Trump Wants Tax Plan to Cut Corporate Rate to 15% • Hacker News Board

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

#61

Post by dsparkman » Mon, Apr 24, 2017, 8:16 PM UTC

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.

You really need to watch https://www.youtube.com/watch?v=bBx2Y5HhplI if you think that because corporations have to pay less in taxes that they will suddenly spend more on R&D and jobs.

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

#62

Post by harryh » Mon, Apr 24, 2017, 8:17 PM UTC

542458 wrote: post #58

harryh wrote: post #53

Earlier quoted context omitted.

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?

All S-Corp earnings are passed through to individuals and taxed at individual tax rates.

Corporate tax rates are for C-Corps.

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

#63

Post by civilian » Mon, Apr 24, 2017, 8:18 PM UTC

My knee-jerk reaction is to be in favor of tax cuts, but with these things I try to find relevant survey questions on IGMChicago Economic Experts panel: http://www.igmchicago.org/igm-economic-experts-panel

Here's one that's close, although it focuses on repatriated profits http://www.igmchicago.org/surveys/repatriated-profits

> Question B: Permanently lowering the effective marginal tax rate on US corporations’ repatriated profits, such as by moving to a territorial-based tax system, would boost US capital investment significantly.

The economists' answers were very mixed and half of them answered "uncertain" or "no opinion". :-/ muh cognitive bias!

mmanfrin points at that tax havens are the problem, here's a NYTimes opinion piece advocating for 0% corporate tax rates as a way to encourage companies to repatriate their profits: https://www.nytimes.com/2014/01/06/opinion/abolish-the-corpo...

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

#64

Post by DenisM » Mon, Apr 24, 2017, 8:18 PM UTC

542458 wrote: post #58

harryh wrote: post #53

Earlier quoted context omitted.

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?

S-Corp does not pay taxes, all income (minus losses) accrues as income to the shareholder(s) who then in turn pay taxes at their own rates.

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

#65

Post by ska » Mon, Apr 24, 2017, 8:19 PM UTC

harryh wrote: post #42

ska wrote: post #36

Earlier quoted context omitted.

The IRS is not stupid, but wealthy enough people have been very effective at creating and exercising approaches to bring their marginal tax rates down to impressively low numbers. So if the IRS is smart but this still happens a lot, there must be something else at work, no?

The primary way that wealthy people bring down their marginal tax rates is buy earning more of their income as capital gains not through the creation of phony businesses to pay for their personal expenses.

[edited summary] Apparently techniques exist to let you capital gains rather than income, increase deductions, or both. In some cases chase subsidies, which is roughly equivalent. And (cf Panama papers) obviously offshoring.

All theoretical interest on my part, so who knows. Government estimates on lost revenue from this range wildly (order 1billion to 100billion) from what I've seen, but they are at least convinced it happens in significant amounts.

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

#66

Post by 542458 » Mon, Apr 24, 2017, 8:21 PM UTC

harryh wrote: post #62

542458 wrote: post #58

Earlier quoted context omitted.

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?

All S-Corp earnings are passed through to individuals and taxed at individual tax rates. Corporate tax rates are for C-Corps.

Not under Trump's tax plan:

> Right now, freelancers, sole proprietors, unincorporated small businesses and pass-through entities are taxed at the high personal income tax rates. [...] The Trump plan addresses this challenge head on with a new business income tax rate within the personal income tax code that matches the 15% corporate tax rate

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

#67

Post by jellicle » Mon, Apr 24, 2017, 8:23 PM UTC

harryh wrote: post #47

mmanfrin wrote: post #38

Earlier quoted context omitted.

15% is still 15% compared to the 0% they pay on money funneled to tax havens. A lower rate won't stop this; a closing of the loophole will.

What you call a loophole most every other country in the world calls "territorial taxation." If a good is produced outside the US and sold for a profit outside the US then the US shouldn't collect taxes on the transaction.

The loophole allows self-dealing transactions to move local profits offshore.

Apple US buys iPods for $10 from China and sells in USA for $100. $90 profit, taxable, right? Wrong. Apple US licenses the Apple name from Apple Ireland for $89/iPod. Final tax sheet looks like:

Revenue: $100 cash from Apple store in San Francisco Expenses: $10 Apple China, $89 Apple Ireland

Taxable profit in USA: $1 (minus labor and such, of course)

Taxes paid to US government: minimal.

The profits from firms that do lots of business in the USA are being paperwork-shifted outside the country to evade taxes.

This has been covered extensively in numerous in-depth articles about major corporations and their tax schemes.

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

#68

Post by dsparkman » Mon, Apr 24, 2017, 8:23 PM UTC

frebord wrote: post #13

xmj wrote: post #4

Earlier quoted context omitted.

Realistically what do you think shareholders do with payouts?

Shareholder's are investors, investors invest.

Shareholder's are speculators, speculators speculate.

Most US public companies do not pay dividends to shareholders. An "investment" in this scenario is not an investment but speculation. You are speculating that you can convince others to pay more for my shares than I paid for them.

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

#69

Post by 542458 » Mon, Apr 24, 2017, 8:24 PM UTC

DenisM wrote: post #64

542458 wrote: post #58

Earlier quoted context omitted.

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?

S-Corp does not pay taxes, all income (minus losses) accrues as income to the shareholder(s) who then in turn pay taxes at their own rates.

As I understand it, Trump's tax plan changes this so that S-corp income is only taxed at the 15% rate:

> Right now, freelancers, sole proprietors, unincorporated small businesses and pass-through entities are taxed at the high personal income tax rates. [...] The Trump plan addresses this challenge head on with a new business income tax rate within the personal income tax code that matches the 15% corporate tax rate

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

#70

Post by harryh » Mon, Apr 24, 2017, 8:25 PM UTC

542458 wrote: post #66

harryh wrote: post #62

Earlier quoted context omitted.

All S-Corp earnings are passed through to individuals and taxed at individual tax rates. Corporate tax rates are for C-Corps.

Not under Trump's tax plan: > Right now, freelancers, sole proprietors, unincorporated small businesses and pass-through entities are taxed at the high personal income tax rates. [...] The Trump plan addresses this challenge head on with a new business income tax rate within the personal income tax code that matches the 15% corporate tax rate

Huh. That's super weird. What's the difference between an S-Corp and a C-Corp then? I agree that this part of the plan is dumb (Trump proposes a dumb thing! News at 11!). I can't imagine that this part of the proposal will get anywhere.