Tax Deductions Are Not Evil Or Underhanded

(What Alexandria Ocasio Cortez and the Leftist Sect don’t want you to understand.)

Do folks understand what corporate tax deductions are? The left erroneously calls tax deductions “loopholes” and tax “breaks” in an attempt to color tax deductions as nefarious and underhanded. They aren't.

First of all, it is the Internal Revenue Service (IRS) that creates the tax deduction. Corporations, as well as individuals, just take advantage of what the IRS has created and allows. Tax deductions in of themselves are not illegal or underhanded. There is a reason for deductions as you will find out.

Secondly and more importantly, a tax deduction is not a refund. For example, Alexandria Ocasio Cortez was complaining that “Amazon was to receive nearly $3 billion in tax breaks, abatements, and grants”.

Let’s say the $3 billion was all in tax deductions. What this would have meant is that Amazon would not have paid taxes on that amount. It does not mean Amazon would have gotten $3 billion.

Tax deductions are often used as incentives to attract industry. Industry means jobs. AOC was so concerned over Amazon’s short term deductions, that she single handed lost New York 25,000 to 40,000 high paying jobs. 25,000 to 40,000 jobs with incomes and benefits around $150,000.00 walked away because of Alexandria Ocasio Cortez. She considered it a victory.

Something else that must be understood. Corporations don’t just collect profits and sit on them. They can’t because the federal government will tax it away. For example, if one year Amazon, due to tax deductions, found itself sitting on big profits, it has to turn right around and re-invest/spend that money or the government will tax it away. This system motivates corporations to not sit on and amass money, but rather keep the money in the economy by forcing the corporation to spend it. When a company reinvests its profits back into the economy, each dollar “rolls over” 10-14 times. What this means is that each dollar of profit the corporation spends, it gets re-spent approximately a dozen times.

For example, Amazon needs cardboard boxes. They spend money in purchasing them, which in turn means the trucking company gets paid, the paper company that makes the boxes gets paid, the recycling center gets paid, the printing company that labels the boxes gets paid and so on and so.

Corporate tax deductions and what they can deduct and how they deduct changes from year to year. A company could have generated the same income from one year to the next, but due to the nature of taxation, could have turned a profit or a loss. Same income. Same outgo, but the tax deductions varied.

If anything, please understand that tax deductions are not illegal, evil or underhanded. They are created by the government. Both corporations and individuals take advantage of them. Deductions encourage spending which in turn boosts the economy. Also understand that the dollar amount of deductions mentioned is not a refund, but rather the amount that federal taxes will not be applied to.

Bill Hitchcock