Entitlement issues like the huge corporate welfare payouts the US government is handing out via the myriad loopholes in the tax system and the 0% (and in many cases negative) effective tax rates enjoyed by government welfare recipients like Verizon and other large corporations (and many billionaires). Verizon had $146 billion revenues and its effective
income tax rate was NEGATIVE -6.7% in the last 12 months.? Are those the "entitlement" issues you were refering to, the corporate welfare payouts that leeches like Verizon and other Fortune 500 companies receive at the expense of the American taxpayers?
Effective Tax Rates are a misleading number for people who don't understand accounting. It makes a great headline, but the negative rates are attributed to the non-controlling interests that Verizon holds.
To be specific, Verizon holds 55% of Verizon Wireless, a joint venture with Vodafone, PLC. The 45% owned by Vodafone is the noncontrolling interest. Because Verizon holds controlling interest, it consolidates Verizon Wireless' financial statements with its own. Revenue goes into Verizon's bag and through all standard calculations such as Operating income and Net income ($10B line item).
But as an operation, Verizon Wireless pays out its income in proportion to both Verizon (parent) and Vodafone. Vodafone treats its shares as equity and the income is taxable as usual on their side. However, because that isn't reflected by the Net Income line on Verizon's statement, another item called Income Attributable to the Non-controlling interest is used to reflect that initial ballooning. Of the $161B revenue (2012), the final Net income attributable to Verizon was $875M (taxable income ~$637M).
This is where the fun comes in. Normally, as laypeople, we define a Tax Rate as the simple percentage of taxable income (eg: earned net-income). The government wants 35% of your earned income. That makes sense. However EITR is based off accounting income which is now bloated because of the non-controlling interest. Expecting 35% x $10B is folly if the $10B isn't even Verizon's to begin with. Worst, that would be double-taxation. So, the government, in fairness taxes 35% x $637M. Effective Tax Rate is a poor term if you don't know what it really is and equate it with colloquial slang.
Some more interesting tax education tidbits. Verizon also booked almost $1B in deferred tax assets (i.e. losses from previous years or timing issues with depreciation/pensions). That's how they managed to get their Income tax provision to negative $660M which gave the -6% EITR. Deferred tax assets/liabilities are a timing issue and are tax-neutral - there's a saying in startup circles, remember to always pay your taxes first during business bankruptcy.
P.S. I'm even more easily annoyed with empty rhetoric that's just plain wrong.
