Corporate Taxes?

Discussion in 'Business & Economics' started by Bowser, Jul 2, 2017.

  1. Bowser Life is Fatal. Valued Senior Member

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    So a while back someone close to me read an article in the local paper. The gist of the article was that corporate taxes create jobs. When she told me this, I hesitated to respond because the premise was, for lack of better definition, stupid. Trying to put it in context, I asked her a simple question:

    After paying your taxes, do you have more or less money to spend?

    I believe corporate taxes are reasonable, providing they don't harm commerce. I'm thinking 15% at most. Your thoughts?
     
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  3. joepistole Deacon Blues Valued Senior Member

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    It depends upon circumstance. There is no fixed magic formula. There is no magic tax rate. Corporate taxes don't exist in a vacuum. You can make an argument for or against corporate taxation. But the tax rate, will, that's a little more nebulous. The optimal tax rate depends on economic circumstances and varies over time. There is no constant fixed optimal corporate tax rate.

    I'd love to see a 15% corporate tax rate. I would benefit from a 15 corporate tax rate. But if you want to get serious, a reform of our tax code is what's needed, not just a rate cut. We've had plenty of rate cuts. We don't treat all income equally. Some sources of income aren't recognized by the tax code as income, e.g. tax exempt bonds. Not all income is taxed equally. Some income isn't taxed at all, and some income receives special tax preferences, and not all income is taxed equally. Tax code revision could begin by taxing all income equally. Some corporations pay no corporate income tax and others pay as much as 39%. The tax code isn't equitable. But it doesn't look like Republicans want to significantly revise the tax code.

    From an economic perspective, we should be raising taxes. But if you ask me, 39% is too high and 0% is too low given our current circumstances. What we need is a more egalitarian tax code, and that would hurt me, because I have some of those tax preferenced investments.But it is the right thing to do.
     
    Last edited: Jul 2, 2017
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  5. iceaura Valued Senior Member

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    What was the premise?

    Obviously anything that provides a tax deduction while increasing the value of one's property - such as a productive employee - would be favored by the imposition of a tax. If the argument was well reasoned from that kind of premise, there wouldn't be much wrong with it.
     
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  7. Bowser Life is Fatal. Valued Senior Member

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  8. sideshowbob Sorry, wrong number. Valued Senior Member

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    That's an oversimplification. If nobody paid taxes, how would you get to work? There would be no roads.
     
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  9. River Ape Valued Senior Member

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    Well I was never a corporation, just a London retailer with shops and mail order sales, but taxing me a proportion of profits (perhaps at around 25%) seems reasonable enough. And what's certain, no one was ever put out of business or bankrupted by handing over a fraction of his profits. Unfortunately, that's not the only form of taxation and costs businesses get hammered with.

    Taxation of commercial property (business rates) has left many UK towns with rows of empty shops. Charges that increase the cost of labour to well above the amount actually paid over to the employee don't help. And employment legislation is a minefield. The desire of local government to extract the maximum possible revenue from motorists' parking charges are an additional burden on retail businesses in particular. (To offset these, should a shop need to sell CHEAPER than online to compete?) "Red tape" in the form of licenses, complicances, registrations and their associated fees (and worse still any legal costs) are of course a drain on the time, the energy and enthusiasm of any businessman. On top of all this, I was acting (for I am now retired) as a taxman for the government in the collection of ever-increasing rates of Value-Added Tax.

    Corporation Tax . . . least of my worries.
     
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  10. billvon Valued Senior Member

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    Not at all.
    Taxes pay for roads. People drive on roads to get to work. Without roads many people wouldn't be able to work.
    Taxes pay for infrastructure. Without sewers, power and communications, companies would have to shut down.
    Taxes pay for regulation. Without the FCC, the broadcast TV industry, the cellphone industry and the satellite TV industry could not exist in their current forms.
    Taxes pay for oversight. Without air traffic control, airlines could not exist in their current form.

    Take away all those taxes, and stop those services, and most of the US would be out of work.
    Less. Now some questions for you:

    Without roads, could you get to work? Could you get to a store? If you couldn't get to work, where would your money come from? And even if you had more money, how would you spend it?
     
  11. spidergoat Valued Senior Member

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    Taxes sometimes pay for office parks, and get this, special tax breaks to other corporations for moving there.
     
  12. Bowser Life is Fatal. Valued Senior Member

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    Yes, some taxes do help pay for some necessities, but they don't create jobs in the private domain. If we were all fortunate to work for the government...?
     
  13. iceaura Valued Senior Member

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    Without them, the private domain cannot create jobs. One of the necessities taxes pay for is the public infrastructure - legal, intellectual, and physical - that private capitalists use when creating jobs.
     
  14. billvon Valued Senior Member

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    Taxes support renewable energy development, and have for decades. Last year there were 260,000 solar jobs in the US, driven in large part by taxpayer funded research into solar-PV cell fabrication, tax incentives for installations and tax money for large utility installations.

    Other taxes - like the taxes that support roads - do both. They create jobs in the public domain (i.e. construction crews) and they enable jobs in the private domain (i.e. so you can drive to work, do your shopping and get your goods shipped to your customers.)

    How about you? Without roads, could you get to work or stores?
     
  15. spidergoat Valued Senior Member

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    Yeah they do.
     
  16. river Valued Senior Member

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    Tbe problem is , where is the updating the infrastructure of roads , bridges etc . Where is the evidence ?
     
  17. iceaura Valued Senior Member

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    Blown up in Iraq and buried in military stuff, sequestered in offshore bank accounts and foreign countries, handed over to medical and insurance company execs, used to build prisons, etc.

    The large tax cuts of the Reagan tenure have never been restored. Neither have the inefficiencies and misappropriations built into government operations by the Reagan Republicans since, been corrected.

    But you do see some benefits - the internet, say.
     
  18. Kittamaru Now nearly 40 pounds lighter. Staff Member

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    In PA at least, road construction is a year-long event it seems...
     
  19. billvon Valued Senior Member

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    Next to my company. A new overpass, and a new bypass for the 5/805 merge was completed about 5 years ago.

    The next big project will be the mid-coast trolley. They are working on it now, and it's about 20% complete.
     
  20. gmilam Valued Senior Member

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    In my neck of the woods (DFW) the road construction is everywhere.
     
  21. sideshowbob Sorry, wrong number. Valued Senior Member

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    Where do you think the government spends the money?
     
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  22. Xelor Registered Member

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    I think there is no best or ideal tax rate and seen through the lens of the question you posed to your friend, nobody in their right mind ascribes to the notion of "why pay less when one can pay more?"


    On the matter of federal income taxation of business (specifically corporate) profits, the U.S.' tax code is inefficient and inequitable. The problem isn't the rates of taxation, but rather that the tax code is used not only to produce revenue for the government, but also as a tool for encouraging or discouraging social and economic behavior. On a tactical level, the morass of deductions, exclusions, rules, and exceptions to the rules creates a situation whereby corporations, to minimize their tax burden, undertake behaviors that are just absurd.

    For example, absent the current convolutions of the U.S. tax code:
    • The convoluted ownership and parent-subsidiary organizational structures that all large companies have would not exist.
    • Businesses would have no need for a cadre of tax attorneys and tax accountants who pour over the tax code to find ways to avail companies of ways to minimize their tax liability by doing things such as forming an entity that holds cash revenue in lower tax-rate jurisdictions.
    • Determining what be an equitable and effective tax rate would be comparatively easy to determine -- it's the rate that, from corporations, generates enough income for governments to do the things it is tasked with doing and that also doesn't consume so much business profit that it materially dissuades businesses from forming and/or doing business in the U.S.
    The solution to the problem is to redesign the tax code so that effective tax rates and marginal tax rates are the same and yield the same quantity of tax revenue. The way to achieve that is not by adjusting the rates, but rather by aligning the definition of "taxable income" with the definition of "net income" as reported in a company's 10-K or, in the case of pass-through organizations, audited financial statements. As goes corporate/business taxation, one will observe that on their statement of income (i.e, tax returns) submitted to the IRS, a business may report that it earned, say, $80M. On the statement of income companies provide to stockholders, (potential) investors, creditors, etc., the exact same company for the exact same calendar period will attest to having earned vastly more, indeed the difference between reported tax income and reported business income is in some instances billions.

    IMO, the solution, with regard to corporate taxation is as follows:
    1. Discard the entirety of the current tax code.
    2. Define graduated income ranges. Make the ranges as large or small as seems reasonable. There is no reason there cannot be several hundred or or even a thousand income ranges.
    3. Assign an income tax rate to each income range.
    4. Stipulate that federal income tax liability is the liability of the parent company. That is to say, the income figures reported in an organization's consolidated statement of income (10-K) is the figure multiplied by the tax rate corresponding to the company's income range.
      • The sum could be net income, EBIT, EBITDA, net revenue, gross margin or some other sum. The viability of solution doesn't depend on what sum is chosen. It depends on there being congruity between the sum reported for financial reporting and the one upon which taxes are paid.
    5. Stipulate that the product of the math operation in step 4 is the corporation's tax liability.
    As go the tax rates under such a model, well, I suspect rates ranging between five percent and 15 percent would be fine. Thus, lets say that there are 250 explicit corporate income ranges defined. Insofar as there are 250 income ranges, the range of tax rates needs to be apportioned over those 250 ranges. That's easy to do: .10 รท 250 = 0.0004; therefore the different between the taxes paid in one bracket and the next will differ by 4/10,000ths of a point.

    Now that may seem absurd give that we like "easy" numbers, but the reality is that every corporation owns or has access to a calculator that can multiply whatever be their income by a decimal having any quantity of significant digits. The IRS will publish the income range-tax-rate tables. Corporations need only find their income figure in the table, multiply it by the decimal shown for that rate, write a check in the amount of the product, and mail the check to the IRS.

    What does that do to the IRS/Dept. of Treasury (DOTS)? Well, it gets rid of or shifts the role of a lot of IRS employees in that the compliance activities of the IRS will be greatly simplified and reduced in quantity because the figures that corporations report to present their operations/profitability in a positive a light so they can attract investors and secure credit are the same figures upon which the undesirable task of calculating tax liability would be calculated. The DOTS will surely need less money to perform its duty re: tax collection. How the DOTS/Congress opts to us the savings is anyone's guess.
     
  23. origin Trump is the best argument against a democracy. Valued Senior Member

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    Really?
    How about Boeing, GE and 1000's of other companies making products for the military. The amount of jobs that are tied to the defense industry is frightening. If all wars and conflicts stopped our economy would be in real trouble.

    Eisenhower warned us and instead of slowing down our move to the military industrial complex we embraced it...
     

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