Where is the US economy headed?

In the first place the report you cited itself emphasizes the fact that most of the tax breaks are concentrated in a few companies serving markets the federal Government particularly favors. Note the fact that 50% of the claimed tax breaks among the 270 companies were concentrated in just 25 of them.

A good deal of what the article cites is mere semantic games designed to make the results more enticing to uncritical and credulous readers and those like yourself looking for verification of an a priori opinion. For example, depreciation is a real cost and treating it as such is not only required by the FASB accounting standards but also representative of real cash outlays amortized over the useful life of the equipment purchased. The government has on occasion enacted "accelerated depreciation" of new plant & equipment in order to stiumulate business investment -- in effect directly acknowledging the adverse effect of taxes on business investment. The options valuation part is yet another semantical deception in the article. Valuing the options when they are exercised is the best measure of the real cost to the company, and it is consistent with the models used for the valuation of stock companies.

The other loopholes are mostly actions by the government, either for its own convenience or to pick winners and losers in our economic life for political reasons.
1. The defense industry was consolidated into just a few companies soon after the Cold War ended, in major part as a result of government direction. These companies are, from an accountiung perspective, distinct from their parent companies and for the most part sell only to our government. The tax breaks are there to compensate for the high uncertainty in government procurements and the high R&D costs the companies must pay to remain competitive. Moreover, it suits the Congress to reduce the tax bill they pay and therefore the money they spend on their products. For their part the defense industry has become adept at pleasing powerful Congressment by building plants in their districts and reaping other favors in return. The late John Murthas was a master at this game.
2. Other loopholes are there to suit government policymakers. GE under Jeff Imelt has mastered the art of cozying up to the current administration and is raking in large sums on tax breaks for wind turbines and solar cells. Indeed these industries wouldn't exist at all if it weren't foir such tax breaks and other hidden subsidies (such as California's requirement that 1/3rd of electrical power be generated from "renewable" sources) precisely because they are themselves uneconomic, costing far more than therir alternatives. In effect these tax breaks and mandates transfer the cost of these favored (by government) products to other consumers and other goods & services.

My essential point was these loopholes don't apply to the vast majority of companies in this country that provide the goods and services you consume and which we depend on to end the unemployment that has gripped the country for the past 18 months. The article you cite reinforces that point.

George, I am not incorporated, but over the past 2o some years of being in business, I have paid approximately 20 to close to 30% in taxes of net taxable profits, including both social security and income taxes. I have not added them all up, but I think it is safe to say I've paid in more than a third of a million dollars in income tax and FICA over that period of time. Those are just my taxes, they do not include all the taxes paid on behalf of my employees over the years, or things like personal property taxes paid to the local authorities, or sales taxes paid in the course of doing business.

In my view, it would be silly to think that reducing taxes on business would not increase the liklihood of them being able to hire more employees or increase the hours of currently part time employees, to perhaps either increase the output of the business or to increase efficiency of the business. Not every business would hire more people, but some would, and it would end up being some percentage of net gain. I have advocated and I honestly believe that eliminating all income tax on business would stimulate one of the largest if not largest economic booms ever seen in this country. We could collect the taxes from individuals, not businesses.

Overall, I am not unhappy with how business has treated me, I have made a living for many years, but it is not a way to becoming a millionaire, I can tell you that, but I've never had any desire to become rich or a millionaire anyway. I have kept business smaller and more manageable by design because I have always felt that there was more to life than working 24 hours per day, such as family, friends, and some free time to do other things. But essentially, those people that have never run a business are mostly clueless about business and how things really are, and most of them generally do not understand the realities of taxes and how they impact business and employment.

I also don't understand why, if as the Republicans claim, these tax cuts are the secret to job growth, two Bush terms only saw the number of jobs grow by 1.1 million, when jobs grew by 22.7 million under Bill Clinton, at the same time that taxes on the rich were higher. And that's according to the Pulitzer Prize-winning Politifact.com, which fact-checked a Bush-Clinton job-growth comparison made by liberal Democratic Sen. Sherrod Brown, and found he was wrong – he actually overestimated job growth under Bush.)

I checked with wiki because it's been 25 years since I took accounting:

In accounting, profit is the difference between price and the costs of bringing to market whatever it is that is accounted as an enterprise (whether by harvest, extraction, manufacture, or purchase) in terms of the component costs of delivered goods and/or services and any operating or other expenses.

Perhaps, the secret behind the astronomical rise in executive compensation is that increasing the salaries of CEOs, CFOs etc., increases the cost of doing business, thereby decreasing profits, thereby lowering the tax burden.

The answer lies in the fact that tax rates are only one factor that overlays all other economic factors, so that it should be easily understood by most folks that tax rate reductions will not necessarily turn an otherwise bad trending economy into an extremely robust one, it will only improve it over what it would have been otherwise. For example, the downward trending economy due to 9/11 would have gotten much worse without tax rate cuts. One industry that could vouch for that was the travel industry, as it basically tanked almost completely after 9/11, especially some sectors of it.

Similarly, the dot com bubble caused job growth for Clinton, but it all had to be compensated for in a burst of that bubble later. The economy is not a 1 to 1 relationship to tax rates, but tax rates is but one very important factor that does in fact have a significant impact upon the economy.

Profit is the difference between business income and business expenses. There is gross profit and taxable profit. Taxable profit is different than gross profit because not all the factors of selling have been included, such as the cost of inventory and amount of inventory on hand.

The answer is obvious. There are many factors, of which tax policy is one, that affect employment and job creation. Politicians and advocates of particular views are very adept at taking credit for events whose origin preceeded them and in selecting comparisons favorable to their point at the moment, but in fact offering very little in the way of truth and light.

Clinton presided over a rather golden era - the Cold War was over and no serious challenges yet confronted a very dominant America. The next decade was and is much different.

What statistics will you cite about the Obama era? I find it odd that many Democrats are so quick to claim credit for the prosperity of the 1990s as the product of an enlightened president (with no credit to the Congress led by the opposing party), and equally quick to blame the troubles of the current era on the previous decade and those in power then. (I also find it depressing when Republicans do the same thing.)

The truth is many elements of today's world do indeed have their roots in actions (and inaction) of years past. However some don't. It is often hard for the best and most honest of us to tell the difference.

okie, When you say income and business expense, that includes the cost of inventory. Inventory on hand is an asset.

That is true. A business can take profits and invest it into more inventory instead of money in the bank. So at the end of a year, if inventory is much higher than at the end of the previous year, the cost value of that inventory is the same as cash in the bank.

I'll agree with that! What carries forward from past president's economy that impacts any future economy is difficult (if not impossible) to assess. People can only guess, but negative trends such as an increase in unemployment that carries over to any subsequent president based on what we understand about the previous' presidents economic policies and its impact can be assumed where it belongs. We will still find "expert" economists disagreeing, because economics is not science.

No, it is not. Many businesses depreciate on-hand inventory for many reasons.

How can you you happen to be on this forum and be so logical and reasonable at the same time? It seems so unusual.

Perhaps they do, but I think they would need to have adequate reasons for it, that are permissable under IRS rules and regs. I am not familiar with that, because I have never engaged in it. It seems like the inventory would have to be shown as degraded and less valuable due to age, or unsalable or some such thing?

okie, I was an Accountant in a previous life.

You can depreciate inventory? I was under the impression it never became any kind of expense till sold - except in the case of merchandise who's value was permenantly impared. Thirty megabyte hard drives could be written to zero, for example.

Congrats for that, ci. In a corporation I worked for, we used to call you guys "bean counters."

roger, Fair question. Many companies depreciate inventory for many reasons. Some times it can be old and outdated inventory. Some times it's because they are overstocked, and wish to move inventory out by sales. At other times, it can be a fire-sale to close out the merchandise. Those write-down of inventory reduces the original cost of the merchandise as a credit, and the debit is the expense for the accounting period.

Okay. I distinguish between write-down and depreciate. One is a special entry due to special circumstances. Depreciation is a routine adjusting entry.

They're handled the same way on the books.