As a small business owner, judoka, you pay whatever tax they tell you to pay. Whether the top rate is 30%, 40% or 50% you're still better off making more money then less. But...if you're a Mega International Corp choosing to set up a business unit in a jurisdiction that charges 20% tax, vs 35% tax, you'll give consideration to the 20% place. If you're allocating word income amongst business units, you'll do your best to push 'profits' to the jurisdiction that taxes you less. The impact to the US treasury is the full loss of tax, not just the marginal difference. And if there's a tax penalty for bringing capital back to the US, you might consider not doing so, and investing it elsewhere instead. And that's why the starting point is a competitive rate. The 'loopholes' and 'deductions' are also often a problem, but they have to be evaluated on their own merits.
I would strongly support that but I am very skeptical that will happen. We didn't see closing loopholes with the Bush tax cuts and ideologically the GOP is for lowering taxes whether or not loopholes are closed. In fact many Congressional Republicans are for keeping particular loopholes as are Congressional Democrats.
the Bush tax cuts, if I recall, were mainly personal. Personal income is not as transient as corporate income. FWIW I think US personal rates need to go up and would still remain very competitive with world personal rates in comparable jurisdicitons. (And starting at a threshold much lower then $250K -- but that's a different thread .)
Not exactly. We don't have a giant accounting department (I don't do our corporate taxes either so I can't speak directly to this and also won't reveal the details of our accounting publically) but we do try to reduce our effective tax rates too just as I as an individual try to take advantage of deductions to reduce my effective tax rates. We can't do it as well as GE but we do what we can. That said at the moment the rate is pretty much a non-factor to whether we expand or not and in our ten year history has been a non-factor. I see your point but there are many many other factors in regard to what drives a business other than the competitive tax rate. I mean we could locate our business to North Dakota if it was just that but there are other factors that drive our business besides what the tax rate is in Fargo. Any decent corporation is going to be a rational actor in regard to what advantages they seek but at the moment what that means is that the US government and taxpayers are the ones who are not behaving rationally.
Corporate profits go through double taxation currently. As a corporation pays taxes on profits before paying a dividend which is taxed at the individual level. Theoretically if a company goes through all kinds of GE type shenanigans to make profits seem more steady and lower taxes, that increases the cash on hand that wasn't paid to the government. That cash will be reflected when valuing shares of GE, which should cause the market price to rise. When those shares are sold there is higher capital gains paid. Instead of increasing taxes and restrictions on companies and having the US be to the world, what Michigan and Ohio are to Texas in terms of job creation and corporations wanting to be there, we should keep the taxation lower and simpler. Its like the cigarette tax that has packs at $14 in New York have now created a huge black market for cigarettes which probably reduces taxable income to the city.
Yes they were mainly regarding personal taxes but they are a good example of where marginal tax rates were cut but loopholes were not. From what I gather the amount of loopholes has even increased regarding personal taxes. Based on that track record I have a hard time believing that if corporate taxes are cut loopholes will also be closed. More likely the corporate taxes will be cut while the loopholes will remain. That may bring some benefit to small businesses but it also means that US taxpayers are further screwed.
Absolutely. Which is why the US continues to be one of the most desirable places to invest and do business. But as the spread increases between the US rate and those of elsewhere, you'll see even more of the stuff GE is doing. I feel dirty discussing this. Campaigning on behalf of the mega corps and CEOs. It's like I'm making the case for John Stockton being in the HOF. Intellectually, it makes sense. But it's fundamentally not right. I must go shower.
The money is taxed when the corporation earns it, and then taxed again when the individual earns it. That's no different than the money you buy a sandwich with being taxed when you earn it as wages and then when the sandwich company earns it.
Hey let's don't even try to tax the wealthy or big corporations as they will get out of it anyway. If we give them very low tax rates than perhaps they will have mercy on the lower 98% and actually pay taxes. Please. Why are conservatives so defeatist?
That isn't double taxation. Also if they are organized as a REIT then they don't pay that corp tax. If you make more money then you make more money and pay more in taxes. I don't understand where you are going with this point. That's fine, but corporations should also be paying their share of the taxes as well and not be influencing how the tax code is written.
The big obvious question that libertarians and concervatives can never answer. How come we had at least as good of an economy when the corporations and the wealthy paid more taxes?
Why do you take the top marginal rate and pretend like it's the effective rate for everybody? That's as ludicrous as saying "Kevin Martin scores 23 ppg, ergo Jordan Hill and Terrence Williams also Rockets, also score 23 ppg. Meanwhile, back in reality, eveen if we're ONLY referring to the top marginal rate that nobody pays, how is it "out of sync on a global scale": The lowest of the low in terms of top nomiinal tax rate are countries like Iceland and Ireland, which have nominal rates in the low teens-> do you really honestly believe that businesses are physically relocating to Iceland and Ireland from the US, since the US just can't compete anymore?
I love when weslinder tries to extrapolate his personal anectdotal experience onto the larger economy, then you get posts like this: That whole thread is actually quite a gem, with basso, large texxx, Jorge, others telling us how amazing the economy is doing as it began to plunge over the cliff, and that Joseph Stiglitz is on crazy pills. A funny read: http://bbs.clutchfans.net/showthread.php?t=137441&highlight=economy Not to pick too much on weslinder, since he's far from the worst offender in that thread, but it also includes a real gem , where wesley, at other times in the same thread, a believer in the existence of a housing bubble, is basically saying how the housing sector, as a whole, was fine, it was just crashing in certain areas. That assumption, that housing couldn't decline simultaneously across the country, is literally straight out of the S&P Moody's "Let's rate it all AAA since it's geographically diverse!" playbook. Irony overload.
I worked with some independent contractors who came down from Canada to do a job. They were exempt for 6 months, then they were charged 35% right off the top on their profits (which was most of their pay), with very few exemptions. These were one-person companies charging us $150-200/hour for their work, so while they were doing well, it's certainly not GE. And they can't afford a lobbyist. They took about 2-3 months of that and went back to Canada, where their tax rate was 16.5%. Granted, Canada's corporate tax structure is just as complex, but it tends to encourage entrepreneurship at least a little, rather than just corporatism.
I was horrifically wrong. I would that I were the search ninja, so I could pull up posts about how feeding the zombie banks would make the economy better.
Sam: I never said the top rate was the effective rate for everybody. But if few are paying it, then it indicates they're making business decisions based on tax policy rather then economic oportunity. The article outlines GE's shift in investment and jobs from the US, and this is consistent with what Canadian industrialists are telling weslinder over lunch. Interestingly, you mention Ireland, which is the country cited in the original article as one to which GE was shifting income. If we're going with basketball analogies, we could say that Kevin Margin and I average 11.5 points a game. Yet he earns so much more then me. How fair is that???? Not sure the point of your point. And your chart looks out of date. The Canadian top marginal rate is budgeted to go to 25% next yr. Your chart has it at 35%. The UK, I think, is going to 25%(ish) -- chart has it at 30%. So....I'll see your chart and raise you mine: It's about what the other guys are doing too. Golden State's 112 points on Wednesday looks pretty good (to them) compared to Houston's 110 on Sunday. But they still lost. As they should. And US policy has to be based on today too -- taking into account trends elsewhere.
