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During our recent blargument Marco wrote:

Facts say what the speaker wants them to (like statistics).

I responded:

This is an abuse of the word “fact” (and “statistic”). I know that your idea of what’s “fact” and mine do not necessarily like up exactly, but there’s no sense in trying to make “fact” mean “objective” and instead make it “subjective”.

We already have a word for that: “opinion”.

I might like to *say* that my opinions are facts, but that doesn’t make it any more true than if I say my car is a Ferrari. It may or may not be, but it would be silly to take my word for it without some sort of evidence (a peek in my garage, my vehicle registration, or perhaps a look at my bank account).

Persuasive arguments are not always false or misleading, but I am at a disadvantage if I take persuader’s word for it that his statements are true (ie: are facts). I need to take other information into account. Part of that may be experience (how accurate has he been in the past, is he drawing reasonable conclusions based on the evidence he’s presented), but outside evidence and/or well-reasoned counterarguments are even more reliable.

(I’ve added the emphasis in my reposting here.)

A week ago the U.S. Government Accountability Office published a study about corporations (both US-based and foreign-controlled) and the taxes they pay. It was factual, apparently objective, and probably accurate (I don’t know how well the GAO does their job, but for the purposes of this argument I’ll assume it’s correct). It specifically did not draw any conclusions from the facts that it presented.

The news media took the report and wrote hundreds of stories on it. Many (most?) of them had the theme “Corporations use tax loopholes to pay less than their ‘fair share’”., lead by the Associated Press who claimed that two-thirds paid no federal income taxes between 1998 and 2005. Even my favorite business news source, APM Marketplace, did a bit about big evil pampered corporations, leading off the story by saying that if real people were dodging their taxes on this scale, there would be public outrage.

The very first thing I thought of when I read the first of these GAO news stories was “were the corporations that aren’t paying taxes also not earning income?

In the U.S. (and in Canada, and probably most other developed nations), corporations pay “income” taxes on their profits, not their sales. This makes sense to most people when you explain it to them. “Sales” refers to the amount of money a business takes in. Subtract “costs” (what they pay out) from that, and the leftovers are what they keep: “profit”. Taxing based on sales (which would ignore costs and profitability) isn’t very effective, because it would hurt a an already struggling company with high sales and low or negative profitability (think GM) yet give a company with small sales and great profitability. There are such things as taxes on certain assets (which would effect business which own those assets, which may tend to be larger), but that’s not what the study was about.

Most people think of corporations as big entities with thousands of employees, woldwide reach, and millions (or billions) in sales — and thus want them to pay millions of dollars in taxes. The truth is that most corporations are small and local; many have only one employee. Many are short-lived too (many don’t survive beyond five years, although the actual numbers vary depending on the study). A lot of them don’t have profits in every year. The laws allow a business who has a loss in one year to apply it against their profits in another year for the purposes of taxes (allowing that business to “catch up” from a business slowdown). Some (similar to my own business, although I’m not incorporated) pay out all of their post-expense sales money to their employee(s) (who then pay personal income taxes on it), and thus show no profit and pay no corporate tax.

As it turns out, what I wrote above is probably a better explanation for the results than “corporate tax-dodging loopholes”. The GAO report itself wrote, in the very first paragraph of the summary:

Most large [foreign-controlled] and [US controlled corporations] that reported no tax liability in 2005 also reported that they had no current-year income. A smaller proportion of these corporations had losses from prior years and tax credits that eliminated any tax liability.

However, that’s not the story you got from most of the news articles.

A few sources did try to offer counterarguments to the popular story. Fark summed it up nicely:

Do corporations really pay no taxes? Or is it just a bunch of overhyped media BS on a slow news day? The real numbers indicate the latter

This is yet another example of why counterarguments are necessary in most (if not all) discussions. Facts don’t speak for themselves (in fact, they don’t speak at all; they don’t have mouths), but everyone with an opinion or an agenda will be quick to offer theirs as the “correct interpretation” of the facts.

It’s too much to ask for an unbiased interpretation of the facts from any one source (as evidenced by the countless examples of biased interpretations) so your best bet is to get multiple interpretations, analyze the reasoning behind their conclusions, and determine the best conclusion based on the strength of the arguments.

Note that this doesn’t necessarily mean picking the best argument out of the group of all arguments. Each argument should have some aspect of the truth in it (if it’s completely faulty then you can discard it). Conclusions will usually only be true if their assumptions are correct, and often decision making comes down to picking from the most probable (but not necessarily correct) assumptions. If it comes down to a choice between one good argument with bad assumptions and one bad argument with good assumptions, you might get the best results by combining the two.