understand this better, here is an excellent read

http://www.nytimes.com/2012/01/22/business/apple-a...

Aside from outright declaring war on China, there's little we can do to improve the situation except for refusing to purchase almost all electronic devices. Neither seem very wise or realistic at this point.

quote:
Voting against slave-shops and criminal corporations is consumer's means to change the world for the better. Vote with your wallet.


Hypocrite. Foxconn doesn't JUST make Apple products. Chances are you own devices made there or have components in them from one of their supply partners. And if not Foxconn, than some other Asian company who uses "slave labor" from China. You sound like some kind of moron honestly. You haven't boycotted sh#t kid.


RE: Do some digging
By Ringold on 2/12/2012 10:18:29 PM , Rating: 2
quote:
If those Foxconn jobs are so great why are people committing suicide?


Good question. Why does anybody? I never said they were great you fool, I said they apparently were better then spending their lives knee deep in mud in rice paddies, living on dirt floors. Otherwise, why move to the city?

quote:
I think we should do an employee exchange program.


Why should we be subjected to that? The American people threw off the yoke of government and created a free society long ago. The Chinese, on the other hand, took one of the worlds leading economic powers and obliterated it by supporting communism and Mao Zedong. So, if their lives are crappy and lag their neighbors by half a century, it's no ones fault but their own.

quote:
ANY company that uses Chinese slave-camps should be boycotted by consumers.


Probably most of the worlds supply chain has a link in China. So, stop buying everything, RIGHT NOW.

quote:
Why do you think over 250,000 people have already signed a petition for Apple to supply an ETHICALLY produced iPhone?


Because they're well-meaning but economically ignorant? Best thing for the Chinese is what they're doing: slowly growing, seeing rapidly increasing wages and standards of living. In the last couple years, the urban classes even have enough time and money to start campaigning for environmental rules.

Anti-corporate trolls such as yourself would have them enforce labor, health and environmental standards that would price them all back to the rice paddies, forgetting that there's a few rungs on the ladder between destitution and advanced information-age economies.

And again, at the end of the day, the vast majority of those employees left their ancestral farms and the mud, rice, dirt floors and cow dung to move in to the gritty, corrupt, grinding but booming cities. Nobody forced them, and, truth is, the government there probably wished the transition happened a little slower. No one forced them there, and when I see urban factory workers interviewed none are surprised by their circumstances and say its still preferable to rural agrarian life. So, there you go.


RE: Do some digging
By ilt24 on 2/13/2012 11:15:57 AM , Rating: 2
quote:
If those Foxconn jobs are so great why are people committing suicide?


Yet the % of people working for Foxconn who committed suicide was lower than the % of people in all of China who commit suicide.

http://www.zdnet.com/blog/foremski/media-gets-its-...


RE: Do some digging
By Beenthere on 2/12/12, Rating: -1
RE: Do some digging
By bupkus on 2/12/2012 2:17:12 AM , Rating: 1
Then why not legalize the selling of currently illegal drugs? Imagine the profits and taxes that could be collected. Why, we'd be the envy of the world.


RE: Do some digging
By Just Tom on 2/12/2012 10:43:39 AM , Rating: 2
While I believe you are being sarcastic, why not legalize drugs? It is a massive waste of money that has justified massive police involvement in numerous aspects of life. It has criminalized personal behavior choices. It has allowed for a disjointed and discrimatory justice system with differential outcomes depending on your socio-economic strata (white middle class = rehab; poor and black = jail).


RE: Do some digging
By Mint on 2/12/2012 5:50:56 AM , Rating: 2
What makes you think Intel wouldn't have done those investments anyway?

A lower corporate tax rate is actually a disincentive to invest, as I explained in a post above.


RE: Do some digging
By Just Tom on 2/12/2012 11:03:38 AM , Rating: 2
quote:
A lower corporate tax rate is actually a disincentive to invest, as I explained in a post above.


So in your view a 100% tax rate would be the optimal level for investment? Perhaps companies would invest nothing if the corporate tax rates were 0%? Your view flies in the face of current economic thought and empirical evidence. Capital moves to places it is least taxed, assuming ceteris paribus. It is a major factor in the flight of capital from those states with significant state corporate taxes to those states without.

Investment costs should return much more than equal value. If I build a plant that costs 1B I get to depreciate that cost over 20 years for a tax benefit. But unless I get a very low ROI that benefit will be less than the added tax burden through the increased profits that plant provides. The tax deduction is nice but not as nice as having lower tax rates.


RE: Do some digging
By Mint on 2/12/2012 3:18:16 PM , Rating: 2
Well yes, obviously there are problems with 100% corporate tax, like flight to other countries, no company savings, etc. I'm not in favor of that, and never said I was. I explicitly said that I don't think it should be higher than 35% responding to you above.

However, a company could still run at 100% tax, as the CEO and employees could take salaries, and yes, it would be the ultimate driver for reinvestment. That takes "use it or lose it" to the extreme, and you'd want to spend every last dollar on new hires or deductible expenses or else that money disappears.

I was just pointing out that there's plenty of R&D that would go on without an R&D credit (BTW, didn't you want to simply the tax code above?). Imagine Microsoft trying to sell a console, thinking that it can sell 2M at $300 and 3M at $250. Effectively, it's selling those extra 1M consoles for $150. It better make enough money on software to make such a move worthwhile; similarly, the gov't better hope that the long term benefits of the marginal investment gain created by that credit pays for the lost revenue (i.e. it better pay for the long term effects of the debt incurred).


RE: Do some digging
By Just Tom on 2/12/2012 4:55:46 PM , Rating: 2
Yes, I am in favor of simplifying the tax code. What did I say that implies I was not?

The point in choosing 0% and 100% as end points is it allows one to visualize there is a curve with ROI on one axis and tax rate on the other. If Dailytech allowed posting of graphs I could show you such a curve. But the fact is after tax profits are higher with lower tax rates other than in situations where ROI is low. If you're skilled with excel it is pretty easy to punch in the numbers. Heck, you could change the scenarios with inflation rates and interest rates.

quote:
However, a company could still run at 100% tax, as the CEO and employees could take salaries, and yes, it would be the ultimate driver for reinvestment. That takes "use it or lose it" to the extreme, and you'd want to spend every last dollar on new hires or deductible expenses or else that money disappears.


Are you actually implying there would be economically significant investments at 100% rates?


RE: Do some digging
By Mint on 2/19/2012 11:14:57 AM , Rating: 2
quote:
The point in choosing 0% and 100% as end points is it allows one to visualize there is a curve with ROI on one axis and tax rate on the other.
First of all, using two extreme points is laughable. I've seen clowns "prove" the Laffer curve with that method, but such a proof has no bearing on reality.

Secondly, you're not calculating ROI correctly, and I pointed it out many places. If you have $1B in pretax profits that you're considering to reinvest, then the true marginal cost of reinvestment is not $1B, but $1B*(1-taxrate). A 90% tax rate means you can buy a $1B in labor or equipment by sacrificing only $100M in profit. The link you provided in an earlier post (St. Louis Fed study) says the same thing.
quote:
Are you actually implying there would be economically significant investments at 100% rates?
Not external investment, but internal, yes. If you had a business, would you rather pay all your profit to the gov't, or put all that profit back into your business (new hires or equipment) to expand it? Again, I am not advocating higher than 35%, let alone 100%, as businesses need some profit to stay solvent and external investment can't be eliminated.


RE: Do some digging
By Beenthere on 2/12/2012 3:59:43 PM , Rating: 2
Intel's criminal behavior has nothing to do with creating jobs. Intel CHRONICALLY violates law for PROFIT.

The way anti-trust laws should be is if a company continues to violate law, after the second offense the CEO goes to prison and the company is fined it's full annual revenues. If they continue to violate anti-trust laws then the execs also go to prison and the company is fine treble their annual revenues. If they can't pay, they get shut down.

If Intel can't operate within the laws of society and be profitable, they need to change their Biz model. Violating law for PROFIT has to come to an end for Intel and every other unscrupulous company trying to eliminate a free marketplace thu chronic violation of law.

Intel needs to stop commiting U.S. tax fraud also and pay their fair share like other businesses. Since CEOs are now responsible for proper financial statements then they should also be held accountable for payment of proper U.S. taxes. False or improper tax deductions should require the CEO to go to prison plus treble damages.


RE: Do some digging
By stadisticado on 2/12/2012 4:03:29 PM , Rating: 2
While we're on the subject of cheating on taxes - would these rules you propose also be in effect for our wonderful elected officials?


RE: Do some digging
By Beenthere on 2/12/2012 5:44:29 PM , Rating: 1
All who cheat should go to prison IMO.


RE: Do some digging
By Reclaimer77 on 2/12/2012 7:11:43 PM , Rating: 2
Yes yes, we know you hate Intel. We'll just lock their CEO's in jail take away their ice cream privileges. That will show em!

quote:
Intel needs to stop commiting U.S. tax fraud also and pay their fair share like other businesses


????

Intel is in the top 5 for U.S taxpaying companies. They pay more in taxes than Apple, while grossing less profit. Wtf are you talking about?


RE: Do some digging
By Beenthere on 2/13/2012 2:20:54 PM , Rating: 2
I hate all criminal corporations. Your Intel fanbois defense is laughable. Three Strikes laws should apply to corporations who are chronic violators. Otellini and other execs who violate laws for profit should go to prison like any other criminal.

Singing Intel's praises does not change the fact they are habitual convicted criminals out to exploit consumers with the highest prices they can get away with while illegally trying to eliminate all competition.

Smart people vote with their wallets against criminal corporations!


RE: Do some digging
By Reclaimer77 on 2/13/2012 2:41:26 PM , Rating: 2
Okay Judge Dread. You go get all the "criminals" for us lol. AHAHAHA!!

I love this kid. Full of piss and vinegar, but dumb as a rock.


"There is a single light of science, and to brighten it anywhere is to brighten it everywhere." -- Isaac Asimov














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