I don't know if you have ever had reason to read IRS tax data, but I occassionally do so from time to time because I like to know A) where the government's revenue comes from, and B) whether or not the numbers add up.
Most often you will find that the numbers do not add up. There are logical breaks in the reported data that should be investigated more closely to figure out why the numbers appear illogical, and my most recent head scratching moment came when reviewing aggregate reporting data for all 5.8 million U.S. Coporations.
According to the IRS, all 5.8 million U.S. Corporations, large and small, public and private, including all of the subsidiaries have a total "book value" of assets as of 2012 reported at about $84 billion. That's right the total value of US corporate assets is reported to the IRS at $84 billion.
Don't believe me, here is where I got that number:
http://www.irs.gov/...
The same data which reports assets in "whole dollars" at $84 billion, suggests that these companies had revenues of $29 trillion, and "net revenues" of $1.7 trillion. This would mean that U.S. corporate assets experience an annual rate of return after expenses of more than 2000%. I suspect this was a mistake in reporting and the actual asset value is $84 trillion as this would mean a much lower and more reasonable annual rate of return on those assets of 2% while total revenue generated on those assets would be about 35%, again more in line with expectations.
Having been startled by numbers which seemed far out of line with expectations, considering the fact that A) the approximate value of the U.S. publicly traded stock market is $20 trillion, and considering the fact that I know of two U.S. corporations with in excess of $100 billion in cash on the balance sheets they report to the SEC. The last time I looked into it, both Google and Apple had more than $100 billion in cash listed on their quarterly reports to the SEC.
After determining either A) that I had misread the intended meaning of this IRS report as it concerned total assets, or B) it needed to be written more clearly, my attention shifted to the top line revenue of these businesses and the rapid drop off in bottom line revenue reported to the IRS.
Something was not adding up for me, but only because I had recently read another report about the Payroll tax for Social Security and Medicare that suggested about $1.2 trillion in revenue was accruing to the U.S. Government from the tax. This means that just shy of $8 trillion in employee wages and salaries are subject to tax. Yes, the wages subject to the tax are capped, but something still does not appear to be adding up here.
$29 trillion in revenue less $8 trillion in wages would leave $22 trillion in revenue potentially subject to tax. Assuming that the $2.4 trillion in health care expenses were entirely absorbed as corporate expenses and the $600 billion attributable to the employers' share of the payroll tax was absorbed entirely by US corporations, that would mean $18 trillion potentially remained as profit to US corporations which should be subject to tax.
Here is where it gets more troubling, if you were to assume that 50% of that remaining potential profitability were consumed in raw materials costs, energy costs, finance cost, ie interest payments, and business insurance costs that would leave $9 trillion in potential profits subject to tax. If we were to assume $4.2 trillion in depreciation losses for the businesses on $84 trillion in assets, that still leaves $4.8 trillion in potential taxable profits of US corporations.
To explain the discrepancy in these numbers between the bottom line reported to the IRS and what seems like a reasonable bottom line for American business, that would mean $3.1 trillion in wages in excess of the Social Security tax cap are paid by US corporations alone annually. That would mean more than $3.1 trillion in wages would need to be earned by those taxpayers making in excess of approximately $120,000 per year in wages.
The problem with that is that if you maximized the income potentially earned by all individuals earning between $120,000 and $10 million per year in the United States, and assumed that every penny of such income was earned as wages, only about $1 trillion in wages would be paid in excess of the tax cap.
That would mean approximately 12,000 potential employees earning in excess of $10 million per year were responsible for $2.1 trillion in untaxed wages.
This data was discerned by reviewing this document from the IRS:
http://www.irs.gov/...
The problem with that theory is the fact that the people in that income bracket had a total adjusted gross income of only approximately $540 billion. At least according to this IRS document that appears to be the case:
http://www.irs.gov/...
So of the $3.1 trillion in possible additional payroll not subject to the Social Securty payroll tax that would be needed to bring the potential corporate profits down the the $1.7 trillion bottom line, only at most $1.6 trillion can be found.
That would leave $3.2 trillion in corporate profits likely subject to tax by the IRS, not the reported $1.7 trillion.
If you refer back to the original document cited, you will note an additional approximately $500 billion in tax credits were taken by US corporations reducing their potentially taxable income to $1.2 trillion, so even the special loopholes which could explain the discrepancy away seems to be nowhere to be found.
I'm sure there is something that explains the numbers, but A) we know that the $1.6 trillion in potential payroll expenses are over exaggerated and they don't account for these costs, B) we know that a big portion of the $2.4 trillion in healthcare costs credited to them are not born by any corporation, C) a good portion of the $600 billion in the employers' share of the payroll tax is not born by them as the self-employed pay some, sole propreitorships, partnerships, and government agencies pay some too, along with not-for-profits, so the question remains how are the books being cooked because it seems quite obvious that they are being cooked. At least it seem obvious to me. Who else sees the same problems I do?