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Trump Wants Tax Plan to Cut Corporate Rate to 15%

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Re: Trump Wants Tax Plan to Cut Corporate Rate to 15%

#51

Post by jellicle »

nodesocket wrote: post #2

The thing that most people fail to realize is that a lower corporate tax rate helps the overall enconomy and all Americans. Companies now suddenly have increased capital to spend on growth (hiring, R&D, and acquisitions). Additionally it boost earnings which will likely increase most people's retirement accounts and stock portfolios. Typical that I'm getting downvoted without any rebuttal.

Money that a corporation spends on hiring, buying new equipment or anything like that is completely tax deductible and always has been. Not a cent of corporate income tax has ever been paid on such things, and reducing the corporate tax rate actively DISCOURAGES such things. It encourages disinvestment in expansion, by rewarding not growing.

Re: Trump Wants Tax Plan to Cut Corporate Rate to 15%

#52

Post by maxerickson »

nodesocket wrote: post #41
rpedela wrote: post #20

Earlier quoted context omitted.

That is the ideal but that isn't reality. The big corporations have large departments devoted to tax avoidance. Where does that saved money go? Usually distributed as dividends to shareholders, executive bonuses, or enormous bank accounts where the money does nothing (e.g. Apple). The best way to improve the economy is put more money into the hands of normal people so that they will buy more stuff which in turn helps…

While some companies indeed return profits back with stock buybacks or increased divvys, lots of companies do expand and grow their hiring and R&D. Here is the problem, without corporations and small/medium businesses this entire world that we live in ceases to exist. Jobs are what make this all possible.

The other side of that argument is that you need people for the jobs to exist.

The idea that a "job" isn't mutually beneficial is such a preposterous talking point. America!

Re: Trump Wants Tax Plan to Cut Corporate Rate to 15%

#53

Post by harryh »

542458 wrote: post #46
harryh wrote: post #27

Earlier quoted context omitted.

The IRS is not stupid. It's perfectly capable of distinguishing a real business from a dummy business set up just to pay personal expenses. There are all kinds of rules about this sort of thing.

Isn't the correct tax dodge here to use an S-corp and take all your payments through that, since Trump has also promised to slash the passthrough rate to 15%? This way would even be completely legal as far as I can tell.

Sure, go create an S-Corp. And, to the extent that it's real business you can expense the costs of that business. But don't go try buying a boat or a snowboard or whatever and writing that off as an expense. That would be tax fraud and if you do it at a big scale you will get caught.

Re: Trump Wants Tax Plan to Cut Corporate Rate to 15%

#54

Post by jellicle »

friedman23 wrote: post #11

I challenge all of those against this to learn what tax incidence is and how it applies to the corporate tax rate

Here you go:

http://piketty.pse.ens.fr/files/Clausing2012.pdf

"At the end of the searching, I find some evidence that suggests that corporate taxation may lower wages, but the preponderance of evidence does not suggest any wage effects from corporate taxation."

Re: Trump Wants Tax Plan to Cut Corporate Rate to 15%

#55

Post by harryh »

bpodgursky wrote: post #15

0%, with raises to capital gains to offset the tax revenue, would be better, but I can understand it's politically infeasible (because people are ignorant). Better than nothing.

Absolutely correct.

For others here is a nice essay on why this is a good idea:

https://www.theatlantic.com/business/archive/2010/10/why-we-...

Re: Trump Wants Tax Plan to Cut Corporate Rate to 15%

#56

Post by cuchoi »

friedman23 wrote: post #11

I challenge all of those against this to learn what tax incidence is and how it applies to the corporate tax rate

Summary: "Economists are divided on the issue. Some (including Gregory Mankiw) are persuaded that the corporate income tax ultimately falls mainly on labor, rather than on the presumably wealthier owners of capital. One can actually make a case for cutting the tax in the name of a more progressive income-tax structure, which should appeal to voters and politicians left of center.

Other economists, including the authors of the surveys cited above (Jane Gravelle, Jennifer Gravelle and Thomas Hungerford), are persuaded by the available empirical evidence on the five factors I note that the burden of the corporate tax ultimately rests mainly on the owners of capital. That also appears to be the operative assumption of the Congressional Budget Office, the Treasury and other agencies when they analyze the distributional impact of various forms of taxation."

Source: https://economix.blogs.nytimes.com/2010/07/23/who-ultimately...

Re: Trump Wants Tax Plan to Cut Corporate Rate to 15%

#57

Post by civilian »

xmj wrote: post #23
frebord wrote: post #13

Earlier quoted context omitted.

Shareholder's are investors, investors invest.

Then why insist on dividends, and not have companies reinvest?

Sometimes a company has matured, where it's captured most of it's market and it's been around so long that it's not very innovative. A company can be good at just "doing it's thing", and that's okay. But that means that--- if there is not more of the market that a company can efficiently capture, then it's time for the shareholders to reap their ROI.

I'm sure you've seen lots of instances of failed innovation in big companies. This is a way to avoid it, and put money where it'll have better odds.

Re: Trump Wants Tax Plan to Cut Corporate Rate to 15%

#58

Post by 542458 »

harryh wrote: post #53
542458 wrote: post #46

Earlier quoted context omitted.

Isn't the correct tax dodge here to use an S-corp and take all your payments through that, since Trump has also promised to slash the passthrough rate to 15%? This way would even be completely legal as far as I can tell.

Sure, go create an S-Corp. And, to the extent that it's real business you can expense the costs of that business. But don't go try buying a boat or a snowboard or whatever and writing that off as an expense. That would be tax fraud and if you do it at a big scale you will get caught.

Oops, maybe I wasn't clear - the tax dodge here is you form an S-corp, and take all your payments through said S-corp (the S-corp doesn't hold onto any more cash than is necessary). Before, a top earner would pay ~39% marginal income tax. But by routing all your income through the S-corp your effective income tax rate drops to 15%, a nearly 25% marginal tax rate cut for top earners. Or am I missing something?

Re: Trump Wants Tax Plan to Cut Corporate Rate to 15%

#59

Post by rpedela »

nodesocket wrote: post #41
rpedela wrote: post #20

Earlier quoted context omitted.

That is the ideal but that isn't reality. The big corporations have large departments devoted to tax avoidance. Where does that saved money go? Usually distributed as dividends to shareholders, executive bonuses, or enormous bank accounts where the money does nothing (e.g. Apple). The best way to improve the economy is put more money into the hands of normal people so that they will buy more stuff which in turn helps…

While some companies indeed return profits back with stock buybacks or increased divvys, lots of companies do expand and grow their hiring and R&D. Here is the problem, without corporations and small/medium businesses this entire world that we live in ceases to exist. Jobs are what make this all possible.

Right but just giving more money to companies regardless of size doesn't create jobs. Businesses try to be as efficient as possible with their capital. Hiring people just because is inefficient. However companies will hire more people if they are unable to meet their current demand.

What is one way to increase demand? Increase the number of people who can afford the goods and services which can be accomplished far more effectively by reducing tax on the middle class and poor. If you do that businesses will have no choice but to create jobs in order to meet demand.

Re: Trump Wants Tax Plan to Cut Corporate Rate to 15%

#60

Post by DenisM »

abhv wrote: post #18

Lower corporate taxes can also help create structures which allow wealthier people to avoid taxes. For example, if you can create a structure in which all of your consulting income + capital-asset income goes into a C-corp, and you pay most of your own expenses through the C-corp (e.g., Trump tower home office), then you can keep most of your income taxed at only 15%. The C-corp holds it forever, and pays your expens…

I don't think it works this way.

If it's a "legitimate" expense it gets deducted from profits, so the tax rate is zero, even under today's rules.

If it's not a "legitimate" expense, e.g. a vacation paid by the company, the beneficiary gets taxed as if he got this much money in salary.

The part of your list that will be taxed differently under new rules is assets - jets, boats, etc. Even so, usage of the boat for leisure should get taxed to the beneficiary at customary boat rental rates.

There is room for creating accounting, as always. But it doesn't look like this is the key change here.

A bigger deal is the double-taxed income. If your C Corp earns $1m, it then pays taxes at ~ 35%, with $650k left in the coffers. Then you pay yourself a dividend of $650k and you get taxed at the dividend tax rate which is also 20%, so now you have $520k left, for a combined effective tax rate of 48%. If the corp rate is cut from 35% to to 15% then your have 680k left, for a combined effective tax rate of 32%.

Going from 48% to 32% is the real prize here.

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