As of now, the U.S. has one of the highest top marginal corporate tax rate in the world.
Given that foreign earnings represent almost half of all profits from the S&P 500, the Treasury misses out on a considerable amount of tax revenue due to the international restrictions of the tax code. To compound this dilemma, creative financing has allowed an avenue for U.S. multinationals to repatriate much of their earnings without paying taxes on the profits earned abroad. Tech giants like Apple and Microsoft currently issue corporate debt in U.S. markets to reduce domestic profits via interest expenses, transfer it to their foreign subsidiaries sitting on billions, which pay the interest expenses out of their foreign earnings. Since the interest rate on say Apple's corporate bonds (2.4%) is more less than a tenth of the effective tax rate on repatriation of foreign earnings (likely around 35%), it is a very profitable tax circumventing endeavor.
The new administration is talking about reforming the corporate tax code, and cutting the corporate rate to 15% in order to make repatriation of U.S. profits more tolerable. Still, it is technically unfavorable on a financial basis given differential between borrowing costs and a 15% tax rate. Perhaps it makes good publicity?
So i offer a solution (not my own) that, as far as i am aware, hasn't been discussed on this forum. Instead of taxing corporations, partnerships, multinationals, etc..., the government is granted preferred (non-voting) equity, which gives them rights to profits. The percentages need to be worked out as well as some of the details regarding no-dividend companies, whether the equity stake can be marketable, etc.... But the idea looks like a necessary leap towards the post-tax society i believe will inhabit the future.
