Thanks Swan,
I see that a lot of you guys are enjoying this discussion about taxes/socialism/corporations and profits. I feel this topic is fairly close to the subject of this thread, because it addresses the unequal advantage that corporations enjoy, especially down south in the United States of America.
I have serious doubts about the 'claimed health' of the NBA. It's footprint is far greater than it has ever been in the history of the league. The revenues of the league have grown substantially and are at a record high historically. However, Stern still claims that the expenses far exceed what they once did. It's hard for me to believe that, considering I followed the league in the late 90's and early 00's and know that sort of contracts that the league could afford to pay back then.
The CBA's have increasingly favoured the owners, and the revenues continued to escalate. Add all this up and its difficult to believe Stern and the league (especially when they are not forthcoming about their books). Now they want to payout like the NHL, while enjoying the revenue streams and TV contracts of the NBA.
So let me show you guys some figures of how other corporations are making out in this environment, and how IMO, the NBA Management has to be incredibly incompetent not to take advantage of these loopholes that every other corporation is taking advantage of. I already pointed out that in November of 2008 Congress passed a stimulus bill that allows ALL corporations to write off their capital expenses 100% in the first year. This means that the NBA has been taking advantage of this loophole during 2009 and 2010 seasons.
Operation profits/loss are not the indicators of the success of a corporation. Often corps will acquire assets and make capital investments that put an operational loss on the books. However, when you look at their capital asset footprint (the valuation), the overall business is worth considerably more. There have been estimates that NBA franchises appreciate at 10% year to year. On a 300 Million dollar property this means 30 Million, so showing a loss of 5-10 million is not a big deal in light of these sorts of appreciations.
Just to give this perspective, in the 70's an NBA franchise could be purchased for as little as 100K. Now the worst one with the a serious loss record is valued at 286 Million (Charlotte Bobcats according to Forbes).
Hence it is very easy for owner to increase their capital and make the players pay for the cost of the money by claiming inordinate expenses that keep them from showing a profit. Most teams have very diverse portfolios, some own their own channels and media assets. Web presence also adds revenue streams that were not enjoyed in the past and allows the NBA to reach markets that previously were untapped.
To show you guys how easy it is to fudge your books and take advantage of loopholes I present this list that I copied from Bernie Sanders, Senator from Vermont's website.
(1) Exxon Mobil. In 2009, Exxon Mobil made $19 billion in profits. Not only did Exxon avoid paying any federal income taxes that year, it actually received a $156 million rebate from the IRS, according to its SEC filings.
(2) Bank of America. Last year, Bank of America received a $1.9 billion tax refund from the IRS, even though it made $4.4 billion in profits and just a couple of years ago received a bailout from the Federal Reserve and the Treasury Department of nearly $1 trillion.
(3) General Electric. Over the past five years, while General Electric made $26 billion in profits in the United States, it received a $4.1 billion refund from the IRS.
(4) Chevron. In 2009, Chevron received a $19 million refund from the IRS after it made $10 billion in profits.
(5) Boeing. Last year, Boeing, which received a $30 billion contract from the Pentagon to build 179 airborne tankers, got a $124 million refund from the IRS.
(6) Valero Energy. Last year, Valero Energy, the 25th largest company in America with $68 billion in sales last year received a $157 million tax refund check from the IRS and, over the past three years, it received a $134 million tax break from the oil and gas manufacturing tax deduction.
(7) Goldman Sachs. In 2008, Goldman Sachs paid only 1.1 percent of its income in taxes even though it earned a profit of $2.3 billion and received an almost $800 billion bailout from the Federal Reserve and U.S. Treasury Department.
(8) Citigroup. Last year, Citigroup made more than $4 billion in profits but paid no federal income taxes, even though it received a $2.5 trillion bailout from the Federal Reserve and U.S. Treasury.
(9) ConocoPhillips. ConocoPhillips, the fifth largest oil company in the United States, made $16 billion in profits from 2007 through 2009, but received $451 million in tax breaks through the oil and gas manufacturing deduction during those years.
(10) Carnival Cruise Lines. Over the past five years, Carnival Cruise Lines made more than $11 billion in profits, but its federal income tax rate during those years was just 1.1 percent.
Now the nominal average corporate tax rate in the USA is supposed to be 35%. This is the rate that Republicans use to claim that corporations pay too much taxes compared to the rest of the world.
The truth is, that the above does not matter, it is the EFFECTIVE TAX rate that does. This boils down to what the actual corp pays after deductions and advantage of countless of loopholes in tax regulations available in the United States.
The effective average Corporate Tax Rate in the US as of 2011 is 11%! Now some sectors pay more and others less. The tax code in the US is a mess due to lobbyist and corporate special interest.
Just to give you an idea of how AWESOME these times are for corporations,
in 1961 the effective average tax rate was 47.4%. This is taxes actually paid.
US companies are increasingly using tax heavens in Switzerland, Bermuda and Cayman Islands to hide their corporate profits. It is estimated that this practice costs the US treasury about 100 Billion a year.
When you add all this up, you realize why there is a huge debt crisis in the United States. It is not due to the minorities, or the entitlement culture like some right wing websites would have you believe. Lots of hard working Americans pay substantially more than the 11% that corporations have been paying. Their schools are being cut, their unions under fire, their way of life under attack and racism and religious elitism is on the rise. It is not the poor that are bankrupting their country, it is the elite who refuse to pay their FAIR share of the taxes. The tea party has been brainwashed to further protect the corporate agenda.
The argument that lower taxes mean more jobs, has been proven to be ridiculous. All of Bushes tax cuts for the wealthy did absolutely nothing to create new jobs in the USA. The facts are that you can get a top notch engineer to work on your project in China for 300 bucks a month. I don't know about you guys but that does not even cover my property taxes.
In fact GE paid no tax, I mean ZERO, and they still moved 1000's of jobs to China this year! In fact some of these corps are getting TAX PAYER refunds from the IRS and they are still moving jobs out.
In the 60's and 70's The tax rates on corporations were so high, that most corps kept the revenues within their businesses, very few CEO's were taking out the sums that CEO's earn today. When they lowered the tax rate, it made incredibly easy for corps to take out money from their operations as profit and move them to emerging markets. So instead of creating jobs, lower taxes actually cost us jobs as it was very easy to cash out and LEAVE.
So please do not fall for the racism and oppression of the poor, who have less and less in this environment. They did not bankrupt the USA, instead it was policies favourable to corporations that currently enjoy 11% effective tax rates. Even Warren Buffet is dumbfounded why his secretary who makes 65K a year pays higher tax rates than he does.
So if this sort of switch tactic can played on an entire nation and lead it into bankruptcy and destruction, what do you think the NBA can do with their numbers?
EDIT: On a related note to the socialist/capitalist tangent of this post: There are serious shortages of Cancer drugs in the USA. These drugs cost a few dollars, and hence are not as profitable to manufacture by big pharma as say, Oxycontin. No shortage of that.
http://www.nytimes.com/2011/08/20/health/policy/20drug.html?_r=1&hp <-- another serious example of why socialism is needed in the USA and how a free market without regulation is not always so beneficial to peoples health. People get sick, not all of them have stockpiles of money. The ones that don't are no longer considered worth saving by system where the making $$$ is the singular motive. It makes no difference if they served their country in its many wars, or their communities through volunteerism. The capitalistic market only sees the benefits of those individuals, that have horded away piles of money. Those that have led pious lives, are deemed less essential (even if logic dictates the opposite).
EDIT2: BTW, I have never seen so much heroin addiction by moms and dads, soccer moms and older more conservative folks, since Purdue Pharma made heroin available in pill form. No longer are these profits just for the Taliban, big pharma can indulge to their capitalistic discretion. A friend of mine was sent to rehab for his addiction and told me that 80% of the folks there are there because of pills. Not many crack or meth heads, just mostly pills and the demographics are not those that hangout behind dumpsters, we are talking about folks that remember Reagan and Thatcher fondly.
