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Global minimum corporate tax: 130 nations to support U.S. proposal

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Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#331

Earlier quoted context omitted.

Raising corporate taxes is generally popular, not "wildly unpopular." For example, in a recent poll 65% of Americans support raising corporate taxes [1]. This number has been fairly steady over time. It's even higher when you ask about closing loopholes that allow international tax havens, as this 15% minimum tax agreement is trying to do--70-85% support [2]. The only terrible shame here is you laundering your opinio…

65% of Americans have no clue what it takes to run a business of any scale. They can barely calculate a tip at the restaurant, yet they think they are qualified to make decisions on taxation. The flavor of democracy we practice has been good. However, we must be honest enough to admit it can degenerate into mob rule, which generally means decisions are made by the most gullible and ignorant among us on any specific t…

> There is no way my vote on a whole range of medical issues should have the same value as that of a medical professional, such as my wife.

Strongly disagree. Your wife should educate the voters around her on issues that she cares enough about to invest the time (or treasure) doing so. Those better-informed votes should all count equally.

It's a slippery slope to suggest that being well-versed in an area should grant extra power. Who determines who is well-informed? Hell of a conflict of interest.

Also, consider how wildly primitive (and often wrong) medicine was two centuries ago but how respected the practioners were at the time. Things are better today but the medical profession is not infallible.

Lastly, should business people get extra votes on economic policy and taxation?

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#332
post #289
post #279

Earlier quoted context omitted.

There are taxes other than income taxes

Enough to offset the EITC? Most low income folks pay a negative tax rate.

I would consider also consider basic rent & food as sort of a "survival tax" if you will, and count it into the equation.

The only useful number is not % tax difference between rich & poor, but % leftover for discretionary spending.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#333
post #327

Earlier quoted context omitted.

Raising corporate taxes is generally popular, not "wildly unpopular." For example, in a recent poll 65% of Americans support raising corporate taxes [1]. This number has been fairly steady over time. It's even higher when you ask about closing loopholes that allow international tax havens, as this 15% minimum tax agreement is trying to do--70-85% support [2]. The only terrible shame here is you laundering your opinio…

Raising corporate taxes is popular, but I suspect the end result of this proposal would be to lower corporate taxes. First, countries would reduce their taxes to the minimum 15% based on the same dynamics we had until today (note that US's tax is higher). Later, countries would find ways to return the tax (not difficult when one could simply 'fail' to collect, or give 'investment aid' etc.). IMHO, the importance of t…

I don't see this resulting in lower taxes. Countries with higher corporate tax rates have their current corporate tax rates for a reason, and this makes them more competitive (by setting a higher floor) which means less incentive to lower the rate.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#334

Earlier quoted context omitted.

"trap" in this context means "coordination trap" which is a scenario in which competition forces individual actors to adopt policies they don't want, but can't avoid. Imagine you and I are neighboring farmers who irrigate our fields from the same river. Our farms grow, as does our water use, until we're each using half the water. I buy a bigger water pump and start sucking up most of the water, leaving you with dying…

I mean, sure, and this could describe almost any resource-sharing situation ever. I'd say that this however is not a resource sharing situation. It's a competition for the magical money tree of corporation taxes. And that's a good thing, because "setting up an environment in which businesses cannot thrive" is often a vote winner, but is a terrible idea.

The key ingredient in a "race to the bottom" is not resource sharing, it's competition combined with a feedback mechanism. Resource sharing figures in a lot of examples, because "consume most of the resources" is a common way to win a competition, but it's not necessary; for example there's no resource being shared in the classic prisoner's dilemma.

Anyway, you're right that this a competition for corp tax money, and that it could be bad in theory if there was no competition for it, since e.g. we could all collectively agree to set the corp tax rate too high, which I agree would be bad. But there's no ratchet effect. All we have to do to avoid the "taxes too high" problem is be aware of it and decide not to do that, whereas we cannot avoid the "race to the bottom" problem by being aware of it, we need an agreement like the one described in the article.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#335
post #331

Earlier quoted context omitted.

65% of Americans have no clue what it takes to run a business of any scale. They can barely calculate a tip at the restaurant, yet they think they are qualified to make decisions on taxation. The flavor of democracy we practice has been good. However, we must be honest enough to admit it can degenerate into mob rule, which generally means decisions are made by the most gullible and ignorant among us on any specific t…

> There is no way my vote on a whole range of medical issues should have the same value as that of a medical professional, such as my wife. Strongly disagree. Your wife should educate the voters around her on issues that she cares enough about to invest the time (or treasure) doing so. Those better-informed votes should all count equally. It's a slippery slope to suggest that being well-versed in an area should grant…

I am not proposing we have classes of voters. I am simply highlighting that votes are equal despite the massive range of understanding from voters, from ignorant to expert.

This is very real problem. Yes, experienced business people are far better at understanding the range of issues pertaining to economic and taxation policy. That is self evident. Most people have zero experience and very little understanding of this, once again, particularly as it pertains to a connected global economy.

Here's a simple example of this:

Today politicians in the US are pushing for a truly massive-beyond-description infrastructure spending plan. Removing political intent (buying votes with our tax dollars by throwing money at large groups through these programs), one of the most typical targets of this infrastructure spending are roads, bridges and government buildings.

Simple question for anyone:

Name just ten companies who, in the last, say, 50 years, decided NOT to base their operations in the US because our roads and bridges are deficient. Just ten. Fifty years is a long time. If this is a real problem it should be very easy to rattle-off ten, if not twenty or more companies.

Any?

Nope. Not one.

In other words, this "infrastructure" thing is a solution looking for a problem. Or, put a different way, it is a waste of time and money at a massive scale.

OK, that's a tough question. Fine.

Same question. Only this time, within the US. Name ten companies who, in the last fifty years, chose to move to another US state because of the condition of the roads and bridges in their original state.

No?

It's a fantasy, isn't it?

Spending money like that is irresponsible. It will waste a decade or more. You can't recover the opportunity cost.

You see, lay people buy this crap without perspective and analysis. Our roads and bridges are just fine. Sure, maybe some here and there. And yet this should not be the focus of our spending. I just watched our local transit agency tear-up and re-pave a one mile stretch of road near our home. There was absolutely nothing wrong with the road. In fact, you could argue what they have done is actually worse. The prior road was gray-colored. The current topping is black tar-based. In other words, they created a mile-long super-heating surface in an already hot summer area.

Anyhow, the obvious question then, might be:

If not roads and bridges, where should we invest?

Where it matters. Ask companies what it would take to have them come back. Ask business people what they need. You are likely to compile a list that looks something like this (not complete):

  - Lower taxes, federal, state and local
  - Lower regulatory burden
  - Faster (light-speed fast) building permits and process
  - Sensible, fair and fast legal immigration policy
  - 10 to 25 year manufacturing subsidies aimed at in-shoring the supply chain
  - Invest whatever it takes to bring in not-trivial capacity 
    in semiconductor and other essential manufacturing
  - Stop the minimum wage madness that is killing competitiveness
  - Cancel the treaty that allows Chinese companies to ship for free within the US
  - Tort reform
  - Stop funding and guaranteeing student loans (this raises costs)
  - Create an intense pro-business entrepreneurial culture
  - Stop throwing money at military crap and use it to fund an industrial revival
This list could be hundreds of lines long. And, yes, some of the items would be controversial and might not make sense. That does not mean they should not be discussed.

As someone in manufacturing, one of the things I want the most is a short and relatively local supply chain. If you are manufacturing microwave ovens in China your supply chain is insanely short. Almost everything you need is within a truck drive from your plant. In the US your supply chain stretches all over the world. Long supply chains cost a lot of money, hence the decision by many to migrate their manufacturing to China. If the glass, screws, wires, chips, displays, plastic you buy is made in China...well, it's hard to justify making your microwave oven in the US when all you can source here might be the box and instruction manual.

An investment in a localized, efficient, low cost supply chain spanning a range of products --from low tech to high tech-- is the single most important decision the US could make. Investing in roads and bridges is going to bring NOTHING to the US. An efficient local supply chain would change the game in ways one can hardly imagine.

Can this be done? Well, it's hard to say until we start focusing on it and getting the right people around the table. We have been focusing on the wrong things for years. Others, like China, have not. This comes with consequences. The uninformed don't have a wide enough view and deep enough expertise to understand where we are and what we need to do to avert disaster.

Perhaps this is the point: When things are good it is OK to make bad decisions here and there because you have a buffer zone. You can make mistakes, survive them and go on. However, when you find yourself in the emergency room, what you need is deep and wide expertise and the right knowledge for someone to be able to make the right decisions. No more amateur night or well-intended-but-dangerous decisions rooted in ignorance.

The US and Europe are in the same place with regards to China. They have intelligently sucked in every industry of any value from both regions. It is hard to create a list of the massive segments of industry that have migrated operations from the US and Europe to China. You have to be in awe of what they have accomplished in about fifty years. If the US and Europe don't change their approach to business we will both suffer further erosion of whatever job-generation we have left. This is no longer a hypothetical. This is very real. And, yes, people with expertise need to be making decisions, not politicians or ignorant voters.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#336

Earlier quoted context omitted.

If you think China and others will abide by this nonsense you might need to review how business is supported by government in China. Did you know they can export products at cost and still make up to 15% on their international sales? The world is not a level playing field. Did you know it costs them darn near zero dollars to ship products within the US, while US companies have to pay full fare? The ONLY way the US an…

>The ONLY way the US and Europe could rebuild a solid industrial base lost to China is to be so pro-business it would make most of the uninformed projectile vomit. If we can do that and maintain it for 25 to 50 years we might have a shot at it. Nothing else will work. Or you just introduce CO2 tariffs and use them to wreck China in the process of building a CO2 neutral economy.

CO2 tariffs do not create jobs.

The idea of a CO2 neutral economy is another utopia fantasy sold to the ignorant voters by politicians. Easy to sell. Easy to form voting groups around it. Who doesn't want to be for "saving the planet".

And yet, we know, without a shadow of a doubt, that we cannot do a thing about atmospheric CO2 accumulation and the climate effects surrounding it. Not a thing. This is what we know --scientifically, not guessing here: If humanity left the planet today and all of our technology simply shut down, it would take somewhere around 50,000 and 100,000 years for atmospheric CO2 to come down 100 ppm. This leads to a very simple conclusion: If such an extreme measure produces a rate of change of 100 ppm / 100K years, a partial measure will not improve on that rate at all.

So, no, a carbon neutral economy will do nothing. Neither will switching to electric cars, full solar and wind power, etc. All fantasies. Sorry. We are being lied to and we are deceiving ourselves.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#337
post #289

Earlier quoted context omitted.

Enough to offset the EITC? Most low income folks pay a negative tax rate.

I would consider also consider basic rent & food as sort of a "survival tax" if you will, and count it into the equation. The only useful number is not % tax difference between rich & poor, but % leftover for discretionary spending.

You might consider those taxes but nobody else does.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#338
post #297
post #105

Earlier quoted context omitted.

That’s what taxing corporate income (or more targeted, corporate assets ) attempts to do: tax the wealthy. Because by-and-large, wealthy people don’t accomplish the things they want to do by drawing an income and then spending it; but rather by setting up corporate vehicles that have their goal as the corporate mission statement, and then getting other corporations to fund its treasury (as negotiated compensation in…

"then they rent the house from that PMC." They'll pay tax on that realized income. And if they build up all that wealth in stock value, then if we don't tax it while they are alive we'll take it when they die, so we'd take away the incentive to hoard all the wealth with those schemes. "That’s what taxing corporate income (or more targeted, corporate assets)" Incorrect. Targeting corporate assets hurts heavy industry.…

> They'll pay tax on that realized income. And if they build up all that wealth in stock value, then if we don't tax it while they are alive we'll take it when they die, so we'd take away the incentive to hoard all the wealth with those schemes.

I don't think you quite understood the scheme here: they never own the PMC. They don't gain the appreciation value of the house or anything like that. It's not an investment to them. They just got someone else to set up the PMC and buy the house, for the positive side-benefits that come from having arranged to assume (at least partial) directorship over that PMC.

Maybe it's easier to picture it at larger scale, with an explicit example: say you're a famous property developer who has built a bunch of hotels with your name on them. In one sense, those are businesses for their own sake. But in another sense, those are your vacation homes. You can stay in them, for free, any time you like, which the hotel will likely book as a business expense (hosting one of its directors for an official evaluation of operations on behalf of shareholders.)

That business expense will also extend to any perks the hotel offers its ultra-premium clients (often a class only set up in the first place as a way to justify giving directors these perks) — e.g. hotel-employed drivers assigned to pick the billionaire up from the airport, and then attached to them to fetch whatever they need as long as they're there.

If you build a bunch of hotels that provide you a free place to stay anywhere you go, then you don't need vacation homes. You never need to buy them, rent them, own them in any sense. They're never realized as income, any more than a "company car" or "company-supplied laptop" that you need to give back when you quit is income.

By itself, this would be ridiculous; it'd be like starting a car rental agency just to have a "company car."

But, because these are also profitable businesses for their own sake, you can get investors (incl. your own investment businesses) to put money into them, such that you never need to put any of your own (post-tax) money into them. You don't actually even need to personally be a shareholder in the hotel chain, "only" a director of it, to reap these benefits! And, if you're also a person with a lot of connections — someone with a rolodex of reliable CEOs and executives to staff these businesses with — then you never need to worry about actually building or running the business, either.

This is how billionaires — or at least, capitalist billionaires — get away with never realizing much income (or even having very many estate-tax-able assets as part of their net worth!) at all. They just cause corporations to invest money in other corporations, never actually touching any of the money or the resulting assets themselves, but rather ending up in arrangements where business expenses of the invested-in corporations are being spent directly on their own happiness, mostly by having temporary use of the business's assets whenever they like, as some non-transactional, pure-expense part of the business's operation. The vast majority of their assets are soft power — social influence — realized/"invested" by putting people into power in roles in businesses, where those people in power in those roles can then give them perks in return.

(And, if they ever need real liquid assets for some reason, then they just make arrangements with other billionaires to 1. start non-profits; 2. get some underemployed accomplices [e.g. relatives] employed at their non-profits in high-paying [but not to the point of being individually highly taxed] roles; and 3. get corporations that owe each billionaire favors, to direct charitable donations to one-another's nonprofits. Then, since this income is entirely the result of cronyism, the accomplices will listen when the billionaire directs them on how to spend their income — and thus the billionaire can spend it as if it were their own income, as they please; usually not on assets, mind you, but rather usually for expenses that personally benefit the billionaire, e.g. things like huge parties or political lobbying. This is the classic "high-society wife" setup, but it can be extended to hundreds of accomplices.)

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#339

Apparently it's also possible to address the issue of shifting corporate profits to tax-havens even without a large scale international agreement. Basically, corporations have one place money comes in and two places it comes out, like so: sales = expenses + profits If you tax the sales, then deduct the expenses, that leaves the incidence of the tax on the profits. But importantly, unlike profits, it's usually clear t…

An agreed upon international base tax rate is the wrong solution. This becomes a minimum wage for nations and removes the incentive to compete to be the home of corporate headquarters. Border adjustment tax removes the tax shelter loophole and strengthens the incentive to be a good place to headquarter a corporation.

> This becomes a minimum wage for nations

Why is that a problem?

> removes the incentive to compete to be the home of corporate headquarters

No, it shifts the means of incentives. It's no longer a race to the bottom tax rate.

As I understand it, the problem with a border adjustment tax is implementation overhead; it would be expensive to audit. Noting that the IRS in the U.S. is not funded enough to investigate tax fraud as it is, this seems to be a major problem. You would also likely need foreign cooperation. There's no reason to believe a corporation headquartered in the U.S. needs to be truthful about their foreign revenue, and how would you know if they were without a foreign government's assistance.

The problem with implementing a world-wide minimum tax rate is organization, getting all countries to agree and stand by it. This is something the world has been engaged in doing for around 100 years now. We've had failures (League of Nations) and successes. There's no guarantee of success, but importantly, tax havens can be isolated if 130+ countries agree to do so, until they follow suit.

Basically, even if global minimum tax is not the optimal solution (which remains to be shown), it's better to have a sub-optimal solution that can be implemented than an optimal solution that's impossible.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#340
post #331

Earlier quoted context omitted.

> There is no way my vote on a whole range of medical issues should have the same value as that of a medical professional, such as my wife. Strongly disagree. Your wife should educate the voters around her on issues that she cares enough about to invest the time (or treasure) doing so. Those better-informed votes should all count equally. It's a slippery slope to suggest that being well-versed in an area should grant…

I am not proposing we have classes of voters. I am simply highlighting that votes are equal despite the massive range of understanding from voters, from ignorant to expert. This is very real problem. Yes, experienced business people are far better at understanding the range of issues pertaining to economic and taxation policy. That is self evident. Most people have zero experience and very little understanding of thi…

I appreciate the thought that went into your response. Also, I like your list of concerns and public priorities. Go run for office so that I can vote for you.

> And, yes, people with expertise need to be making decisions, not politicians or ignorant voters.

I agree with the sentiment but there's no universal definition of ignorant voter in the political sphere. There's only, subjectively, useful to someone or not useful to someone.

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