I don't want to sound like some kind of hardcore Austrian fundamentalist, because I'm not. Taxes are fine, but levying them on fictitious non-person entities is just a means of obscuring to voters where the tax burden ultimately lies. All taxes are paid by individuals, either directly, or by corporations raising or lowering the prices they charge and prices they pay, to suppliers, employees, owners, and customers. But this just means who bears the burden is now an opaque function of relative bargaining power and price elasticity of supply and demand.
But that is not what we want from tax rates. We want them to be an open, transparent reflection of democratically passed laws. To that end, it is far better to levy taxes directly on suppliers, employees, owners, and customers of businesses, rather than on the businesses. This would also have the nice side effect of causing businesses to choose where they locate headquarters and factories based on something other than comparative tax rates, reducing an avenue of both dead weight loss and potential corruption.
I'm kind of the opposite. We should have 0% personal income tax and a minimum corporate income tax.
A personal income tax incentivises the state to surveil the economic activity of individuals and play games with nudging people to do X or Y, and puts the burden of tax filing and the consequences of not reporting (which some people just can't do correctly).
Contrariwise, a corporate income tax can be thought of as a "user fee" for the privilege of the corporate veil and limited liability. If you don't want your mom and pop shop to pay corporate income tax, simple: don't incorporate, and be responsible for your personally responsible for your employees' well being. And thus it becomes a driver of small business growth and a progressive taxation (the beneficiaries of bigcorp profits are going to be disproportionately wealthy). If you can't afford an accountant to keep track of what taxes you owe, don't incorporate. Etc.
I've never seen this proposal before. I'm curious what the consensus is that leads to it being downvoted so. I'm inclined to think this is a bad idea, but I'm not confident.
My guess is you'd see a small portion go to employees, a large chunk reinvested into the business, and a large chunk go directly to shareholders. If you managed to alter the structure of taxes so that shareholders paid more for capital gains and dividend income, I feel that's a better outcome than corporate taxes. But lingering doubts of the feasibility of doing so + companies just hoarding cash seem like large problems.
Agreed. Instead of taxing the profit of a corporation, just tax the payment of dividends from that profit. The total tax burden can still remain the same if that's what people desire, but the end result will be more transparency as you say. I think Estonia has exactly this policy, or at least they did last time I checked.
It also removes the incentive to mess around with stock buybacks, which is good because the extra liquidity can be put to better use within the company.
For very small companies (such as my own) it would also remove the bureaucracy involved in saving profits from one fiscal year to the next.
An interesting thought exercise, but you use the term "supplier" as if it isn't itself a business.
And while I see what you're trying to get at, I think the idea is flawed. Taxed being "open and transparent" are good attributes, but not the reason, for taxes to exist. They exist to fund society.
Corporations and businesses, as entities, utilize public services. They wear roads, they take up land, they pollute. They should be expected to pay their portion of the upkeep to their local area.
I understand the idea of reducing the race to the bottom and city/country gamesmanship for tax evasion... which is what the linked proposal looks to solve AFAIK.
Also worth noting that corporate taxes make up only 7% of federal tax receipts, but likely incur a huge cost in terms of avoidance and manipulating practices.
I am for 0% corporate rates as well, I personally think we should just raise the taxes on higher earners and rethink cap gains for people that sell large amounts of assets, but cut corporate taxes to 0%.
I'm trying to think through the ways this could be cheated. For example, if I own a business then instead of paying myself and then donating to a 527 political issue group I could instead have my business donate to the 527. Since the 527 is tax exempt that money never got taxed, but if I had to take the money as income first I'd have to pay income taxes. I'm sure there's other ways to take advantage of a zero percent corporate tax, or indeed even the lower-than-personal corporate tax rate already in place.
I don't see any reason why the Irelands of the world would be amenable to the idea of a minimum corporate tax rate. There are huge economic benefits to be had by luring US and UK companies with favorable tax treatment. Yellen's fantasy about getting every country to apply the same high tax rate against their interests is not helping the US's global competitiveness.
In business, if you find yourself in a "race to the bottom" on price it typically means your product has become a commodity. The antidote to commodification is strong branding. Instead of trying to collude on tax rates like some kind of financial mafioso, somebody in Washington needs to figure out how to rescue the brand of the United States in order to reverse this trend.
It isn't a fantasy if the US and other high tax rate countries apply pressure in the form of holding at stake economic access at stake.
I'm not in favour of the corporate tax, I would rather have a high progressive consumption tax, a progressive inheritance tax, and a land value tax. (yes I recognize this will never happen...) That said, tax arbitrage across borders is the same kind of global coordination problem as climate policy across borders.
Accepting a race to the bottom and resigning to a climate catastrophe are not solutions; we need countries who want to fix these problems to band together and create carrots and sticks to incentivize misbehaving countries to join in.
Whether or not we see such a harmonized tax rate emerge and even if we could find a way to have some governing body “enforce” it, you’d still see countries lowering their effective tax rates to lure firms or bolster growth. I bet there’s a maximum sustainable effective corporate tax rate, but I have no idea what it is (and for all I know it could be zero or negative).
Can these small countries who offer the low rates stand up the US sanctions and tarrifs apparatus. The US has alot of strings to pull to make these tax havens cooperate. Thats a nice export industry you have there, would be a shame if something were to happen to it wink nudge.
In many countries, vendors from Apple to the guy selling apples on the street-corner collect Value-Added Tax (VAT) from their customers. It's a kind of sales tax that applies to all sales, not just retail sales to end users. It's harder for companies to play the international shell game with sales than it is with cash.
VAT seems to be sufficiently fair, workable, and enforceable. People don't like it, but nobody likes taxes.
The US feds can't do VAT though. It took the 16th amendment to allow the feds to collect income tax from people; it carves out an exception to the Article 1 requirement that all taxes be apportioned among the states by population.
This corporate alternative minimum tax idea seems to be a way to stay within the bounds of the 16th amendment and still collect business taxes.
None of it matters at all unless the tax-audit authorities get more teeth than they now have. Business-tax compliance in the US could easily go down Greece's path, where you're a chump unless you cheat.
My theory is that inequality is simply the result of globalization and it's not necessarily a bad thing.
If you had build the most successful retail business, in 1900 you would own the market in your town; in 1950 in your country; in 2020 you'd own the world (or a big part of it). The opportunity is just a lot bigger now than 50 years ago and that trickles down.
Also technology enables goods and services to be produced from everywhere; that means countries compete globally. Many 0.1%ers had to overcome global competition to make the money they're making. In addition, more and more of them can do it from anywhere (def true for entrepreneurs starting fully remote startups, for instance).
So there is both value and necessity in having to compete globally to attract the entrepreneurs and highest producers / best talent. Does it mean 0 tax? No. But it does mean you have to have reasonable taxes and offer a good product (security, laws, culture, talent, whatever it may be).
It also means you don't offend your best 'customers' all the time. All this talk about how 0.1% people essentially unfairly stole their way to their success won't want to make anyone pay more or stick around to higher tax place (city/state/country).
As a government you first want to be efficient with tax money; be reasonable with taxes, even if higher than average (but within the competitive ballpark); show appreciation for the people that end up paying most of your taxes; and stop talking about inequality as being exclusively a bad thing and a result of tax policy.
> If you had build the most successful retail business, in 1900 you would own the market in your town; in 1950 in your country; in 2020 you'd own the world (or a big part of it). The opportunity is just a lot bigger now than 50 years ago and that trickles down.
In 1900, thousands would own the markets in their respective towns, in 1950 dozens would own the the markets in their countries, and in 2020 one person would own the entire market. This is not trickling down, this is flooding up.
It's no different than being the big man in your small island culture before the British navy rolls in. If there are no protections in place to preserve you, you will disappear and the Empire will expand.
Inequality is simply inherent to capitalism. The free flow of capital, goods and labor will always see concentration happening. The issue is that it should be very possible to eliminate true poverty with reasonable redistribution policy. Capitalism (and Industrialization) have gotten us tantalizing close to a post-scarcity economy. We still need the last 1/3 or so of the world to get on the trolley while addressing our growing ecological crises. Both of which are hard problems to solve, but at this point we actually probably have all the ammunition we need if we can just summon the will. We can reach a point where we still have some absurdly wealthy people, but everyone else down the ladder has food, shelter, health care and dignity available at all times.
Isn't that just called a dividend? Or are you suggesting that shareholders owe tax liability for all earned corporate profits, regardless whether any of that is paid to them as a dividend?
Or this has nothing to do with "ideology". And it's meant to reduce the unfairness in tax rates between individuals (who pay taxes on worldwide income) and corporations (which do not).
I believe that the pandemic will make world politics lean to the left. It's inevitable. Such a gigantic crisis will force society into mutual help, and will make it harder for values like independence and individualism to really thrive and endure. No man is an island. It's true that trade and entrepreneurship are a form of mutual help, but competition bring the worse, and it becomes the economy of the survival of the fittest.
When governments inject money into private banks, it's impossible to deny that capitalism doesn't work without state intervention. Capitalism has been dying since 2008. In my view it started dying after the end of the cold war. An ideology without rival slowly becomes irrelevant because it's unchallenged.
And yet, it didn't do that with the US. I'm frankly shocked that so many anti-maskers and covid-hoaxers are so adamant, because this was the perfect case for universal health care in the US. And yet, you hear NO ONE calling for it. It's like learned helplessness. There's almost half the population that actively rejects it, which is mindboggling to me.
That doesn't seem fair to the smaller (sovereign) countries who want to set their own tax laws to incentivize companies to do business there. In fact, it seems fundamentally outrageous that one country should be able to dictate anything about tax laws in another country. Wars have been fought over such abuses of power.
> "We're working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom."
The race to the bottom Yellen refers to is corporations playing one country off another, as in "lower your taxes or we'll move our profits to Ireland." The proposed solution - countries agreeing with each other not to lower the corporate tax rate below some limit - is an example of sovereign nations working together in a way that benefits both sides, not one sovereign nation dictating policy to another.
So it is fair that one tiny country sets a near-zero capital tax, and enjoy free trade of food and services with all the big countries around it. Any corporation would move to the tiny country, of course, where nothing happens except tax and accounting.
You're confused about the incentives here, I think. Traditionally the conflict in this space has been smaller nations wanting to tax economic activity within their borders (by larger multinational corporations) and being prevented from doing so by coercive foreign policy. You really think that Ecuador or wherever wouldn't like a bigger cut of the oil they're shipping out?
The news here is that US policy seems to be moving to align with smaller powers, not the reverse.
But it’s not global it’s whoever the allies are, which I guess is OECD and co. They’re just trying to avoid having companies move (tax jurisdiction shopping) and do reverse mergers to shirk tax responsibilities, etc.
I presume it would be via some convention which allows tit for tat reciprocity and so on.
dang|4 years ago
nonameiguess|4 years ago
I don't want to sound like some kind of hardcore Austrian fundamentalist, because I'm not. Taxes are fine, but levying them on fictitious non-person entities is just a means of obscuring to voters where the tax burden ultimately lies. All taxes are paid by individuals, either directly, or by corporations raising or lowering the prices they charge and prices they pay, to suppliers, employees, owners, and customers. But this just means who bears the burden is now an opaque function of relative bargaining power and price elasticity of supply and demand.
But that is not what we want from tax rates. We want them to be an open, transparent reflection of democratically passed laws. To that end, it is far better to levy taxes directly on suppliers, employees, owners, and customers of businesses, rather than on the businesses. This would also have the nice side effect of causing businesses to choose where they locate headquarters and factories based on something other than comparative tax rates, reducing an avenue of both dead weight loss and potential corruption.
dnautics|4 years ago
A personal income tax incentivises the state to surveil the economic activity of individuals and play games with nudging people to do X or Y, and puts the burden of tax filing and the consequences of not reporting (which some people just can't do correctly).
Contrariwise, a corporate income tax can be thought of as a "user fee" for the privilege of the corporate veil and limited liability. If you don't want your mom and pop shop to pay corporate income tax, simple: don't incorporate, and be responsible for your personally responsible for your employees' well being. And thus it becomes a driver of small business growth and a progressive taxation (the beneficiaries of bigcorp profits are going to be disproportionately wealthy). If you can't afford an accountant to keep track of what taxes you owe, don't incorporate. Etc.
klmadfejno|4 years ago
My guess is you'd see a small portion go to employees, a large chunk reinvested into the business, and a large chunk go directly to shareholders. If you managed to alter the structure of taxes so that shareholders paid more for capital gains and dividend income, I feel that's a better outcome than corporate taxes. But lingering doubts of the feasibility of doing so + companies just hoarding cash seem like large problems.
cuspycode|4 years ago
It also removes the incentive to mess around with stock buybacks, which is good because the extra liquidity can be put to better use within the company.
For very small companies (such as my own) it would also remove the bureaucracy involved in saving profits from one fiscal year to the next.
unethical_ban|4 years ago
And while I see what you're trying to get at, I think the idea is flawed. Taxed being "open and transparent" are good attributes, but not the reason, for taxes to exist. They exist to fund society.
Corporations and businesses, as entities, utilize public services. They wear roads, they take up land, they pollute. They should be expected to pay their portion of the upkeep to their local area.
I understand the idea of reducing the race to the bottom and city/country gamesmanship for tax evasion... which is what the linked proposal looks to solve AFAIK.
bko|4 years ago
https://www.cbpp.org/research/federal-tax/where-do-federal-t...
partiallypro|4 years ago
SomewhatLikely|4 years ago
relax88|4 years ago
How do you determine the value of goods exchanged and ensure these are equitably taxed?
What happens when you've got a mega-corporation that is both supplier and customer to another business?
What happens if they just decide to exchange goods well below market price and only settle the surplus/deficit of those transactions?
toomuchredbull|4 years ago
fatbob|4 years ago
jurassic|4 years ago
In business, if you find yourself in a "race to the bottom" on price it typically means your product has become a commodity. The antidote to commodification is strong branding. Instead of trying to collude on tax rates like some kind of financial mafioso, somebody in Washington needs to figure out how to rescue the brand of the United States in order to reverse this trend.
Hammershaft|4 years ago
I'm not in favour of the corporate tax, I would rather have a high progressive consumption tax, a progressive inheritance tax, and a land value tax. (yes I recognize this will never happen...) That said, tax arbitrage across borders is the same kind of global coordination problem as climate policy across borders.
Accepting a race to the bottom and resigning to a climate catastrophe are not solutions; we need countries who want to fix these problems to band together and create carrots and sticks to incentivize misbehaving countries to join in.
ghgdynb1|4 years ago
scsilver|4 years ago
Ericson2314|4 years ago
OliverJones|4 years ago
VAT seems to be sufficiently fair, workable, and enforceable. People don't like it, but nobody likes taxes.
The US feds can't do VAT though. It took the 16th amendment to allow the feds to collect income tax from people; it carves out an exception to the Article 1 requirement that all taxes be apportioned among the states by population.
This corporate alternative minimum tax idea seems to be a way to stay within the bounds of the 16th amendment and still collect business taxes.
None of it matters at all unless the tax-audit authorities get more teeth than they now have. Business-tax compliance in the US could easily go down Greece's path, where you're a chump unless you cheat.
woot482|4 years ago
If you had build the most successful retail business, in 1900 you would own the market in your town; in 1950 in your country; in 2020 you'd own the world (or a big part of it). The opportunity is just a lot bigger now than 50 years ago and that trickles down.
Also technology enables goods and services to be produced from everywhere; that means countries compete globally. Many 0.1%ers had to overcome global competition to make the money they're making. In addition, more and more of them can do it from anywhere (def true for entrepreneurs starting fully remote startups, for instance).
So there is both value and necessity in having to compete globally to attract the entrepreneurs and highest producers / best talent. Does it mean 0 tax? No. But it does mean you have to have reasonable taxes and offer a good product (security, laws, culture, talent, whatever it may be).
It also means you don't offend your best 'customers' all the time. All this talk about how 0.1% people essentially unfairly stole their way to their success won't want to make anyone pay more or stick around to higher tax place (city/state/country).
As a government you first want to be efficient with tax money; be reasonable with taxes, even if higher than average (but within the competitive ballpark); show appreciation for the people that end up paying most of your taxes; and stop talking about inequality as being exclusively a bad thing and a result of tax policy.
macrael|4 years ago
pessimizer|4 years ago
> If you had build the most successful retail business, in 1900 you would own the market in your town; in 1950 in your country; in 2020 you'd own the world (or a big part of it). The opportunity is just a lot bigger now than 50 years ago and that trickles down.
In 1900, thousands would own the markets in their respective towns, in 1950 dozens would own the the markets in their countries, and in 2020 one person would own the entire market. This is not trickling down, this is flooding up.
It's no different than being the big man in your small island culture before the British navy rolls in. If there are no protections in place to preserve you, you will disappear and the Empire will expand.
tootie|4 years ago
huy-nguyen|4 years ago
legitster|4 years ago
A corporate tax rate of 0% but corporate income is passed through to shareholders as personal income seems better in every regard.
kinghajj|4 years ago
partiallypro|4 years ago
AzzieElbab|4 years ago
jmpman|4 years ago
sadmann1|4 years ago
[deleted]
ArkanExplorer|4 years ago
[deleted]
triceratops|4 years ago
Proven|4 years ago
[deleted]
UncleOxidant|4 years ago
jokoon|4 years ago
When governments inject money into private banks, it's impossible to deny that capitalism doesn't work without state intervention. Capitalism has been dying since 2008. In my view it started dying after the end of the cold war. An ideology without rival slowly becomes irrelevant because it's unchallenged.
ping_pong|4 years ago
djvu9|4 years ago
TechBro8615|4 years ago
ineptech|4 years ago
> "We're working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom."
The race to the bottom Yellen refers to is corporations playing one country off another, as in "lower your taxes or we'll move our profits to Ireland." The proposed solution - countries agreeing with each other not to lower the corporate tax rate below some limit - is an example of sovereign nations working together in a way that benefits both sides, not one sovereign nation dictating policy to another.
rcMgD2BwE72F|4 years ago
How fair.
newacct583|4 years ago
The news here is that US policy seems to be moving to align with smaller powers, not the reverse.
mc32|4 years ago
I presume it would be via some convention which allows tit for tat reciprocity and so on.
mvzvm|4 years ago