They're clearly not a charity. But there are TONS of tax-sheltered businesses that aren't charities.

To me, it's morally equivalent to eg churches that use tax-free money to buy and operate super nice concert venues. Or any other non-profit that uses pre-tax money to pay salaries.

IMO, Ikea > Churches.

> or talk to anyone who's ever received a DARPA / NSF / etc. grant

Y Combinator recently published an article about how to bootstrap a biotech startup on a small seed round, and they included an example company. Step Zero was "get NSF/NIH grants and hire a student/post-doc at a university". Incidentally also the Step Zero for lots of tech companies in the 80s, 90s, and even today.

The NIH and NSF have two funding programs, the Small Business Innovation Research and Small Business Technology Transfer programs, that specifically fund startups/spin-outs from their research programs. More here: https://www.sbir.gov/ Some DARPA programs also have similar commercialization milestones: our PMs were pushing people to think about FDA approval and manufacturing.

Completely agreed! I didn't mean to give that impression at all. I was simply giving a specific recent example demonstrating GP's statement that "especially when said innovation is often possible only because of extensive public investment in research, supply chain stability, etc.".

There are smaller churches that would benefit from the Govt policies.

TBH though, it's not 1800. we should stop (not) taxing based on institution type and start (not) taxing based on where the dollars are going. This would solve lots of problems in the non-profit world (including IKEA and churches).

While I don't necessarily disagree, this seems like it would create a large administrative burden and a strong incentive for businesses to simply lie (or creatively disguise) where there money going. This seems easier than fraudulently registering a for-profit business as a non-profit. Although I suppose it's hard to say whether the current or your proposed approach would result in tax breaks really happening where we want them.

Tax Evasion[0] is not paying taxes you legally owe. Tax Avoidance[1] is finding ways to owe less tax. Evasion is considered illegal, but Avoidance can practically be considered encouraged, as it's perfectly legal and rewards practitioners with lower tax bills.

[0]https://www.investopedia.com/terms/t/taxevasion.asp

[1]https://www.investopedia.com/terms/t/tax_avoidance.asp

It is openly encouraged. All those little policies, those loopholes, are there to encourage certain behaviors and discourage others. Want to funnel profits into live insurance on your employees in order to avoid tax? (Walmart does this) Go right ahead. That bit of tax code is there specifically to encourage the use of life insurance. If it is in the code, it is there because the government wants you to use it.

But I still call it tax evasion colloquially, because I'm just an average Joe who can't prosecute anyone so my legal opinion doesn't matter. My judgement is not whether it's illegal, but whether it's immoral and scummy.

My neighbor, a self-employed painter, claiming his work truck (that he also uses to pull the family camper) as a depreciating business asset is tax avoidance, and I can get behind that. Ikea registering as a nonprofit with 99% overhead is tax evasion, and it's scummy.

Society, as represented by the government, wants charities to exist to assist with causes that society values, like, I suppose, architecture. They encourage this through the tax code. Society also want for-profit businesses to pay their fair share of taxes. This is blatantly a deceitful manipulation of the tax code, whether it's legal or not I don't care, they've abused the law to do things it wasn't intended to do

Also, most people learn this in high school. Calling it evasion when it is avoidance only confuses people as to what you mean, and makes people think you don't know what the terms mean.

> My neighbor, a self-employed painter, claiming his work truck (that he also uses to pull the family camper) as a depreciating business asset is tax avoidance, and I can get behind that. Ikea registering as a nonprofit with 99% overhead is tax evasion, and it's scummy.

But objectively speaking, you are aware it's the exact opposite? It's like trying to defend a function in C that causes UB by claiming it works on your machine. Yes, ok, but it is still UB. Your opinion does not change that, or what other people assume you mean when you say things.

> And since we're not in the middle of some courtroom proceedings, in spirit is how we should understand these words.

Agreed that one should be charitable with their interpretations. That said, not caring (or knowing) about this important difference between the two terms is a signal that one only has a shallow understanding of these matters. What useful opinion could one hold about how companies should be taxed when one doesn't understand basic economic terms?

edit: changed you->one so as not to seem accusatory

One of the things we debate as a society is taxes, because we live with them, pay them and discuss the services and salaries these taxes pay for. It is therefore incumbent upon participants to put their best foot forward in the larger discussion, and equating avoidance with evasion mimics vapid and hollow rhetoric. Else why bother to participate?

It is fair to criticize IKEA and you can certainly stake out a position as an adversary to their tax avoidance scheme without equating it with tax evasion out of a sort of intellectual laziness for one is within the realm of legislative discretion and the other within the real prosecutorial discretion and lead to two entirely different discussions.

Do you contribute to a 401(k)? Deduct home mortgage interest from your taxes? If so, you've participated in legal tax avoidance, too! I don't think either of those are scummy.

Or the government wants to encourage home ownership, so it makes mortgage interest tax deductible.

Or it wants you to get married so it gives you a tax break for filing jointly.

Or it wants you to live in Alaska so it gives you a tax credit to move there.

Or it wants you to revive an economically insecure geographical area so it gives your business a tax break for operating there.

Or it wants you to hire ex convicts so it gives you a tax credit for each one you hire.

This is a mechanism that is used by the federal and state governments to drive behavior. Arguably churches being tax exempt then is the government encouraging its citizens to participate in church activities because we are only one nation “under god”.

Seen under this lens, any individual or corporation who is not practicing optimal "tax avoidance" — i.e. doing the things required to qualify for tax credits, and avoiding the things that would cause taxes — is not putting themselves as fully under the thumb of the state's operant-conditioning apparatus as the state would like.

The state wants you to min-max your taxes. The tax system is designed around the assumption that taxable entities will min-max their taxes. If you're not doing it, you're not just leaving free money on the table; you're also being sub-optimally pro-social in the state's (society's?) opinion. "Tax avoidance" is to Western states, as "social credit score" is to China: a score of how well you're living up to the government's expectations for you. Of course they want you to aim for the best score you can!

(I can understand people refusing to minimize their tax burden for ideological reasons — i.e. refusing to be manipulated into certain behaviors by the state. But I don't think I've ever heard anyone espouse this stance. Most people don't even understand that taxes are the state attempting to manipulate you.)

"Tax avoidance" is the perfectly legal practice of (more or less aggressively) minimising the amount of tax lawfully due.

Everyone engages in tax avoidance at least to a degree.

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

It's the same with the mortgage interest deduction. You avoid some level of taxes as a homeowner by deducting your mortgage interest. Until you have a house and need to do so, it may seem like some weird loop-hole in the taxes, and when you have a house and use it, it's just something you do every year.

Don't expect a multi-national company worth hundreds of millions or billions to view the tax system as being as opaque and complicated as it seems to an individual. Their situation is vastly more complicated than an individuals, and their capability to navigate the tax system is vastly higher as well with multiple CPAs on staff or a large firm hired, so they can take advantage of those provisions put into the system specifically for them.

The reasoning was that when corporate tax rates are low companies will use the extra money to play financial games, and when corporate tax rates are high companies know they are better of off giving the money to retain/recruit good employees or spending it on research to grow the business instead.

https://www.npr.org/transcripts/499490275

https://web.archive.org/web/20201112042116/https://www.econo...