Immigrating to the U.S., living in the U.S., and being a taxpayer provides profound insights. In the U.S., paying taxes is the starting point for many things!Therefore, for those currently considering immigration to the U.S., taxation has become a key focus. Let us take a look at a recent report. In 2015, the ten most profitable companies in the U.S. were Apple(109.85, -2.25,-2.01%), Berkshire Hathaway, JPMorgan Chase(61.87, -0.72, -1.15%), Wells Fargo(48.25, -0.54, -1.11%), Gilead Sciences(98.29, 0.10, 0.10%), Verizon(51.35, -0.01, -0.02%) Communications, Citigroup, Bank of America(14, -0.14, -0.99%), Alphabet (formerly Google(759, 5.80, 0.77%)), and ExxonMobil(84.97, -0.46, -0.54%).
Forbes reported that these companies generated a combined annual revenue of 665 billion USD and created 175 billion USD in profits. Meanwhile, they paid over 60 billion USD in taxes.
This result is quite different from a year ago, when Walmart (69.06, 0.26, 0.38%) was still among the top ten. In 2014, the top ten most profitable companies paid a total of 80 billion USD in taxes, while in 2013, the figure exceeded 100 billion USD.
The largest taxpayer that year was Apple, with 68 billion USD in profits and nearly 13 billion USD in taxes, exceeding the 10 billion USD paid in 2014. Berkshire Hathaway paid 4.5 billion USD in taxes, and ExxonMobil paid 7.3 billion USD—significantly lower than the 18 billion USD paid in 2014 due to the collapse in oil prices.
Gilead was a new addition to the list this year, with 18 billion USD in profits and 3.5 billion USD in taxes. Their inclusion is mainly attributed to the strong sales performance of their hepatitis C drugs.
Of course, not all taxes were paid to the United States. These multinational corporations have numerous tax lawyers who help them find various ways to reduce their tax burden by allocating profits among international subsidiaries. Since the U.S. corporate tax rate is 35%, which is higher than in many other countries, companies often choose to keep overseas profits abroad rather than repatriating them to the U.S. The overall effective tax rate for the top ten most profitable U.S. companies is approximately 25%. Data from FactSet shows that Gilead and Alphabet (Google) have the lowest effective tax rates, at as low as 16.4%.
Corporate tax rates have also changed significantly over the years. The maximum U.S. corporate tax rate in 1909 was only 1%, rising to 10% a decade later, surging to 40% during World War II, reaching a peak of 54% in the 1960s, and being set at the current 35% in 1993.
Taxation is one of the topics Americans care about most, and calls for reform are constant. In short, the federal government receives approximately 350 billion USD in corporate income tax annually, while individual income tax is nearly 1.5 trillion USD, plus 1 trillion USD in contributions to Social Security and other benefit programs. The Treasury Department expects federal revenue this year to be 3.18 trillion USD, while expenditures are close to 3.8 trillion USD.
So, where exactly does the spending go? The top ten areas for budget appropriations are as follows:
Department of Health and Human Services (various medical insurance programs, Food and Drug Administration) — 1 trillion USD
Social Security Administration — 950 billion USD
Department of Defense — 570 billion USD
Interest on National Debt — 300 billion USD
Department of Veterans Affairs — 160 billion USD
Department of Agriculture — 150 billion USD (including 70 billion USD in food stamps)
Department of Education — 100 billion USD
Office of Personnel Management — 95 billion USD
Department of Transportation — 80 billion USD
Department of Labor (employment training, pensions) — 53 billion USD
These are the major items of U.S. government spending; Capitol Hill only needs 4.9 billion USD, and President Obama only needs 400 million USD.
Although the formulation of corporate tax laws is the responsibility of Congress, presidents and candidates often express their own views. What do the current presidential candidates think? Sanders wants to raise tax rates, and significantly so. Hillary wants to "close corporate tax loopholes." Trump wants to lower the corporate tax rate cap to 15%. Cruz wants a 16% "flat corporate tax rate" while abolishing payroll taxes.
Jobs has always been an advocate of a flat tax rate. His view is:
"The federal tax code is simply hopeless. We should abolish it and replace it with a flat tax rate. My tax proposal is to set a 17% flat tax rate, giving individuals and families generous deductions (the first 46,000 USD of a family of four's income would be tax-free). That is the point—no savings tax and no death tax. The federal tax rate should be lowered to 17% so that capital investment would immediately increase. A flat tax rate has many other advantages."
Speaking of tax issues, Benjamin Franklin's words are the most classic:
"Friends and neighbors, the taxes are indeed very heavy, and if those laid on by the government were the only ones we had to pay, we might the more easily discharge them; but we have many others, and much more grievous to some of us. We are taxed twice as much by our idleness, three times as much by our pride, and four times as much by our folly."