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Protecting tax revenue is not an answer. Accountants can move faster than lawmakers, and lawmakers may or may not prioritize this kind of a thing at any point

by Gratsby 11y ago

Protecting tax revenue is not an answer. Accountants can move faster than lawmakers, and lawmakers may or may not prioritize this kind of a thing at any point in time. The solution is to encourage and foster economic growth. The outliers like Apple with large cash reserves being held offshore should be dealt with individually. (Not calling them out, it's just that they are well known for it) You don't penalize them for being smart with their money, you simply incentivize them to use the money in-country. The news this election cycle seems to be a flurry of anti-1%/anti-corporate propoganda. There seems to be a feeling of take-take-take from these entities that took-took-took from us. That mindset simply does not work long term. Without real economic growth tax revenue is a finite and dwindling resource.

darawk 11y ago
Two things: Making companies pay their legally required tax bill is not 'taking'. It's just making them follow the spirit of the law. Secondly, accountants can only move faster than the law if there are loopholes - if you close those loopholes it does in fact get harder and harder for them to move around them, and it does in fact bring in more tax revenue. If it didn't, they wouldn't lobby against it. All that being said, the corporate income tax doesn't make a whole lot of sense in the first place and we should probably get rid of it and replace it with a more economically sound revenue stream. However, as long as the law is on the books, it ought to be enforced, and even moreso ought to be enforced fairly for large corporations and small.
- matt_wulfeck 11y ago
  > Making companies pay their legally required tax bill is not 'taking'. It's just making them follow the spirit of the law. They are following the law though. It's the law that allows this. If you create more laws that disencentive the behavior people will just find more loopholes. spirit of the law is meaningless here. Generally we don't consider anything illegal unless it is actually illegal. Are you following the spirit of the tax law when you itemize your deductions and get a nice tax break?
  - ksdale 11y ago
    Exactly! There is no "spirit" of the law. You don't give someone a speeding ticket for going 25 in a 25 because the spirit of the law is that they should be going slow.
  - darawk 11y ago
    I wasn't making a moral argument about the companies themselves. They are following the law, and that's fine. But the authors of the law did not intend for things like corporate inversions to be used to avoid tax bills. Again, this is not a moral judgment of the company. It's simply a flawed law. The law was poorly written and these companies have exploited that. That's ok, but we should fix the law.
- pink_dinner 11y ago
  The spirit of the law is much different than the actual law. What these companies are doing isn't illegal. Closing these loopholes may bring in some more revenue in the short-term, but if it no longer makes sense financially, they will just move their HQ to another country completly.
  - darawk 11y ago
    Ya I don't necessarily disagree. I think the economics should be considered. But I think we should fix the law so that it operates as intended, and/or re-evaluate the original intent in light of economic realities. What we should not do is say "hey wait, this bug is actually a feature, if we fix it, these companies will leave". That seems silly to me.
- djschnei 11y ago
  Ah, "spirit of the law". A favorite of the authoritarian (unless, of course, we are talking constitutional law). At what point do taxes become "taking"? Do they ever? I mean, why isn't the forceful confiscation of someones labor/result of labor considered "taking"? Just because in this one instance we change the definition? Seriously never understood this...
  - darawk 11y ago
    Well, i'm starting from the premise that governments have the right to levy taxes. If you'd like to argue that point we can do so, but that is not particularly relevant to this discussion.
    - djschnei 11y ago
      Nitpick: Governments don't have "the right" to do anything. We the people consent to grant them abilities. I think reasonable taxation is a perfectly legitimate function of government -- not many would argue that. However, we are light years away from reasonable taxation. I'm a year out of school and already I work over 6 months of the year to pay taxes... But, I digress... The law is the law. This notion that "the spirit of the law" is king is incredibly dangerous. Next level dangerous. Have you ever seen the tax code printed out? To argue that you should "just close the loopholes" is absurd. Also, the notion that if companies keep more of their earning then tax revenue will fall is a huge fallacy. If you over tax, tax revenue will fall. It's a proven fact, all over the world. The answer is to simplify the tax code. Create economic certainty (from a tax liability standpoint) and the economy, as well as tax revenue, will surge.
      - darawk 11y ago
        I don't disagree with any of that. I wasn't arguing that the spirit of the law should be enforced despite it not being written, I was arguing that the law should be rewritten to better conform to its spirit. And I agree that probably the best way of accomplishing that is to simplify the tax code. You'll get no argument from me there.
- danieltillett 11y ago
  Corporate income tax makes a lot of sense unless you want to see all productive assets end up in a corporate shell and untaxed. The solution is to pass a credit for the tax paid down to the shareholders which they can use against their own tax bill. We have this here in Australia (it is called Franking credits). I pay 30% tax on the profit of my company and when I pay a dividend to myself I also pass on franking credits for the tax paid on this profit which reduces my tax bill. This way income is only tax once not twice.
  - darawk 11y ago
    Ya, that is a real problem with just eliminating it. I think there are probably ways of working around that problem, but they may be messy. I don't think just giving shareholders a credit is sufficient though. Fundamentally the problem with the corporate income tax is that it takes away productive capital from companies - capital they could be using to hire more people, invest in R&D, etc. The reason we have a corporate income tax is that people think corporations = wealthy, and they want to tax the wealthy more. This is a fine goal, but it'd be better served by doing just that: taxing the wealthy more, rather than taking what would have been productive capital away from private enterprises.
    - danieltillett 11y ago
      The problem is if you don’t get the corporate and personal income taxes approximately equal is you end up with people basically running everything through a company. The nice thing about franking credits is they work like a LLC in making corporate income tax a pass-through structure to the shareholders. At the moment US companies don’t seem to be constrained by lack of capital, more a lack of profitable investment opportunities due to weak consumer demand. I ams sure making the 0.01% richer will help solve this.
- Gratsby 11y ago
  Two responses: If there was a flat tax of some sort, you might be able to say "pay their legally required tax bill" in this conversation, but considering that tax dues are the result of a formula derived from a set of laws that span multiple volumes, what is actually due is almost always subject to debate. It's not like paying $3.48 for a gallon of milk. Second, there are always loopholes. Unless you have a vastly simplified system the way you operate your companies' financials will always have a system where there are advantageous ways to structure finances where taxes are concerned. Moving money offshore is always a possibility. You can't force money to stay in the U.S. You can create an environment such that it's the most desirable place to keep it.
  - darawk 11y ago
    While there are certainly squabbles to be had around the edges, there are also clearcut cases where companies ought to be paying more. There are definitely gray areas, and those should be dealt with in a nuanced way. But many of these things are clearly exploitative. To your second response - your argument is akin to saying "there will always be security vulnerabilities, so why care about security?". Just because it will always be possible to evade taxes, doesn't mean we should give up and make it easy.
djschnei 11y ago
Bingo. This populist/protectionist agenda on both sides of the isle is incredibly troubling. Turns out it's also an incredibly effective way to drum up support. The president "retro-actively" changing tax code does nothing but create uncertainty.
FussyZeus 11y ago
This argument holds less and less water each year, what with Apple, Facebook and Google and company all sitting on an amount of wealth so insane that even they barely know how much money they actually have and with the middle class nearing extinction. At some point the corporate overlords are going to have to acknowledge that in order to maintain their positions, they're going to have to let some of the other people have some of the money, if for no other reason than so they can spend it. I don't hate the rich at all, I think they're acting rationally in a poorly designed system that incentivizes them to hoard more and more while the rest of us fight for the scraps, but that system can only go on so long.
- Gratsby 11y ago
  I'd love to have a debate with you offline about this. I think I've already gotten a little more political than appropriate for this community, and if not my response to this most certainly would be. I will only say that if you are tired of fighting for scraps - change your perspective, work your ass off, and earn yourself a bigger slice of pie. This is the United States of America. Everything is possible.
  - FussyZeus 11y ago
    I won't get into the politics further, but can I say it's amazing to me that Internet Economists always assume that the people complaining about the lack of economic opportunity in the U.S. both A) are not working hard enough to deserve it and B) are unhappy with their current economic state. For the record, I'm perfectly happy. I'd obviously enjoy a raise, but I don't need it, I have food on my table and an excellent lifestyle. The fact that I can appreciate that while saying, hey, maybe we should spread the prosperity around a little are not mutually exclusive and should be doable by any human being with empathy.
  - goldbrick 11y ago
    Preposterous. It might work for you, and it might even work for FuzzyZeus, but it's quite clearly impossible for everyone to "earn" themselves a bigger piece of pie.
DINKDINK 11y ago
>Apple with large cash reserves being held offshore should be dealt with individually. What evidence is there that the money Apple holds offshore was generated 'onshore'? If it is the case that funds that Apple holds offshore were generated offshore, it's unreasonable that an entity should pay taxes on it. How much income tax do you pay to countries you don't live in?
- Gratsby 11y ago
  None but anecdotal. I only used them as an example because they are frequently used as one, it was not any form of indictment.
- Infernal 11y ago
  > How much income tax do you pay to countries you don't live in? If you're a U.S. citizen living and working abroad, but spend 35 or more days in the U.S. in a given year, then the answer is - the same amount as if you lived and worked in the U.S. full-time. "If you’ve never lived abroad for an extended period of time, you probably don’t know the United States requires its citizens to continue to pay taxes back home. You are required to file taxes on foreign income even if you pay taxes in the host countries."[0] [0]https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/Filing-Taxes-While-Overseas/INF19130.html https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-T...
  - DINKDINK 11y ago
    An interesting tangent that I expected someone to bring up but not applicable to the scenario I illustrated: > How much income tax do you pay to _countries you don't live in?_
    - Infernal 11y ago
      That's my point... if you're a U.S. citizen, even if you don't live in the U.S., you still pay U.S. income tax. Edited to say, I agree with your larger point though. This situation is ridiculous, and income earned outside the U.S. should not be taxed by the U.S. gov't. in my opinion.

by Gratsby 11y ago

darawk 11y ago

Two things: Making companies pay their legally required tax bill is not 'taking'. It's just making them follow the spirit of the law. Secondly, accountants can only move faster than the law if there are loopholes - if you close those loopholes it does in fact get harder and harder for them to move around them, and it does in fact bring in more tax revenue. If it didn't, they wouldn't lobby against it. All that being said, the corporate income tax doesn't make a whole lot of sense in the first place and we should probably get rid of it and replace it with a more economically sound revenue stream. However, as long as the law is on the books, it ought to be enforced, and even moreso ought to be enforced fairly for large corporations and small.

matt_wulfeck 11y ago
> Making companies pay their legally required tax bill is not 'taking'. It's just making them follow the spirit of the law. They are following the law though. It's the law that allows this. If you create more laws that disencentive the behavior people will just find more loopholes. spirit of the law is meaningless here. Generally we don't consider anything illegal unless it is actually illegal. Are you following the spirit of the tax law when you itemize your deductions and get a nice tax break?
- ksdale 11y ago
  Exactly! There is no "spirit" of the law. You don't give someone a speeding ticket for going 25 in a 25 because the spirit of the law is that they should be going slow.
- darawk 11y ago
  I wasn't making a moral argument about the companies themselves. They are following the law, and that's fine. But the authors of the law did not intend for things like corporate inversions to be used to avoid tax bills. Again, this is not a moral judgment of the company. It's simply a flawed law. The law was poorly written and these companies have exploited that. That's ok, but we should fix the law.
pink_dinner 11y ago
The spirit of the law is much different than the actual law. What these companies are doing isn't illegal. Closing these loopholes may bring in some more revenue in the short-term, but if it no longer makes sense financially, they will just move their HQ to another country completly.
- darawk 11y ago
  Ya I don't necessarily disagree. I think the economics should be considered. But I think we should fix the law so that it operates as intended, and/or re-evaluate the original intent in light of economic realities. What we should not do is say "hey wait, this bug is actually a feature, if we fix it, these companies will leave". That seems silly to me.
djschnei 11y ago
Ah, "spirit of the law". A favorite of the authoritarian (unless, of course, we are talking constitutional law). At what point do taxes become "taking"? Do they ever? I mean, why isn't the forceful confiscation of someones labor/result of labor considered "taking"? Just because in this one instance we change the definition? Seriously never understood this...
- darawk 11y ago
  Well, i'm starting from the premise that governments have the right to levy taxes. If you'd like to argue that point we can do so, but that is not particularly relevant to this discussion.
  - djschnei 11y ago
    Nitpick: Governments don't have "the right" to do anything. We the people consent to grant them abilities. I think reasonable taxation is a perfectly legitimate function of government -- not many would argue that. However, we are light years away from reasonable taxation. I'm a year out of school and already I work over 6 months of the year to pay taxes... But, I digress... The law is the law. This notion that "the spirit of the law" is king is incredibly dangerous. Next level dangerous. Have you ever seen the tax code printed out? To argue that you should "just close the loopholes" is absurd. Also, the notion that if companies keep more of their earning then tax revenue will fall is a huge fallacy. If you over tax, tax revenue will fall. It's a proven fact, all over the world. The answer is to simplify the tax code. Create economic certainty (from a tax liability standpoint) and the economy, as well as tax revenue, will surge.
    - darawk 11y ago
      I don't disagree with any of that. I wasn't arguing that the spirit of the law should be enforced despite it not being written, I was arguing that the law should be rewritten to better conform to its spirit. And I agree that probably the best way of accomplishing that is to simplify the tax code. You'll get no argument from me there.
danieltillett 11y ago
Corporate income tax makes a lot of sense unless you want to see all productive assets end up in a corporate shell and untaxed. The solution is to pass a credit for the tax paid down to the shareholders which they can use against their own tax bill. We have this here in Australia (it is called Franking credits). I pay 30% tax on the profit of my company and when I pay a dividend to myself I also pass on franking credits for the tax paid on this profit which reduces my tax bill. This way income is only tax once not twice.
- darawk 11y ago
  Ya, that is a real problem with just eliminating it. I think there are probably ways of working around that problem, but they may be messy. I don't think just giving shareholders a credit is sufficient though. Fundamentally the problem with the corporate income tax is that it takes away productive capital from companies - capital they could be using to hire more people, invest in R&D, etc. The reason we have a corporate income tax is that people think corporations = wealthy, and they want to tax the wealthy more. This is a fine goal, but it'd be better served by doing just that: taxing the wealthy more, rather than taking what would have been productive capital away from private enterprises.
  - danieltillett 11y ago
    The problem is if you don’t get the corporate and personal income taxes approximately equal is you end up with people basically running everything through a company. The nice thing about franking credits is they work like a LLC in making corporate income tax a pass-through structure to the shareholders. At the moment US companies don’t seem to be constrained by lack of capital, more a lack of profitable investment opportunities due to weak consumer demand. I ams sure making the 0.01% richer will help solve this.
Gratsby 11y ago
Two responses: If there was a flat tax of some sort, you might be able to say "pay their legally required tax bill" in this conversation, but considering that tax dues are the result of a formula derived from a set of laws that span multiple volumes, what is actually due is almost always subject to debate. It's not like paying $3.48 for a gallon of milk. Second, there are always loopholes. Unless you have a vastly simplified system the way you operate your companies' financials will always have a system where there are advantageous ways to structure finances where taxes are concerned. Moving money offshore is always a possibility. You can't force money to stay in the U.S. You can create an environment such that it's the most desirable place to keep it.
- darawk 11y ago
  While there are certainly squabbles to be had around the edges, there are also clearcut cases where companies ought to be paying more. There are definitely gray areas, and those should be dealt with in a nuanced way. But many of these things are clearly exploitative. To your second response - your argument is akin to saying "there will always be security vulnerabilities, so why care about security?". Just because it will always be possible to evade taxes, doesn't mean we should give up and make it easy.

djschnei 11y ago

Bingo. This populist/protectionist agenda on both sides of the isle is incredibly troubling. Turns out it's also an incredibly effective way to drum up support. The president "retro-actively" changing tax code does nothing but create uncertainty.

FussyZeus 11y ago

This argument holds less and less water each year, what with Apple, Facebook and Google and company all sitting on an amount of wealth so insane that even they barely know how much money they actually have and with the middle class nearing extinction. At some point the corporate overlords are going to have to acknowledge that in order to maintain their positions, they're going to have to let some of the other people have some of the money, if for no other reason than so they can spend it. I don't hate the rich at all, I think they're acting rationally in a poorly designed system that incentivizes them to hoard more and more while the rest of us fight for the scraps, but that system can only go on so long.

Gratsby 11y ago
I'd love to have a debate with you offline about this. I think I've already gotten a little more political than appropriate for this community, and if not my response to this most certainly would be. I will only say that if you are tired of fighting for scraps - change your perspective, work your ass off, and earn yourself a bigger slice of pie. This is the United States of America. Everything is possible.
- FussyZeus 11y ago
  I won't get into the politics further, but can I say it's amazing to me that Internet Economists always assume that the people complaining about the lack of economic opportunity in the U.S. both A) are not working hard enough to deserve it and B) are unhappy with their current economic state. For the record, I'm perfectly happy. I'd obviously enjoy a raise, but I don't need it, I have food on my table and an excellent lifestyle. The fact that I can appreciate that while saying, hey, maybe we should spread the prosperity around a little are not mutually exclusive and should be doable by any human being with empathy.
- goldbrick 11y ago
  Preposterous. It might work for you, and it might even work for FuzzyZeus, but it's quite clearly impossible for everyone to "earn" themselves a bigger piece of pie.

DINKDINK 11y ago

>Apple with large cash reserves being held offshore should be dealt with individually. What evidence is there that the money Apple holds offshore was generated 'onshore'? If it is the case that funds that Apple holds offshore were generated offshore, it's unreasonable that an entity should pay taxes on it. How much income tax do you pay to countries you don't live in?

Gratsby 11y ago
None but anecdotal. I only used them as an example because they are frequently used as one, it was not any form of indictment.
Infernal 11y ago
> How much income tax do you pay to countries you don't live in? If you're a U.S. citizen living and working abroad, but spend 35 or more days in the U.S. in a given year, then the answer is - the same amount as if you lived and worked in the U.S. full-time. "If you’ve never lived abroad for an extended period of time, you probably don’t know the United States requires its citizens to continue to pay taxes back home. You are required to file taxes on foreign income even if you pay taxes in the host countries."[0] [0]https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/Filing-Taxes-While-Overseas/INF19130.html https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-T...
- DINKDINK 11y ago
  An interesting tangent that I expected someone to bring up but not applicable to the scenario I illustrated: > How much income tax do you pay to _countries you don't live in?_
  - Infernal 11y ago
    That's my point... if you're a U.S. citizen, even if you don't live in the U.S., you still pay U.S. income tax. Edited to say, I agree with your larger point though. This situation is ridiculous, and income earned outside the U.S. should not be taxed by the U.S. gov't. in my opinion.