Taxes have been controversial for decades, with no one thinking they pay their fair share. Lately, one big issue has been whether corporations should pay more tax, and the Citizens for Tax Justice recently released a report arguing that General Electric (GE), Boeing (BA), Verizon Communications (VZ), and nearly two dozen other corporations paid no tax between 2008 and 2012. Is that fair, or are there other factors to consider?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, takes a closer look at the CTJ report. In particular, Dan notes that you have to be sure you know what you're looking at in studies like this, as there can be big differences between the tax allowances companies include in their income statements and the actual cash they pay in taxes from year to year. Moreover, Dan points out that items like depreciation for Verizon, timing issues and tax incentives for General Electric, and revenue-recognition timing for Boeing can distort snapshots of tax payments, requiring a longer-term look at taxes to get the complete picture. Dan concludes that you have to look beyond the headlines to have an informed opinion about whether companies pay too much or too little in tax.
