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Remember the Laffer curve? The cornerstone of supply-side economics, it was a visual representation of the idea that tax revenue could in many cases be increased by lowering corporate tax rates. That was the idea behind Bush's $136 billion corporate tax cut in 2004 and, more recntly, he's pushed for another big cut. How's that working out for ya? The Wall Street Journal sums it up (subscription required): "With turmoil rocking financial markets and housing woes slowing the economy, corporate tax revenues are falling and leaving big holes in the federal budget."

Corporate income tax revenue for the first seven months of the fiscal year plummeted 14.7% while government outlays increased 7.3%. The budget deficit increased a stunning 88%.

What's the solution to this mess? That's right: send people a check for a few hundred bucks, hoping that they'll go buy a plasma television or a diamond-encrusted vibrator.

Does any of this make sense to anyone?

Corporate tax revenue plummets 14.7% originally appeared on BloggingStocks on Tue, 13 May 2008 17:09:00 EST. Please see our terms for use of feeds.

Read | Permalink | Email this | Comments]]>bdugetCorporate taxesCorporateTaxesinthenewsTaxesTue, 13 May 2008 17:09:00 EST<![CDATA[How IBM saved $1.6 billion on taxes]]>http://www.bloggingstocks.com/2007/06/07/how-ibm-saved-1-6-billion-on-taxes/http://www.bloggingstocks.com/2007/06/07/how-ibm-saved-1-6-billion-on-taxes/http://www.bloggingstocks.com/2007/06/07/how-ibm-saved-1-6-billion-on-taxes/#commentsFiled under: , , ,

International Business Machines Corp. (NYSE: IBM) came up with such a clever way to save $1.6 billion on its taxes that the IRS plans to shut down the loophole.

As the Wall Street Journal [subscription] explains, IBM used some creative but legal maneuvering in structuring a $12.5 billion stock repurchase. First, Big Blue formed a new subsidiary in the Netherlands. Then it spent $1 billion in cash and $11.5 billion in borrowed funds to buy 111.8 million shares. By doing so, IBM avoided having the money subject to higher U.S. corporate tax rates.

Experts are divided on whether the IRS will fight IBM but Fortune 500 companies run in packs. If one company came up with a clever way to reduce taxes, others will copy it.

As the presidential election kicks into high gear, candidates from both political parties are going to make noise about ending corporate welfare and making the tax system more equitable. Companies such as Tyco International Ltd. (NYSE: TYC) that are based overseas for tax purposes are going to get special scrutiny.

There's no escaping death and taxes even for members of the Fortune 500.

How IBM saved $1.6 billion on taxes originally appeared on BloggingStocks on Thu, 07 Jun 2007 12:12:00 EST. Please see our terms for use of feeds.

Read | Read | Permalink | Email this | Comments]]>corporate taxesCorporateTaxesibmirstax policytaxesTaxPolicytycoThu, 07 Jun 2007 12:12:00 EST