Thursday, October 21, 2010

“Don’t be evil” Is paying low taxes evil?

News came out the Google, inc. only pays taxes at a 2.4% rate. The corporate tax rate in the US is 35% which is higher than almost all the other industrialized countries. So an industry of reducing your taxes is the game many companies play. These games use to be played by individuals in the U.S. when tax rates were as high as 70%. The tax rates were lowered to 39.6 (later to 36%) under Reagan but the loop holes were also taken away.

In the Bloomberg article ( the flow of franchise fees to Ireland, then the Netherlands and finally ending up in Bermuda create the 3.1 billion dollar reduction in taxes for the technology giant. By the way the whole flow of income was approved by the IRS in 2006 so there is nothing illegal about this under current U.S. tax laws.

The motto of Google is “Don’t be evil” and the article challenges that by including a quote by a professor of accounting, “flying a banner of doing no evil, and then they’re perpetrating evil under our noses,” can only be a legitimate question if you believe that all income is the governments.

When Google pays low taxes, it frees up more money for investment (paying other people and increasing their taxable income), increase dividends (which are taxable) or just pay their own employees more money (more taxable income) so it will eventually make its way to an income tax return and the government, just not in a way that progressives or anti-corporate types would like it to.

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