Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Trump Wants Tax Plan to Cut Corporate Rate to 15%

wsj.com

Post reply on HN
Print view View original

71–80 of 129 posts

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

#71

Post by nodesocket »

jliptzin wrote: post #49
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.

I never understood this argument. I am a business owner. I optimize for personal profit, which is the profit from my business, with some percentage cut out for taxes. When I optimize my business profit, the tax rate is not part of the equation. If I find that hiring someone for $100k / year is a good thing to do for the long term profitably of the company, I will do that. If I need to spend $50k on a machine because…

I am also a small business owner. Agree, everyday expenses I don't evaluate against how much in taxes I am going to pay. However at public companies scale and the rule of large numbers applies. It makes a significant impact to bottom lines and profits of corporations.

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

#72

Post by [deleted] »

maxerickson wrote: post #43
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?

Do you have examples that aren't long term capital gains? (which enjoy a low rate but are not really sophisticated financial engineering)

[deleted]

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

#73

Post by jellicle »

harryh wrote: post #27
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…

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.

The IRS is not stupid, but their budget gets cut every year and at this point they are nearly completely ineffective as a tax-compliance organization, lacking the manpower for any sort of real enforcement.

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

#74

Post by fauigerzigerk »

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…

The corporation tax rate over here in the UK is 20%, but I wouldn't be able to do what you're suggesting without committing tax fraud of the most obvious sort.

If my company pays for some of my personal expenditure that money becomes part of my remuneration as an employee/director and therefore my personal income tax rate applies.

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

#75

Post by harryh »

jellicle wrote: post #67
harryh wrote: post #47

Earlier quoted context omitted.

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,…

You actually have it backwards. US firms that do a lot of business overseas are being paperwork-shifted outside of the US not to avoid paying taxes on US operations but to avoid paying US taxes on operations that take place largely overseas.

This is how Apple ends up with 250 Billion (or whatever it is now) overseas that it doesn't want to Repatriate and pay US taxes on. That money wasn't earned by selling iPods in the US, it was earned by selling iPods everywhere else.

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

#76

Post by harryh »

ska wrote: post #65
harryh wrote: post #42

Earlier quoted context omitted.

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…

What you describe is largely a myth.

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

#77

Post by jellicle »

jliptzin wrote: post #49
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.

I never understood this argument. I am a business owner. I optimize for personal profit, which is the profit from my business, with some percentage cut out for taxes. When I optimize my business profit, the tax rate is not part of the equation. If I find that hiring someone for $100k / year is a good thing to do for the long term profitably of the company, I will do that. If I need to spend $50k on a machine because…

A corporate tax rate of 100% wouldn't have any real effect on your personal business. You could still run a business, paying yourself a handsome salary and making a good living for yourself, without ever running a business profit year-over-year.

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

#78

Post by harryh »

jellicle wrote: post #73
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.

The IRS is not stupid, but their budget gets cut every year and at this point they are nearly completely ineffective as a tax-compliance organization, lacking the manpower for any sort of real enforcement.

If you believe that I encourage you to start making up deductions to reduce your tax burden. You'll get to see just how ineffective the IRS is.

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

#79

Post by abhv »

harryh wrote: post #27
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…

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.

If I own a software business that earns 500k-1m a year, currently, I can organize as an LLC and induce pass-thru income that is taxed marginally at ~50% (federal, state, NYC). If I organize as a C-corp, I pay the corporate rate which is also roughly 40%, and I also get double-taxed on salary and any dividends paid to owners.

Under these new rules, if a C-corp gets taxed at 15%, there is a strong incentive to pass all income through this C-corp, even after double-taxation.

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

#80

Post by [deleted] »

harryh wrote: post #76
ska wrote: post #65

Earlier quoted context omitted.

[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…

What you describe is largely a myth.

[deleted]
Post reply on HN