Proof Taxes have to be Cut - Corporate Inversions

[jem]

There was an article in IBD this morning about the fact that we are doing 100s of billions of corporate inversions right now. A record pace of our big businesses swalling up a small business in a low tax area like Ireland and calling Ireland home.

While the world has been cutting taxes down and offering incentives down to 25 10 or even zero...

We have a corporate tax rate of about 39% when you combine Fed State and local.
Our corps are leaving in droves and bring lots of good jobs with them.

So when people tell you the business just pass the taxes on they lie.
Taxes drives jobs overseas.

http://news.investors.com/ibd-edito...ns-rise-due-to-high-us-corporate-tax-rate.htm

 

[Ricter]

<img src="http://upload.wikimedia.org/wikipedia/commons/a/ae/Effective_Corporate_Tax_Rate_OECD_Countries%2C_2000-2005_Average.jpg">
Effective corporate tax rate for OECD countries averaged between 2000 and 2005. The effective tax rate equals corporate taxes/corporate surplus

<img src="http://upload.wikimedia.org/wikipedia/commons/3/3e/US_Effective_Corporate_Tax_Rate_1947-2011_v2.jpg">
The U.S. federal effective corporate tax rate has become much lower than the nominal rate because of tax shelters such as tax havens.

<img src="http://upload.wikimedia.org/wikipedia/en/e/eb/U.S._Federal_Corporate_Income_Tax_Receipts_and_Pre-Tax_Profits.png">
Federal corporate income tax receipts have declined relative to corporate profits.

Corporate tax in the United States

 

[jem]

Ricter you are printing old slanted stuff. We are not talking effective rate with slanted definitions. We are talking taxes rate.... and jobs and businesses are leaving on a massive scale as countries all around the word have cut taxes. The very high us tax rate is screwing americans out of jobs as first the jobs left and now the management leaves.

I specifically stated the article said that when you combine local state and Federal we are at 39% and other countries have been cutting down to 25 10 and even zero (after incentives)

And scream or post all you want... and in the past you used post crap from guys like buffett saying taxes don't matter they just get passed on...
But proof is that we are losing billions in future tax revenue and current jobs as the corporate inversions are going on a massive scale right now.

 

[Ricter]

Ricter you are printing old slanted stuff. We are not talking effective rate with slanted definitions. .

You have to talk effective taxes, because corporations take every deduction and credit and deferment they can get.

 

[jem]

1. you do not just look at effective rate in this case.
the taxable income might stay the same -- as the us is going to probably tax that income by the same US definition...
but on the world income if you have to pay 13 percent in the US but on only 7 percent in some other OECD country... you might move.
and some are.

2. You also leave out the fact in the US you also can get hammered by state and local taxes.

3. companies leave CA and NY because of taxes... and NY is not advertising incentives to get them back

4. the bottom line is billion in these inversions are happening now... which I think calls b.s. on your effective rate theories.

 

[Tsing Tao]

You have to talk effective taxes, because corporations take every deduction and credit and deferment they can get.

I would agree with this - you have to talk effective rate. The one thing to call out, however is that only large corporations really have access to moving money off shore and all the other big loopholes. The majority of companies in the united states are smaller and don't have that access to all the loopholes.

As for state and local taxes, that is a choice for a company. They can move to more advantageous tax locales if they wish. No one is holding a gun to their head.

 

[Scataphagos]

I would agree with this - you have to talk effective rate. The one thing to call out, however is that only large corporations really have access to moving money off shore and all the other big loopholes. The majority of companies in the united states are smaller and don't have that access to all the loopholes.

As for state and local taxes, that is a choice for a company. They can move to more advantageous tax locales if they wish. No one is holding a gun to their head.

What we really need is tax reform.

If corporate tax is to be part of it, should be something like....

1. Low, flat rate
2. If company is domiciled in US, tax is paid on world wide profits
3. Not allowed to avoid current tax by keeping profits off shore
4. Dividends should be tax free as taxes were already paid on earnings.

Our current progressive tax structure is unfair and immoral.

 

[Ricter]

1. you do not just look at effective rate in this case.
the taxable income might stay the same -- as the us is going to probably tax that income by the same US definition...
but on the world income if you have to pay 13 percent in the US but on only 7 percent in some other OECD country... you might move.
and some are.

2. You also leave out the fact in the US you also can get hammered by state and local taxes.

3. companies leave CA and NY because of taxes... and NY is not advertising incentives to get them back

4. the bottom line is billion in these inversions are happening now... which I think calls b.s. on your effective rate theories.

The adoption of inversions does not necessarily mean taxes are "too high", it may (and probably does imo) simply mean that some corporations (yes, Tsing, the big internationals) have found a legal way of paying less tax, so they exercise it. That's to be expected, it's part of the game. This isn't the first "loophole" and won't be the last.

We get cheated by many of these very low tax jurisdictions. They poach our enterprise and talent yet expect our protections.

 

[jem]

You are most likely mostly wrong.
It is what I stated it is. Its not just about the effective rate on U.S. income but world wide income.

The inversions are happening because our state local and federal taxes are far higher than other countries.
To your point about effective rate. the effective rate is low for the cronies who buy congress and create their loopholes.
So we hammer most businesses but give the cronies a huge break. GE paid nothing a year or two ago.
How could that happen?


http://en.wikipedia.org/wiki/Corporate_inversion


Corporate inversion is a form of tax avoidance. It is driven by a combination of factors, but the most prevalent factor is that the U.S. tax code (unusually amongst developed nations) seeks to impose income tax on profits earned abroad by American corporations.[6] This creates a strong incentive for American companies with large overseas markets to seek to recharacterise themselves as a foreign corporation if they want to return foreign earnings to stockholders without double taxation.[7]

Corporate inversions as a tax-reduction maneuver have become a public policy issue, as substantial tax revenues are lost.[8][9][10][11] Politicians and governmental officials from Barack Obama[12] to Jack Lew[13] have issued statements calling corporate inversions "unpatriotic", and various proposals have been discussed to prevent corporate inversions where the relevant corporation is less than 50% foreign owned. The Economist has called recent calls in America to restrict companies from relocating abroad by way of merger "misguided", and called for wider tax reform to address the more fundamental flaws in the American corporate tax system instead.[14]

The adoption of inversions does not necessarily mean taxes are "too high", it may (and probably does imo) simply mean that some corporations (yes, Tsing, the big internationals) have found a legal way of paying less tax, so they exercise it. That's to be expected, it's part of the game. This isn't the first "loophole" and won't be the last.

We get cheated by many of these very low tax jurisdictions. They poach our enterprise and talent yet expect our protections.

 

[jem]

McDermott International to Panama, 1982
Helen of Troy to Bermuda, 1994
Tyco International to Bermuda, 1997
Fruit of the Loom to the Cayman Islands, 1998
Ingersoll Rand to Bermuda, 2001
Ensco plc to the United Kingdom, 2009
Eaton Corporation to Ireland, 2012
Actavis to Ireland, 2013
Chiquita to Ireland, 2014 (pending)
Applied Materials to the Netherlands, 2014 (pending)
Abbvie to Ireland, 2014 (pending)
Medtronic to Ireland, 2014 (pending)
Walgreens to Switzerland, 2014 (pending)
Mylan to the Netherlands, 2014 (pending)