Should corporations pay tax?

[nitro]

All good points. My only concern is, how is it that the happiest nations in the world NOT ONLY pay a huge income tax, but get a large number of benefits for that money like:

• nearly free education
• great health care
• good law enforcement
• etc?

You see, I think the problem in this country isn't the taxes, it is the way it is spent. People (in P&R threads) say that Bernie wanted "free" things. Nothing is free if you are taxed. The correct term is directed. Bernie wanted to re-direct how we spent our tax money, from endless war-mongering and nation building and policing the world, to the tune of SIX HUNDRED BILLION DOLLARS A YEAR, and direct those same taxes to free public education, single payer health care, community policing, etc etc etc.

I don't know what the right answer is. Believe me I am nowhere near that Aha moment. But I agree that what we do in this country is the worst of both worlds - high taxes and shit service.

Either:

• Low or zero taxes and people fend for themselves saving for health care, education etc...or
• High taxes but amazing service like free education, free health care, etc etc.

That might be two sides of the same side of the coin.

Yes I agree with your points above. And yes, the global wars, nation building all that cost money. But my greater point is, just the process of running a normal functioning gov't does not require as much money as they make you think. The problem with the income tax is its not fair for the poor or the middle class. They will never be able to afford the lobbyist to go to Washington and defend them. The rich can build moats around their wealth and they will pay whatever it takes to protect it. And as our gov't gets bigger and bigger, the entire burden will fall on the poor and the middle class. A national sales tax would at the very least make things more equitable. And btw, if you are worried about the poor, or lower middle class, basic items are not taxed neither is food or medicine. You can also give them automatic tax credits to compensate them for a typical basket of goods with someone of their income level would ideally purchase. So the tax would hit the upper middle class and the rich and the lobbyists power would be rendered useless.

 

[Maverick74]

All good points. My only concern is, how is it that the happiest nations in the world NOT ONLY pay a huge income tax, but get a large number of benefits for that money like:

• nearly free education
• great health care
• good law enforcement
• etc?

You see, I think the problem in this country isn't the taxes, it is the way it is spent. People (in P&R threads) say that Bernie wanted "free" things. Nothing is free if you are taxed. The correct term is directed. Bernie wanted to re-direct how we spent our tax money, from endless war-mongering and nation building and policing the world, to the tune of SIX HUNDRED BILLION DOLLARS A YEAR, and direct those same taxes to free public education, single payer health care, community policing, etc etc etc.

I don't know what the right answer is. Believe me I am nowhere near that Aha moment. But I agree that what we do in this country is the worst of both worlds - high taxes and shit service.

Either:

• Low or zero taxes and people fend for themselves saving for health care, education etc...or
• High taxes but amazing service like free education, free health care, etc etc.

That might be two sides of the same side of the coin.

Nitro, a few things here. Those Scandinavian countries are not paying as much in taxes as you think or at least not as much in comparison to the US. Yes, they pay high income taxes but you know what, they pay hardly any other taxes. It's all lumped into one tax. Here in the US we have over 30k taxes! We tax EVERYTHING. You can't simply look at income taxes. We also have a sales tax, property tax, capital gains tax and thousands of other taxes that those countries don't have. If you actually look at TOTAL tax burden by nation, we pay more in taxes then even Scandinavian countries. And yes, I do agree they are not being directed where they should. I think you would be shocked if you got out an excel spreadsheet and factored in your "real" tax rate from the taxes you pay on phone, internet, TV, subway, airport taxes, water taxes, auto taxes, gas taxes, tolls, fees, fines, charges for this for that, etc. I think you would see that your "real" tax rate might even exceed 70%!

 

[nitro]

Nitro, a few things here. Those Scandinavian countries are not paying as much in taxes as you think or at least not as much in comparison to the US. Yes, they pay high income taxes but you know what, they pay hardly any other taxes. It's all lumped into one tax. Here in the US we have over 30k taxes! We tax EVERYTHING. You can't simply look at income taxes. We also have a sales tax, property tax, capital gains tax and thousands of other taxes that those countries don't have. If you actually look at TOTAL tax burden by nation, we pay more in taxes then even Scandinavian countries. And yes, I do agree they are not being directed where they should. I think you would be shocked if you got out an excel spreadsheet and factored in your "real" tax rate from the taxes you pay on phone, internet, TV, subway, airport taxes, water taxes, auto taxes, gas taxes, tolls, fees, fines, charges for this for that, etc. I think you would see that your "real" tax rate might even exceed 70%!

Yeah,

Not only that. I had a conversation with someone that lives(d) there say and he said there lots of huge gorgeous houses, something that should be "impossible" when taxed at 90%. So the theory is, Panama Papers type stuff is going on in Finland, Norway, Sweden, etc.

My point is, 70% tax rate would not be bad if health care was "free" and terrific; education was "free" and terrific; our environment and water was "free" and terrific; our roads/bridges and infrastructure in general was "free" and terrific; our enforcement agencies was more interested in protecting us instead of catching you taking a right on red etc,etc,etc - you get my drift.

 

[drcha]

When discussing taxes, we have to keep in mind that in the US, we have taken on the job of being the cops for the entire free world because no other country wants this responsibility. I do not mean to disparage the considerable contributions and sacrifices of our fine allies, only to point out that none of them spends like we do on defense. We can't use Europe or Canada as a model.

Introducing another idea: Has anyone brought up sin tax in this thread? Have you ever bought a bottle of wine or a pack of cigarettes in Scandinavia? Jesus F. Christ! They tax sin to the max over there! All possible outcomes regarding this tax are good, including:

-The govt. collects more money because demand is inelastic for these things (translation: I will never stop loading up at Total Wine and Bev Mo even if they triple the price of my Bordeaux and Rioja). Payers of the sin tax are voluntarily giving up this money. Unlike food, transportation, and shelter, one can live without these things. The tax need not be regressive on the poor, who have the same choices as everyone else, and who also have greater incentives to alter their choices because of their poverty.
-The govt. collects less sin-generated money because fewer people drink and smoke, but probably therefore spends less money on medical costs.
-The govt. collects more money overall because the population becomes healthier and can work longer and pay more taxes via payroll.
-The govt. spends less money on special education and prisons when fewer children are born with fetal alcohol syndrome and fewer people are convicted of drunk driving.

Ok, there might be a small downside: your MO and DEO dividends. Sorry about that, but if you are sitting around collecting dividends, you already probably belong to the upper socioeconomic sin tax class, and you can find another stock without too much difficulty. Maybe that's not too difficult if people just stop drinking Bordeaux and switch to Schlitz Malt Liquor (I don't even know if they still make Schlitz Malt Liquor; it's just the worst beverage I can think of right now). In that case, you just have to buy a less fancy sin stock.

In summary, even if we tax sin so heavily that no one sins any more, it might be beneficial.

 

[Maverick74]

When discussing taxes, we have to keep in mind that in the US, we have taken on the job of being the cops for the entire free world because no other country wants this responsibility. I do not mean to disparage the considerable contributions and sacrifices of our fine allies, only to point out that none of them spends like we do on defense. We can't use Europe or Canada as a model.

Introducing another idea: Has anyone brought up sin tax in this thread? Have you ever bought a bottle of wine or a pack of cigarettes in Scandinavia? Jesus F. Christ! They tax sin to the max over there! All possible outcomes regarding this tax are good, including:

-The govt. collects more money because demand is inelastic for these things (translation: I will never stop loading up at Total Wine and Bev Mo even if they triple the price of my Bordeaux and Rioja). Payers of the sin tax are voluntarily giving up this money. Unlike food, transportation, and shelter, one can live without these things. The tax need not be regressive on the poor, who have the same choices as everyone else, and who also have greater incentives to alter their choices because of their poverty.
-The govt. collects less sin-generated money because fewer people drink and smoke, but probably therefore spends less money on medical costs.
-The govt. collects more money overall because the population becomes healthier and can work longer and pay more taxes via payroll.
-The govt. spends less money on special education and prisons when fewer children are born with fetal alcohol syndrome and fewer people are convicted of drunk driving.

Ok, there might be a small downside: your MO and DEO dividends. Sorry about that, but if you are sitting around collecting dividends, you already probably belong to the upper socioeconomic sin tax class, and you can find another stock without too much difficulty. Maybe that's not too difficult if people just stop drinking Bordeaux and switch to Schlitz Malt Liquor (I don't even know if they still make Schlitz Malt Liquor; it's just the worst beverage I can think of right now). In that case, you just have to buy a less fancy sin stock.

In summary, even if we tax sin so heavily that no one sins any more, it might be beneficial.

Sin taxes raise very little money and create black markets. BTW, we already have sin taxes on these things at the state level. The city of Chicago taxes ciggies as does cook county and the state if IL which in total is a 100% tax!!!!!!! And yes, it's the most expensive place in the country to buy cigs.

Also, as I said before, national sales taxes are not regressive. You don't tax food, medicine and basic life expenses. On top of that, you can give tax credits to the poor at a fixed amount based on an avg annual basket of goods purchased. There is a lot of research on this.

 

[nitro]

How Apple paid just 0.005% tax on its global profits

Why is the European Union going after Apple for $14 billion in unpaid taxes?
Consider this: In 2014, the corporate giant paid just $50 in tax for every million it made selling iPhones and iPads to most of the world outside America.


That's a tax rate of just 0.005%. Yes, you read that correctly.

So how was that allowed to happen?

Apple has funneled most of its profits from Europe, the Middle East, Africa and India through Ireland for decades. Nothing usual in that. Others do it too.

But under deals the company struck with the Irish government as far back as 1991, it was allowed to split these profits between its Ireland branch and an Apple head office that existed only on paper.

Apple paid the standard Irish tax rate on profits booked to its Ireland branch. Those it allocated to the phantom head office were tax free, because under Irish law it was then considered a "stateless company."

Guess where most of the profits went?...

http://money.cnn.com/2016/08/30/technology/apple-tax-ruling-numbers/index.html

 

[nitro]

The EU is going to be rich after they are done beating the tax-dodged gains out of these US companies.

Apple's EU tax nemesis takes aim at other U.S. companies' offshore profits
John W. Schoen | @johnwschoen
1 Hour AgoCNBC.com

COMMENTS Apple with a $14.5 billion back tax bill signaled over the weekend she's not done yet with American companies that park profits offshore to lower their tax bills.


Those profits swelled to some $2.4 trillion — or about 14 percent of U.S. gross domestic product, according to new estimates released Monday.

The EU's antitrust commissioner, Margrethe Vestager, was in Washington on Monday to meet with U.S. officials, including Treasury Secretary Jack Lew, who has been bluntly critical of a series of EU investigations into taxes paid by American companies on profits held outside the U.S.

Both Apple and the Irish government are appealing a ruling last monththat the tech giant owes the Irish Treasury $14.5 billion, based on a government tax break that the EU ruling said qualified as "state aid." Such assistance amounts to an illegal subsidy under EU law, the ruling said.

U.S. Treasury officials have also blasted the ruling, saying it sets up the EU as "supranational tax authority." The bloc's efforts also threaten to cut into the Treasury's revenue collections because taxes paid to a foreign country can be deducted from a company's U.S. tax bill.

The move has also drawn fire from U.S. corporate groups, including the Business Roundtable, which represents 185 CEOs of large companies with combined revenues of $7 trillion. On Friday, the group sent a letterto the leaders of all 28 EU member countries, urging them to work to overturn the Apple ruling and end the tax probes.
...

http://www.cnbc.com/2016/09/19/appl...m-at-other-us-companies-offshore-profits.html

 

[nitro]

Tricks used by the wealthy to avoid taxes:

• Buffett has been known to buy companies and cancels their dividends to shield most of his net worth from taxable income.
• He has also used stock splits to buy companies to help avoid paying taxes on those buys.
• And, through what is called "deferred liabilities," Berkshire can get out of paying tens of billions of dollars in taxes right now. This is something Buffett himself has referred to as "an interest-free loan from the U.S. Treasury."
• One of the reasons elite private fund managers can make [URL='http://www.cnbc.com/2014/03/04/private-equity-earnings.html']millions oreven billions of dollars in a single year is because they often pay relatively low taxes due to something called Carried Interest[/URL].

http://www.cnbc.com/2016/10/11/trum...-warren-buffett-should-zip-it-commentary.html

 

[atrp2biz]

Buffett has been known to buy companies and cancels their dividends to shield most of his net worth from taxable income.

Actually, no. It is well known that BRK accumulates cash flow to the top of the house and redistributes cash to its subsidiaries that require capital. These transfers do not trigger a taxable event.

He has also used stock splits to buy companies to help avoid paying taxes on those buys

What? Stock splits do not trigger/avoid a taxable event. I'm not clear what the columnist is referring to.

And, through what is called "deferred liabilities," Berkshire can get out of paying tens of billions of dollars in taxes right now. This is something Buffett himself has referred to as "an interest-free loan from the U.S. Treasury."

Deferred taxes arises from the difference of taxable income between the accounting book and the tax book. The tax book generally provides for accelerated depreciation to incent capital investment.

One of the reasons elite private fund managers can make millions or even billions of dollars in a single year is because they often pay relatively low taxes due to something called Carried Interest.

Carried interest is just the mechanism of compensation for a fund manager and is taxed as a capital gain (as it should be since he is receiving a share of the capital gain). I don't think the concept of 2 and 20 is anything new.

To defend this concept, consider the following thought exercise. If the GP was the sole investor in the fund and for whatever reason, the compensation to the GP was 100% of profits, it would only make sense to treat the carried interest (compensation) as a capital gain. If the carried interest were treated as income, all of a sudden you turn 100% of the capital gain into income.

I'm Canadian and don't particularly monitor US accounting/tax rules, but I don't think the columnist has any clue of how accounting works.

 

[atrp2biz]

Nitro, a few things here. Those Scandinavian countries are not paying as much in taxes as you think or at least not as much in comparison to the US. Yes, they pay high income taxes but you know what, they pay hardly any other taxes. It's all lumped into one tax. Here in the US we have over 30k taxes! We tax EVERYTHING. You can't simply look at income taxes. We also have a sales tax, property tax, capital gains tax and thousands of other taxes that those countries don't have. If you actually look at TOTAL tax burden by nation, we pay more in taxes then even Scandinavian countries. And yes, I do agree they are not being directed where they should. I think you would be shocked if you got out an excel spreadsheet and factored in your "real" tax rate from the taxes you pay on phone, internet, TV, subway, airport taxes, water taxes, auto taxes, gas taxes, tolls, fees, fines, charges for this for that, etc. I think you would see that your "real" tax rate might even exceed 70%!

Allow me to provide an Alberta perspective.

• I'm in the top income bracket and have an average (not marginal) tax rate of 32% which includes my contribution to the Canada Pension Plan and employment insurance
• My house is valued at $800k and I pay ~$4000 in property taxes for education (kindergarden through high school), infrastructure and municipal services
• There is no sales tax in Alberta, however we have the 5% GST which is taxed on most things except most foods from the grocery store and kids' clothing
• I don't think we have a single road toll in the province, except for maybe at the Montana border
• I don't pay a dime (outside taxes) for health care. I broke my hand this weekend and went to urgent care. Saw a doctor in 10 minutes and was out in 1.5 hours (x-rays and all)

I think there's a misconception about high taxes in Canada. I'm happy to pay this share of my taxes particularly given the value our society yields from it.