Facebook Set To Receive $429 Million Tax Refund… Tax Loopholes To Blame
I have a close friend who claims “exempt” on her W-4 tax withholding status every year. And in spite of paying no federal income payroll taxes, she typically receives a $3,000 tax federal income tax refund every year. Granted, she’s a single mom who gets no child support, and I would have no issue with her paying no taxes. But the fact that she is paid a few thousand dollars each year by our debt-ridden government is a problem. Is it her fault? Absolutely not. She’s not cheating the system or finding any loopholes. It’s the way the way the tax code is built. And therein lies the issue.
Now multiply the $3,000 the federal government pays her to work each year by about 143,000, and you’ve got the scenario Facebook has created. Although the company made $1.1 billion in pre-tax profits in 2012, the US tax code is allowing it to receive a $429 million refund from the IRS. How is this possible? The tax code allows stock options to be considered operating expenses that reduce overall profits. So when Facebook went public in May 2012, its employees got hit with taxes for the past four years’ worth of stock-based compensation–like a few billion dollars’ worth. Facebook covered the taxes with a $1.13 billion payment as well as $2.86 billion in extra stock granted to employees to cover their tax obligations.
So when the lobbying organization Citizens for Tax Justice attacked Facebook for treating its stock options as operating expense in order to offset its profits, perhaps it should instead focus on the US tax code. Just like my friend, Facebook didn’t cheat, it simply used the rules available to its benefit. I don’t blame my friend for her refund each year, and I don’t blame Facebook. But the tax code needs fixed. How can it be considered “raising” taxes to simply eliminate loopholes that give refunds to those who aren’t paying anything? President Obama called for an end to such loopholes during his State of the Union speech, and he couldn’t be more right. But, where Obama said the loopholes to target are those that assist the “well-off an well-connected,” I believe they all need addressed. The IRS shouldn’t be “refunding” anyone more than the full amount of taxes already paid.
I want more stuff like this!