Tax Inversions Hinder Economy, Boost Large Caps

Credit to: Offshore News : Tax Inversions Hinder Economy, Boost Large Caps

QUIZ: Are Your Investment Fees Bleeding You Dry?
Further hurting U.S. companies is the practice of “double taxation.” When a U.S. corporation earns income in another country, it must pay taxes to that country. Then, the U.S. requires companies to pay our 35% rate on the profits that were already taxed in that other country. This is punitive and a disincentive to keeping businesses in the U.S. Most other countries only tax domestic income.

Maybe that’s why 20 U.S. companies have run screaming to relocate.

4 Vanguard Funds I’ll Never Sell

Buying these Vanguard funds was one of the most profitable decisions of my investing life. And they can change your life, too! You’ll find their names and complete details in my latest Special Report. It’s yours FREE when you click here.

And that’s why companies are keeping their foreign profits overseas. There’s about $2 trillion invested abroad. A fifth of that is held by Microsoft (MSFT), Apple (AAPL), Google (GOOGL, GOOG) and five other technology firms.

Imagine what could be done if that was here. How many jobs would that create? How many shareholders would be rewarded with dividend increases that they, in turn, would spend or invest in our economy?

Click to expand...

The question is, are they a good partner/steward in the economy?

What do they pay in prop taxes comparatively?

What do they pay in employee taxes?

How many other social 'benefits' which are really taxes, do corps pay that the employee deems necessary but never pays for?

and yes, all of those taxes that are not in plain view are paid by the corps/businesses, local or large entities.

when is enough taxation enough?

edward222 said:

Credit to: Offshore News : Tax Inversions Hinder Economy, Boost Large Caps

The question is, are they a good partner/steward in the economy?

What do they pay in prop taxes comparatively?

What do they pay in employee taxes?

How many other social 'benefits' which are really taxes, do corps pay that the employee deems necessary but never pays for?

and yes, all of those taxes that are not in plain view are paid by the corps/businesses, local or large entities.

when is enough taxation enough?

Click to expand...

NO, the question is why you would think corporations should derive all the benefits of legal personhood without the tax consequences?

A 35% rate is the rate currently for individual's who earn $411,500 - $413,200 (2015). The rate is 39.6% for income earners over $413,200. Tax Brackets (Federal Income Tax Rates) 2000 through 2015 and 2016

Property tax is the state and local form of taxation and common citizens also pay that if they own real property.

Employee tax is for unemployment benefits and typically varies depending on the size of a company and the number of ex-employees currently on unemployment after losing their jobs.

Instead decrying the fact that businesses incorporated in the US have to pay for the legal benefits of being considered a "person," why not argue about how to create trade agreements which would prevent them from paying taxes overseas?

Captain Adverse said:

NO, the question is why you would think corporations should derive all the benefits of legal personhood without the tax consequences?

A 35% rate is the rate currently for individual's who earn $411,500 - $413,200 (2015). The rate is 39.6% for income earners over $413,200. Tax Brackets (Federal Income Tax Rates) 2000 through 2015 and 2016

Property tax is the state and local form of taxation and common citizens also pay that if they own real property.

Employee tax is for unemployment benefits and typically varies depending on the size of a company and the number of ex-employees currently on unemployment after losing their jobs.

Instead decrying the fact that businesses incorporated in the US have to pay for the legal benefits of being considered a "person," why not argue about how to create trade agreements which would prevent them from paying taxes overseas?

Click to expand...

The real issue is why do we have the corporate tax at all, let alone the highest corporate in the civilized world. Ans: to pander to the pure economic ignorance of liberalism. In fact, corporations are tax collectors not tax payers. They pass on the tax cost, like any cost, to customers in the form of higher prices. Liberalism has driven perhaps 10 million middle class jobs off shore out of pure and perfect ignorance.

Captain Adverse said:

NO, the question is why you would think corporations should derive all the benefits of legal personhood without the tax consequences?

A 35% rate is the rate currently for individual's who earn $411,500 - $413,200 (2015). The rate is 39.6% for income earners over $413,200. Tax Brackets (Federal Income Tax Rates) 2000 through 2015 and 2016

Property tax is the state and local form of taxation and common citizens also pay that if they own real property.

Employee tax is for unemployment benefits and typically varies depending on the size of a company and the number of ex-employees currently on unemployment after losing their jobs.

Instead decrying the fact that businesses incorporated in the US have to pay for the legal benefits of being considered a "person," why not argue about how to create trade agreements which would prevent them from paying taxes overseas?

Click to expand...

very few companies 35% tax , avg tax on large companies is more like 20% , in fact their customers pay the taxes when they buy the products .

companies should pay 20% tax on the profits they tell the stock holders they made , if a company has 10 million shares outstanding and tell their stock holders they made $1/sh that's $10 million profit , they pay $2 million in taxes .

if they don't like it then move somewhere else and stop using out police-fire-defense dept's.

edward222 said:

Credit to: Offshore News : Tax Inversions Hinder Economy, Boost Large Caps

The question is, are they a good partner/steward in the economy?

What do they pay in prop taxes comparatively?

What do they pay in employee taxes?

How many other social 'benefits' which are really taxes, do corps pay that the employee deems necessary but never pays for?

and yes, all of those taxes that are not in plain view are paid by the corps/businesses, local or large entities.

when is enough taxation enough?

Click to expand...

First of all, I really hate it when writers claim expertise and don't do the most basic of research. I'm not sure I'd rely on someone that lazy for investment advice personally....

There are problems with our corporate tax system, but it's NOT that profits earned overseas are subject to a "double" tax, first subject to tax abroad then again by the U.S. on the same income - that's just misleading to the point of a deliberate lie, and so the writer is either totally ignorant about taxation of multinationals or is spreading BS for some purpose. If Google earns $1 billion in China, pays tax of e.g. $100 million to China, it is only subject to U.S. income tax on the repatriated earnings - cash brought home. As long as the earnings stay offshore, there is no U.S. tax on it, so if it's permanently reinvested in a new plant, that income won't EVER be subject to U.S. income taxes.

When the earnings are repatriated, they are subject to U.S. income taxes on the amount brought home, but the corporation gets a credit for foreign taxes paid on that income. So if Google brings home that $billion, it will owe U.S. income taxes of, say, $350 million, take a $100 million credit for income taxes paid to China, and remit $250 million to IRS.

And the article is correct that we have a worldwide system (tax all profits everywhere for U.S. based companies) and most countries have territorial systems (tax only domestic income) but it's not that simple at all. The deferral we allow makes our system operate much like a territorial system, and territorial systems have a lot of anti-abuse provisions that generally result in higher EFFECTIVE tax rates on multinationals than our worldwide system that in theory should tax them far higher. Anyway, bottom line is this is a very complex area and any article that tries to simplify it, unless the writer is clearly expert, is full of crap basically. There are too many differences between what happens in theory versus reality to compare our system to, say, the UK, and make sweeping claims about how it affects competitiveness.

Anyway for those interested, here's a decent article on the issues: https://www.imf.org/external/pubs/ft/wp/2013/wp13205.pdf

edward222 said:

very few companies 35% tax , avg tax on large companies is more like 20% , in fact their customers pay the taxes when they buy the products .

companies should pay 20% tax on the profits they tell the stock holders they made , if a company has 10 million shares outstanding and tell their stock holders they made $1/sh that's $10 million profit , they pay $2 million in taxes .

if they don't like it then move somewhere else and stop using out police-fire-defense dept's.

Click to expand...

That's partially true. The tax incidence - which party ultimately bears the tax burden - varies to put it simply. The three broad possibilities are labor (workers and/or executives), owners of capital (stockholders) or customers. Depending on all kinds of factors, the incidence could fall on any of them. To take a simple example, GE because of losses in the financial collapse (and because they have hundreds of tax lawyers on staff to plan around income taxes) at least had an effective corporate income tax rate of about 0% for a while, sometimes negative as they carried back losses and claimed refunds on past taxes. Someone competing with GE but with positive tax rates can't exactly raise their prices by 20% (their effective rate) to offset the income tax they have to pay, GE pays no income tax so could keep prices low and undercut them and run them out of business, so customers probably bear very little of the income tax burden, and instead it's more likely ultimately paid by shareholders (owners) and/or employees at that firm.

edward222 said:

, in fact their customers pay the taxes when they buy the products .

Click to expand...

this is very very true which begs the question, why do we have the tax at all when we could tax customers directly and thus not force our golden corporations and 20 million jobs to move off shore to avoid the tax.

James972 said:

this is very very true which begs the question, why do we have the tax at all when we could tax customers directly and thus not force our golden corporations and 20 million jobs to move off shore to avoid the tax.

Click to expand...

The idea that businesses can just raise prices to cover all their income taxes is a myth.

And it's more likely they're moving offshore for few environmental regs, no workplace regs and wages less than $1 an hour, no benefits. Imagine how much cheaper it is to do business when you can do this to your population:

edward222 said:

very few companies 35% tax , avg tax on large companies is more like 20% , in fact their customers pay the taxes when they buy the products .

companies should pay 20% tax on the profits they tell the stock holders they made , if a company has 10 million shares outstanding and tell their stock holders they made $1/sh that's $10 million profit , they pay $2 million in taxes .

if they don't like it then move somewhere else and stop using out police-fire-defense dept's.

Click to expand...

the top marginal rate in the US is like 35-39% for corporations making X amount of dollars.
yep they are moving somewhere else because they are not stupid.

JasperL said:

The idea that businesses can just raise prices to cover all their income taxes is a myth.

And it's more likely they're moving offshore for few environmental regs, no workplace regs and wages less than $1 an hour, no benefits. Imagine how much cheaper it is to do business when you can do this to your population:

Click to expand...

Not really.
the cost of doing business is either covered by higher prices or lower wages.
which do you prefer? if the government raises the cost of me doing business
then either you the consumer or you the employee is going to pay for it because I am not.

James972 said:

this is very very true which begs the question, why do we have the tax at all when we could tax customers directly and thus not force our golden corporations and 20 million jobs to move off shore to avoid the tax.

Click to expand...

I am all for a national sales tax and getting rid of the punishing payroll taxes that we have.
I would vote for it in a heart beat.

ludin said:

Not really.
the cost of doing business is either covered by higher prices or lower wages.
which do you prefer? if the government raises the cost of me doing business
then either you the consumer or you the employee is going to pay for it because I am not.

Click to expand...

And if you can just raise price to whatever level you wanted, or cut wages indiscriminately and still get people to work for you, you'd do it today, make more money, but those are largely determined by market forces you can't affect. So, yeah, in most cases you will pay for at least part of it.

Bottom line is taxes can be ultimately paid by 1) employees (workers and/or executives), 2) higher prices, and/or 3) lower profits for owners. What mix of those depends on a bunch of factors.

Here's just one of many discussions of tax incidence. http://economix.blogs.nytimes.com/2010/07/23/who-ultimately-pays-the-corporate-income-tax/?_r=0

James972 said:

The real issue is why do we have the corporate tax at all, let alone the highest corporate in the civilized world. Ans: to pander to the pure economic ignorance of liberalism. In fact, corporations are tax collectors not tax payers. They pass on the tax cost, like any cost, to customers in the form of higher prices. Liberalism has driven perhaps 10 million middle class jobs off shore out of pure and perfect ignorance.

Click to expand...

Interesting that you would talk of the "economic ignorance of liberalism" and then in the very next sentence demonstrate your own economic ignorance. Rather ironic, isn't it? It helps to know what you are talking about before you go off half-cocked.

Sorry pal, but if you took any micro economics in college you would have had to learn about the concept of incidence of tax, which clearly discusses who actually pays the tax. Only in cases of extreme inelasticity of an under-lying product could a company fully pass the tax obligations along to a consumer. Otherwise, it works into the supply curve, but doesn't necessarily move the price of goods one iota, meaning the company will eat some or most (if not ALL) of it.

http://www.econport.org/content/handbook/Elasticity/taxincidence.html

Taxes, in particular, are not a product cost but a cost of a particular corporate structure. Its particularly hard to unitize them (turn them into a unit cost and unit price).

Prices are set at levels where demand curve meets the supply curve. There are number of factors that work into the equation, including competition, a business with an adverse tax structure is at a competitive disadvantage to those with more favorable tax structures, hence they are likely to have eat the tax because they can not raise prices as the product price is established by the market.

To help you understand this at a macro level, if a company could just pass their cost along to consumers, no company would ever lose money or go out of business.

BTW.. although US has the highest marginal rate in the world, the actual effective rate of corporate income taxes in the US is actually 12.6%. The problem with corporate taxes in the US is that they tend to fall more heavily on smaller, domestic and less capital intensive corporations. The tax structure could stand reformation.

GAO: U.S. corporations pay average effective tax rate of 12.6% - Jul. 1, 2013

ludin said:

Not really.
the cost of doing business is either covered by higher prices or lower wages.
which do you prefer? if the government raises the cost of me doing business
then either you the consumer or you the employee is going to pay for it because I am not.

Click to expand...

You too! See above as you clearly lack understanding of micro economics.

ludin said:

I am all for a national sales tax and getting rid of the punishing payroll taxes that we have.
I would vote for it in a heart beat.

Click to expand...

So you are fine with a 25% sales tax (at least 20% plus state tax)? You are fine with the lower and middle tax payers paying most of the tax? You do realize that a sales tax greatly benefits the wealthiest of American because they "consume" a much smaller percentage of income than the middle class?

http://www.iga.ucdavis.edu/Research/CSLT/Publications/NationalSalesorValue-addedTax.pdf

A national sales tax is a totally impractical solution to what really isn't much of a problem...

JasperL said:

And if you can just raise price to whatever level you wanted, or cut wages indiscriminately and still get people to work for you, you'd do it today, make more money, but those are largely determined by market forces you can't affect. So, yeah, in most cases you will pay for at least part of it.

Click to expand...

People already do it. why do you think a double cheese burger doesn't cost 99 cents anymore it is almost a 1.50.

Bottom line is taxes can be ultimately paid by 1) employees (workers and/or executives), 2) higher prices, and/or 3) lower profits for owners. What mix of those depends on a bunch of factors.

Here's just one of many discussions of tax incidence. http://economix.blogs.nytimes.com/2010/07/23/who-ultimately-pays-the-corporate-income-tax/?_r=0

Click to expand...

Companies might eat a .5-2% increase in something but when you see anything above that they start raising it either consumers or employee's.

upsideguy said:

So you are fine with a 25% sales tax (at least 20% plus state tax)? You are fine with the lower and middle tax payers paying most of the tax? You do realize that a sales tax greatly benefits the wealthiest of American because they "consume" a much smaller percentage of income than the middle class?

http://www.iga.ucdavis.edu/Research/CSLT/Publications/NationalSalesorValue-addedTax.pdf

A national sales tax is a totally impractical solution to what really isn't much of a problem...

Click to expand...

if only it worked that way. since middle and lower income people don't pay taxes
up to the poverty level for their size family then it should be ok.

the wealthy also buy way more higher priced. items therefore pay more tax percentage than lower income people.

ludin said:

People already do it. why do you think a double cheese burger doesn't cost 99 cents anymore it is almost a 1.50.

Click to expand...

I'm not sure what "it" is but it's sure as hell not raise prices to any level when they want, or else a double cheeseburger would cost $100, why not $1,000 each? Nor is it to cut wages to whatever you want to pay, or you'd be able to hire competent managers at $1 an hour.

I suspect the increase in prices for that meal has more to do with input costs like beef and bread than income taxes, and those direct, operating costs obviously commodities for the most part and are more or less uniform across competitors and they must all cover those pre-tax direct costs. Effective income tax rates are levied on after tax profits (obviously) and will vary tremendously from one business to the next. GE's tax rate has been hovering around 0% for a few years - do you think their competitors can just raise prices when they have tax rates higher than GE? Of course not - GE would undercut them and steal the market.

Companies might eat a .5-2% increase in something but when you see anything above that they start raising it either consumers or employee's.

Click to expand...

It depends. You can't make blanket statements about when and how much companies will increase prices/cut wages/cut dividends or owner payouts to cover INCOME taxes.

JasperL said:

I'm not sure what "it" is but it's sure as hell not raise prices to any level when they want, or else a double cheeseburger would cost $100, why not $1,000 each? Nor is it to cut wages to whatever you want to pay, or you'd be able to hire competent managers at $1 an hour.

I suspect the increase in prices for that meal has more to do with input costs like beef and bread than income taxes, and those direct, operating costs obviously commodities for the most part and are more or less uniform across competitors and they must all cover those pre-tax direct costs. Effective income tax rates are levied on after tax profits (obviously) and will vary tremendously from one business to the next. GE's tax rate has been hovering around 0% for a few years - do you think their competitors can just raise prices when they have tax rates higher than GE? Of course not - GE would undercut them and steal the market.



It depends. You can't make blanket statements about when and how much companies will increase prices/cut wages/cut dividends or owner payouts to cover INCOME taxes.

Click to expand...

LOL you evidently don't know business very well.
I do.

in fact my company just moved their headquarters to England. why? it is cheaper to operate out of England than it is the US.
I am glad they did it. cheaper operating costs means less cuts on my end.

LOL $100. wow you really don't know anything about business do you?

the fact is when you raise operating costs on businesses prices go up.
worse if businesses feel they can't raise their prices then they start cutting
employee wages and hours to make up the difference.

that is why the whole 15 minimum wage thing will pretty much put a lot of people out of work.
that or you are going to pay the price for it. which most people won't want to.

ludin said:

LOL you evidently don't know business very well.
I do.

in fact my company just moved their headquarters to England. why? it is cheaper to operate out of England than it is the US.
I am glad they did it. cheaper operating costs means less cuts on my end.

LOL $100. wow you really don't know anything about business do you?

the fact is when you raise operating costs on businesses prices go up.
worse if businesses feel they can't raise their prices then they start cutting
employee wages and hours to make up the difference.

that is why the whole 15 minimum wage thing will pretty much put a lot of people out of work.
that or you are going to pay the price for it. which most people won't want to.

Click to expand...

I just made clear distinctions between 1) operating costs versus 2) income taxes on profits, you ignored it all, didn't address that central point that income tax rates vary between businesses and therefore are fundamentally different than operating costs, misstated my argument entirely, then claimed I don't know what I'm talking about. I can see this is a waste of time so I'll bow out here unless you want to go back and address what I actually said, in context.

ludin said:

if only it worked that way. since middle and lower income people don't pay taxes
up to the poverty level for their size family then it should be ok.

the wealthy also buy way more higher priced. items therefore pay more tax percentage than lower income people.

Click to expand...

... no, middle and lower income tax payers do indeed pay taxes, contrary to what you have been told on Fox... and we do have an de facto flat tax for the upper half of the income groups.



What people do not understand about our income tax system is that is designed to tax discretionary income, not total income. This is why we have deductions, exemptions and credits. The lower income groups often have little to no discretionary income, hence often pay little to no income tax. They do, however, pay payroll taxes, sales taxes, use taxes and property taxes.

ludin said:

I am all for a national sales tax and getting rid of the punishing payroll taxes that we have.
I would vote for it in a heart beat.

Click to expand...

That would kill US business.. it would be a giant tax on wealth..we would have to expand the IRS.. its about the dumbest thing to do.

Hmmm

Well lets see there is a lot of misinformation floating here.

1. The reason for the corporate tax is because without a corporate tax.. corporations would become huge holding companies in order to avoid taxes indefinitely. Anyone can set up a corporation. I would.. (and it was done in the past.. thus the corporate tax) set up a corporation.. call it Jaeger corp.
then any income I made I would funnel through or make through jaeger corp and KEEP it in Jaeger corp.. and NEVER pay tax on it. Be a nice personal tax haven courtesy of the law.

So my "corporation" could make a million a year. I would simply leave it in the corporation. NEVER pay tax on it until I took it out to say buy a boat or whatever. And better yet.. hopefully I set up a corporation where I can buy the boat through the corporation. Watch my effective tax rates plummet.

Its why there is a corporate tax.. to prevent corporations from becoming holding companies to avoid tax.

the problem I see with the corporate tax code (other than the preferential treatment in the code etc etc) is that dividends are not expensed.

2. As far as the customer pays taxes? Not when it comes to income taxes, or corporate taxes. Those taxes are not passed on. If they were.. then prices would go up.. there would be more income.. then taxes would go up.. then prices go up etc.. prices would never stabilize.

ludin said:

I am all for a national sales tax and getting rid of the punishing payroll taxes that we have.
I would vote for it in a heart beat.

Click to expand...

That's because you are in favor of taxing the poor instead of the wealthy. Regressive taxes that penalize consumption would wreck our consumer economy. But it would be a huge windfall for the wealthy who only be taxed on a small % of their income. Why are the wealthy so needy?

jaeger19 said:

That would kill US business.. it would be a giant tax on wealth..we would have to expand the IRS.. its about the dumbest thing to do.

Click to expand...

A tax on wealth? Now that would be a better idea than penalizing consumer spending with a national sales tax. Taxing money not spent encourages spending and raises GDP growth. I would favor an annual 2% tax on all personal wealth over $2 million or so. That would get the economy going. Spend it or lose it is an easy choice.

JasperL said:

I'm not sure what "it" is but it's sure as hell not raise prices to any level when they want, or else a double cheeseburger would cost $100, why not $1,000 each? Nor is it to cut wages to whatever you want to pay, or you'd be able to hire competent managers at $1 an hour.

I suspect the increase in prices for that meal has more to do with input costs like beef and bread than income taxes, and those direct, operating costs obviously commodities for the most part and are more or less uniform across competitors and they must all cover those pre-tax direct costs. Effective income tax rates are levied on after tax profits (obviously) and will vary tremendously from one business to the next. GE's tax rate has been hovering around 0% for a few years - do you think their competitors can just raise prices when they have tax rates higher than GE? Of course not - GE would undercut them and steal the market.



It depends. You can't make blanket statements about when and how much companies will increase prices/cut wages/cut dividends or owner payouts to cover INCOME taxes.

Click to expand...

General Electric last 3 fiscal years

Income Before Tax 17,229,000 16,151,000 17,381,000
Income Tax Expense 1,772,000 676,000 2,534,000
effective rate 10.28% 4.18% 14.57%

none of those are zero as far as i can see

and since i am a shareholder, i kind of like them keeping their rate as low as possible