Posted on 08/25/2014 8:43:05 AM PDT by BenLurkin
This has to do with two elements of the American tax system.
For one, the U.S. has the highest statutory corporate tax rate in the OECD, a combined rate of about 39 percent when taking into account federal and state taxes. Effective tax rates are harder to come by, but a report from the Tax Foundation found that the U.S. had the highest marginal effective corporate tax rate among developed country groups. It can be profitable then for U.S. firms to move offshore to reduce tax liabilities.
But there is another factor at play here as well. Most developed economies use what’s known as a “territorial” tax system. Under such an approach, income is only taxed when it’s earned domestically. So a U.K.-headquartered company will only pay U.K. taxes on its British income. The United States, however, employs a hybrid between a territorial and worldwide system. U.S. citizens and corporations are required to pay U.S. taxes on all income – even if that income is earned outside of the country. (The tax system provides credits for foreign taxes paid, which reduce or eliminate double taxation of income.) But foreign income is only taxed upon repatriation – when it is brought back to American shores. At this point the incentives should be fairly clear – companies have every reason to avoid bringing their earnings back to the U.S. if they were earned in a lower corporate tax rate country....
Simply put, a worldwide tax system puts American firms at a significant competitive disadvantage
(Excerpt) Read more at forbes.com ...
Apparently the law requires it but this can be reversed.
The law requires it if the corporation is headquartered here. That is why companies are doing inversions. Yes, the law should be changed. I am not sure why you seem to think "patriotism" requires the companies to keep their headquarters here just so they can keep paying US tax on money earned in other countries. Or am I misinterpreting your comments?
If you don't see a problem with the above, then you shouldn't see a problem with off-shoring. After all, that's what the above policy encourages.
If only products that were manufactured here in the US were included, you MIGHT have an argument. But the law encompasses even products made and sold overseas by US corporations if the money is returned to the US. In those cases, how is the US owed any taxes? They didn't provide the infrastructure for the manufacture or sale, their laws did not provide the protection (the host country did).
I am not in favor of corporate taxes to begin with, since corporations don't really pay taxes - the just take the money from the workers (in the form of lower pay), from the stockholders (in the form of lower dividends and stock price) and the customers (in the form of higher prices). But if they are to be imposed, then they should be as low as possible, and should not be applied to corporate activities that occur outside the jurisdiction of the US.
And you are in FAVOR of the government being able to steal your property before you are allowed to leave? I think you are on the wrong discussion board - you might be more at home at HuffPo or TPM...
You want to change your legal residency. Pay it on the way out like the rest US.
First too big to fail. Now too big to tax.
What to both results have in common?
TOO BIG.
Break them up.
You’re mixing apples and oranges— in a very big way.
Or put another way: Taxes don’t go to the country. They go to the government. And the government is NOT the country.
“BTW, would elimination of the business tax then lower consumer prices by 39 %?”
what do you think? I have my strong opinion.
I hope Theoria is on the correct discussion board.
Or is your every answer to debate the repression of debate?
If that's the case, your opinions can hardly be taken seriously because they are not informed opinions.
excellent point.
Corrections:
SOME corporations pay dividends.
Dividends are not tied to stock price.
The original argument was stock price fluctuations being taxed and being tied to double taxation.
Dividends you can try to make the double taxation argument on, but you cannot tie stock price to double taxation.
Now as to dividends:
Corporations are not required to pay Dividends, and Dividends are an optional payout that is not required to do business... therefore they are not a direct business expense.
They are not a baseline cost of doing business, they are a chosen expenditure and as not being related to a direct cost of doing business, the double taxation argument is certainly one that can be counter argued quite well.
They didn't provide the infrastructure for the manufacture or sale, their laws did not provide the protection (the host country did).
So that means we should reward them with lower taxes for offshoring American jobs?
What happened to government of the people?
Nice straw man. I didn't say he/she couldn't or shouldn't be here. No attempt to repress debate. I am merely pointing out that his/her post seems to support a very statist philosophy, since it appears he/she believes the government has a right to demand a ransom of a percentage of your wealth, on which you have already paid high taxes, as some sort of fee to "allow" you to leave, as if your wealth actually belongs to the government and they are being generous by allowing you to take a portion of it with you. That type of philosophy is expressed with great approval at sites like HuffPo and TPM, which is why I suggested he/she might be more at home there.
Turn the question around. Would raising the business tax to 60% raise prices, or not? You’ll find your answer.
Size has nothing to do with the tax issue, except as to the fact that only large corporations have the financial ability to take advantage of this method of reducing their tax burden. It is not the government's job to determine how big a company should get, any more than it is the government's job to rescue a failing company, regardless of how big it gets.
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