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Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

bloomberg.com

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Re: Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

#71

Post by malandrew »

moosey wrote: post #15
malandrew wrote: post #4

So much of the tax avoidance tactics ends up as more investment and propels our economy forward. Amazon is a prime example. The government taxes profits. Amazon instead of making a profit, reinvests the money into its business. Even when corporations do stock buy backs, it's not like most of the money goes to the investors to spend frivolously. Instead most of it just gets reinvested in different businesses that have…

There are things that Amazon needs done to continue to run it's business effectively. Roads need repaired, crime needs to be kept down to acceptable rates, trash needs to be removed, they need to be defended from foreign nations, etc. The need of the corporations of our nation means that everyone, including these companies that don't build their own roads and militaries are on "the government teat". The idea that mon…

Amazon pays for road repair. That happens through fuel taxes.

The main problem with taxes used for roads is that they are grossly distorted. We should be paying for roads on the basis of vehicle miles traveled multiplied by gross vehicle weight per axle. That would force those responsible for the most wear and tear to roads to pay for the maintenance. This may increase the cost of goods and services to cover those costs, but at least then those goods and services will be accurately prices based on the input costs and that will determine if they should be produced in the first place and if so, in what quantities.

If trash needs to be moved, charge for that service. That's what most businesses do. It's part of the costs of doing business and ends up impacting the price of the goods and services produced.

For crime and military, even those are being paid for, directly and indirectly, by the business. By hiring people or making purchases, they are paying sales and payroll taxes and the people they employ are paying income taxes. The amount of taxes paid is proportional to the economic activity they produce. If they reinvest more, they pay taxes on that additional activity.

The idea that some companies pay zero taxes because of zero profits is a blatant falsehood. Their activities still result in taxes being paid, just not on taxes on profit.

Re: Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

#72

Post by asdfasgasdgasdg »

Eridrus wrote: post #67
asdfasgasdgasdg wrote: post #25

Earlier quoted context omitted.

It is correct. People own corporations. So if you're taxing a corporation, you're actually just taxing the people that own it. (And/or its customers or employees.) The only point in taxing corporations vs. people directly is if you're trying to target a set that's difficult to tax otherwise, such as rich people who own big corps but don't realize a lot of income on their own balance sheet. Which IMO is a fair group t…

Why is it hard to tax these things directly? Is it our dumb inheritance rules or something else?

I don't think it is that hard, technically. At least not in broad strokes. You'd want to have some way to tax investment gains, even if unrealized. Then you levy that tax on rich people. One big problem with the corporate income tax is that you're also taxing pension funds, and middle class people who have small investments. And you're actually taxing them at the same rate (as a fraction of their holdings) as ultra wealthy people. In that sense the corporate tax is actually rather flat, which is normally something we progressives are not a huge fan of. The only thing that makes the situation even a little tolerable is that pension funds are going the way of the dinosaur and truly poor people cannot afford to invest, so the tax is mainly incident on the super wealthy. But the middle class is definitely getting a raw deal from corporate taxes.

Re: Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

#73

Post by max76 »

jcranmer wrote: post #55
rb808 wrote: post #38

Earlier quoted context omitted.

I'm not sure if you're in America, but in the US it federal income taxes largely goes to 14 giant aircraft carriers, a huge network of nuclear weapons, corporate farmers intensely growing carbs that makes our nation fat and payoffs to various politically well-connected lobby groups. State and local taxes probably are more useful for the things you think benefit society. Social Security and Medicare are of course fund…

> largely goes to 14 giant aircraft carriers How much do you think the Navy actually costs? Crunching the numbers, the tax the corporation I work at (admittedly, not a small company) is by itself sufficient to pay for running one of those carriers.

The Department of Defense's budget is about Six Hundred and Fifty Billion Dollars. It appears too high for peace time. We have friendly relations with both neighboring states. We have huge natural defenses (oceans) to the east and west. We have the nuclear deterrent. We have a well armed population.

We don't need 355 deployable navy vessels. Improving education and health care of our citizens would do more to improve America's economic position than jostling for terrority in the Indian Ocean. Climate change is a bigger treat than terrorism.

Re: Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

#74

Post by AdamM12 »

skybrian wrote: post #59
AdamM12 wrote: post #6

Earlier quoted context omitted.

Just a thought. How about abolishing corporate tax and then making every entity as pass through entity for tax purposes? At the EOD all entities are owned by someone and that income is taxed at a progressive rate. From what I've read the corporate tax is only 10% of the federal budget anyway. Edit: This wouldn't stop a company from doing what Amazon did and reinvest all the time but at least given a profit an entity…

Investors can delay capital gains tax by not selling their shares. If they delay them until they die, they don't pay capital gains at all. (Step-up basis for their heirs.) You kind of want to collect at least some taxes in the year the economic activity happened.

This would be a tax on income not on capital gains. The entities would have to pay out some amount of money to shareholders to cover their tax liability.

Re: Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

#75

Post by AdamM12 »

reitzensteinm wrote: post #22
AdamM12 wrote: post #6

Earlier quoted context omitted.

Just a thought. How about abolishing corporate tax and then making every entity as pass through entity for tax purposes? At the EOD all entities are owned by someone and that income is taxed at a progressive rate. From what I've read the corporate tax is only 10% of the federal budget anyway. Edit: This wouldn't stop a company from doing what Amazon did and reinvest all the time but at least given a profit an entity…

We have that in Australia & NZ, called Franking. When a corporation pays tax, it receives credits which can be distributed with the dividends it pays out. While strictly better than the alternative for business owners, I always felt the incentives were a bit weird; if you left profits in the company to expand, you'd pay tax on that up front which would slow growth. So it would bias you towards withdrawing profits (at…

I believe double taxation actually refers to paying the corporate tax rate as well as the shareholder paying their dividend tax rate. Not capital gains.

Re: Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

#76

Post by reitzensteinm »

AdamM12 wrote: post #75
reitzensteinm wrote: post #22

Earlier quoted context omitted.

We have that in Australia & NZ, called Franking. When a corporation pays tax, it receives credits which can be distributed with the dividends it pays out. While strictly better than the alternative for business owners, I always felt the incentives were a bit weird; if you left profits in the company to expand, you'd pay tax on that up front which would slow growth. So it would bias you towards withdrawing profits (at…

I believe double taxation actually refers to paying the corporate tax rate as well as the shareholder paying their dividend tax rate. Not capital gains.

I misspoke and meant to say corporate tax which would be more correct. But the tax rate also effectively applies to capital gains, since the value of a company is the NPV of its future distributions.

If Apple were suddenly permanently excepted from income tax tomorrow through some bizarre legislation, its future dividends would be proportionally increased, and its market cap would (should) rise to match.

The water is muddied due to a few factors such as inflation, uncertainty around future tax rates, potential tax holidays for overseas income etc. But they're in very general terms two sides of the same coin.

Re: Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

#77

Post by rland »

Tax for revenue's sake (as opposed as one legislated to change behavior, like a carbon or environment tax) should be 0% on businesses. The rhetoric I see coming from the left is very worrying. "We will pay for this by just taxing 'corporations.'"

What happens under high corporate taxes is that executives of the corporation manage to extract their share, while using the share of those not in control (the workers) to pay the tax. The end result is that the government does not decide who must pay; instead, those with power in the corporation decide. This outcome is always unfair to the worker: a line cook at McDonalds cannot decide whether McDonald's should cut wages or decrease dividends to pay for the corporate tax this year.

That doesn't even describe the case where a business cannot operate under a heavy tax burden and ceases doing business, which is a loss for everyone in the economy.

Taxes on corporations should be reserved for those situations where we need to control behavior at the corporate level, where a tax at the individual level cannot efficiently be used. For example; a carbon tax levied on a corporation to effect the corporation's behavior re: carbon.

This is not an argument for lower taxes.

Re: Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

#78

Post by Terr_ »

thrill wrote: post #52
Terr_ wrote: post #43

Earlier quoted context omitted.

> The only point in taxing corporations vs. people directly is I disagree, you're skipping a huge governmental benefit that almost all the biggest corporations request/receive: "Limited Liability." If Nuclear Asbestos Infant Toys goes bankrupt, everybody else is picking up the tab for land-cleanup and tumor-removal. In other words, those owners have chosen to socialize their company's risks, so it's only natural and…

The smallest corporation receives that same benefit.

Uh... okay? My point was that commonplace/large/consequential portions of the nation's economic activity occurs in the context of limited-liability.

Re: Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

#79

Post by gnicholas »

tschwimmer wrote: post #70
gnicholas wrote: post #41

The Bloomberg article links to a blog post by Warren, which is headlined by a graphic that says: You probably pay more in federal income taxes than America's biggest, most profitable corporations . This strikes me as an inflammatory — and generally untrue — statement. Even if you assume that all of these corporations pay zero federal income tax (they don't), then roughly half of Americans don't pay more (recall Mitt…

Mitt Romney's statement was not primarily in character a factual observation that 47% of people pay no income tax. It was something far more opinionated and in my opinion, deeply inhumane and unethical. The full quote: "There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victim…

> Tax loss carryforward is a standard accounting practice that makes rational sense. Nevertheless, it's the type of policy that helps those who need help the least, and I think we need to start to rethink these kinds of policies.

Get rid of this and you will find all manner of foolish inefficient corporate behavior. Companies with huge losses will be bought by companies with gains they want to soak up that year. Companies will make investment decisions based on their current year's tax position instead of the needs of the business. The end result will not be a more equitable system; it will be a system in which tax lawyer and accountants are the only ones who come out ahead.

And to be clear, I only mentioned Romney's infamous 47% line because it is well known and makes the point quickly. There's no need to rail against the larger message he was giving, which doesn't bear on whether Warren's headline is accurate or misleading. It leads us down a rabbit hole of discussing whether it was appropriate in the context (stumping to potential donors, IIRC), etc. I only referenced it because many people are aware that he said it and that it was a controversial comment but a true one.

Re: Warren Has a Good Beginning for Ending Corporate-Tax Avoidance

#80

Post by jopsen »

olliej wrote: post #3

Can’t we just say “your profit for the purposes of taxation is the profit you report to shareholders?”

The thing is you're not required to pay tax on money that you reinvest in the business.. you would do away with that?

It has upsides and downsides.. it certainly encourages reinvestment, rather than pulling the money out.

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