Thursday, May 19, 2011

"Big Computer" Made Almost $100 Billion in 2010

The "Big Five" made almost $68 billion in profits last year.  No, not the "Big Five" oil companies that have been in the news lately for making $77 billion last year in profits.  I'm talking about that other "Big Five": Microsoft ($18.7 billion), IBM ($15 billion), Apple ($14 billion), Intel ($11.4 billion) and Hewlett-Packard ($8.8 billion).  And when you add the next five most profitable computer companies - Google ($8.5 billion), Cisco ($7.8 billion), Oracle ($7.7 billion), Dell ($2.63 billion) and Ebay ($1.8 billion) - the "Big Ten" raked in almost $100 billion last year in "windfall" profits last year ($96.1 billion), boosted by strong demand for IT products as the U.S. and global economies recovered from the Great Recession.  

Suppose that Congress next investigated "Big Computer" for earning almost $100 billion in record profits last year, and imposed a higher tax burden on the "Big Ten."  

Q: What would likely happen to computer prices for the "Big Ten's" products; and what would likely happen to "Big Ten" spending on capital equipment and research?  A: Prices would probably be higher and investment spending would probable be lower.  And that's exactly what would likely happen to oil prices and investment spending by the other "Big Five."     

41 Comments:

At 5/19/2011 1:32 PM, Blogger Rufus II said...

Let's start with Microsoft. How much U.S. Income Tax did they pay last year on that $18 Billion?

 
At 5/19/2011 1:32 PM, Blogger Stephan said...

Strange post. A lot of hot air to make the case for ideological posturing. Suppose X happens to A. X will cause most likely assumption Y. And you know what? A = B = C = ...

 
At 5/19/2011 1:39 PM, Blogger Mark J. Perry said...

Microsoft made about $25 billion in EBT, paid $6.25 billion in income taxes and made $18.7 billion in profits (effective tax rate of 25%).

 
At 5/19/2011 1:43 PM, Blogger Rufus II said...

No, no, no. U.S. Income Taxes

I don't live in Ireland.

 
At 5/19/2011 1:46 PM, Blogger Benjamin said...

Why tax productive behavior at all?

Should we not take pollution, luxury consumption and tobacco, alcohol and recreational drugs? And religion?

Wipe out corporate income taxes. People working to produce goods and services in a free market are to be admired, not taxed.

 
At 5/19/2011 1:49 PM, Blogger Rufus II said...

For example, Microsoft Corporation’s Financial Statements in its 2010 Annual Report indicated that the company has $29.5 billion in “permanently reinvested earnings” outside the United States (that is, after foreign-tax earnings of foreign subsidiaries that Microsoft does not currently intend to repatriate to the United States). Microsoft also noted that the tax cost of repatriating those earnings to the United States would be $9.2 billion.

 
At 5/19/2011 1:52 PM, Blogger Rufus II said...

Microsoft structured acquisition of Skype to avoid U.S. Taxes

That's why they used their stock (even though it is, currently, considered "undervalued") instead of Cash, of which they have a'plenty.

 
At 5/19/2011 1:54 PM, Blogger Rufus II said...

Why sure, Benny; let's just don't tax anybody with a job. We'll just fund the guvmint on taxes on those that Don't have a job (the non-productive ones.)

Pefeckly logical.

 
At 5/19/2011 1:58 PM, Blogger Rufus II said...

In my 1:59 comment, notice the phrase

“permanently reinvested earnings” outside the United States

 
At 5/19/2011 1:59 PM, Blogger Rufus II said...

1:49 comment

 
At 5/19/2011 2:08 PM, Blogger juandos said...

"In my 1:59 comment, notice the phrase

“permanently reinvested earnings” outside the United States
"...

Well rufus did you think these corporations became profitable for just rolling over and wasting part of their profits so US politicos could use that money to pander to parasites?

From Seeking Alpha-March 13, 2011: High U.S. Corporate Tax Rate a Barrier to Economic Growth?

 
At 5/19/2011 2:15 PM, Blogger Rufus II said...

Let's move on to "Google," shall we?

Google, the owner of the world’s most popular search engine, uses a strategy that has gained favor among such companies as Facebook Inc. and Microsoft Corp. The method takes advantage of Irish tax law to legally shuttle profits into and out of subsidiaries there, largely escaping the country’s 12.5 percent income tax. (See an interactive graphic on Google’s tax strategy here.)

The earnings wind up in island havens that levy no corporate income taxes at all. Companies that use the Double Irish arrangement avoid taxes at home and abroad as the U.S. government struggles to close a projected $1.4 trillion budget gap and European Union countries face a collective projected deficit of 868 billion euros.

 
At 5/19/2011 2:17 PM, Blogger Rufus II said...

Would you like some Google Double Dutch

with that sweet, sweet tax evasion?

 
At 5/19/2011 2:48 PM, Blogger juandos said...

This comment has been removed by the author.

 
At 5/19/2011 3:05 PM, Blogger Che is dead said...

Yes, in Dufus's perfect world there would be a fence around every nation in order to assure that the productive are properly harnessed for the benefit of the parasitic. "From each according to his ability, to each according to his need".

Enlighten us all, Dufus. What was your contribution to our collective well being last year? How much did you pay in taxes? How many jobs did you create? Or, is your socialist slavery reserved only for those who can actually shoulder the plow?

 
At 5/19/2011 3:13 PM, Blogger Rufus II said...

Che, I've been retired for years. As a result, my tax statement Last Year wasn't too awfully exciting. I will assure you, however, that I've paid my share over the years. As a result, my entire income last year was income from business in force.

You ad hom attacks on me have nothing to do with whatever taxes were, or were not, paid by Microsoft, and Google.

 
At 5/19/2011 3:18 PM, Blogger Che is dead said...

In a world run by socialists and crony capitalists you've got to learn to line the right pockets:

While Democrats rip into oil and gas companies for failing to pay their "fair share" because of tax breaks Congress gave them, another special interest break they're not talking about is the billions of dollars worth of gold, silver, uranium and other minerals that mining companies take off federal lands for which they pay nothing. ...

Since taking office, Reid has received $750,000 in campaign contributions from the mining industry, according to the Center for Responsive Politics. That number includes $127,000 from Nevada's two largest gold producers in the 2010 election. Together, those two companies had profits of $5 billion last year yet they paid taxpayers nothing for minerals taken off public lands. ...

According to Yahoo Finance, three of the 10 most profitable industries in the U.S. right now are in mining, including copper, gold and silver, which enjoy a 47 percent net-profit margin. Oil and gas exploration, by contrast, ranks 50th with a net margin of 11 percent.

Yet oil and gas are singled out, particularly by Reid.

FOX News

 
At 5/19/2011 3:19 PM, Blogger Rufus II said...

Over the years my taxes have paid for Universities from which Microsoft, and Google derived their employees, Defense of the country (and of their employees,) and infrastructure used by those companies, and their employees.

It is childish to suppose that Wealthy, Successful Corporations can exist in an environment of No Infrastructure, and/or Governance.

Soon, you would get to Benny's logical point of "taxing only the unemployed." Cain't run a railroad like that.

 
At 5/19/2011 3:29 PM, Blogger Che is dead said...

"Over the years my taxes have paid for Universities from which Microsoft, and Google derived their employees ..."

And so have the individual income taxes paid by the shareholders of these and other corporations. Why is it that you feel that you are entitled to another cut just because these taxpayers formed themselves into a corporation? What special accommodation was made by the government to Google and Microsoft that was not offset by the jobs and economic activity that they have generated?

You are very quick to mock the contribution that others have made or are making. In that light, it's only fair that your contribution be scrutinized.

 
At 5/19/2011 3:37 PM, Blogger Che is dead said...

This comment has been removed by the author.

 
At 5/19/2011 3:54 PM, Blogger Bobby Caygeon said...

@ Benjamin

"Should we not take pollution, luxury consumption and tobacco, alcohol and recreational drugs? And religion?"

If you tax religion how will the liberals be able to tap enough discretionary income to keep Obama going through his current campaign?

 
At 5/19/2011 4:07 PM, Blogger Benjamin said...

Bobby C-

Religions strike me as great parasites on productive and working people. Much like militaries.

The difference is that religions get by on voluntary contributions, while militaries confiscate their income.

 
At 5/19/2011 4:23 PM, Blogger Buddy R Pacifico said...

Rufus states:

"Let's start with Microsoft. How much U.S. Income Tax did they pay last year on that $18 Billion?"

I know many Microsft millionairs (employees and ex-employees). They are paying a lot of taxes. I am glad they had the ability to work and earn high wages in the U.S. Corporate taxes need to be low to allow opoortunities for millions of new millionairs.

 
At 5/19/2011 4:27 PM, Blogger Benjamin said...

Rufus-

I say tax rich people to the moon--but not when they are investing to create jobs.

Big mansion, yachts, expensive liquor, whorehouses, second-home vacation mansions etc.. Tax all that crap any way you like. Cocaine, booze, mistresses.

But money to create products and services is sacred.

 
At 5/19/2011 4:39 PM, Blogger PeakTrader said...

There are many American tech "heavyweights" in strong financial positions, e.g. revenues much higher than expenses, huge profit margins, no debt, lots of cash, etc..

They tend to be labor intensive instead of capital intensive.

American tech firms lead the rest of the world combined in revenues and profits, and likely in many other virtuous categories.

Given the billionaires and multi-billionaires in top management, you wonder if their workers are compensated enough.

 
At 5/19/2011 4:46 PM, Blogger PeakTrader said...

"Suppose that Congress next investigated "Big Computer" for earning almost $100 billion in record profits last year."

I suspect, that would be priced into their stocks (i.e. unnecessary added risk).

 
At 5/19/2011 5:05 PM, Blogger PeakTrader said...

Rufus II, it's not illegal to avoid taxes.

If "Big Computer" paid their workers more, government will collect more taxes from them.

 
At 5/19/2011 5:14 PM, Blogger Mike said...

Ummm, Benjamin...do you think the people making yachts, the builders of mansions and 'ladies of the night' aren't working at a job that the rich are creating? The people who maintain them? Insure them?
Not to mention the excessive property taxes on at least 2 of the 3.

It would make more sense to tax people who save their money....not that I'm suggesting such a thing.

 
At 5/19/2011 6:44 PM, Blogger Benjamin said...

Mike-

It is an interesting topic, how to raise taxes, in such a manner as to not discourage productive behavior.

Of course, solution #1 is to eliminate all but necessary federal outlays.

Still, you gotta raise the money somehow.

Usually, econ types suggest PIGOU taxes. Pollution taxes. Luxury taxes.

Progressive consumption taxes was an idea of Milton Friedman's, to pay for the military. No right-winger quotes Friedman on that one. Friedman also liked taxing pollution.

In general, I think people who work and invest should not be taxed.

 
At 5/19/2011 10:18 PM, Blogger Ron H. said...

Dufus

Your constant whining about corporate tax avoidance is getting tiresome, and you still don't seem to understand, that taxes on corporations are paid by individuals, either as customers, employees, or stockholders.

Did you read your own link about Microsoft acquiring Skype? Did you miss the message that companies will tend to do business in, and move to, countries that have the lowest tax rates. If you want companies to pay taxes in the US, then your efforts should be spent lobbying for lower US corporate taxes, so companies would flock to the US as a tax haven, as well as to closer to the largest market for goods and services in the world.

If you think there are benefits to having companies operate in the US, beyond just what can be bled from them in taxes, you might want to give that idea some serious thought.

And, don't give me any patriotic duty crap, unless you can honestly say you have never personally tried to minimize the taxes you pay. Something you see as evil when corporations do it.

Hopefully you understand that the less cpmpanies pay in taxes, the more they have to use for expanding and growing their business, and for hiring people.

 
At 5/19/2011 10:24 PM, Blogger Ron H. said...

"It would make more sense to tax people who save their money....not that I'm suggesting such a thing.

People who save their money, are making that money available for others to use, unless the savers just stuff it iinto their mattresses, and even then there's a benefit.

I think it makes more sense to tax the poor, who have demonstrated that they are either unable or unwilling to work hard and create the wealth that we all benefit from.

 
At 5/20/2011 7:05 AM, Blogger RollCast said...

Who gouges the people more - Big Oil or Apple? The price to produce the next marginal barrel of oil is around $70. That isn't the price Big Oil pays, though - they pay whatever the price is based on the demand to claim that barrel of oil.
Currently that markup is about 45%.

The cost to manufacture a 16GB IPad is around $260, yet sells for $500, a markup of almost 100%.

 
At 5/20/2011 11:17 AM, Blogger Ron H. said...

"Who gouges the people more - Big Oil or Apple?"

How do you gouge people when they buy something voluntarily? Please give your Apple example first. Perhaps I don't understand the word "gouge".

Also please explain who should decide what a product should sell for, and what a "fair" profit margin should be.

 
At 5/20/2011 12:11 PM, Blogger juandos said...

rufus says: "Over the years my taxes have paid for Universities from which Microsoft, and Google derived their employees, Defense of the country (and of their employees,) and infrastructure used by those companies, and their employees"...

Ahhh, who hasn't had their extorted tax dollars go for those items?

Did you also know your tax dollars went for this?

From the Washington Times: Senator questions benefits to ‘adult baby’

 
At 5/20/2011 12:23 PM, Blogger Paul said...

Benji,

"No right-winger quotes Friedman on that one."

You should check out whatFriedman had to say about the socialist health care you endorse.

 
At 5/20/2011 12:27 PM, Blogger Mike said...

Benjamin,
I think the entire topic is a non-starter. If the gov't can expect to receive 19% of gdp in revenue, raising taxes on the money movers is counter-productive.
If the gov't wants more money, they need to focus on policy to raise gdp and getting rid of policy that stands in the way.


Ron,
Typically, you're right, but it depends on how the money is saved.

 
At 5/20/2011 3:03 PM, Blogger morganovich said...

"If you want companies to pay taxes in the US, then your efforts should be spent lobbying for lower US corporate taxes, so companies would flock to the US as a tax haven"

you're dead on here ron.

consider:

the us agrees to let companies that relocate here pay a 10% tax rate.

that's found revenue.

but, it pales in comparison to other revenue sources.

that company will have a payroll.

nearly all companies spend more on SGA in wages than they make in profits.

thus, a loss of corp profits to tax is more than made up for by payroll and income taxes.

cutting the corp tax to 17% would be a huge net win for tax revenues over 5 years.

 
At 5/20/2011 5:41 PM, Blogger Ron H. said...

"Ron,
Typically, you're right, but it depends on how the money is saved.
"

For example...

Keep in mind that money that is invested or saved has already been taxed. are you recommending taxing it again?

 
At 5/20/2011 5:48 PM, Blogger Ron H. said...

"nearly all companies spend more on SGA in wages than they make in profits.

thus, a loss of corp profits to tax is more than made up for by payroll and income taxes.
"

I can never understand why this is so hard to understand for those who complain about corp taxes, or why it's not understood that ultimately, individuals pay all taxes in one way or another.

 
At 5/20/2011 9:03 PM, Blogger VangelV said...

Microsoft also noted that the tax cost of repatriating those earnings to the United States would be $9.2 billion.

Good for Bulmer. He is protecting his shareholders from confiscatory taxation of the US Congress.

Microsoft structured acquisition of Skype to avoid U.S. Taxes

That's why they used their stock (even though it is, currently, considered "undervalued") instead of Cash, of which they have a'plenty.


Again, a wonderful approach. That is one way to use those foreign earnings productively without bending over for the IRS. Of course, if MSFT management had any balls it would also move its corporate headquarters in a tax haven and would not have to worry about the US Congress as much as it does now.

 
At 5/20/2011 9:07 PM, Blogger VangelV said...

Yet oil and gas are singled out, particularly by Reid.

I hope that you wont' be dumb enough to suggest that the US government tax mining companies at higher rates. If it does you might as well close the hundreds of low grade heap leach operations right now. While that would piss off Reid and his Nevada constituents many on the Left will throw a huge party as Congress would do what its lawyers could not in the court system.

 

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