Porcupine, WOW -- what an undertaking!
You know, I fell in love with accounting in college because it only had four concepts and nine principles, and, after that, it was up to the practitioner. Obviously, it has gotten somewhat more complex since the 70's.
And then, I was introduced to the world of taxation. The basic accounting principles are that we desire to match our current revenue and costs. Taxation accounting says that we want our costs now, our revenue in the future, and to Hell with matching. Taxation accounting has incredible implications on a company's net income and free cash flow. Consider for a moment, that a corp the size of an IBM is paying (supposedly) a marginal tax rate of 40% (including state taxes) on each incremental dollar of net income. Of course, share buy backs and dividends are not deductible expenses.
Also consider, that once upon a time tariffs were the main source of revenue to the operations of this country. And then, the concept of free trade was developed. And then, corporate taxes was the main revenue source. And then, individual taxes became the main revenue source. And then, a half a century ago, payroll taxes became the main source of revenue. An issue to consider on this evening.
Can you possibly imagine the increased revenue to our Treasury if IBM et al properly accounted for their income? I do not fault them, but applaud them. For as a supreme court justice long-ago stated: "Taxes are enforced exactions and not voluntary contributions and to demand more in the name of morals is mere cant".
IBM can obviously afford the best minds in the field of taxation. They are, in fact, substantially enhancing shareholder value by postponing the taxation of current revenue.
Berney |
