Will Pres. Trump also consider removing AMT?
Trump Tax Plan Said to Call for Lowering Corporate Rate to 15%
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Re: Trump Tax Plan Said to Call for Lowering Corporate Rate to 15%
#22Earlier quoted context omitted.
You are missing that the reduction should cause some money sitting in coffers outside to flow back in to US. Microsoft, Apple, Goog etc have billions of dollars parked outside the country.
>You are missing that the reduction should cause some money sitting in coffers outside to flow back in to US. Microsoft, Apple, Goog etc have billions of dollars parked outside the country They won't bring it back if they have to pay 15% on it. We let them bring it back for 5% in 2004 and the result was a net loss to the taxpayer, if I remember correctly. https://www.wsj.com/articles/SB10001424052970203633104576623..…
We let them bring it back for 5% in 2004 and the result was a net loss to the taxpayer, if I remember correctly.
Well, 5% is probably too low. And I think they will bring it back for 15%. It costs money to maintain all these tax-minimization schemes globally. And America is still Apple's biggest market by far. Being able to leverage all that cash here could make a big difference to their bottom line.
Re: Trump Tax Plan Said to Call for Lowering Corporate Rate to 15%
#23I'm skeptical that tax reform has a better chance of making it through this Congress than ACA reform, but: Can anyone comment on how a lower corporate rate would likely affect S corps and incentives to form them? Maybe a new 15% rate wouldn't apply to such firms, but if it did, wouldn't it represent a pretty big new benefit/loophole for incorporation?
Wouldn't apply to S-corps, as pass-through taxation from the company is applied at the owners' personal tax rate(s).
But, indirectly, the biggest incentive that I can see would be with regard to retained earnings and reinvestment. For an S-corp, shareholders pay tax on profits according to their ownership percentage, irrespective of whether they even receive a distribution from those profits.
And, if on Jan 1, the company invests all of its profit in a new project (essentially wiping out the profit), it doesn't matter. Prior year taxes are still due from shareholders at the full rate. This can generally lead to forced distributions to shareholders just so they can cover taxes.
So, that's painful, especially for a business that's in growth/re-investment mode. Problem is, moving to a C-corp and being doubly-taxed at a 35% corporate rate, and again at a ~30% marginal personal rate is usually even more painful.
So, yeah, a much reduced corporate rate might allow for a different calculus there that incentivizes me to organize as a C Corp vs. S Corp. Let the company take the 15% corporate tax hit and keep the 20% balance vs the old rate. Plus minimize dividends to keep the max amount of money in the company to re-invest.
Re: Trump Tax Plan Said to Call for Lowering Corporate Rate to 15%
#24I'm skeptical that tax reform has a better chance of making it through this Congress than ACA reform, but: Can anyone comment on how a lower corporate rate would likely affect S corps and incentives to form them? Maybe a new 15% rate wouldn't apply to such firms, but if it did, wouldn't it represent a pretty big new benefit/loophole for incorporation?
The benefit of S-corps is to pass through taxation to the owner's personal tax return in order to avoid double taxation. There is no added benefit with lower corporate taxes because they are effectively 0% at the corporate level.
Re: Trump Tax Plan Said to Call for Lowering Corporate Rate to 15%
#25Earlier quoted context omitted.
You are missing that the reduction should cause some money sitting in coffers outside to flow back in to US. Microsoft, Apple, Goog etc have billions of dollars parked outside the country.
Is there evidence of this? Tax reduction proponents often claim some offsetting benefit, but rarely does it seem to come true. Look up the Laffer Curve from the 1980s, when the Reagan administration claimed that tax cuts would spur economic activity and actually increase tax revenue. Also, to a degree it's based on the premise that these companies are overwhelmed with high taxes and that is determining their behavior…
But income tax revenue grew robustly over the 1980's:
https://www.thebalance.com/current-u-s-federal-government-ta...
Re: Trump Tax Plan Said to Call for Lowering Corporate Rate to 15%
#26No corporation with a good tax team pays anything more than 20% of taxes. This idea that 15% is going to really be THE thing that spurns business, well, it might work initially, but the reality is, it will just create more federal debt (think Bush tax cuts of 2003). Also, the current tax codes (loop holes) are too favorable for corps. With the proposed lower corp. base tax rate it will just make it easier for corpora…
> No corporation with a good tax team pays anything more than 20% of taxes
Seems like a good reason to level the playing field, no? We want businesses to succeed by providing better products and services at better prices, not by being extra good at bureaucratic arbitrage.
Re: Trump Tax Plan Said to Call for Lowering Corporate Rate to 15%
#27Re: Trump Tax Plan Said to Call for Lowering Corporate Rate to 15%
#28It will lead to a generalized and obnoxious "IR35" problem, which says that "you are NOT a real company", because you just incorporated your activity as an employee to pay a much lower corporate tax instead of the higher personal income tax and other contributions that you should be paying. Paying the lower corporate tax is reserved for TRUE capitalists and not for smaller entities such as yourself, who are in fact meant to be treated as substantially higher-taxed wage slaves.
Re: Trump Tax Plan Said to Call for Lowering Corporate Rate to 15%
#29We don't know about the side effects yet, but a 15% corporate tax would be the starting signal for some entrepreneurial friends of mine to found a company in the USA the second the bill has passed. There is no other big market with such a low corporate tax.
Corporate taxes are on profits - it's very easy for a company, especially a startup, to not make a profit - ever - if they reinvest the earnings before the end of the tax year or the shareholders make drawings. I don't see how low corporate tax rates will spur new startups - but I do see it as incentivizing the repatriation of foreign-earned income by large multinationals.
On the contrary, I think a higher and progressive corporate tax rate would spur startups because it would serve as a governor to prevent large corporations (of the faceless variety) becoming large conglomerates - which generally have a depressive effect on the economy - thus giving smaller and more nimble startups an opportunity to compete.
> There is no other big market with such a low corporate tax.
Ireland's corporate tax rate is 12.5% ( https://en.wikipedia.org/wiki/Corporation_tax_in_the_Republi... ) and as Ireland is in the EU it has full access to the largest single market in the world - but I'll concede the EU's market is fragmented by localization issues and less demand for high-technology compared to North America.
Re: Trump Tax Plan Said to Call for Lowering Corporate Rate to 15%
#30We don't know about the side effects yet, but a 15% corporate tax would be the starting signal for some entrepreneurial friends of mine to found a company in the USA the second the bill has passed. There is no other big market with such a low corporate tax.
So, they wouldn't sell to the biggest, richest market in the world, with some of the best infrastructure, cheapest energy, no shortage of wealthy customers and educated labour, (With some of the lowest levels of labour protection in the developed world...) Until we slash the taxes they will pay on profits?
Given that we are in an era of cheap credit, your friends sound insane.