Friday, August 29, 2008

Econ 101 For Reporters

Do News Reporters Even Understand Economics?

"The impression one gets from corporate critics is that many are prospering but exploiting loopholes in the tax code and leaving the rest of us to pick up the tab." -- Steven Malanga

I found this piece by Steven Malanga: Do Corporations Really Pay No Taxes? It makes the point that so much of the economic reporting we see today is at best devoid of necessary context and at worst, downright misleading.

I thought it was basic knowledge that corporations pay taxes on profits, not gross sales, but Malanga points out a reporter who makes no effort to clarify that point. Forgetting that $50 million in sales is not money the company gets to keep. Think of eight or nine percent of that amount as "evil" corporate profits and you are probably closer to the truth.

Malanga also points out that the profit is often passed through the entity as salaries and dividends. That is where they are taxed.

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