This rhetoric is ridiculous. If I were to stash trillions of income overseas to evade taxes, I'd go to jail, not have the law changed.
> It may look unfair to tax consumers to compensate for a major business tax holiday -- but then such a move would give businesses a strong incentive to keep prices lower to avoid a drop in demand.
A drop in demand? People are going to eat less food because taxes are now lower? Need less healthcare? Will move to a cheaper home? Just not use internet? Drive the car less to work and sit more at home?
Supply/demand is crooked. It doesn't work for the majority of the goods the majority of the people purchase. Demand is fairly fixed and based on population, and supply is provided by the only bidder in your area.
> Besides, liberated from corporate taxes, they'd have more freedom to increase wages.
Does anyone still believe this 'trickle-down' hogwash?
I really wonder when America will have its wake up call during its third part-time job to pay the rent that maybe change is needed, and that your government has no intention of making it.
If you had millions (much less trillions) in income to stash overseas, you wouldn't go to jail for it, even if it was flagrantly illegal. People don't go to jail for white-collar crime, generally.
The real argument for abolishing the corporate tax is not that they avoid it and therefore its worthless (though that is true). It's that taxing corporations doesn't really make sense. Corporations don't want things. Taxing them is just another way of taxing their customers and employees indirectly. And if you want to do that, why not just tax the customers and employees more in the first place?
Food, healthcare, housing, land, education, etc. are almost always taxed differently from everything else, so changing the corporate tax reality should have no effect there. Also note that healthcare and food, (food especially) are heavily subsidized by the government already. While I personally believe that distorts the market and should probably stop, even in some doomsday tax-burden-shift scenario that you fear, a bump to subsidies could resolve the worst effects.
Really this is just like any other situation where the government due to structural weaknesses can't set/enforce policy effectively. Just like in the Prohibition or the War on Drugs, neither of which the government was equipped to make happen, the solution is to remove the problematic policies and take a more realistic approach.
Climate change has near unanimous support from climatologists. Most (rightly, imho) point that as a reason why it should be accepted by the general public. And those doubting the experts are considered ridiculous.
Here, however, we have an issue to drop corporate taxes which has near unanimous support from economists (across the political spectrum). Yet we call the experts ridiculous.
Why the flip? Why should the general public accept the expert advice in one field, but then turn around & call it ridiculous in another?
> Besides, liberated from corporate taxes, they'd have more freedom to increase wages.
Can someone explain this to me? I was under the impression that wages were expenses and non-taxable. So if they paid higher wages so they ended up with no profits they would have to pay no tax.
> Does anyone still believe this 'trickle-down' hogwash?
Absolutely not. Corporation will choke employees and consumers alike if they are allowed to have their way. This quarter my company decided to cut the quarterly bonuses to zero because Y-oY growth targets were not met. Although profits were higher then last year. Now it looks ridiculous to me to expect an fixed pefcentshe growth forever and then punishment employees who didn't even knew that increasing Y-oY growth is part of their responsibility. If at all anybody should have been punished, it should have been the top management. But since they make the rules, there is no downside.
When you say the majority of goods people purchase are fixed in demand, and there is only one bidder (supplier?), can you give a few examples of what you had in mind?
> If I were to stash trillions of income overseas to evade taxes, I'd go to jail, not have the law changed.
Yes. But you see, if the state did that to you there would be no unpleasant consequences, whereas doing that to a big corporation will bring on a wold of pain.
NPR has a recent podcast called "The No-Brainer Economic Platform" which includes changes to the tax codes that have a unanimous approval of economists across the political spectrum (e.g. abolishing corporate tax), but which they show via focus groups would be impossible to present to the public:
Their other plans include things like abolishing housing and medical subsidies, which they claim just leads to price inflation in the longer term, but which are obvious political suicides to propose.
The point of these episodes was not to try to present some absolute truth about economic policies, but rather to demonstrate that while there are certain things experts universally or near-universally agree on, convincing voters of these policies can be a hard sell.
E.g. they argue that eliminating mortgage tax deduction would have the counter-intuitive long-term benefit of making houses more affordable. But when you try to explain that to people you've lost most of them once they realize that in the shorter term their existing mortgage would go up.
Can you summarize why economists support abolishing corporate tax?
AFAIK, corporate tax is optional anyhow. Any company could organize as unlimited partnership and not pay corporate taxes. But most companies chose not to, and I think that extra tax is a perfectly reasonable way of paying for extra protection (that of a limited company).
* economists who were completely blindsided by the largest financial crisis of our time.
In the UK there was near unanimous 'expert' support for the idea that Brexit would immediately trigger a level of uncertainty pre-article 50 that would crater the economy and employment.
Growth and employment are now ever so slightly up.
>experts universally or near-universally agree on, convincing voters of these policies can be a hard sell.
Because voters are suspicious about the supposed expertise of elite economists and they have pretty good reason. They've been sold on a lot of policies over the last 30 years that have fucked them.
If we were to abolish corporate taxes, would this make it trivial to avoid paying taxes on any money above what you need for consumption by routing all your pay through a shell company where you keep it until you need it? Seems like it would be essentially the equivalent of removing contribution caps on 401ks.
Interested to hear if there is a reason people couldn't do this, or why it doesn't matter.
Thanks, that was very informative! They explained their reasoning very clearly, and it's sad that these policies will never see the light of day.
I would be interested to hear their thoughts on a universal healthcare system. It seems like the benefits outweigh the drawbacks in countries such as Canada and New Zealand. But maybe there is an economic reason why it wouldn't work in the US.
> It may look unfair to tax consumers to compensate for a major business tax holiday -- but then such a move would give businesses a strong incentive to keep prices lower to avoid a drop in demand. Besides, liberated from corporate taxes, they'd have more freedom to increase wages.
We tried this with Reagan and everyone is still waiting for their increased wages.
Indeed, I've heard the reverse argument, that with extremely high corporate taxes, companies find paying their employees more money a better use of their money than giving it away to the government, since at least they get something out of it, however marginal they think the gains might be.
A major source - maybe the major source - of massive unfairness in the US tax code is the capital gains tax. Tax on capital gains is about half the tax on wage income. This is justified by the "double taxation" of corporate income tax. So abolish the corporate income tax, with its myriad loopholes and ineffectiveness, but treat capital gains as ordinary income.
Wealthy individuals who make most of their income on capital gains rather than wages would then pay the same as the rest of us. I remember during the 2012 presidential election, when Mitt Romney finally released his tax returns, he paid less than 50% of my family's tax rate, on 100 times our income. How does that make any sense? If capital gains were taxed as ordinary income, his taxes would have been roughly the same as ours.
There are literally two arguments in this waste of ink:
1. Enforcement is undermined by international competition and tax optimization
...which is like calling for the abolishment of the criminal code in the face of a rise in crime.
There have actually been major advances in corporate taxation in the last decade or so. Switzerland is basically gone, so are Panama, Luxembourg, possibly Ireland and the Caymans as well. If the EU and US managed to cooperate, they could easily make the rules watertight.
2. liberated from corporate taxes, they'd have more freedom to increase wages
...which is complete BS because (a) it's never happened, and (b) only earnings (after costs such as wages) are taxed. If anything, the money could be better spend to lower associated costs of employment, such as health insurance. Or, you know, basically anything else: education, infrastructure, a decent life even for the less fortunate.
His best argument is actually the counterargument he cites: you don't want corporations (...are people...) to sit on endless amounts of cash. It creates a power imbalance equal to that of billonaire dynasties.
The "author" reaches new hights of asininity with his proposal to increase VAT instead, fully knowing that it is the most regressive possible taxation. You'd need VAT increases to 30%, which means a 30% tax on the lower third to half of society that lives paycheck-to-paycheck, but results in a 5% tax rate for the guy earning so much he can invest 3/4th of his income – no VAT on financial transactions etc.
The top five tech companies Apple, Microsoft, Alphabet, Cisco and Oracle had a total of $504bn of cash by the end of 2015. They have more money than they know what to do with. Lowering their tax rates will create exactly zero jobs and have no effect on wages.
I think the main argument for abolishing corporate taxes is that they're inherently regressive, if we assume that the taxes get passed on to either consumers (who may be poor) in the form of higher prices, or investors (like grandma holding retirement shares) in the form of lower stock prices.
There's certainly an argument to made that corporate taxes should be abolished, and personal taxes increased instead (income and capital gains), where we can ensure that the equivalent amount of taxation is applied progressively, through higher tax rates on the rich.
Because the key thing to remember is, corporations don't exist on their own -- they have human owners. So if you tax the rich owners directly, instead of taxing the corporation, you can get the same money but with finer-grained control -- you can progressively tax the rich owners more, and grandma's pension less.
(Of course, if you don't believe in progressive taxation, then corporate tax, sales tax, property tax, etc. are all just fine.)
Why do you think the planet's largest companies are still the planet's largest companies? Because they've gotten in bed with government. That's why there's no income tax, because of regulatory capture. Of course Bloomberg wants to just give up the fight. Sure, corporate tax right now doesn't contribute much, but there's no reason why it can't. Yes, it's hard to enforce laws on entities with ginormous amounts of resources, but that doesn't mean we shouldn't at least try.
I disagree. I think there's a multi-pronged, not-necessarily-partisan critique of corporate income taxes.
These taxes are inefficient: They're difficult to collect. They disadvantage small companies that can't afford costly tax minimization strategies. They encourage big companies to spend money on non-productive activities (offshoring, shell games, etc.) The point of taxes is to raise money for the treasury, not stick it to the man. Moral indignation doesn't put bread on the table, so if we can collect by easier means, we should.
Corporate income taxes are a big part of the rationale for the tax treatment of capital gains. The money has been taxed once, so taxing it at standard rates amounts to double taxation. There's an argument to be made for abolishing corporate income taxes and treating capital gains as ordinary income. Since the returns on capital outpace the returns on labor, in the long run wealth accumulates with capital and reinforces inequality.
Why stop at corporate taxes? Why not personal income taxes?
Maybe it's time to transform myself into a corporation. No more taxes, limited liabilities, easy bankruptcy (student loans), can't go to jail even if I make a real mess (financial crisis of 2007, Wells Fargo, BP), welcome at exotic tax havens, tax breaks to move to another region... The ultimate lifehack: forget cloning yourself, just corporize!
Lots of people do exactly this, as least for some portion of their finances. Buying houses through an llc and renting to oneself is not uncommon. You lose the tax benefits of interest deduction, but if you're paying cash that doesn't matter anyhow. Other large purchases like cars and boats are owned in similar arrangements. When you are financially independent (not working a W2 job), many of your financials are easily categorized as business-related, with all the tax benefits that incurs.
How about abolishing income tax in general and just have a consumption and land taxes.
I live and run my company in a tax haven. I had to move here in order to be competitive internationally with other low tax jurisdictions. My only other option was to go out of business.
In addition to not having to pay any income taxes I also don't have to report anything to the government or worry about the government, bank, isp, phone company etc spying on me. No need to worry about going to jail over a misinterpretation of the tax code. I don't have to worry about immigration issues. Healthcare is completely private and very affordable.
Politics is a lot more boring when the parties are not fighting over who's in control over massive amounts of spending. Helps keep corruption down.
Leaving SF and moving to a tax haven was the best decision I've ever made in my life.
I'm culturally American, but I'm not a citizen. If the US were to adopt similar policies I'd love to move back. I'd bring money and jobs with me. But unless Texas succeeds I'm unlikely to see a western (anglosphere) country doing this in my lifetime.
> Besides, liberated from corporate taxes, they'd have more freedom to increase wages.
Are corporations desperately brainstorming to find ways to pay their employees more, only to be foiled by freedom-impinging corporate taxes?
> The populist governments...need to deliver economic growth and benefits to the disenchanted workers who have brought them to power. One way to do it in a way everyone would understand would be to abolish the corporate tax
The article posits replacing corporate tax with a 25% VAT. These disenchanted lower-income workers would see their cost of living increase substantially, but presumably they could dip into their newfound corporate tax savings to cover the difference.
Their argument for abolishing the tax seems to be (a) it's not a big contibutor to GDP, (b) businesses might raise employee wages, and (c) we can control corps with other regulations.
Reasons a and b seem to conflict. If corps already aren't paying tax, they have the cash ready to raise wages.
Reason c ignores that there are similar loopholes to safety and environmental regulations too.
Taxing corps is an answer to the problem that companies cost the government money (i.e. trucking companies use roads) while benefitting the state (employing people who consume and pay income tax). Maybe it's a good idea for the government to directly recoup the benefit of a company using state resources.
I'd be on board with this if one thing resulted: corporations would be prohibited from making political donations, or any sort of political activity. Not being a tax paying entity, they should have no "voice" in politics as a corporation.
Eliminating corporate taxes ranked fairly well when Planet Money asked economists for policy proposals.[0] (All the proposals were things that have fairly broad agreement by left and right wing economists but are deeply unpopular to most people, like eliminating the mortgage interest deduction.)
It wouldn't have been something I even considered before that episode, but one economist argued that people really find corporate taxes appealing because they're suspicious of concentrated wealth. But if we're trying to transfer wealth from the rich to the poor, we could just transfer wealth from the rich to the poor through more progressive income taxes.
While I think they made a good prima facie case, there's one counterargument that I haven't seen explored. Cheating is positively correlated with tax rates. So if you have a variety of kinds of taxes, you can have lower rates than if you just have one source of revenue. You can reduce the incentive to cheat while collecting the same revenue.
The "sweetheart deals" mentioned here are definitely aggravating though, they seem deeply unfair, and zero sum when states compete for the business.[2]
I'd like more countries and states to adopt a "most favored company" rule, where any company can claim the same terms as the most favored company in that territory. Similar to how the WTO ensures fairness. If a state wants to eliminate corporate taxes, fine, whatever, but you can't just do it for one company whose execs took you out to a few ball games.
Is the real question not about taxes but what to do about all this cash?
Taxes are necessary. But in the case of corporations I think the problem is not about what the right corporate tax rate should be but instead what does a company do when they effectively have so much cash they can not find good options to invest that money in.
If one of these companies suddenly reports a significant drop in cash due to aggressive investments in something that is failing (say, perhaps building an autonomous car) their stock will be punished, a very negative incentive.
The real question: is a company investing this cash the right thing to do? IMO it is, we want that money at work, building something. I don’t believe taxes can solve this. Instead can we need to find a way for companies to be able to invest this money in new ideas but not be so punitive via the markets when they try things that fail.
[+] [-] nightcracker|9 years ago|reply
> It may look unfair to tax consumers to compensate for a major business tax holiday -- but then such a move would give businesses a strong incentive to keep prices lower to avoid a drop in demand.
A drop in demand? People are going to eat less food because taxes are now lower? Need less healthcare? Will move to a cheaper home? Just not use internet? Drive the car less to work and sit more at home?
Supply/demand is crooked. It doesn't work for the majority of the goods the majority of the people purchase. Demand is fairly fixed and based on population, and supply is provided by the only bidder in your area.
> Besides, liberated from corporate taxes, they'd have more freedom to increase wages.
Does anyone still believe this 'trickle-down' hogwash?
I really wonder when America will have its wake up call during its third part-time job to pay the rent that maybe change is needed, and that your government has no intention of making it.
[+] [-] beat|9 years ago|reply
If you want to go to jail, try shoplifting.
[+] [-] darawk|9 years ago|reply
[+] [-] nxc182|9 years ago|reply
Really this is just like any other situation where the government due to structural weaknesses can't set/enforce policy effectively. Just like in the Prohibition or the War on Drugs, neither of which the government was equipped to make happen, the solution is to remove the problematic policies and take a more realistic approach.
[+] [-] wdr1|9 years ago|reply
Here's what I honestly don't understand about HN:
Climate change has near unanimous support from climatologists. Most (rightly, imho) point that as a reason why it should be accepted by the general public. And those doubting the experts are considered ridiculous.
Here, however, we have an issue to drop corporate taxes which has near unanimous support from economists (across the political spectrum). Yet we call the experts ridiculous.
Why the flip? Why should the general public accept the expert advice in one field, but then turn around & call it ridiculous in another?
[+] [-] karlshea|9 years ago|reply
Can someone explain this to me? I was under the impression that wages were expenses and non-taxable. So if they paid higher wages so they ended up with no profits they would have to pay no tax.
[+] [-] JonFish85|9 years ago|reply
Evade, or avoid? It's a big difference--as I'm sure has been said, tax evasion is illegal. Tax avoidance is not.
[+] [-] ominous|9 years ago|reply
You mean, if you went abroad, produced trillions of income, left said income there and came back to your country?
[+] [-] drieddust|9 years ago|reply
Absolutely not. Corporation will choke employees and consumers alike if they are allowed to have their way. This quarter my company decided to cut the quarterly bonuses to zero because Y-oY growth targets were not met. Although profits were higher then last year. Now it looks ridiculous to me to expect an fixed pefcentshe growth forever and then punishment employees who didn't even knew that increasing Y-oY growth is part of their responsibility. If at all anybody should have been punished, it should have been the top management. But since they make the rules, there is no downside.
[+] [-] KKKKkkkk1|9 years ago|reply
[+] [-] WillPostForFood|9 years ago|reply
[+] [-] dingdingdang|9 years ago|reply
That would be impossible unless the law itself changes from the way it is currently interpreted:
https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
[+] [-] vorotato|9 years ago|reply
[+] [-] blahi|9 years ago|reply
[+] [-] 77pt77|9 years ago|reply
Yes. But you see, if the state did that to you there would be no unpleasant consequences, whereas doing that to a big corporation will bring on a wold of pain.
[+] [-] avar|9 years ago|reply
http://www.npr.org/sections/money/2016/10/26/499490275/episo...
Their other plans include things like abolishing housing and medical subsidies, which they claim just leads to price inflation in the longer term, but which are obvious political suicides to propose.
A text summary of the podcast is available at: http://www.npr.org/sections/money/2012/07/19/157047211/six-p...
They did a follow-up episode where they hired an actor to play a politician advocating these policies, and tried to convince focus groups of voters:
http://www.npr.org/sections/money/2016/11/02/500413695/episo...
The point of these episodes was not to try to present some absolute truth about economic policies, but rather to demonstrate that while there are certain things experts universally or near-universally agree on, convincing voters of these policies can be a hard sell.
E.g. they argue that eliminating mortgage tax deduction would have the counter-intuitive long-term benefit of making houses more affordable. But when you try to explain that to people you've lost most of them once they realize that in the shorter term their existing mortgage would go up.
[+] [-] tomp|9 years ago|reply
AFAIK, corporate tax is optional anyhow. Any company could organize as unlimited partnership and not pay corporate taxes. But most companies chose not to, and I think that extra tax is a perfectly reasonable way of paying for extra protection (that of a limited company).
[+] [-] crdoconnor|9 years ago|reply
* economists who were completely blindsided by the largest financial crisis of our time.
In the UK there was near unanimous 'expert' support for the idea that Brexit would immediately trigger a level of uncertainty pre-article 50 that would crater the economy and employment.
Growth and employment are now ever so slightly up.
>experts universally or near-universally agree on, convincing voters of these policies can be a hard sell.
Because voters are suspicious about the supposed expertise of elite economists and they have pretty good reason. They've been sold on a lot of policies over the last 30 years that have fucked them.
[+] [-] Eridrus|9 years ago|reply
Interested to hear if there is a reason people couldn't do this, or why it doesn't matter.
[+] [-] rwmj|9 years ago|reply
[+] [-] nathan_f77|9 years ago|reply
I would be interested to hear their thoughts on a universal healthcare system. It seems like the benefits outweigh the drawbacks in countries such as Canada and New Zealand. But maybe there is an economic reason why it wouldn't work in the US.
[+] [-] 77pt77|9 years ago|reply
I seriously doubt the unanimous approval from the far the far left to the far right.
[+] [-] Findeton|9 years ago|reply
[+] [-] darpa_escapee|9 years ago|reply
We tried this with Reagan and everyone is still waiting for their increased wages.
[+] [-] Amezarak|9 years ago|reply
[+] [-] tobltobs|9 years ago|reply
[+] [-] beat|9 years ago|reply
A major source - maybe the major source - of massive unfairness in the US tax code is the capital gains tax. Tax on capital gains is about half the tax on wage income. This is justified by the "double taxation" of corporate income tax. So abolish the corporate income tax, with its myriad loopholes and ineffectiveness, but treat capital gains as ordinary income.
Wealthy individuals who make most of their income on capital gains rather than wages would then pay the same as the rest of us. I remember during the 2012 presidential election, when Mitt Romney finally released his tax returns, he paid less than 50% of my family's tax rate, on 100 times our income. How does that make any sense? If capital gains were taxed as ordinary income, his taxes would have been roughly the same as ours.
[+] [-] matt4077|9 years ago|reply
1. Enforcement is undermined by international competition and tax optimization
...which is like calling for the abolishment of the criminal code in the face of a rise in crime.
There have actually been major advances in corporate taxation in the last decade or so. Switzerland is basically gone, so are Panama, Luxembourg, possibly Ireland and the Caymans as well. If the EU and US managed to cooperate, they could easily make the rules watertight.
2. liberated from corporate taxes, they'd have more freedom to increase wages
...which is complete BS because (a) it's never happened, and (b) only earnings (after costs such as wages) are taxed. If anything, the money could be better spend to lower associated costs of employment, such as health insurance. Or, you know, basically anything else: education, infrastructure, a decent life even for the less fortunate.
His best argument is actually the counterargument he cites: you don't want corporations (...are people...) to sit on endless amounts of cash. It creates a power imbalance equal to that of billonaire dynasties.
The "author" reaches new hights of asininity with his proposal to increase VAT instead, fully knowing that it is the most regressive possible taxation. You'd need VAT increases to 30%, which means a 30% tax on the lower third to half of society that lives paycheck-to-paycheck, but results in a 5% tax rate for the guy earning so much he can invest 3/4th of his income – no VAT on financial transactions etc.
[+] [-] pg314|9 years ago|reply
[+] [-] crazygringo|9 years ago|reply
There's certainly an argument to made that corporate taxes should be abolished, and personal taxes increased instead (income and capital gains), where we can ensure that the equivalent amount of taxation is applied progressively, through higher tax rates on the rich.
Because the key thing to remember is, corporations don't exist on their own -- they have human owners. So if you tax the rich owners directly, instead of taxing the corporation, you can get the same money but with finer-grained control -- you can progressively tax the rich owners more, and grandma's pension less.
(Of course, if you don't believe in progressive taxation, then corporate tax, sales tax, property tax, etc. are all just fine.)
[+] [-] vinceguidry|9 years ago|reply
Why do you think the planet's largest companies are still the planet's largest companies? Because they've gotten in bed with government. That's why there's no income tax, because of regulatory capture. Of course Bloomberg wants to just give up the fight. Sure, corporate tax right now doesn't contribute much, but there's no reason why it can't. Yes, it's hard to enforce laws on entities with ginormous amounts of resources, but that doesn't mean we shouldn't at least try.
The audacity of these people...
[+] [-] bhickey|9 years ago|reply
These taxes are inefficient: They're difficult to collect. They disadvantage small companies that can't afford costly tax minimization strategies. They encourage big companies to spend money on non-productive activities (offshoring, shell games, etc.) The point of taxes is to raise money for the treasury, not stick it to the man. Moral indignation doesn't put bread on the table, so if we can collect by easier means, we should.
Corporate income taxes are a big part of the rationale for the tax treatment of capital gains. The money has been taxed once, so taxing it at standard rates amounts to double taxation. There's an argument to be made for abolishing corporate income taxes and treating capital gains as ordinary income. Since the returns on capital outpace the returns on labor, in the long run wealth accumulates with capital and reinforces inequality.
[+] [-] 131012|9 years ago|reply
[+] [-] yabatopia|9 years ago|reply
Maybe it's time to transform myself into a corporation. No more taxes, limited liabilities, easy bankruptcy (student loans), can't go to jail even if I make a real mess (financial crisis of 2007, Wells Fargo, BP), welcome at exotic tax havens, tax breaks to move to another region... The ultimate lifehack: forget cloning yourself, just corporize!
[+] [-] mypalmike|9 years ago|reply
[+] [-] _pferreir_|9 years ago|reply
[+] [-] psyc|9 years ago|reply
[+] [-] figjamjam|9 years ago|reply
I live and run my company in a tax haven. I had to move here in order to be competitive internationally with other low tax jurisdictions. My only other option was to go out of business.
In addition to not having to pay any income taxes I also don't have to report anything to the government or worry about the government, bank, isp, phone company etc spying on me. No need to worry about going to jail over a misinterpretation of the tax code. I don't have to worry about immigration issues. Healthcare is completely private and very affordable.
Politics is a lot more boring when the parties are not fighting over who's in control over massive amounts of spending. Helps keep corruption down.
Leaving SF and moving to a tax haven was the best decision I've ever made in my life.
I'm culturally American, but I'm not a citizen. If the US were to adopt similar policies I'd love to move back. I'd bring money and jobs with me. But unless Texas succeeds I'm unlikely to see a western (anglosphere) country doing this in my lifetime.
[+] [-] ridgeguy|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] redler|9 years ago|reply
Are corporations desperately brainstorming to find ways to pay their employees more, only to be foiled by freedom-impinging corporate taxes?
> The populist governments...need to deliver economic growth and benefits to the disenchanted workers who have brought them to power. One way to do it in a way everyone would understand would be to abolish the corporate tax
The article posits replacing corporate tax with a 25% VAT. These disenchanted lower-income workers would see their cost of living increase substantially, but presumably they could dip into their newfound corporate tax savings to cover the difference.
[+] [-] eganist|9 years ago|reply
We've already played the trickle-down economics game. I don't recall it being all that successful.
[+] [-] pfraze|9 years ago|reply
It doesn't make a very compelling case. Consumption taxes slow spending, and private wealth can also evade taxation.
EDIT: corrected, thanks rectang
[+] [-] raverbashing|9 years ago|reply
Really? Wages are a business expense, taxes are paid on profit. Hence wages have nothing to do with corporate tax.
[+] [-] BillFranklin|9 years ago|reply
Reasons a and b seem to conflict. If corps already aren't paying tax, they have the cash ready to raise wages.
Reason c ignores that there are similar loopholes to safety and environmental regulations too.
Taxing corps is an answer to the problem that companies cost the government money (i.e. trucking companies use roads) while benefitting the state (employing people who consume and pay income tax). Maybe it's a good idea for the government to directly recoup the benefit of a company using state resources.
[+] [-] a3n|9 years ago|reply
[+] [-] 1_2__3|9 years ago|reply
[+] [-] rectang|9 years ago|reply
The article would be more interesting it explored replacing corporate taxes with a wealth tax rather than an income tax.
[+] [-] brownbat|9 years ago|reply
It wouldn't have been something I even considered before that episode, but one economist argued that people really find corporate taxes appealing because they're suspicious of concentrated wealth. But if we're trying to transfer wealth from the rich to the poor, we could just transfer wealth from the rich to the poor through more progressive income taxes.
While I think they made a good prima facie case, there's one counterargument that I haven't seen explored. Cheating is positively correlated with tax rates. So if you have a variety of kinds of taxes, you can have lower rates than if you just have one source of revenue. You can reduce the incentive to cheat while collecting the same revenue.
The "sweetheart deals" mentioned here are definitely aggravating though, they seem deeply unfair, and zero sum when states compete for the business.[2]
I'd like more countries and states to adopt a "most favored company" rule, where any company can claim the same terms as the most favored company in that territory. Similar to how the WTO ensures fairness. If a state wants to eliminate corporate taxes, fine, whatever, but you can't just do it for one company whose execs took you out to a few ball games.
[0] http://www.npr.org/sections/money/2012/10/18/163106924/a-tax...
[1] Planet Money had another episode on that a few years back, on the state level.
[+] [-] jSully24|9 years ago|reply
Taxes are necessary. But in the case of corporations I think the problem is not about what the right corporate tax rate should be but instead what does a company do when they effectively have so much cash they can not find good options to invest that money in.
If one of these companies suddenly reports a significant drop in cash due to aggressive investments in something that is failing (say, perhaps building an autonomous car) their stock will be punished, a very negative incentive.
The real question: is a company investing this cash the right thing to do? IMO it is, we want that money at work, building something. I don’t believe taxes can solve this. Instead can we need to find a way for companies to be able to invest this money in new ideas but not be so punitive via the markets when they try things that fail.