President Proposes to Lower Taxes

[thegreekdog]

http://www.weeklystandard.com/blogs/oba ... 42312.html
http://www.nytimes.com/2013/07/31/us/po ... d=all&_r=0

Mr. Obama outlined the terms of his tax plan in early 2012 during the presidential election, when he said the corporate tax rate would be reduced to 28 percent, from 35 percent, with a lower rate of 25 percent for manufacturing firms.

Obama's push to lower the corporate tax rate to 28 percent comes less than a year after he raised the top individual income tax rate, paid by many small businesses, to 39.6 percent.

"Right now, our tax code is so riddled with wasteful loopholes that many companies doing the right thing and investing in America pay 35%, while the corporations with the best accountants stash their money abroad and pay little or nothing at all. I’m willing to simplify our tax code in a way that closes those loopholes, ends incentives to ship jobs overseas, and lowers rates for businesses that create jobs right here in America."

Interesting stuff. I have a few initial thoughts.

(1) I'm in favor of lower corporate tax rates.
(2) I'm disinclined to favor higher tax rates for small business owners (see Weekly Standard Blog) while essentially benefitting big business with a tax rate cut for those companies. I'm reading Cloud Atlas and this calls to mind corpocracy.
(3) 28% and 25% are still higher than a lot of tax rates around the world, so if the president thinks tax rates are the only or most important impediment to companies operating in the United States (hint - it isn't), but still leaves the corporate tax rates higher than most other places, how does that "create an incentive?" That question is, of course, rhetorical, but won't be asked by any of your media outlets.

Here are relevant countries with lower tax rates than 25%: Israel, South Korea, Sweden, Russia, Iceland, Turkey, Hungary, Taiwan. There are other countries where I've not heard of U.S. company relocations.

(4) This attack on companies that "stash their money abroad" is very misleading. I've gone on this diatribe before, but I'll make it short. If a company makes money in the United States, it's taxed in the United States. If a subsidiary company makes money in Ireland, it's taxed in Ireland. If the subsidiary company attempts to distribute that money to the parent company in the United States, that same money that was taxed in Ireland is taxed again in the United States. There is no U.S. company in existence that makes money in the United States and then stashes that money overseas.

(5) Why do some news outlets refer to the president as "Mr. Obama?" I'm of the opinion that he should be referred to as "President Obama" for the remainder of his life.

[Teflon Kris]

I'm in favor of lower corporate tax rates.

Please change your avatar !!

This guy died for a reason, please dont take the p*ss !!

P.S. On a less-important note, point (4) is a joke - international companies move money around and pay tax in one place only, usually not where the money was made. They make as much money as possible. Full stop.

[Night Strike]

Different numbered list:

1) At least Obama finally recognizes that cutting deductions and flattening rates will actually increase the revenue to the government.

2) Why does he want to spend that excess revenue rather than balance the existing problems?

3) If large corporations will gain such a benefit from these changes, why did he fight so hard to do the exact opposite and raise taxes on individuals and small businesses? Do they not get to benefit?

[The Voice]

(4) This attack on companies that "stash their money abroad" is very misleading. I've gone on this diatribe before, but I'll make it short. If a company makes money in the United States, it's taxed in the United States. If a subsidiary company makes money in Ireland, it's taxed in Ireland. If the subsidiary company attempts to distribute that money to the parent company in the United States, that same money that was taxed in Ireland is taxed again in the United States. There is no U.S. company in existence that makes money in the United States and then stashes that money overseas.

I'm confused. I thought there were indeed places (countries) that don't have such taxes.

[AndyDufresne]

(4) This attack on companies that "stash their money abroad" is very misleading. I've gone on this diatribe before, but I'll make it short. If a company makes money in the United States, it's taxed in the United States. If a subsidiary company makes money in Ireland, it's taxed in Ireland. If the subsidiary company attempts to distribute that money to the parent company in the United States, that same money that was taxed in Ireland is taxed again in the United States. There is no U.S. company in existence that makes money in the United States and then stashes that money overseas.

I'm confused. I thought there were indeed places (countries) that don't have such taxes.

I am too. I remember a Forbes article.

Edit: U.S. Companies Stashing More Cash Abroad As Stockpiles Hit Record $1.45T (3/19/2013)

In 2012, U.S. non-financial companies filled their coffers with an additional $130 billion, taking their total cash to a record $1.45 trillion as the economy has stagnated and the labor market has moved sideways. At the same time, a prohibitive corporate tax scheme coupled with emerging market growth have pushed U.S. firms to keep 58% of their cash, or $840 billion, overseas.

List

Unless TGD means all their money, then that seems true.


--Andy

[thegreekdog]

I'm in favor of lower corporate tax rates.

Please change your avatar !!

This guy died for a reason, please dont take the p*ss !!

P.S. On a less-important note, point (4) is a joke - international companies move money around and pay tax in one place only, usually not where the money was made. They make as much money as possible. Full stop.

Don't you think it ironic that a man who died for a reason is plastered all over t-shirts? Perhaps you should read the caption closely.

Please explain how companies move money around and pay tax in one place only, usually not where the money was made. If you can explain that, I would like to offer you a job.

[thegreekdog]

(4) This attack on companies that "stash their money abroad" is very misleading. I've gone on this diatribe before, but I'll make it short. If a company makes money in the United States, it's taxed in the United States. If a subsidiary company makes money in Ireland, it's taxed in Ireland. If the subsidiary company attempts to distribute that money to the parent company in the United States, that same money that was taxed in Ireland is taxed again in the United States. There is no U.S. company in existence that makes money in the United States and then stashes that money overseas.

I'm confused. I thought there were indeed places (countries) that don't have such taxes.

I am too. I remember a Forbes article.

Edit: U.S. Companies Stashing More Cash Abroad As Stockpiles Hit Record $1.45T (3/19/2013)

In 2012, U.S. non-financial companies filled their coffers with an additional $130 billion, taking their total cash to a record $1.45 trillion as the economy has stagnated and the labor market has moved sideways. At the same time, a prohibitive corporate tax scheme coupled with emerging market growth have pushed U.S. firms to keep 58% of their cash, or $840 billion, overseas.

List

Unless TGD means all their money, then that seems true.


--Andy

That's a great article, but the only reference I saw to taxes (in the article itself) was this:

U.S. companies will have to figure out how to effectively manage their cash flows, and avoid having to pay onerous taxes for repatriating foreign cash.

Do you guys know what "repatriating" means? Andy's quote from the article notes that companies are "keeping" their cash overseas.

So I'm not sure what the issue with my statement is? Are there jurisdictions with no taxes? Sure. If that's your point, then carry on. If your point is that U.S. companies are avoiding U.S. taxes by parking cash overseas, the answer is they might be, but they aren't enjoying the use of that cash in the United States and they haven't earned that cash in the United States. And, since I like examples, let's do one now.

Company X earns $100 in the United States. It is taxed at, let's say, 35%. Company X's subsidiary, Company Y, earns $200 in Ireland. It is taxed at, let's say, 10%. When Company X puts together it's financial statements, X and Y are consolidated and earn, together, $300, on which it paid tax of $55. Articles are written blasting Company X for making money tax free and stashing it overseas in tax havens and taking advantage of tax loopholes to the detriment of the U.S. economy to line the pockets of wealthy people.

Well, the truth here is that Company X cannot use the $200 it made in Ireland in the United States at all. In order to use that cash, it must repatriate it, meaning distribute the cash from Company Y to Company X. So Company Y distirbutes $190 to Company Y. Company X now pays an additional 35% tax rate on that $190 (with a credit for taxes paid to Ireland). So if Company X wishes to use the money earned in Ireland in the United States, it must pay additional U.S. taxes on said cash.

In sum, there is no loophole. There is no tax avoidance. Or to put it another way, if you're living in New York and taxed in New York, should that money be taxed in Pennsylvania too? It makes sense that money earned in Ireland is taxed in Ireland and not also in the United States. Can someone provide any good reason why income earned in Ireland should be taxed in both Ireland and the United States (and the 100+ other countries in the world)?

[thegreekdog]

Different numbered list:

1) At least Obama finally recognizes that cutting deductions and flattening rates will actually increase the revenue to the government.

2) Why does he want to spend that excess revenue rather than balance the existing problems?

3) If large corporations will gain such a benefit from these changes, why did he fight so hard to do the exact opposite and raise taxes on individuals and small businesses? Do they not get to benefit?

I can answer (2) and (3), although they are rhetorical questions (they are interrelated). I suspect that some of the president's biggest supporters (financially and otherwise) are large corporations benefitting from the reduced rates and not individuals with small businesses that will not benefit from higher rates; since those large corporations/supporters of the president are benefitting, why should the president not give them an additional benefit by taking the increased revenues and giving it back to them in the form of corporate welfare? That's worked for Republicans in the past.

[AndyDufresne]

To me, this topic is pretty uninteresting and I don't have strong feelings either way, so I'll just defer to whatever you think.


--Andy

[thegreekdog]

To me, this topic is pretty uninteresting and I don't have strong feelings either way, so I'll just defer to whatever you think.


--Andy

Philistine! Uninteresting? How dare you!?

The tl;dr version of this thread is that politically driven tax rhetoric is stupid and should be immediately ignored.

[AndyDufresne]

Anything with taxes just makes me want to go to the other room. TGD, I don't know how you make it through your taxing days.


--Andy

[Army of GOD]

I think I'd prefer to watch a fat man's toenails grow then talk about tax law.

[thegreekdog]

I think I'd prefer to watch a fat man's toenails grow then talk about tax law.

Reported for baiting and flaming.

[Woodruff]

"Right now, our tax code is so riddled with wasteful loopholes that many companies doing the right thing and investing in America pay 35%, while the corporations with the best accountants stash their money abroad and pay little or nothing at all. I’m willing to simplify our tax code in a way that closes those loopholes, ends incentives to ship jobs overseas, and lowers rates for businesses that create jobs right here in America."

How about we just close those damn loopholes (I know you don't like that term, but it's the one he uses) and then deal with the tax rate? In all honesty, that is where the problem primarily lies, in my opinion. Too many ways to avoid taxation that really don't hold the benefit worthy of avoiding taxation. The tax rate could almost certainly be lowered significantly if this were done and the government would bring in more money than they do now (same with the individual loopholes).

(2) I'm disinclined to favor higher tax rates for small business owners (see Weekly Standard Blog) while essentially benefitting big business with a tax rate cut for those companies. I'm reading Cloud Atlas and this calls to mind corpocracy.

Agreed. Big business isn't the strength of America...small business is (in my opinion). We shouldn't be giving advantages to either side, but certainly if I had to pick one, it wouldn't be big business.

(5) Why do some news outlets refer to the president as "Mr. Obama?" I'm of the opinion that he should be referred to as "President Obama" for the remainder of his life.

Amen. This annoys the hell out of me too. My cadets have to refer to the President as "The President", "President Obama", or "the Honorable Barack Obama" (which is how they must refer to him at drill meets, so it's good practice for them).

It's not that "Mr Obama" is really disrespectful...it's not, so much. But it's not as respectful as it SHOULD be.

[Woodruff]

Do you guys know what "repatriating" means?

Sure...that's when we turn a Muslim into a 'Merican!!!!!

[Teflon Kris]

I'm in favor of lower corporate tax rates.

Please change your avatar !!

This guy died for a reason, please dont take the p*ss !!

P.S. On a less-important note, point (4) is a joke - international companies move money around and pay tax in one place only, usually not where the money was made. They make as much money as possible. Full stop.

Don't you think it ironic that a man who died for a reason is plastered all over t-shirts? Perhaps you should read the caption closely.

Please explain how companies move money around and pay tax in one place only, usually not where the money was made. If you can explain that, I would like to offer you a job.

How would you 'Mericans like it if my avatar was a dood nailed to a cross with "Muslim Prophet. Killed by Jews." ??

Give me the job and I will do it

They all do it, very easy, simple departmental trickery.

Just tell me where you want to pay tax, install me in an office there (could be a tiny office for all it matters), put a sign on the door and job done

[Phatscotty]

Obama will only do this tax cut if his opponents allow more spending/debt.

[Nobunaga]

Meanwhile, small business taxes are jacked up to 40%.

http://www.weeklystandard.com/blogs/oba ... 42312.html

In a speech delivered Tuesday afternoon, Obama did not explain why he thinks it's a sound economic idea to raise the top marginal tax rate on small businesses but lower it for corporations.

...

[Phatscotty]

Meanwhile, small business taxes are jacked up to 40%.

http://www.weeklystandard.com/blogs/oba ... 42312.html

In a speech delivered Tuesday afternoon, Obama did not explain why he thinks it's a sound economic idea to raise the top marginal tax rate on small businesses but lower it for corporations.

...

I wonder if all the large corporations that will end up with these tax cuts are essentially the same large corporations that got waivers from Obamacare...

[Metsfanmax]

(3) 28% and 25% are still higher than a lot of tax rates around the world, so if the president thinks tax rates are the only or most important impediment to companies operating in the United States (hint - it isn't), but still leaves the corporate tax rates higher than most other places, how does that "create an incentive?" That question is, of course, rhetorical, but won't be asked by any of your media outlets.

If we assume that companies already do want to participate directly in the US market (for external reasons), and that the high tax rate is the most significant impediment to doing so, then lowering the tax rate makes it more likely for them to set up shop here. The rhetoric of your question is only meaningful if we assume that the tax rate is the single most important factor, as opposed to the single most important impediment.

[Serbia]

Meet a giant fish (like a boss)
Fuck his brains out (like a boss)

Bollocks.

[Woodruff]

Meet a giant fish (like a boss)
Fuck his brains out (like a boss)

Uh...too much rum tonight?

[thegreekdog]

I'm in favor of lower corporate tax rates.

Please change your avatar !!

This guy died for a reason, please dont take the p*ss !!

P.S. On a less-important note, point (4) is a joke - international companies move money around and pay tax in one place only, usually not where the money was made. They make as much money as possible. Full stop.

Don't you think it ironic that a man who died for a reason is plastered all over t-shirts? Perhaps you should read the caption closely.

Please explain how companies move money around and pay tax in one place only, usually not where the money was made. If you can explain that, I would like to offer you a job.

How would you 'Mericans like it if my avatar was a dood nailed to a cross with "Muslim Prophet. Killed by Jews." ??

That's cool by me. Knock yourself out.

Give me the job and I will do it

They all do it, very easy, simple departmental trickery.

Just tell me where you want to pay tax, install me in an office there (could be a tiny office for all it matters), put a sign on the door and job done

So you don't know what you're talking about. Cool.

[thegreekdog]

(3) 28% and 25% are still higher than a lot of tax rates around the world, so if the president thinks tax rates are the only or most important impediment to companies operating in the United States (hint - it isn't), but still leaves the corporate tax rates higher than most other places, how does that "create an incentive?" That question is, of course, rhetorical, but won't be asked by any of your media outlets.

If we assume that companies already do want to participate directly in the US market (for external reasons), and that the high tax rate is the most significant impediment to doing so, then lowering the tax rate makes it more likely for them to set up shop here. The rhetoric of your question is only meaningful if we assume that the tax rate is the single most important factor, as opposed to the single most important impediment.

I don't believe the president is concerned with companies participating in the United States market. His concern (rightfully) is whether companies want to perform their manufacturing activities in the United States. More manufacturing = more jobs.

So, again assuming taxes are the only factor/impediment/whatever in the determination of a company to locate a manufacturing plant in the United States, lowering the rate for manufacturers from 35% to 25% looks awesome, but really doesn't do anything when the tax rate in Ireland is 20%. I personally think labor cost is the most important factor/impediment/whatever - and that is offered without political commentary.

Quick sidebar - Generally speaking, a non-U.S. entity can participate in the United States market without tax repurcussions provided it does not have a "permanent establishment" in the United States. A manufacturing facility would give it a permanent establishment.

[Night Strike]

Quick sidebar - Generally speaking, a non-U.S. entity can participate in the United States market without tax repurcussions provided it does not have a "permanent establishment" in the United States. A manufacturing facility would give it a permanent establishment.

Oh virtual businesses.....they're so much fun to deal with. We had a group approach us last year to make a product for them and they were going to find another company to handle the formulation and marketing as this original business was just a holding group that contracts other companies to do the manufacturing. Turned out that the company they found to do the formulation and marketing wanted to use their own suppliers to also make the key material that we were going to make, so we lost that major purchase at the last minute. Really sucked.