A Fair Income Tax on the Trillion-dollar Behemoths

171 Tax Notes Federal 1199

12 Pages Posted: 8 Jul 2021

See all articles by Calvin H. Johnson

Calvin H. Johnson

University of Texas at Austin - School of Law

Date Written: May 24, 2021

Abstract

Our trillion-dollar market capitalization behemoths, Apple, Amazon, Google and Microsoft, pay effective tax rates of between 0.65 percent and 2.9 percent because they deduct immediately ("expense") their intangible investments that have value beyond the end of the year. Current regulations allow expensing of investments that cannot be sold or seized apart from the business as a whole, but they also permit mandatory capitalization of expenditures with value beyond the tax year upon publication in the Federal Register. Treating the investments as creating basis, not expensing, and correcting prior year's error of allowing expensing of costs with continuing value would raise $6 trillion revenue, under income tax norms, without the participation of Congress.

Keywords: Capitalization of intangible investments; $6 trillion revenue

JEL Classification: K34,H25,h26

Suggested Citation

Johnson, Calvin Harsha, A Fair Income Tax on the Trillion-dollar Behemoths (May 24, 2021). 171 Tax Notes Federal 1199, Available at SSRN: https://ssrn.com/abstract=3873277

Calvin Harsha Johnson (Contact Author)

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
512-232-1306 (Phone)
512-232-2399 (Fax)

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