By Andrew Wilford
Real Clear Markets
In response to the much-ballyhooed …
By Andrew Wilford Real Clear Markets In response to the much-ballyhooed news reports about large corporations paying little to no taxes in a given year, Democratic nominee and former Vice President Joe Biden added a proposal for a minimum 15 percent tax on corporate profits to his platform. That may prove politically popular, but as the coronavirus-induced recession reminds us, it’s terrible policymaking. For this reason, the tax code allows for deductions for net operating losses to be carried into years other than the one in which the loss technically occurred. Profits and losses frequently don’t coincide neatly with calendar years. For example, goods purchased or produced by a company in December of one year might be sold in January of the next. Loss provisions in the tax code allow them to smooth out liabilities resulting from such activity, as opposed to being stuck with a “heads I win, tails you lose” scenario in which they pay tax on more than their actual profits.
