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We have known for decades that some corporations are not paying their fair share. Gigabuck corporations use loopholes to avoid paying any tax on hundreds of millions in profits. They also offshore profits and outright evade taxes on profits earned by selling in the USA. There is no doubt that the corporate tax structure needs a total overhaul, starting with the elimination of all corporate tax credits. On the up side, they should be able to deduct any capital investment from their profit bottom line. If all corporations were truly taxed at the 36% tax rate, they would have excellent motivation to grow both their company and the US economy. Adding another personal income tax bracket to push higher incomes past a 50% marginal tax rate would also be an excellent move. Stockholders would see improved capital gains as infinitely preferable to dividends.
What we need is a clean tax code, not a minimal tax code. Change the investment rules to make investment more attractive, and the economy would go back to growing.
The deferral of taxes on foreign profits was only created in 2003. There was a "repatriation" tax holiday in 2005 that was aimed at taxing some of those fake offshore profits. The tradeoff for corporations is that they pay the politicians a few million dollars to keep the law on the books in exchange for 700 billion dollars of unpaid tax liabilities that's growing every year. Every few years, some congressman will bring up the prospect of doing away with the tax loophole as a way of shaking down the corporations.
That's not really how it works...with your whole fake profits and shakedown spiel.
The foreign earnings were taxed in the foreign jurisdiction. The company would have had to make an assertion that the profits are permanently reinvested overseas to avoid making a deferred income tax liability on their balance sheet under asc740 to pay u.s taxes on the earnings. They had to prove the cash wasn't needed in the u.s to continue operations and that there were actual plans in place to use the money overseas for capital investment, ect.
Tax was paid on those foreign e&p in a foreign jurisdiction already. Bringing the money home with a one time holiday is taxing those same earnings again...that are otherwise left out of the country for the potential benefit of having it invested here. The corporations could just never bring it home and the IRS could never get at it. It's an attempt at a win win compromise. It would be cheaper for the companies to just borrow money in the us than it would to bring back the money at a marginal rate of 35 percent.
Last edited by Thatsright19; 05-18-2017 at 09:55 AM..
That's not really how it works...with your whole fake profits and shakedown spiel.
The foreign earnings were taxed in the foreign jurisdiction. The company would have had to make an assertion that the profits are permanently reinvested overseas to avoid making a deferred income tax liability on their balance sheet under asc740 to pay u.s taxes on the earnings. They had to prove the cash wasn't needed in the u.s to continue operations and that there were actual plans in place to use the money overseas for capital investment, ect.
Tax was paid on those foreign e&p in a foreign jurisdiction already. Bringing the money home with a one time holiday is taxing those same earnings again...that are otherwise left out of the country for the potential benefit of having it invested here. The corporations could just never bring it home and the IRS could never get at it. It's an attempt at a win win compromise. It would be cheaper for the companies to just borrow money in the us than it would to bring back the money at a marginal rate of 35 percent.
They select a tax haven for a domicile. The shakedown implies that there was never really the realistic intention to do more than getting consideration of a bill in committee before it could reach the floor for a vote. As I explained, the money is not outside the country. Foreign subsidiaries of US firms can hold accounts in the US. Keeping such a large amount of funds abroad would subject the funds to currency risk.
Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant. -- Learned Hand
As a rule of thumb, if what people are doing is illegal, one should prosecute it. If it is not illegal, one must seek to change the law first and then prosecute it
Thank you. Yes, the tax laws need a serious overhaul to remove egregious loopholes. The question is not if the loopholes are legal. Of course they are. The question is if the tax laws act to the benefit of the USA and its citizens, which they do not.
They select a tax haven for a domicile. The shakedown implies that there was never really the realistic intention to do more than getting consideration of a bill in committee before it could reach the floor for a vote. As I explained, the money is not outside the country. Foreign subsidiaries of US firms can hold accounts in the US. Keeping such a large amount of funds abroad would subject the funds to currency risk.
There is no such thing as a "tax haven". This word makes it seem as if it is a fictional place. These so called "tax havens" are sovereign nations, who have a brilliant long term growth strategy in place, to charge very low tax rates to businesses, so that they will park their money there.
These countries don't saddle their citizens and businesses with exorbitant tax rates. The result is exactly what business leaders, and economic free thinkers, have stated for years. If your tax rate is lower than the rest of the developed world, businesses will flock to your country, bringing with them jobs, and stabilizing capital markets.
Why can't the United States be the tax haven of the world? What would the United States be like if every major corp. on this planet was headquartered here? Trillions of dollars parked in our banking system.
These are the questions we should be asking our selves. What tax rate would make the United States the best place to do business on this planet. It's not 35%, we can see what that gets us. If the tax laws are fair, and plainly written, there wouldn't be any need to try to skirt the law.
There is no such thing as a "tax haven". This word makes it seem as if it is a fictional place. These so called "tax havens" are sovereign nations, who have a brilliant long term growth strategy in place, to charge very low tax rates to businesses, so that they will park their money there.
These countries don't saddle their citizens and businesses with exorbitant tax rates. The result is exactly what business leaders, and economic free thinkers, have stated for years. If your tax rate is lower than the rest of the developed world, businesses will flock to your country, bringing with them jobs, and stabilizing capital markets.
Why can't the United States be the tax haven of the world? What would the United States be like if every major corp. on this planet was headquartered here? Trillions of dollars parked in our banking system.
These are the questions we should be asking our selves. What tax rate would make the United States the best place to do business on this planet. It's not 35%, we can see what that gets us. If the tax laws are fair, and plainly written, there wouldn't be any need to try to skirt the law.
It was already explained that the money is not parked there. Much of it is already invested in the US. For the same reason, money would not automatically park in the United State after any favorable tax treatment. It is primarily an accounting change.
It was already explained that the money is not parked there. Much of it is already invested in the US. For the same reason, money would not automatically park in the United State after any favorable tax treatment. It is primarily an accounting change.
If the multinational corporations that I have worked for are any indication, that's not true. The profits are kept in their local functional currencies and must deal with the currency risk. With the dollar strengthening, there have been many fx losses. The cash isn't in the U.S...hence attestations are made that it's "permanently reinvested". It's all reported to the IRS on form 5471 so they know exactly how much foreign E&P there is.
As far as tax havens and shifting profits, transfer pricing has been a hot issue and as we speak country-by-country reporting is coming.
I swear, people hear a sound byte of "CORPORATIONS HAVE BILLIONS IN UNTAXED PROFITS" and run with it. It's the thing that makes me worry about money I put into Roth 401k's. Someday the masses are going to hear that the money was allowed to grow and taken out without being taxed!!!!.....despite the fact taxes came out up front.
Quote:
Why can't the United States be the tax haven of the world? What would the United States be like if every major corp. on this planet was headquartered here? Trillions of dollars parked in our banking system.
Which is why we need to shift away from a worldwide tax system and go to a territorial one like all of the other countries.
Last edited by Thatsright19; 05-18-2017 at 12:44 PM..
If the multinational corporations that I have worked for are any indication, that's not true. The profits are kept in their local functional currencies and must deal with the currency risk. With the dollar strengthening, there have been many fx losses. The cash isn't in the U.S...hence attestations are made that it's "permanently reinvested". It's all reported to the IRS on form 5471 so they know exactly how much foreign E&P there is.
The loophole is very recent.
We are talking about profits having been invested. Profits don't sit in cash all the time. Since most of the business is done outside the tax haven, the working capital requirement would be very small.
The companies also have foreign operations. Hence, they will report fx losses. It doesn't necessarily mean that the currency losses are directly tied to the country where they've set up a domicile.
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Originally Posted by Thatsright19
As far as tax havens and shifting profits, transfer pricing has been a hot issue and as we speak country-by-country reporting is coming.
Transfer pricing normally relates to manufacturing and parts assembly. There are also other ways to restructure the operations and assets to move the profits to a tax haven.
Quote:
Originally Posted by Thatsright19
I swear, people hear a sound byte of "CORPORATIONS HAVE BILLIONS IN UNTAXED PROFITS" and run with it. It's the thing that makes me worry about money I put into Roth 401k's. Someday the masses are going to hear that the money was allowed to grow and taken out without being taxed!!!!.....despite the fact taxes came out up front.
Monied interests lobby Congress to put these kinds of laws on the books all the time. On the other hand, the politicians run with the same slogan you've just cited when they push for tax cuts. Most people don't realize that the same corporations paid the politicians to get these tax breaks.
It's an Economics forum. Lots of people here "get it."
For those of you new to this particularly nasty schtick, those who "get it" would no doubt include Fairfaxer, Oaktonite, Vendor Dude, The Bishop, and Major Barbara (et al., I would guess).
Thank you. Yes, the tax laws need a serious overhaul to remove egregious loopholes. The question is not if the loopholes are legal. Of course they are. The question is if the tax laws act to the benefit of the USA and its citizens, which they do not.
Yes, the tax laws need a serious overhaul. But not for the reason you cite.
The right questions are
How much tax revenue does the Federal Government need (decide to collect)?
In which ways should it be collected so as to minimize the harmful effects of a distortion in the efficient allocation of capital?
In which ways can it be collected without harmful and needless complexity?
In which ways can it be collected so as to provide the USA both a comparative and competitive advantage?
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