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View Full Version : U.S. Issues Anybody see 60 minutes tonight re corp tax havens?


chris
08-14-2011, 07:42 PM
USA corporate tax rate: 35%
Zug, Switzerland: 15%
Ireland: 12.5%

USA has 2nd highest corp tax rate in developed world

And people wonder why corps flee the USA or use loopholes.

If I was CEO of a Fortune 500 corp, it would be my fiduciary duty to take advantage of these low tax rates.

John Chambers of Cisco has $40B of profits that he would like to bring back into USA without being taxed at 35%. Total similar industry profits is estimated @ $1.2T. In the meantime, it is being put to work overseas building plants and creating jobs. Foreign jobs.

And the politicians get their sheep to scream about jobs going overseas or GE not paying taxes. (Corrected: 3%) Sad.

If you could be saving 10%-20% on your taxes, you would do the same thing.

All together now: flat tax, flat tax, flat tax.

alpha_omega
08-14-2011, 08:00 PM
GE, 3%.

Bewbies
08-14-2011, 08:07 PM
I wish they had spent some time talking about how much money Zug makes a year in tax revenue simply because so many companies are moving there....

Imagine if we made the USA the tax haven that Euro/Asian business fled to to save money.

chris
08-14-2011, 08:10 PM
I wish they had spent some time talking about how much money Zug makes a year in tax revenue simply because so many companies are moving there....

Imagine if we made the USA the tax haven that Euro/Asian business fled to to save money.

Indeed.

FD
08-14-2011, 08:50 PM
They need to just get their act together and get on corporate tax reform. Obama proposed lowering corporate tax rates in his last State of the Union, Republicans have done the same. There is no real disagreement and it would be a great policy reform. I think the politics of the election approaching might make it impossible but its something they really should just do.

BWillie
08-14-2011, 09:05 PM
Yeah most people are employed by large corporations, but somehow, they are evil and must be stopped. But really though, flat tax? Do you even know what that means? There will not, and should not, ever be a flat tax.

banyon
08-14-2011, 09:12 PM
USA corporate tax rate: 35%
Zug, Switzerland: 15%
Ireland: 12.5%

USA has 2nd highest corp tax rate in developed world

And people wonder why corps flee the USA or use loopholes.

If I was CEO of a Fortune 500 corp, it would be my fiduciary duty to take advantage of these low tax rates.

John Chambers of Cisco has $40B of profits that he would like to bring back into USA without being taxed at 35%. Total similar industry profits is estimated @ $1.2T. In the meantime, it is being put to work overseas building plants and creating jobs. Foreign jobs.

And the politicians get their sheep to scream about jobs going overseas or GE not paying taxes. (Corrected: 3%) Sad.

If you could be saving 10%-20% on your taxes, you would do the same thing.

All together now: flat tax, flat tax, flat tax.

I watched this in March when it came out, which is good, because today my DVR somehow got the end of some golf tournament instead.

Here it is online:

<embed src="http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf" scale="noscale" salign="lt" type="application/x-shockwave-flash" background="#333333" width="425" height="279" allowFullScreen="true" allowScriptAccess="always" FlashVars="si=254&&contentValue=50109660&shareUrl=http://www.cbsnews.com/video/watch/?id=7376848n&tag=segementExtraScroller;housing" />

It's really just legalized tax evasion.

Lower them here, and someone else lowers them lower. It's a shell game that doesn't end. A race to the bottom. When you can just file a few papers for a sham office somewhere on the other side of the world to evade taxes, we would have to lower our tax rates to practically nothing. The tax laws are just outdated.

Frankly, the reaction should be outrage. The tax revenues they are not paying are accruing to our children and grandchildren in the form on more debt.

Also, it's important to point out that Chamber's proposed "tax holiday" was already tried in 2004 and virtually none of that money found its way back into the economy (as they reported in an "extra" that somehow didn't make its way into the main piece). They used the cash for stock buybacks.

<embed src="http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf" scale="noscale" salign="lt" type="application/x-shockwave-flash" background="#333333" width="425" height="279" allowFullScreen="true" allowScriptAccess="always" FlashVars="si=254&&contentValue=50102386&shareUrl=http://www.cbsnews.com/video/watch/?id=7360936n&tag=segementExtraScroller;housing" />

banyon
08-14-2011, 09:21 PM
Another shocking (IMO) 60 minutes I watched last week (also a repeat that I had not seen) where these mortgage companies hired contractors who hired subcontractors who literally forged one woman's name as "vice president" (who was not even employed by any company) for multiple banks and their subsidiaries.


<embed src="http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf" scale="noscale" salign="lt" type="application/x-shockwave-flash" background="#333333" width="425" height="279" allowFullScreen="true" allowScriptAccess="always" FlashVars="si=254&&contentValue=50102710&shareUrl=http://www.cbsnews.com/video/watch/?id=7361572n" />

These people ought to be strung up.

chris
08-14-2011, 10:23 PM
Another shocking (IMO) 60 minutes I watched last week (also a repeat that I had not seen) where these mortgage companies hired contractors who hired subcontractors who literally forged one woman's name as "vice president" (who was not even employed by any company) for multiple banks and their subsidiaries.


<embed src="http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf" scale="noscale" salign="lt" type="application/x-shockwave-flash" background="#333333" width="425" height="279" allowFullScreen="true" allowScriptAccess="always" FlashVars="si=254&&contentValue=50102710&shareUrl=http://www.cbsnews.com/video/watch/?id=7361572n" />

These people ought to be strung up.

Cool! For once we agree on something. I would like to think those people were caught and sent to prison for a long, long time.

chris
08-14-2011, 10:37 PM
I watched this in March when it came out, which is good, because today my DVR somehow got the end of some golf tournament instead.

Here it is online:

<embed src="http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf" scale="noscale" salign="lt" type="application/x-shockwave-flash" background="#333333" width="425" height="279" allowFullScreen="true" allowScriptAccess="always" FlashVars="si=254&&contentValue=50109660&shareUrl=http://www.cbsnews.com/video/watch/?id=7376848n&tag=segementExtraScroller;housing" />

It's really just legalized tax evasion.

Lower them here, and someone else lowers them lower. It's a shell game that doesn't end. A race to the bottom. When you can just file a few papers for a sham office somewhere on the other side of the world to evade taxes, we would have to lower our tax rates to practically nothing. The tax laws are just outdated.

Frankly, the reaction should be outrage. The tax revenues they are not paying are accruing to our children and grandchildren in the form on more debt.

Also, it's important to point out that Chamber's proposed "tax holiday" was already tried in 2004 and virtually none of that money found its way back into the economy (as they reported in an "extra" that somehow didn't make its way into the main piece). They used the cash for stock buybacks.

<embed src="http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf" scale="noscale" salign="lt" type="application/x-shockwave-flash" background="#333333" width="425" height="279" allowFullScreen="true" allowScriptAccess="always" FlashVars="si=254&&contentValue=50102386&shareUrl=http://www.cbsnews.com/video/watch/?id=7360936n&tag=segementExtraScroller;housing" />

This is where we differ again.

You want to punish those who use the system to beat the system to compete globally. "off with their heads!" You want to fix the symptoms and not the problem.

Why don't we fix the problem by removing the need to legally move offshore?

My tax when I lived in Cayman Islands working for the government was a flat 7%. Period. Simple clean. Everyone was happy instead of trying to get someone else to support their way of life. We need that here.

banyon
08-14-2011, 10:48 PM
This is where we differ again.

You want to punish those who use the system to beat the system to compete globally. "off with their heads!" You want to fix the symptoms and not the problem.

Why don't we fix the problem by removing the need to legally move offshore?

My tax when I lived in Cayman Islands working for the government was a flat 7%. Period. Simple clean. Everyone was happy instead of trying to get someone else to support their way of life. We need that here.

What do you mean the need? What's wrong with my point that it will just be a race to the bottom?

banyon
08-14-2011, 10:48 PM
Cool! For once we agree on something. I would like to think those people were caught and sent to prison for a long, long time.

Yes. :thumb:

alnorth
08-14-2011, 10:50 PM
Lower them here, and someone else lowers them lower. It's a shell game that doesn't end. A race to the bottom. When you can just file a few papers for a sham office somewhere on the other side of the world to evade taxes, we would have to lower our tax rates to practically nothing. The tax laws are just outdated.

I'm not suggesting we should try to win the race to the bottom, but if we are in this race, we are currently running dead last by a mile. For all the talk (which I agree with) that personal income tax rates are too low, that is definitely not true for companies, our corporate tax system has an extremely high rate with a ton of loopholes and deductions. If our corporate tax rate was comparable to our peers in Japan and Europe, they would be more likely to go ahead and repatriate the profit.

We should dramatically simplify our corporate tax system, get rid of most of the breaks and loopholes, and then lower the tax rate to something that is competitive. Someone out there is going to go to 10% or 5% or whatever, and thats fine, let them. But, our rate is currently about 50% higher than anyone else in our peer group.

banyon
08-14-2011, 10:56 PM
I'm not suggesting we should try to win the race to the bottom, but if we are in this race, we are currently running dead last by a mile. For all the talk (which I agree with) that personal income tax rates are too low, that is definitely not true for companies, our corporate tax system has an extremely high rate with a ton of loopholes and deductions. If our corporate tax rate was comparable to our peers in Japan and Europe, they would be more likely to go ahead and repatriate the profit.

We should dramatically simplify our corporate tax system, get rid of most of the breaks and loopholes, and then lower the tax rate to something that is competitive. Someone out there is going to go to 10% or 5% or whatever, and thats fine, let them. But, our rate is currently about 50% higher than anyone else in our peer group.

Alnorth, you are smarter than this. Why don't you mention the effective rates with deductions and loopholes?

alnorth
08-14-2011, 11:02 PM
Alnorth, you are smarter than this. Why don't you mention the effective rates with deductions and loopholes?

I'm obviously not suggesting they are paying 35%, because they obviously aren't, often due to keeping profit made overseas invested overseas. They are not trapped within the walls of our country, which is the point of the debate on corporate taxes in our country. Some of the profit, which could have been taxed up to 35%, isn't because they are choosing to keep it out of our country.

If there was no advantage or not much of an advantage to keeping profit invested overseas, a lot of companies would go ahead and bring the money back to their home country.

FD
08-14-2011, 11:03 PM
Alnorth, you are smarter than this. Why don't you mention the effective rates with deductions and loopholes?

Even if the effective rate is low a high marginal rate can be harmful. A high marginal rate combined with deductions and loopholes may produce a low effective rate, but it is bad for business incentives and is highly distortionary.

Broaden the base and lower the rates.

alnorth
08-14-2011, 11:09 PM
As for "being outraged", ok fine, be outraged. You can't do anything about it. Its like CA environmentalists getting pissed at companies moving to neighboring states to escape crushing fees and regulation. They may whine about being in a race to the bottom too, but it wont help their unemployment rate.

We don't have to win the race to the bottom. If some company wants to squeeze out every nickle by moving most of their business to Ireland, they can do that. The problem is our rate is so high relative to everyone else that international companies who would ordinarily be inclined to make their lives easier by paying a little more are instead heavily encouraged to jump through the legal hoops needed to keep all profitable businesses out of the US.

chris
08-14-2011, 11:13 PM
As for "being outraged", ok fine, be outraged. You can't do anything about it. Its like CA environmentalists getting pissed at companies moving to neighboring states to escape crushing fees and regulation. They may whine about being in a race to the bottom too, but it wont help their unemployment rate.

We don't have to win the race to the bottom. If some company wants to squeeze out every nickle by moving most of their business to Ireland, they can do that. The problem is our rate is so high relative to everyone else that international companies who would ordinarily be inclined to make their lives easier by paying a little more are instead heavily encouraged to jump through the legal hoops needed to keep all profitable businesses out of the US.

rep.

banyon
08-15-2011, 07:49 AM
As for "being outraged", ok fine, be outraged. You can't do anything about it. Its like CA environmentalists getting pissed at companies moving to neighboring states to escape crushing fees and regulation. They may whine about being in a race to the bottom too, but it wont help their unemployment rate.

We don't have to win the race to the bottom. If some company wants to squeeze out every nickle by moving most of their business to Ireland, they can do that. The problem is our rate is so high relative to everyone else that international companies who would ordinarily be inclined to make their lives easier by paying a little more are instead heavily encouraged to jump through the legal hoops needed to keep all profitable businesses out of the US.

The legal hoops aren't all that tricky, thanks to trade deals and the deregulations the piece refers to. Now companies are at a competitive disadvantage if they don't play this shell game to the best of their ability. They won't just come back because "aw, it's not as bad as it used to be".

You may have noticed that Ireland is doing pretty sh*tty lately, with their entire country having to virtually nationalize all their major banks and in a serious sovereign debt crisis (probably second only to Greece and arguably Italy). So, I'm not sure it's exactly a great model to follow.

What needs to be done is to put rules in place that will end this fictionalized paper office practice of tax arbitrage.

Bewbies
08-15-2011, 08:56 AM
The legal hoops aren't all that tricky, thanks to trade deals and the deregulations the piece refers to. Now companies are at a competitive disadvantage if they don't play this shell game to the best of their ability. They won't just come back because "aw, it's not as bad as it used to be".

You may have noticed that Ireland is doing pretty sh*tty lately, with their entire country having to virtually nationalize all their major banks and in a serious sovereign debt crisis (probably second only to Greece and arguably Italy). So, I'm not sure it's exactly a great model to follow.

What needs to be done is to put rules in place that will end this fictionalized paper office practice of tax arbitrage.

I'm sure Ireland's economy is screwed up because of the low corporate tax rate and not because of uncontrolled spending. Just like us.

patteeu
08-15-2011, 10:12 AM
Lower them here, and someone else lowers them lower. It's a shell game that doesn't end. A race to the bottom. When you can just file a few papers for a sham office somewhere on the other side of the world to evade taxes, we would have to lower our tax rates to practically nothing.

What would be so bad about a zero corporate tax rate? As long as there were rules in place to capture cash and benefits that people get from corporations as a part of the individual tax system, why would it be bad?

patteeu
08-15-2011, 10:14 AM
Alnorth, you are smarter than this. Why don't you mention the effective rates with deductions and loopholes?

If you don't have a loophole to shelter incremental income, marginal tax rates are what will drive your behavior.

Bewbies
08-15-2011, 05:20 PM
What would be so bad about a zero corporate tax rate? As long as there were rules in place to capture cash and benefits that people get from corporations as a part of the individual tax system, why would it be bad?

I like the Fair Tax. We become the corporate tax haven of the world, and every single dollar spent here a revenue source.

patteeu
08-15-2011, 05:48 PM
I like the Fair Tax. We become the corporate tax haven of the world, and every single dollar spent here a revenue source.

I'm down.

banyon
08-15-2011, 08:36 PM
If you don't have a loophole to shelter incremental income, marginal tax rates are what will drive your behavior.

Companies that hire people? Don't costs drive their decision?

Isn't the price of labor in practical terms always going to be a bigger factor than some marginal tax rate differentials?

patteeu
08-15-2011, 08:45 PM
Companies that hire people? Don't costs drive their decision?

Isn't the price of labor in practical terms always going to be a bigger factor than some marginal tax rate differentials?

That's a different subject. My statement was about the difference between marginal and effective tax rates. It goes without saying that there are other factors that drive behavior in addition to tax considerations.

Bewbies
08-15-2011, 09:19 PM
Companies that hire people? Don't costs drive their decision?

Isn't the price of labor in practical terms always going to be a bigger factor than some marginal tax rate differentials?

You actually get a return for employees. Taxes don't produce, innovate, expand, market, sell, create, or contribute.