As a result of tax loopholes and deductions, the social media giant Facebook paid no income taxes for the fiscal year 2012, despite reaping $1.1 billion in US corporate profits, according to a new report.
While Americans have just been subjected to higher taxes, billion-dollar corporations like Facebook, General Electric, Boeing and Wells Fargo have all been able to avoid paying any corporate income taxes, reports Citizens for Tax Justice.Assuming that the report is accurate, Facebook will collect $429 million in net tax refunds for the last fiscal year. On top of the $1.1 billion US corporate profits it made last year, the company continues to remain financially superior while poor and middle-class Americans struggle to pay back the national debt.Even though Facebook’s stock value remains low, the company was able to use its public offering to its advantage: the social media giant has been able to take advantage of the tax deduction available to those with executive stock options.That tax break alone reduced Facebook’s federal and state income taxes by more than $1 million in 2012. And with its public offering of stock, Facebook is “also carrying forward another $2.17 billion in additional tax-option tax breaks for use in future years,” the report states.Its current and future tax reductions therefore total $3.2 billionAnd while deductions and loopholes continue to exist, thereby giving wealthy corporations a way out of paying taxes, the US government continues to debate how to pay back its $6 trillion debt and taxes continue to rise for all Americans – including low-income and middle-class citizens. The Social Security portion of the payroll tax rose from 4.2 percent to 6.2 percent this year, while the top marginal tax rate (affecting individuals making more than $400,000 a year) increased from 35 percent to 39.6 percent. A number of other specific taxes have also been raised as the US continues to struggle with the deficit.Meanwhile, large corporations continue to benefit from stock option tax breaks, among other loopholes and deductions. And lawmakers have done little to change these. In 2011, Sen. Carl Levin (D-MI) introduced the “Ending Excess Executive Corporate Deductions for Stock Options Act”. The bill would prevent companies from deducting more stock options than than they have recorded as a book expense. Levin claims that the excess deduction returns about $12 billion and $61 billion a year to US corporations.“Because companies typically low-ball the estimated values, they usually end up with bigger tax deductions than they deduct from the profits they report to shareholders,” the report states.But lawmakers have failed to pass the bill. Levin hopes to reintroduce similar legislation in 2013. Unless loopholes and deductions are addressed, Facebook can continue to avoid paying income taxes and avoid paying the IRS billions of dollars.“When profitable corporations can use the stock option tax reduction to pay zero corporate income taxes for years on end, average taxpayers are forced to pick up the tax burden,” Levin said last year, shortly before Facebook went public.