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A letter they didn’t publish

Can’t think why they didn’t myself:


David Leonhardt tells us that “cash taxes paid” is the correct measure for how much tax a corporation is really paying. This is nonsense. Using this measure his employer, the New York Times Company, appears to have had a tax rate of 63% in 2014, $21 million cash taxes paid on $33 million of profits. Good going in a country with a national profits tax rate of 35%.

The corporate income tax is largely paid in arrears. Cash paid in taxes in 2014 will largely be the taxes due on profits made in 2013. Those paid in 2015 those due from 2014. The system does not exactly work in this manner but largely so.

Thus companies whose profits are growing quickly will, by the cash taxes paid method, always have low tax rates. Those maintaining a humdrum stability will have rates near the statutory one. Those where, unfortunately, profits fall year on year, as with the NYT Co in 2014, will have rates well above the statutory rate.

This is not a sensible method of determining whether a corporation is paying what it really should.

Yours etc,

Tim Worstall

But I guess that even the NYT letters section works on a less than 5 year cycle so they’re not going to publish now.

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