the logical outcome?

[barmar]

PS: I actually think corporation tax should be zero. Economy is made up of people consuming things. So tax people, when they are paid, and when they consume. Taxing corporations, rather than the people they employ and the people they pay the money to, is weird, and it mostly happens because people don't know who is being taxed when you tax a faceless corporation, and so they don't know who is paying, and that always makes it politically feasible to have high corportation taxes.

But as the Supreme Court pointed out in the Citizens United case, corporations are people.

 

But as to the "weirdness" of taxing corporations -- who and how much to tax is mostly arbitrary. It's no more weird to tax corporations than to have different tax rates on food purchased at a restaurant than at a grocery (in MA, we have a meals tax, but no tax on groceries). Dividing up the tax burden is mostly political -- taxes either implement public policy (increasing taxes on activities you want to discourage, like smoking), or are done in ways least likely to hurt one's political career (corporations don't vote, and they have lots of money, so it's safer to tax them).

[mycroft]

This is one of those annoying `small truths' that isn't exactly false but paints a completely false picture.

 

The fundamental reason this number is falling is that co-corporations are earning more of their money abroad. If you are a co-orporation, you should be paying US corporation tax only on those profits relating to operations in the US.

Agree, but:

These figures are created by taking at the declared world wide earnings of corporations, and then looking at US taxes paid. Which is obviously a ridiculous thing to do. Why should the US government be entitled to tax profits made by (say) British workers, working in British factories, using British infrastructure to transfer their goods to British consumers, just because their parent company happens to be incorporated in the US, rather than (almost) any other country in the developed world :).

If you are a U.S. Citizen, you pay U.S. tax on foreign earnings, when living in the foreign country, and employed by a foreign company (there are bigger "standard deductions", because they do realize that the foreign country wants *their* taxes, but it still happens, and it happens even if the money never enters the U.S). Why should other entities that pay tax be any different?

 

Also, if you see for example Microsoft Ireland, it's amazing how much U.S. business is done "by european workers, in a european office, using european infrastructure."

 

On your note about corporations and their taxes, I already work with several corporations who are co-workers. Removing any non-consumable taxes on corporations will simply encourage everybody, rather than those that are willing to deal with the hassle, to self-encorporate. And then where are you? Also, if people get taxed when they get paid, why shouldn't corporations? And if not - if we only tax people or institutions on consumption - we avoid all this hassle about "marginal income tax rates", but for all the reasons I've outlined before (specifically the "shrinking incremental value of money") that can (and therefore will, if those that have the money have the say, and they usually do, at least for a while) lead to the same issues we had in Dickensian Victoriana and Robber Baron U.S.

 

Faster than we're currently going, that is.

[phil_20686]

But as the Supreme Court pointed out in the Citizens United case, corporations are people.

which is completely ridiculous. And your legislature should move immediately to change this.

 

But as to the "weirdness" of taxing corporations -- who and how much to tax is mostly arbitrary. It's no more weird to tax corporations than to have different tax rates on food purchased at a restaurant than at a grocery (in MA, we have a meals tax, but no tax on groceries).

 

Except that US corporation tax is set up to create weird incentives. For example: it is cheaper for a US company like google to acquire foreign start ups than US start ups, as it can acquire foreign investments without paying corporation tax. A tax system that makes it inefficient to invest in your own country does not seem like a winner to me.

 

Also, I don't think taxes when you cannot predict the tax incidence are a good idea. I like predictable taxes and transparency. The incidence of corporation tax changes depending on the state of global competition, (they will pass on the tax to consumers unless constrained by global competition) so it is either a competitive handicap or a tax paid by consumers. The first thing isn't a good thing, and the second is a sales tax dressed up to look like something else.

[phil_20686]

Agree, but:

If you are a U.S. Citizen, you pay U.S. tax on foreign earnings, when living in the foreign country, and employed by a foreign company (there are bigger "standard deductions", because they do realize that the foreign country wants *their* taxes, but it still happens, and it happens even if the money never enters the U.S). Why should other entities that pay tax be any different?

This is also ridiculous. This penalises US citizens for working abroad, which handicaps US corporations from being able to send their best people to work abroad.

 

Also, if you see for example Microsoft Ireland, it's amazing how much U.S. business is done "by european workers, in a european office, using european infrastructure."

Its unclear what you mean by "us buisness".

 

 

On your note about corporations and their taxes, I already work with several corporations who are co-workers. Removing any non-consumable taxes on corporations will simply encourage everybody, rather than those that are willing to deal with the hassle, to self-encorporate. And then where are you? Also, if people get taxed when they get paid, why shouldn't corporations?

 

Tax systems should not allow you to avoid tax by self incorporation. That is, you should not be able to get the money out of the corporation and into your greedy paws without paying income tax.

[onoway]

Perhaps people would be more comfortable with corporations not paying much (or any) taxes if they weren't ever given preferential treatment / subsidised/ bailed out/ with taxpayer money.

 

Aside from that, why should corporations not be required to give something back to the community? Don't they also use the infrastructure that the taxes supposedly are paying for? Roads, police, septic systems and so forth? Education systems which prepare their workers for them? Roads would last a whole lot longer if big heavy trucks weren't trundling over them, and a whole lot of civil servants would be unnecessary if too many corporations didn't try to get away with what is basically antisocial behaviour.

 

Reasonable behaviour has too often gone by the wayside by companies who pollute and cut corners re safety and generally disregard anything but their own bottom line as having any importance.

 

Such behaviour means that society has to have something in place supposedly to protect the citizens from corporate misbehavour. Why shouldn't corporations be held responsible for paying for such things? People have to pay taxes for schools even if they have no kids, so why should corporations not have to pay their share as well?

 

I know someone who owns shopping malls and 100+ apartment complexes and at least one car dealership in Canada and the US and pays NO income tax at all. Hasn't for many years. And now you are saying that his companies ALSO should pay no taxes? That's a pretty hard sell, I think.

[phil_20686]

Aside from that, why should corporations not be required to give something back to the community? Don't they also use the infrastructure that the taxes supposedly are paying for? Roads, police, septic systems and so forth? Education systems which prepare their workers for them? Roads would last a whole lot longer if big heavy trucks weren't trundling over them, and a whole lot of civil servants would be unnecessary if too many corporations didn't try to get away with what is basically antisocial behaviour.

 

 

Such behaviour means that society has to have something in place supposedly to protect the citizens from corporate misbehavour. Why shouldn't corporations be held responsible for paying for such things? People have to pay taxes for schools even if they have no kids, so why should corporations not have to pay their share as well?

 

I know someone who owns shopping malls and 100+ apartment complexes and at least one car dealership in Canada and the US and pays NO income tax at all. Hasn't for many years. And now you are saying that his companies ALSO should pay no taxes? That's a pretty hard sell, I think.

 

Because corporations are "things" and so they don't "pay". If you tax a corporation, it is people somewhere who are paying. Either the consumer in higher prices, or the employees in lower wages, or the owner in lower profits. If you tax a corporation one of these three groups is paying. So why not tax them directly? I am arguing that you should set up your tax law in such a way that people get taxed.

 

Moreover, we have no idea who pays for corporation tax in general. Is it a tax on rich people or poor people? How can we decide how redistributive a tax system is when we have no idea who is paying one of the major taxes?

 

Also, your example cannot possibly be true. But even if it is mostly true, in the sense that he pays much less than the legislature intended, it only tells you that you should be rewriting your income tax law. Finally, you are assuming that the rich guy is the one who loses from corporation tax. It could very well be that it is actually his tenants who are paying the tax through higher rents. Corporation tax incidence is very complicated.

[barmar]

Agree, but:

If you are a U.S. Citizen, you pay U.S. tax on foreign earnings, when living in the foreign country, and employed by a foreign company (there are bigger "standard deductions"

Are you sure they can't take a credit for the foreign taxes paid? I don't know about taxes on wages, but that's how it works for taxes on investments.

[Cthulhu D]

Aside from that, why should corporations not be required to give something back to the community? Don't they also use the infrastructure that the taxes supposedly are paying for? Roads, police, septic systems and so forth? Education systems which prepare their workers for them? Roads would last a whole lot longer if big heavy trucks weren't trundling over them, and a whole lot of civil servants would be unnecessary if too many corporations didn't try to get away with what is basically antisocial behaviour.

 

 

You're forgetting that Isaac Newton's quote "If I have seen further it is only by standing on the shoulders of giants" is seen as an indictment of capitalism/endorsement of socalism by the US Republican movement. Just look at the sheer number of hilariously bad political cartoons sledging the 'you didn't build that' remark.

 

The bottom line is that your statement is self evidently true, but it runs contrary to the de jure republican/protestant line that man can pull himself up by his own bootstraps, everything government does is bad, and everything would be better if there was no government. Given the dissonance, they have to reject one position and for some reason that eludes me, they pick yours.

[mike777]

Actually I think the real debate is over the theory/question: are free markets the best antipoverty program?

 

 

 

That's the way the free market system distributes the fruits of economic progress among all people. That's the secret of the enormous improvements in the conditions of the working person over the past two centuries.”

― Milton Friedman, Free to Choose: A Personal Statement

[Cthulhu D]

Actually I think the real debate is over the theory/question: are free markets the best antipoverty program?

 

 

 

That's the way the free market system distributes the fruits of economic progress among all people. That's the secret of the enormous improvements in the conditions of the working person over the past two centuries.”

― Milton Friedman, Free to Choose: A Personal Statement

 

Except that the US has higher inequality and more poverty than, say, Finland on a per capita basis. Is there any data amongst the OECD to suggest that this is the case?

[mike777]

Except that the US has higher inequality and more poverty than, say, Finland on a per capita basis. Is there any data amongst the OECD to suggest that this is the case?

 

 

As I said that is the real question and debate. Is the Finland economic model applied worldwide or to the USA a better antipoverty program. You seem to say yes..so better to describe how it works compared to free market economic theory and why it can and should be applied worldwide.

 

 

The data I see and Friedman says the free market model is proven best over the last 200 years or so.

[Cthulhu D]

As I said that is the real question and debate. Is the Finland economic model applied worldwide or to the USA a better antipoverty program. You seem to say yes..so better to describe how it works compared to free market economic theory and why it can and should be applied worldwide.

 

 

The data I see and Friedman says the free market model is proven best over the last 200 years or so.

 

Are you counting the social democracies as free markets or not? (Friedman does obviously)

[WellSpyder]

I don't think taxes when you cannot predict the tax incidence are a good idea. I like predictable taxes and transparency. The incidence of corporation tax changes depending on the state of global competition, (they will pass on the tax to consumers unless constrained by global competition) so it is either a competitive handicap or a tax paid by consumers. The first thing isn't a good thing, and the second is a sales tax dressed up to look like something else.

I agree that the (final) incidence of corporation tax is unclear. But if you want to abolish taxes with unclear incidence then I am afraid you won't be raising very much money! The incidence of income tax depends on the state of competition in the labour market, for instance. And the incidence of sales tax depends on the state of competition in product markets......

[mike777]

Are you counting the social democracies as free markets or not? (Friedman does obviously)

 

 

Actually Friedman was highly critical of say Britain as compared to say Hong Kong under British Rule.

 

 

Britain become a much poorer place compared to Hong Kong due to its economic policies.

 

 

"Nonetheless, there are some statistics, and in 1960, the earliest date for which I have been able to get them, the average per capita income in Hong Kong was 28 percent of that in Great Britain; by 1996, it had risen to 137 percent of that in Britain. In short, from 1960 to 1996, Hong Kong’s per capita income rose from about one-quarter of Britain’s to more than a third larger than Britain’s. It’s easy to state these figures. It is more difficult to realize their significance. Compare Britain—the birthplace of the Industrial Revolution, the nineteenth-century economic superpower on whose empire the sun never set—with Hong Kong, a spit of land, overcrowded, with no resources except for a great harbor. Yet within four decades the residents of this spit of overcrowded land had achieved a level of income one-third higher than that enjoyed by the residents of its former mother country"

 

 

from wsj

[phil_20686]

I agree that the (final) incidence of corporation tax is unclear. But if you want to abolish taxes with unclear incidence then I am afraid you won't be raising very much money! The incidence of income tax depends on the state of competition in the labour market, for instance. And the incidence of sales tax depends on the state of competition in product markets......

 

Transparent incidence is a thing which is true by degree. The incidence of income tax is only unclear if you think that labour markets really compete globally, but they only slightly do. Most people are prepared to take relative pay cuts to stay in their home countries, not to mention language barriers.

 

Sales/VAT taxes have very clear incidence I thought. They are not affected by competition, as you basically have to buy things in the place where you live, and so no companies are put at a relative disadvantage, which is the route of unclear incidence.

 

Surely pretty much everyone agrees that the incidence of corporation tax is much more difficult to understand than income or VAT taxes?

[Winstonm]

As I said that is the real question and debate. Is the Finland economic model applied worldwide or to the USA a better antipoverty program. You seem to say yes..so better to describe how it works compared to free market economic theory and why it can and should be applied worldwide.

 

 

The data I see and Friedman says the free market model is proven best over the last 200 years or so.

 

A free market economy is not the same as a free market society, and the US has morphed into the latter over the past 3-4 decades. Societies cannot be simplified to profit/loss statements.

[blackshoe]

A free market economy is not the same as a free market society, and the US has morphed into the latter over the past 3-4 decades. Societies cannot be simplified to profit/loss statements.

What, pray tell, is the difference?

[luke warm]

What, pray tell, is the difference?

one is spelled e-c-o-n-o-m-y and the other s-o-c-i-e-t-y

[mike777]

to be fair Biden presents the otherside that the economy and wall street should be in shackels.

 

romney says unshackel wall street.

 

I think this is a good political discussion to have, keep wall street and the banks in chains or not.

[onoway]

Because corporations are "things" and so they don't "pay". If you tax a corporation, it is people somewhere who are paying. Either the consumer in higher prices, or the employees in lower wages, or the owner in lower profits. If you tax a corporation one of these three groups is paying. So why not tax them directly? I am arguing that you should set up your tax law in such a way that people get taxed.

 

Moreover, we have no idea who pays for corporation tax in general. Is it a tax on rich people or poor people? How can we decide how redistributive a tax system is when we have no idea who is paying one of the major taxes?

 

Also, your example cannot possibly be true. But even if it is mostly true, in the sense that he pays much less than the legislature intended, it only tells you that you should be rewriting your income tax law. Finally, you are assuming that the rich guy is the one who loses from corporation tax. It could very well be that it is actually his tenants who are paying the tax through higher rents. Corporation tax incidence is very complicated.

 

Well, corporations "earn" so why shouldn't they pay taxes just as people who "earn" pay taxes? It seems to me to be far clearer about who is paying and for what if the corporations are taxed..then people have the choice whether or not to contribute part of what they "earn" to the corporation's bottom line. Otherwise who knows where the taxes paid are going, lord knows much of the time it isn't anywhere people would normally choose to have their taxes go. Governments have all had and continue to have corruption scandals and suchlike. They also already bail out corporations with taxpayer money but at least now the taxpayer KNOWS that their taxes are going to benefit banks and big business. Why make it easier for them to hide such activities?

 

Also seems to me that the more you tax people rather than corporations, the more you limit the ability of people to start and run businesses. I would guess that that isn't high on the list of priorities for governments oriented toward "bigger is better" and "global economy" but I read somewhere a long time ago (but it stuck in my mind) that the period of time with the lowest taxation for the middle class corresponds to the period of the most active development of the economy in terms of businesses starting/employment and so forth. Problem is that now there are so many regulations (many put in place because big business misbehaved but applied to small businesses even when it isn't appropriate), it costs so much to start up a business and it's pretty tough for a small business to compete with the big players, who have the sympathetic ear of governments everywhere.

 

As someone said to me recently, there are too many people in the government (from municipal on up to federal) in charge of "making people sad" for trying to do anything.

 

Now you have the mega businesses such as Walmart driving 3 generation family businesses to close their doors permanently just by announcing they are moving into an area. As far as I can see, the wholesale pandering to megabusinesses is turning the general population into a society of workers rather than entrepeneurs with all of the fallout that entails. It's a sort of 22nd century feudalism situation but the "lords" (corporations) clearly most often feeling no responsibility for the workers at all, but only to the bottom line and the shareholders.

 

It's what leads corporations to go to set up sweat shops for child labour in 3rd world countries, or dump their toxic wastes there, or cut corners on materials/upkeep which leads to toxic spills, or give as few as possible of their workers full time work so they don't have to pay any benefits such as health care or pensions, or to fire/downsize an older worker who is approaching retirement or may have health issues.

 

In an industry I once worked in, it was common knowlege that if anyone ever used workman's compensation they would be dumped by the company (just no work at the moment, we'll call you) and would not work again for the company once the claim was over, no matter how valid, and no matter how many years they had worked for the company. But of course they weren't fired..that would be illegal, so until word got around people waited to get called to work rather than looking elsewhere, until finances made them desperate and they had to go elsewhere.

 

It's what allows corporations to pay one woman what they pay men and all other women get much lower wages doing the same job. As long as ONE woman has parity, 1000 others could get paid half of what men earn and the company is within the letter of the law. I don't know about the States but that is certainly true in Canada. Given that stats say women earn less in the States it appears to be true there as well.

 

We now commonly have the situation where workers take rollbacks for a number of years to help corporations deal with the results of their own mismanagement, often also subsidising such businesses as the auto industry with taxpayer dollars. The companies take the taxpayer money, turn things around and start to make big profits again. Then if the workers want to benefit from the turnaround that they funded through wage rollbacks and tax dollar forgiveness/subsidies,the companies threaten to take all the jobs elsewhere. Or they just move, once they've milked the taxpayers for everything they can get, and abandon the workforce that kept them in business.

 

Or as one company did, keep a handful of people temporarilly on the payroll for a couple of months to train the replacement workers in the new country.

 

And they should pay no taxes? Why on earth not?

a) They are earning money

b) they use the services of the community such as the police, and

c) too often as a result of their activities, whether it be toxic wastes or an abandoned work force, taxpayers are left to deal with the fallout

d) Of course the costs will be passed on to the consumer but then it is his or her CHOICE to buy from BP or Walmart or whatever.

 

It seems the perfect example of how schizoid govenments are about handling money when it relates to big business when you consider that (to my understanding) tobacco growers are heavilly subsidized with tax dollars even as the tobacco companies are being taken to court and zapped with fines for selling the stuff. Great for lawyers, I suppose. It may be that the government figures it makes more money back in fines than the subsidies, but if all the hoopla is true, then we are paying much much more in such things as medical care than the fines could ever hope to approach. Why not do the simpler thing and subsidize the tobacco farmers ONCE to switch to another crop such as hemp? :P

 

As far as the guy paying no income tax, of course I have not seen his tax returns and am going by what he claims. I think the way he did it was to have everything owned by the various companies..e.g. the vehicles by the car dealership, the house was on a horse farm (very common for lawyers and such to have a "farm" to avoid taxes here). The stables/arena area were.. much nicer than many peoples's houses, and included his accountant's office etc.

 

I know there are people in the States with some authority who are claiming to know how to retire after 20 years or so with well over $100,000 per MONTH, ALL NONtaxable income, if they make certain arrangements having to do with the way the banking system works. The catch is, as is so often the case, you need to have lots of money to be able to set it up. Like the old joke which is too often true, you can only get money if you don't need it.

[phil_20686]

Well, corporations "earn" so why shouldn't they pay taxes just as people who "earn" pay taxes? It seems to me to be far clearer about who is paying and for what if the corporations are taxed..then people have the choice whether or not to contribute part of what they "earn" to the corporation's bottom line. Otherwise who knows where the taxes paid are going, lord knows much of the time it isn't anywhere people would normally choose to have their taxes go. Governments have all had and continue to have corruption scandals and suchlike. They also already bail out corporations with taxpayer money but at least now the taxpayer KNOWS that their taxes are going to benefit banks and big business. Why make it easier for them to hide such activities?

 

And they should pay no taxes? Why on earth not?

a) They are earning money

b) they use the services of the community such as the police, and

c) too often as a result of their activities, whether it be toxic wastes or an abandoned work force, taxpayers are left to deal with the fallout

d) Of course the costs will be passed on to the consumer but then it is his or her CHOICE to buy from BP or Walmart or whatever.

 

If you tax a corporation, the people who pay are either the consumers in higher prices, or the employees in lower salaries, or the shareholders in lower profits. A corporation is just an organisation of people.

 

If you put a corporation tax on a real estate agency, well it probably applies to all real estate agencies in the area, so they are in competition but at a higher price, and the result is that in reality you are putting a tax on the clients of real estate agencies through higher prices.

 

On the other hand, a firm like IBM, which makes high value goods in a global market place, is in competition with global firms who will not be paying US corporation tax. In that case it puts them at a competitive disadvantage, and since they cannot change prices (lest they lose market share), they must lower either salaries or profits. In which case you are really taxing dividends or incomes. It is my belief that it is in fact the lowest paid who will bear the brunt of this cost cutting, as they have the skills for which there is least competition.

 

The practical case against corporation tax is that: (1) corporations are much better at avoiding tax than individuals, both through loopholes, and through lobbying. (2) putting your firms at a disadvantage to foreign firms in low tax areas of the world will incentivise offshoring. (3) The current rules encourage multinationals to invest offshore, rather than in the US, to avoid corporation tax. (4) Virtually any political end in terms of redistribution is better served by raising income tax and VAT taxes. (5) It would instantly cut about ten thousand pages of tax law, devoted to what are and are not business expenses subject to tax credits.

 

The case against it is: (1) In order to be revenue neutral you would have to have higher marginal tax rates, which might discourage workers. (2) Since no one knows who pays corporation tax, it is often a politically convenient tax to raise. (3) All taxes are somewhat distorionary, so it is often better to have many small taxes than a few larger ones.

[akwoo]

My suggestion on corporate taxes:

 

Abolish corporate taxes as well as taxes on dividends and capital gains on shares.

 

Replace this by considering all corporate profits the individual income of the shareholders (on a pro rata basis), taxable under their individual income taxes (regardless of whether they have received any of the profit in their own pockets), and a tax (which would be very very small percentage-wise) on financial transactions.

 

Also - just as discharge of debts under personal bankruptcy is income, discharge of a corporation's debt under bankruptcy should be considered income for the shareholders.

[blackshoe]

incentivise

:lol: Much to my surprise, this "word" is actually in my computer's dictionary. Maybe I should get a new one. :ph34r: :lol: :lol: :lol:

[Cyberyeti]

:lol: Much to my surprise, this "word" is actually in my computer's dictionary. Maybe I should get a new one. :ph34r: :lol: :lol: :lol:

I thought it had been in an American English dictionary for a while, it's more recently crept to the UK as well.

[awm]

If corporate tax is zero...

 

Suppose I create AWM Inc. with myself as sole owner. My employers treat me as a contractor and transfer all my compensation to AWM and no tax is paid.

 

Of course, I probably want the money in my own pockets. But there are many ways to do this. I can make sure my workplace is far from my nominal home and AWM provides a comfortable per diem. I can have AWM "loan" me computer equipment, a company car, a cellular phone. The company pays for frequent flights between my workplace and my nominal home, and sends me on business trips to "check out real estate investments" in exotic locales. All of these corporate "perks" and "business expenses" are effectively tax free and could easily reach into the hundreds of thousands of dollars in value.

 

If I need more money from AWM, I just pay out a dividend to myself, taxed at the lower rate for long-term capital gains.

 

While this may "seem like a scam," real (large) companies do exactly this with executive compensation. No reason it should be legal for a big corporation and not for AWM Inc. Only the corporate tax rate provides defense against this.