patrick.net

Ah yes- reality

Ruki says

No, it is Corporate Tax RECEIPTS that are at their lowest in 40 years, not tax RATES.
...
But libs either don't or are not willing to understand the difference between rates and receipts, typically. It threatens their ideology to do so.

Want to get more revenue (that means more in tax receipts for the ignorant)? Then cut the rate at least to levels competitive with world average levels (about 20% - 25% vs our 35% rate).

Oh, the irony. Total corporate tax receipts divided by total tax profits is equal to the average effective tax rate. You really shouldn't be trying to correct people.

Here are your liberal friends at Fox making fun of your favorite idol. Those liberal dummies use the term 'tax rate' in the same manner as the OP.

http://www.foxnews.com/politics/2012/04/13/president-obama-paid-lower-tax-rate-than-his-secretary/

For corporations, Effective tax rates is current tax + deferred tax.

Cash receips is essentially current tax. With 100% bonus depreciation, which effected cash receipts, corporations will pay a lower current tax and higher deferred tax. Temporaary diffence do not effect ETR.

Research credits, domestic productions, foreign rate diffential effects ETR, but these are not related to Obama.

"U.S. companies are booking higher profits than ever. But the number crunchers in Washington are puzzling over a phenomenon that has just come into view: Corporate tax receipts as a share of profits are at their lowest level in at least 40 years."

Are these same think tanks or research including foreign companies that pay US income tax ? You think US subs of Toyota, BMW, Sony, Bayer arent paying US Taxes ?

There is a difference between SEC published Net Income and unpublished Corporate IRS returns (Taxable Income).

Ruki says

Read the above. Do you see the word 'effective' in the title of this blog? Or in the article?

You're such an intellectual lightweight, I don't know why we bother. Shooting fish in a barrel, I guess.

Apples to apples, the 'effective' tax rate now is lower than the 'effective' tax rate has been in 40 years. There are several reasons for this, but none of them are because Obama hates business and is a socialist or communist. Obama is very pro business.

Find a different talking point. Like he is soft on terrorists.

Ruki says

No, it is Corporate Tax RECEIPTS that are at their lowest in 40 years, not tax RATES. Try reading your own article that you source in support for your incorrect claim

Ruki says

But libs either don't or are not willing to understand the difference between rates and receipts, typically. It threatens their ideology to do so.

Right and your ideology sounds so sensible. It goes something like this:

Tax receipts as a percentage of profits are the lowest they've been in 40 years. Therefore we need to lower corporate tax rates.

Oh, I see. It's the old lower tax rates to increase revenues trick. Ahhh yes. Brilliant. Never mind that it takes some mental gymnastics to even start to believe it.

Here's another version of this shrekian logic: The problem with these high corporate tax rates is they are an unfair burden on corporations making it impossible for them to compete globally, as demonstrated by the record breaking low taxes they are paying.

Ruki says

cut the rate at least to levels competitive with world average levels

It's like this. Our corporations pay less taxes than corporations in other countries, but can't you see that it's the higher rates here that make it impossible for our corporations to compete. Sheeesh ! What's so hard to understand about that ??

If we lower tax rates on corporations, not only will they all be more profitable, but they will all pay more in taxes as well.

Hey, it's a brave new world out there, if you can't take the heat, get out of the kitchen.

Ruki isn't even talking supply side voodoo economics. That would be where lower taxes paid, free up money to be spent, thus stimulating the economy.

In this case the taxes now being paid by corporations are low, and according to shrek, lowering rates (that is the official rate - not what gets paid after the tax attorneys have their fun), will actually increase revenues to the government, and simultaneously make corporations more globally competitive (while they are paying more taxes as a percentage of profits than before).

YOu can't make this stuff up. OH, wait, ummm actually that's exactly what Shrek and his heroes do. They make this stuff up.

The difference between receipts and rates is a nice measurement of crony capitalism. Given our comparatively high rate, and comparatively low receipts-- this is situation is such that small businesses (read: competition) pay way too much and the crony corporations pay too little.

Arguing about the tax rate here is missing the point.

A free market is the only cure for cronyism.

CBOEtrader says

A free market is the only cure for cronyism.

Good luck with that after Citizen's United...

Out of curiousity, talking about comparing apples to apples, what's the average ETR for the world? Because it sounds like some people are talking about the actual US corporate tax rate compared to the rest of the world's actual corporate tax rate, and other people are saying the ETR is what matters, but nobody has said anything about the average global ETR.

This is corporate rates.

This was under 2006 -2009. We've come down some because of businesses deferring taxes more and because of some credits from the current administration.

Most countries don't have a tax code that is as complicated and packed with loopholes as the United States. That is what I've read, but not sure.

rooemoore says

This is corporate rates.

The non-US average looks like its getting skewed by a bunch of 3rd world oil producing states who don't need to raise money from corporate taxes. Germany and Japan both have higher tax rates than we do as you can see.

Also worth considering: in most other countries the corporations don't have to pick up the tab for health insurance the way they do here.

There is no specific definition for 'tax rate.' There are fairly specific definitions for 'effective tax rate' and 'marginal tax rate.' The generic 'tax rate' is used all the time to refer to either.

Ruki's insistence that 'tax rate' always refers to the marginal rates is a pointless rhetorical adventure. His contribution to the thread is to derail the original conversation and mark the place up with mental hemorrhage.

Here are some publications that use 'tax rates' as the OP did, all on the first page or two of google links for romney tax rates.

Where 'tax rate' and 'effective tax rate' are used as synonyms.
http://media.talkingpointsmemo.com/slideshow/mitt-romney-taxes
http://www.huffingtonpost.com/2012/01/24/mitt-romney-tax-returns_n_1225968.html
http://news.yahoo.com/obama-paid-20-5-pct-tax-rate-2011-145921502.html
http://www.reuters.com/article/2012/04/13/us-usa-campaign-romney-taxes-idUSBRE83C1KD20120413
http://www.nytimes.com/2012/01/18/us/politics/facing-pointed-attacks-romney-urges-focus-on-obama.html
http://news.yahoo.com/obama-paid-20-5-pct-tax-rate-2011-145921502.html

This guy always uses 'effective tax rate'
http://www.washingtonpost.com/business/economy/obama-beats-romney-for-tax-return-political-savvy/2012/04/16/gIQA9FtPMT_story.html

Ruki says

Who is shrek?

http://www.facebook.com/friend.shrekengast

Also known as "Zyndryl" and "Dennis".

That help ya?

thomas.wong1986 says

You think US subs of Toyota, BMW, Sony, Bayer arent paying US Taxes ?

Yes. That's usually how it works since the Japanese auto makers Us subsidiaries (on paper) make no profits.

Ruki says

Tax revenues almost doubled under Reagan. Did you know that? But according to your world view, you require some mental gymnastics to believe it.

They also shot up after the Kennedy Tax cuts in the 1960s and right after Congress forced Clinton to agree to a capital gains cut.

And when Nixon raised the capital gains tax rate? Investment and production plummeted.

A big duh moment for Ruki. Tax revenue went from 3.5 to 4.9 under Reagan. That's not almost doubled, more like 50%. Maybe 10% average inflation rates for 3 years then 4-5% the next 5 had just a little to do with that. I'll leave the compounding math to you.

Capital gains is a big double yawn. The GAO did a big report to congress right after Clinton left office which isn't available online any more that I can find. It said that in the 6 months leading up to an decrease cap gains taxes fell almost to zero then after the decrease skyrocketed for 6 months. Same but opposite for an increase in capital gains tax. Obviously lots of people held off or cashed in while the law worked it's way through congress.

The GAO concludes if you take the one year period with the cut/increase in the middle you get big swings. Extend it out to 18 months on either side of the rate change and the actual capital gains (not the taxes) go back to baseline. Bottom line the "increases" in capital gains collections from a rate cut or "decreases" after a rate increase are fictitious, just a temporary blip while people game the tax system.

zzyzzx says

thomas.wong1986 says

You think US subs of Toyota, BMW, Sony, Bayer arent paying US Taxes ?

Yes. That's usually how it works since the Japanese auto makers Us subsidiaries (on paper) make no profits.

If the homeowner isn't insulted by your offer...you didn't bid low enough!!!

Since my understanding of international tax law is limited, I have a question to anyone that knows. Does the effective tax rate in the chart include all the profits that have been washed to offshore accounts (for example apples billions of dollars sitting in the caymans) or just domestic? If just domestic profits are included in the calculation then the effective tax rate is actually much lower.

Not only that but it would amount to yet another example of socialized losses. A company could sit on the offshore profits for years until it suffered a loss then bring them back and not pay any taxes. A company without this pool of untaxed profits would simply have to take pay taxes on all their profits during profitable years and not be able to offset at a much later date. The taxpayers would be on the hook for the profits that were never taxed, just stashed offshore until needed to cover a loss.

The other question that comes to mind is whether offshore profits represent double dealings for executives. Do they include the profits that go offshore as part of the basis for salaries and bonuses. In which case they are essentially stealing from the stockholders, since this pool of profits is being used to calculate how much to pay them but is not available for dividends to be distributed.

Any one a good enough international accountant to comment?

Ruki says

The true gains in revenue from capital gains tax cuts are not from the cap gains tax revenue itself, but the increases in over all income and corporate tax revenues from the increased economic growth that results from cap gains increases. Ditto for the reverse when they are raised.

Your proof of this is?

rooemoore says

Most countries don't have a tax code that is as complicated and packed with loopholes as the United States. That is what I've read, but not sure.

Pretty much many if not all other countries have Accounting Net Income = actual Govt taxable income.

I wouldnt call it loopholes however, since for example top officers salary over $1M isnt a deductable expense under IRS code. And there are many other permanent and deferred items that create a difference. Thats how you get a lower effective rate vs taxable rates.

http://en.wikipedia.org/wiki/Deferred_tax

bdrasin says

Also worth considering: in most other countries the corporations don't have to pick up the tab for health insurance the way they do here.

Actually, Asian and European companies do pick up the tab for Health and Social (retirement plans, social securities) from their employees salaries and from the foreign companies like we have here. Foreign companies doing business also pick up the tab having workers in the host Asian and Euro country. As do foreign companies doing business in the US. Nothing is free!

zzyzzx says

Yes. That's usually how it works since the Japanese auto makers Us subsidiaries (on paper) make no profits.

Right off bat ... companies like Sony, also own US companies... like Columbia Pictures, CBS records. So subs do pay US income tax.
You also have Roche, Swiss drug maker with US biotech companies they have purchases like Genentech and others. And we seen countless Euro Software giant SAP have US holdings. They get no special treatment.

Dont you think the US Govt wants their piece of the pie ?

Of course they do...

toyota...
see page 50 of Toyota's SEC filing.
http://www.sec.gov/Archives/edgar/data/1094517/000119312511172686/d20f.htm
for a list of Toyota business units in the US.

see page 67.. affiliated companies include US based companies.

The provision for income taxes increased by ¥220.2 billion, or 237.6%, to ¥312.8 billion during fiscal 2011 compared with the prior fiscal year due to the increase in income before income taxes. The effective tax rate for fiscal 2011 was 55.5%, which was higher than the statutory tax rate in Japan. This was due to the increase in deferred tax liabilities relating to undistributed earnings in affiliated companies accounted for by the equity method.

bob2356 says

Any one a good enough international accountant to comment?

Global, offset by FTC...Section 10. Foreign Tax Credit

http://www.irs.gov/irm/part4/irm_04-061-010.html

4.61.10.1 (05-01-2006)
Foreign Tax Credit Audit Guidelines

The purpose of the Foreign Tax Credit (FTC) is to provide relief from double taxation. Double taxation may occur, for example, when the U.S. taxes foreign sourced income. FTC limits the overall tax rate on foreign sourced income to the higher of the taxpayer's foreign or U.S. tax rate.

The United States does not impose additional tax on foreign income when the foreign tax rate is higher than the U.S. rate.

Conversely, if the tax rate on the foreign sourced income is lower than the U.S. tax rate, the FTC causes the overall tax on the foreign income to approximate the U.S. rate.

bob2356 says

Does the effective tax rate in the chart include all the profits that have been washed to offshore accounts (for example apples billions of dollars sitting in the caymans) or just domestic? If just domestic profits are included in the calculation then the effective tax rate is actually much lower.

There really isnt a washing of US profits to offshore accounts.. somehow billions sitting in the caymans. They consolidate the non-US global operations in Ireland, pay Irish taxes as needed. ( see Exhibit 21.1 ).

its a sad myth! simple put! what is earned overseas, already taxed overseas, must yet be taxable again ... it will be paid when dividend to the parent is declared (IRS tax law). Otherwise this is a deferred liability. The cash held in asian and european banks are there to pay their staff, bills, taxes, build new operations/expansion, and acquire new companies.

see page... 62-63

http://investor.apple.com/secfiling.cfm?filingID=1193125-11-282113&CIK=320193

Income Taxes
The Company records a tax provision for the anticipated tax consequences of the reported results of operations. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the deferred tax assets. In the event that the Company determines all or part of the net deferred tax assets are not realizable in the future, the Company will make an adjustment to the valuation allowance that would be charged to earnings in the period such determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.!

bob2356 says

The other question that comes to mind is whether offshore profits represent double dealings for executives. Do they include the profits that go offshore as part of the basis for salaries and bonuses. In which case they are essentially stealing from the stockholders, since this pool of profits is being used to calculate how much to pay them but is not available for dividends to be distributed.

Lol.. YES! its all designed to screw the US taxpayer and keep all this hidden from the US Government/IRS... and if you really believe in this.. I got a bridge in San Francisco i like to sell you...

Ruki says

Cap gains taxation directly correlates to investment rates. Investment rates correlate with total production and productivity. Increased production and increased productivity generates more wealth and economic activity. Those in turn generate more tax revenues

LOL! unless its a price bubble.. than it all goes to pot!

thomas,
If the US company has to pay taxes when the income is brought in, what is the benefit of the double irish or dutch sandwich arrangements?
http://en.wikipedia.org/wiki/Double_Irish_arrangement

YesYNot says

what is the benefit of the double irish or dutch sandwich arrangements?

OK, what do you think transfer pricing is ? your not moving profits generated from US customers to non-US (foreign) entities. This is all within non-US entities overseas. Anyway, you dont double tax the same profit.

thomas.wong1986 says

bdrasin says

Also worth considering: in most other countries the corporations don't have to pick up the tab for health insurance the way they do here.

Actually, Asian and European companies do pick up the tab for Health and Social (retirement plans, social securities) from their employees salaries and from the foreign companies like we have here. Foreign companies doing business also pick up the tab having workers in the host Asian and Euro country. As do foreign companies doing business in the US. Nothing is free!

Really? There is a line item on your paycheck for health insurance company XYZ? I guess it must depend on the country. When I worked in the UK my health care was from the national healthcare service, which is paid for out of tax revenue. What it means is that the employer can pay me a somewhat lower salary because health care is already covered.

Ruki says

Tax revenues almost doubled under Reagan. Did you know that? But according to your world view, you require some mental gymnastics to believe it.

Yes, and interest rates dropped more than 50% under Reagan. See graph (long term rates, short term rates dropped even more)

A monkey President would look good in that environment. I hope you aren't going to make the retarded claim that Reagan brought interest rates down. When he raised taxes it might have helped maintain the trend, but it was CArter's appointee Volker who killed inflation with high interest rates, and when they fell like a rock, anything Reagan did was going to look great.

You're a troll.

I wasn't arguing that when tax rates are too high that lowering them can't be good. But rates are low now. And receipts even lower because of the way that people and corporations avoid paying taxes.

You're a troll.

Or if you aren't, maybe you can explain why competing with countries where corporate rates are lower is affected by our higher rates, when we actually PAY LESS than they do.

ruki says

Want to get more revenue (that means more in tax receipts for the ignorant)? Then cut the rate at least to levels competitive with world average levels

WTF ? Again. If we pay less than they do in taxes, it's actually rates that are irrelevant.

Stay tuned to see how Ruki dodges the question. We could start a pool. Will it be an ad hominem attack perhaps ? Maybe one of many logical fallacies ? I'll admit, I am curious. My bet is he just runs, or maybe changes his name again.

The question: Can you explain why competing with countries where corporate rates are lower is affected by our higher rates, when we actually PAY LESS than they do ?

By the way....

Ruki says

Tax revenues almost doubled under Reagan

Good thing, since the deficit tripled. I guess it could be argued that if revenues doubled while the deficit tripled, Reagan was really teaching us how to live beyond our means, and it's true what people say about the mother of all credit binges (and fake economies) being initiated by Reagan.

Also, one can't help but wonder whether the massive expansion of government and deficits under Reagan helped our economy ?

thomas.wong1986 says

OK, what do you think transfer pricing is ? your not moving profits generated from US customers to non-US (foreign) entities. This is all within non-US entities overseas. Anyway, you dont double tax the same profit.

I don't know what transfer pricing is, and was asking a genuine question. My understanding is that related entities (controlled by the same organization) can sell each other goods at non-market rates and move profits around. In the articles they mentioned that a company like Apple could place their IP in a subsidiary company in Ireland, and then the patent revenue would flow through Ireland.

In fact, my understanding was that the best argument for lowering corporate taxes is that corporations can so easily shift profits from one place to another. A human can do this to some degree by living in Florida for 6 months out of a year to avoid state taxes if they have a lot of investment income. A corporation doesn't have to make such sacrifices to avoid taxes.

Maybe a company that shifts profits to a tax haven country just gets to hold it there and defer taxes? If you understand exactly how these things work, then maybe you can help explain it. This graphic in the NYT shows money staying in a tax haven country. I don't know if the money can be passed directly from the tax haven country to investors as a dividend or if it has to be brought back into the US, logged as corporate profit, and then passed on as a dividend.

http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html

From the next article...
In a regulatory filing just a week before the Japanese disaster put a spotlight on the company’s nuclear reactor business, G.E. reported that its tax burden was 7.4 percent of its American profits, about a third of the average reported by other American multinationals. Even those figures are overstated, because they include taxes that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back.

http://www.nytimes.com/2011/03/25/business/economy/25tax.html?pagewanted=all

Ruki says

bob2356 says

Your proof of this is?

Prove to me the sky is blue.

Not my prob if you don't know the basics of Econ 101, dude.

Cap gains taxation directly correlates to investment rates. Investment rates correlate with total production and productivity. Increased production and increased productivity generates more wealth and economic activity. Those in turn generate more tax revenues.

Obey The Tripods

Oh yes the classic you prove the sky is blue because I don't have a clue other than Rush told me so response.

Ok you are so well versed on econ 101, how about some actual real world examples and numbers to back this all up? I'm sure the next step in this little farce is the classic I'm not your google whore response.

marcus says

Stay tuned to see how Ruki dodges the question. We could start a pool

I like it, the Ruki dodgem pool. I'm in .

thomas.wong1986 says

There really isnt a washing of US profits to offshore accounts.. somehow billions sitting in the caymans. They consolidate the non-US global operations in Ireland, pay Irish taxes as needed. ( see Exhibit 21.1 ).

its a sad myth! simple put! what is earned overseas, already taxed overseas, must yet be taxable again ... it will be paid when dividend to the parent is declared (IRS tax law). Otherwise this is a deferred liability. The cash held in asian and european banks are there to pay their staff, bills, taxes, build new operations/expansion, and acquire new companies.

So you are saying the NYT got it wrong, that apple is actually paying taxes on their intellectual property in ireland before shipping the money to the netherlands and then off to the carribean? Can you document that? I would be curious how as big a publication as the times got something so totally wrong and no one picked it up.

So when exactly will all these billions in yet untaxed profits sitting offshore actually be returned to the shareholders as dividends? Why is so much money being held offshore for long periods of time? Which was part 2 of my question. Are ceo's and senior management paying themselves based on the profits generated offshore but never distributed as dividends? Do they bring these profits back in to load balance loss years, never giving dividends but making their numbers and bonuses with it?

SFace says

You probably misundestand how this works. A multi-national corporation files on a consolidated basis. A consolidated return will exclude the foreign subs thus during the period of loss, your companies includable will be the same. The corporation will not be able to use losses on the federal consolidated return with offset from foreign E&P. In fact, I believe if the company have 20 foreign subs and file 20 form 5471's, they cannot be netted against another.

They can't net against each other in the same year. What about a company like apple that has 75 billion in untaxed (in the US) profits (who knows how much sitting in bvi, it's not broken out by apple) from many different years. Can't apple (or any corporation with substantial offshore profits) bring some back in a year they lose money in the US and net it out then? In which case the senior executives would have been paid for performance in generating the profits at time they were first created, then avoided be penalized for the losing year by moving the untaxed profits back? Plus there is 75 billion out there the stockholders are not getting. Last time I checked the stockholders were the actual owners of that money.

bob2356 says

Can't apple (or any corporation with substantial offshore profits) bring some back in a year they lose money in the US and net it out then?

simple put no! you cant 'move' revenues and related expenses (what you call profits) from one tax year to another. For that purposes your prior tax years are closed and if you suffer a loss (NOL net operating loss) in say year 3, you can apply a loss credit 2 years before the loss and forward for 20 years. Therefore you get a refund for years 1 and 2.
This applies to both Corp and Individuals tax payers.

bob2356 says

They can't net against each other in the same year. What about a company like apple that has 75 billion in untaxed (in the US) profits (who knows how much sitting in bvi, it's not broken out by apple) from many different years.

No.. what you see from the SEC filings is different from what the US auditors and what the IRS see. Not to mention all the foreign tax agencies who want to collect their taxes.

A typical consolidated internal PL will include... Same for balance sheet.

Top horizontal line (my country or legal entity)
US, Japan, Mexico, China, Canada, Ireland, UK, Norway, etc etc etc.

Vertical Account line...
Revenues by product lines
Cost of goods detail by product lines
Salaries
Bonus
Commission
Rental
Small tools
and
100s of other expense lines

Other income/taxes... detail by type
FX gain losses

US federal Tax
US State tax
Foreign Tax
etc etc

Net Income..by each country - entity.

Pretty much everthing is finally audited by their Price Waterhouse (3rd party US auditors and their own affiliated).

bob2356 says

So you are saying the NYT got it wrong, that apple is actually paying taxes on their intellectual property in ireland before shipping the money to the netherlands and then off to the carribean? Can you document that? I would be curious how as big a publication as the times got something so totally wrong and no one picked it up.

Define Intellectual property from the Balance Sheet you see in the SEC filings.. what exactly is this IP assets the media talks about ?

is it Cash, investments, AR, inventory, fixed assets.. long term assets ?
Like Apple many have few dollars sitting in their cash accounts (pay salary,vendor bills).. Apple has what 3-4B out of $80-90B in cash US accounts.. the rest are in US Govt Bonds.. there isnt Billions sitting in some cayman islands transfered from the US as you think...
How does it come to be..

NYT, arent accounting or tax experts.. they have a political agenda.
Surely they should get someone from the Big 4 Accounting/Tax firm to explain all this ... but that would kill their articles off !

SFace says

In short, it will allow the company to lower their effective tax rate, increase their earnings and earnings per share.

Thanks SFace.
I want to make sure I have this right. Taking your profits in a low tax country and moving the profits to a place like the Caymans is done, and it is used to defer taxes. The company earnings (used for price to earnings ratio) is calculated based on after tax earnings, so includes all of the money that goes into the Caymans account.
Is that correct?
thomas.wong1986 says

simple put no! you cant 'move' revenues and related expenses (what you call profits) from one tax year to another. For that purposes your prior tax years are closed and if you suffer a loss (NOL net operating loss) in say year 3, you can apply a loss credit 2 years before the loss and forward for 20 years. Therefore you get a refund for years 1 and 2.
This applies to both Corp and Individuals tax payers.

I think what bob meant was that by shifting profits to foreign subsidiaries, and then storing money in a foreign company, you are deferring taxes until you bring the money home. The questions is not whether profits from one year can balance losses from another year. The question is, can you offset the 'profits' generated when you bring money back to the US with losses in the US in one year. These seem different to me.