16 ms·

Don't Lower Corporate Taxes, Abolish Them

135 points by aburan28 10y ago

eganist 10y ago
> Besides, liberated from corporate taxes, they'd have more freedom to increase wages. We've already played the trickle-down economics game. I don't recall it being all that successful.
- phkahler 10y ago
  Agreed. They would have the freedom to increase wages, but without any incentive to do so they won't. Instead they'll just increase dividends which are taxed at a lower rate than income. Hence the rich get richer. Simple.
  - witty_username 10y ago
    But non-rich people also invest in stocks. > They would have the freedom to increase wages, but without any incentive to do so they won't. Workers would go to the company with higher wages. And the company would be able to sustain higher wages as the tax is abolished.
    - 1_2__3 10y ago
      Not on any significant scale no. And trying to make the 99% buy into something by making that exact claim ("not only rich people own stocks") has been thoroughly debunked as propaganda. Yes, you are correct, but only academically. In practice the 99% benefit very little from the stock market while the 1% makes most of their money from it.
      - witty_username 10y ago
        Source for debunking? Many people indirectly purchase stocks through investments. For example, I might invest in a mutual fund which buys stock. Also, bonds and other instruments are linked to stock prices. So if stock prices go up, interest rates of bonds and debts go up too. Even if the 99% are not investing in stocks currently, they can in the future; so they can profit from corporate tax abolition.
        phkahler 10y ago
        The key is to ask what portion of ones income is from investments. Or simply the ability to quit working and live on the investment income. For most of the middle class, their investments are hoped to fund their retirement, not any portion of their current lifestyle. That's why it doesn't matter that so much is in tax deferred retirement accounts.
        witty_username 10y ago
        But it funds their current lifestyle indirectly as without investments one would have to cut down on expenses to save more for retirement. If tomorrow investments doubled money in a year, then people would work far less.
        phkahler 10y ago
        So saving for the future "funds their current lifestyle"? I don't see a sarcasm tag on that.
        witty_username 10y ago
        No sarcasm; I gave an explanation how that occurs indirectly in some sense. Essentially, with better investment earnings, you need to save less for retirement; which allows better current lifestyle. What would you do if investments doubled your money in a year?
    - deleted 10y ago
      [deleted]
    - banach 10y ago
      The point is that this policy disproportionately benefits rich people, who invest a lot more, and thus stand to gain a lot more.
      - witty_username 10y ago
        It is not disproportionate with respect to stock invested so non-rich people can invest in stocks. I do not see why rich people gaining disproportionately is a problem.
        banach 10y ago
        > I do not see why rich people gaining disproportionately is a problem. You are free to have that opinion, but I think that the majority of the people affected by these economic policies (who by definition cannot be rich) will disagree with you. I think that the debate of policy would be greatly improved if proposals started with a statement of fundamental axioms like these, from which the supposed merits of policies are derived.
        witty_username 10y ago
        > You are free to have that opinion, but I think that the majority of the people affected by these economic policies (who by definition cannot be rich) will disagree with you. Didn't you just say that rich people benefit? So the policy affects rich people positively.
        banach 10y ago
        It does, but they are a minority.
- witty_username 10y ago
  The article fails to point out that if corporate tax rates are reduced wages and/or shareholder profits have to increase—the money must go somewhere. So, if wages are not increased, company will make more profit after taxes and thus shareholders will make more money.
  - nicky0 10y ago
    Or they just keep it in a cash pile like Apple.
    - bhickey 10y ago
      Apple's cash pile includes a lot of overseas holdings. There simply aren't enough things for them to spend $60bn on. They don't want to repatriate the money because they'd get hit with (wait for it) taxes. If we eliminated corporate taxes while raising capital gains taxes, Apple would have an incentive to repatriate the cash and the piper would still get paid.
  - nicky0 10y ago
    Or they just keep it in a cash pile like Apple.
  - forgottenpass 10y ago
    The article fails to point out that if corporate tax rates are reduced wages and/or shareholder revenues have to increase—the money must go somewhere. Of course they fail to point that out, because there is a strong counterfactual in the way many rich companies let cash sit in bank accounts for an indefinite amount of time.
    - witty_username 10y ago
      Perhaps your wording was metaphorical, but the cash does not sit in bank accounts. Apple is investing the cash pile in securities. (http://www.marketwatch.com/story/apple-isnt-really-sitting-on-216-billion-in-cash-2016-01-26 http://www.marketwatch.com/story/apple-isnt-really-sitting-o...) If corporate tax is abolished, Apple's cash pile would enlargen and thus Apple's investments would increase which would increase other company's stock prices or bond yields.
coldcode 10y ago
The problem will come when you collide a corporate tax rate of 0% with tax cuts for the wealthy. The end result will be higher taxes for the rest of the population and no more services of any kind. Or even higher national debt. I suppose you could always raise duties on foreign imports to insane levels which would no doubt be popular politically. No idea what type of country that would result in.
vinceguidry 10y ago
Fuck. That. Why do you think the planet's largest companies are still the planet's largest companies? Because they've gotten in bed with government. That's why there's no income tax, because of regulatory capture. Of course Bloomberg wants to just give up the fight. Sure, corporate tax right now doesn't contribute much, but there's no reason why it can't. Yes, it's hard to enforce laws on entities with ginormous amounts of resources, but that doesn't mean we shouldn't at least try. The audacity of these people...
- 131012 10y ago
  Bloomberg L.P. would definitely love having to pay no taxes. So do I.
  - kuschku 10y ago
    I wouldn’t. I’d gladly pay even more taxes, tbh. Because taxes are the best RoI I can get. Every Eurocent of my taxes goes back to better education of society, better infrastructure, more investment in innovative technologies. Sure, I don’t get more money directly from it, but a very educated, modern society, with perfectly maintained infrastructure can save a lot of costs in many places, and increase your income even more.
    - AznHisoka 10y ago
      Its hard to feel that way for me when it takes days to get a government organization to respond to your queries (ie status of immigration or status of obamacare application)
    - prkua 10y ago
      So why don't you pay more? Is there a law in your country that prevents you from paying more than your are forced to? Aren't you allowed to donate money to your government? Sounds like this is the best investment a person can make.
      - kuschku 10y ago
rectang 10y ago
What a repulsively regressive proposal. The article would be more interesting it explored replacing corporate taxes with a wealth tax rather than an income tax.
- vixen99 10y ago
  'repulsively regressive' is an uninteresting cliched opinion. How about explaining why you take this view taking into account that the tax means that someone has less money to play with - could be employees, shareholders, consumers who pay higher prices for the goods produced or all three groups who might otherwise gain from business expansion. The money could go into a pot of course but it's used in the same ways ultimately.
  - pikzen 10y ago
    Because it doesn't happen. Employees are not going to be paid more. Shareholders are going to get more money, except that's it's going to be negligible if you're a small shareholder. Consumers are still going to pay the same price because they are already paying that price. Source: the last fifty years. At the very least.
  - banach 10y ago
    > 'repulsively regressive' is an uninteresting cliched opinion. Note that "regressive" is technically an accurate description of the suggested policy. > The money could go into a pot of course but it's used in the same ways ultimately. It is not necessarily used in the same way. One reason why progressive taxation is both socially and economically beneficial is that poor people spend a larger proportion of their income, and thus generate demand. The same money, given to the rich, will largely end up as savings.
darpa_escapee 10y ago
> It may look unfair to tax consumers to compensate for a major business tax holiday -- but then such a move would give businesses a strong incentive to keep prices lower to avoid a drop in demand. Besides, liberated from corporate taxes, they'd have more freedom to increase wages. We tried this with Reagan and everyone is still waiting for their increased wages.
- tobltobs 10y ago
  I did read this whole article because I was really curious which arguments would be used. And everything I could find was this BS.
- Amezarak 10y ago
  Indeed, I've heard the reverse argument, that with extremely high corporate taxes, companies find paying their employees more money a better use of their money than giving it away to the government, since at least they get something out of it, however marginal they think the gains might be.
  - blahi 10y ago
    So where are those high salaries in Denmark?
    - listentojohan 10y ago
      The corporate tax rate in Denmark is only around 23% (as far as I remember), a lot lower than the US tax rate.
    - Amezarak 10y ago
      Denmark's corporate tax rates don't appear to be that high. Their nominal tax rate is lower than the US tax rate. US corporate tax rates were once 52%, and it was in that context as well as very high income tax rates on top earners (i.e., the business elite) that this argument appeared to have generally been made.
  - deelowe 10y ago
adamnemecek 10y ago
Bloomberg being Bloomberg.
spraak 10y ago
This post, also on the front page right now argues to increase corporate tax https://news.ycombinator.com/item?id=13037810 https://news.ycombinator.com/item?id=13037810
pfraze 10y ago
TL;DR: corporate taxes can not be collected effectively due to off-shoring, and so should be replaced with taxes on private income or on consumption. It doesn't make a very compelling case. Consumption taxes slow spending, and private wealth can also evade taxation. EDIT: corrected, thanks rectang
- pfraze 10y ago
  What the article doesn't do, is make the economic case that less corporate taxation will increase investment. Credit for that, I guess.
  - 1_2__3 10y ago
    Almost certainly because they assume the reader takes that as fait accompli.
  - deleted 10y ago
    [deleted]
- Pica_soO 10y ago
  It could be collected, by prohibiting company's unwilling to pay taxes to access the market of a state.
  - pfraze 10y ago
    Im inclined to agree; the US market is too valuable for a corporation to ignore, and there's no simpler solution than rigorously pursuing collection.
    - nicky0 10y ago
      It's not so simple. How do you pursue collection of money that isn't owed?
  - nicky0 10y ago
    It's not like companies are point blank refusing. They simply take advantage of the rules as they stand.
a3n 10y ago
I'd be on board with this if one thing resulted: corporations would be prohibited from making political donations, or any sort of political activity. Not being a tax paying entity, they should have no "voice" in politics as a corporation.
- whatthesmack 10y ago
  I've never understood the logic of silencing companies (banning political donations, participation, etc). Companies are groups of people. People are free to speak (legally enshrined in many locales). Restricting how a company speaks seems to be restricting the decisions of a group of people to speak, and thus an individual's right to speak. With regards to the statement about being a "tax paying entity" or not to have a voice, that is an extremely dangerous road to go down. See "poll taxes".
  - maxxxxx 10y ago
    Considering that in corporations only a few people have a real say giving corporations political speech gives those few disproportional representation. They still can speak as much as they want but as individuals.
  - bhickey 10y ago
    Companies aren't just groups of people. They're groups of people that are specially organized and granted limited liability and other privileges. I don't mean to claim that companies should or shouldn't have political voice, but let's not pretend that there's something sacrosanct about incorporation.
  - a3n 10y ago
    > With regards to the statement about being a "tax paying entity" or not to have a voice, that is an extremely dangerous road to go down. See "poll taxes". Not at all. Every person has the potential to pay taxes, whether they do or not. We have wisely decided that people who make below some vague amount don't have to pay taxes. But they'd be eligible to pay if they made more money. As opposed to a theoretically non tax paying corporation. As for corporations "speaking", the people controlling the corporation are using the productivity of their workers to speak for those workers (if money is speech, that money came from the employees' productivity), whether their employees want the to or not. They're unjustly gaining extra speech, beyond their individual speech, which everyone already has a right to. EDIT: taxes and speech, I probably wasn't clear. Any person can vote, whether they pay taxes or not. They have skin in the game, because they're people. Their population determines congressional districts at every census, and corporations do not. I'm not saying you can't vote until you make enough to pay.
pg314 10y ago
The top five tech companies Apple, Microsoft, Alphabet, Cisco and Oracle had a total of $504bn of cash by the end of 2015. They have more money than they know what to do with. Lowering their tax rates will create exactly zero jobs and have no effect on wages.
- tonyedgecombe 10y ago
  They would probably return that money to shareholders which they don't feel they can do at the moment because it is mostly held outside the US.
  - jbuzbee 10y ago
    And returning that money to shareholders (dividends) would incur income tax to the recipient, thus the tax-man gets his due. A much better outcome than just holding cash overseas
    - pg314 10y ago
      If they return money to shareholders via buybacks, there is no tax. Only when the shareholder sells will potential capital gains be taxed.
      - ryanworl 10y ago
        Someone has to sell shares for Apple to buy them. Those sellers pay tax.
        pg314 10y ago
        If they realise capital gains and they live in the US. E.g. Belgian stockholders of Apple don't pay any taxes (not in Belgium, not in the US) on capital gains.
        jayd16 10y ago
        So now we'll just have private offshore holdings instead of business holdings?
raverbashing 10y ago
"liberated from corporate taxes, they'd have more freedom to increase wages" Really? Wages are a business expense, taxes are paid on profit. Hence wages have nothing to do with corporate tax.
matt4077 10y ago
There are literally two arguments in this waste of ink: 1. Enforcement is undermined by international competition and tax optimization ...which is like calling for the abolishment of the criminal code in the face of a rise in crime. There have actually been major advances in corporate taxation in the last decade or so. Switzerland is basically gone, so are Panama, Luxembourg, possibly Ireland and the Caymans as well. If the EU and US managed to cooperate, they could easily make the rules watertight. 2. liberated from corporate taxes, they'd have more freedom to increase wages ...which is complete BS because (a) it's never happened, and (b) only earnings (after costs such as wages) are taxed. If anything, the money could be better spend to lower associated costs of employment, such as health insurance. Or, you know, basically anything else: education, infrastructure, a decent life even for the less fortunate. His best argument is actually the counterargument he cites: you don't want corporations (...are people...) to sit on endless amounts of cash. It creates a power imbalance equal to that of billonaire dynasties. The "author" reaches new hights of asininity with his proposal to increase VAT instead, fully knowing that it is the most regressive possible taxation. You'd need VAT increases to 30%, which means a 30% tax on the lower third to half of society that lives paycheck-to-paycheck, but results in a 5% tax rate for the guy earning so much he can invest 3/4th of his income – no VAT on financial transactions etc.
cm2187 10y ago
Flat tax, no tax deductibility of debt. Let's make the system simpler, easier to enforce and comply with and eliminate all loopholes.
- Tomte 10y ago
  Flat tax ignores that people's ability to contribute differs vastly. Also, it ignores the decreasing marginal utility of money. That statement basically means "fuck the poor".
BillFranklin 10y ago
Their argument for abolishing the tax seems to be (a) it's not a big contibutor to GDP, (b) businesses might raise employee wages, and (c) we can control corps with other regulations. Reasons a and b seem to conflict. If corps already aren't paying tax, they have the cash ready to raise wages. Reason c ignores that there are similar loopholes to safety and environmental regulations too. Taxing corps is an answer to the problem that companies cost the government money (i.e. trucking companies use roads) while benefitting the state (employing people who consume and pay income tax). Maybe it's a good idea for the government to directly recoup the benefit of a company using state resources.
yabatopia 10y ago
Why stop at corporate taxes? Why not personal income taxes? Maybe it's time to transform myself into a corporation. No more taxes, limited liabilities, easy bankruptcy (student loans), can't go to jail even if I make a real mess (financial crisis of 2007, Wells Fargo, BP), welcome at exotic tax havens, tax breaks to move to another region... The ultimate lifehack: forget cloning yourself, just corporize!
- _pferreir_ 10y ago
  Why don't get why people are downvoting this. One may agree or disagree but it looks like a valid point.
  - bhickey 10y ago
    Folks might be downvoting because it isn't a valid point. If you incorporate you're required to pay yourself. The IRS will come down on your like a ton of bricks if they believe you're underpaying yourself. Unless you're a tax attorney, it's a very hazardous line of thinking to believe yourself smarter than the tax man.
    - leni536 10y ago
      One can consult with a tax attorney though.
- mypalmike 10y ago
  Lots of people do exactly this, as least for some portion of their finances. Buying houses through an llc and renting to oneself is not uncommon. You lose the tax benefits of interest deduction, but if you're paying cash that doesn't matter anyhow. Other large purchases like cars and boats are owned in similar arrangements. When you are financially independent (not working a W2 job), many of your financials are easily categorized as business-related, with all the tax benefits that incurs.
  - coredog64 10y ago
known 10y ago
No taxes; Just go and print currency;
- deleted 10y ago
  [deleted]
- wav-part 10y ago
  Only if they let https://en.wikipedia.org/wiki/Liberty_dollar_(private_currency) https://en.wikipedia.org/wiki/Liberty_dollar_(private_curren...
1_2__3 10y ago
It's extremely challenging not to read this article as satire.
strict9 10y ago
a few points made in original article, paraphrased: 1. lowering taxes will benefit consumers because corporations will lower prices (and definitely not maximize shareholder value) 2. taxes have loopholes and sweetheart deals, so we should level the playing field by rewarding their talents (or deep pockets) by eliminating everything 3. Only 10% of Federal tax revenue, despite the whales' best efforts at tax avoidance I think #1 is the most offensive. The idea of companies putting excess profit from tax removal into hands of consumers is the most laughable argument for removing corporate taxes I've ever heard.
nightcracker 10y ago
This rhetoric is ridiculous. If I were to stash trillions of income overseas to evade taxes, I'd go to jail, not have the law changed. > It may look unfair to tax consumers to compensate for a major business tax holiday -- but then such a move would give businesses a strong incentive to keep prices lower to avoid a drop in demand. A drop in demand? People are going to eat less food because taxes are now lower? Need less healthcare? Will move to a cheaper home? Just not use internet? Drive the car less to work and sit more at home? Supply/demand is crooked. It doesn't work for the majority of the goods the majority of the people purchase. Demand is fairly fixed and based on population, and supply is provided by the only bidder in your area. > Besides, liberated from corporate taxes, they'd have more freedom to increase wages. Does anyone still believe this 'trickle-down' hogwash? I really wonder when America will have its wake up call during its third part-time job to pay the rent that maybe change is needed, and that your government has no intention of making it.
- beat 10y ago
  If you had millions (much less trillions) in income to stash overseas, you wouldn't go to jail for it, even if it was flagrantly illegal. People don't go to jail for white-collar crime, generally. If you want to go to jail, try shoplifting.
  - alphabettsy 10y ago
    https://www.theguardian.com/film/2013/apr/08/wesley-snipes-released-prison https://www.theguardian.com/film/2013/apr/08/wesley-snipes-r...
    - cheez 10y ago
      Black guy. Different thing. I've noticed that many of the scapegoats for the flash crash, and other similar things are not white.
      - MustardTiger 10y ago
        https://en.wikipedia.org/wiki/Confirmation_bias https://en.wikipedia.org/wiki/Confirmation_bias
avar 10y ago
NPR has a recent podcast called "The No-Brainer Economic Platform" which includes changes to the tax codes that have a unanimous approval of economists across the political spectrum (e.g. abolishing corporate tax), but which they show via focus groups would be impossible to present to the public: http://www.npr.org/sections/money/2016/10/26/499490275/episode-387-the-no-brainer-economic-platform http://www.npr.org/sections/money/2016/10/26/499490275/episo... Their other plans include things like abolishing housing and medical subsidies, which they claim just leads to price inflation in the longer term, but which are obvious political suicides to propose. A text summary of the podcast is available at: http://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate http://www.npr.org/sections/money/2012/07/19/157047211/six-p... They did a follow-up episode where they hired an actor to play a politician advocating these policies, and tried to convince focus groups of voters: http://www.npr.org/sections/money/2016/11/02/500413695/episode-413-our-fake-candidate-meets-the-people http://www.npr.org/sections/money/2016/11/02/500413695/episo... The point of these episodes was not to try to present some absolute truth about economic policies, but rather to demonstrate that while there are certain things experts universally or near-universally agree on, convincing voters of these policies can be a hard sell. E.g. they argue that eliminating mortgage tax deduction would have the counter-intuitive long-term benefit of making houses more affordable. But when you try to explain that to people you've lost most of them once they realize that in the shorter term their existing mortgage would go up.
- Findeton 10y ago
  No-brainer in the sense that it doesn't work and no one should support abolishing corporate taxes.
  - deelowe 10y ago
    Good thing we got an expert to chime in and set those economists straight.
  - avar 10y ago
    Ironically this entire podcast series is about how it's impossible for politicians to have an educated conversation with the public about certain policies, due to the prevalence of knee-jerk comments like yours.
crazygringo 10y ago
I think the main argument for abolishing corporate taxes is that they're inherently regressive, if we assume that the taxes get passed on to either consumers (who may be poor) in the form of higher prices, or investors (like grandma holding retirement shares) in the form of lower stock prices. There's certainly an argument to made that corporate taxes should be abolished, and personal taxes increased instead (income and capital gains), where we can ensure that the equivalent amount of taxation is applied progressively, through higher tax rates on the rich. Because the key thing to remember is, corporations don't exist on their own -- they have human owners. So if you tax the rich owners directly, instead of taxing the corporation, you can get the same money but with finer-grained control -- you can progressively tax the rich owners more, and grandma's pension less. (Of course, if you don't believe in progressive taxation, then corporate tax, sales tax, property tax, etc. are all just fine.)
- moron4hire 10y ago
  Also, most people aren't employed by the type of giganto corporations people are mentioning in this thread, like Google or Apple. Most people are employed by the very long tail of small businesses, whose owners are decidedly not ultrarich demigods. From your small consultancies to the sort of cafe I'm sitting in right now, lowering the corporate income tax will have a huge impact on how many people they can employ and what sort of prices they can charge. All of the small business owners I know don't want to make themselves absurdly rich. They just want to have a comfortable, middle-class life and help other people do the same.
- tomp 10y ago
  Why would taxes be passed onto customers? The goal of the company is to optimize pre-tax profit, regardless of what kind of tax is slapped on top of it (as long as that tax isn't 100%).
  - crazygringo 10y ago
    "The cost of corporate taxes are usually split between the companies and the customers." http://www.cs.cmu.edu/~ref/econ101e.html http://www.cs.cmu.edu/~ref/econ101e.html
beat 10y ago
It's only half the picture. A major source - maybe the major source - of massive unfairness in the US tax code is the capital gains tax. Tax on capital gains is about half the tax on wage income. This is justified by the "double taxation" of corporate income tax. So abolish the corporate income tax, with its myriad loopholes and ineffectiveness, but treat capital gains as ordinary income. Wealthy individuals who make most of their income on capital gains rather than wages would then pay the same as the rest of us. I remember during the 2012 presidential election, when Mitt Romney finally released his tax returns, he paid less than 50% of my family's tax rate, on 100 times our income. How does that make any sense? If capital gains were taxed as ordinary income, his taxes would have been roughly the same as ours.
- soVeryTired 10y ago
  "Double taxation" is a crazy argument anyway. What's the difference between a tax of 40% and two successive taxations of 20%? (compounding aside)
  - beat 10y ago
    It's not crazy. Just self-serving. It makes total sense if your goal is to get out of paying taxes by convincing people you're getting ripped off.
- lazyjones 10y ago
  > Wealthy individuals who make most of their income on capital gains rather than wages would then pay the same as the rest of us. I remember during the 2012 presidential election, when Mitt Romney finally released his tax returns, he paid less than 50% of my family's tax rate, on 100 times our income. How does that make any sense? It's not an entirely accurate/honest picture. Romney's tax rate is lower because the income from his capital gains has already been taxed as corporate profits (well, assuming no tax evasion). I.e. the double taxation you mentioned affects him too, but it's not contained in his tax rate.
  - beat 10y ago
    Are you sure? What rate did those corporations pay? Remember, the article that triggered this is about how difficult it is to collect corporate taxes, how little revenue they really generate, and how they lead to tax-sheltering overseas. I think it's fair to say that Romney's effective tax rate, including the corporate taxes, do not rival the taxes my wife and I paid as middle class wage earners. And even if they did, what's wrong with my solution? It would be fair, and visibly fair, without the whiff of "Oh, you're just ignorant" to the naysayers.
coldplay 10y ago
The real enemy of the small-medium businesses http://failedevolution.blogspot.gr/2016/03/the-real-enemy-of-small-medium.html http://failedevolution.blogspot.gr/2016/03/the-real-enemy-of...
- dang 10y ago
  Please stop posting these links; most users here would consider that spamming HN, and get mad about it. You're welcome, of course, to participate in the community alongside the rest of us. However, please familiarize yourself with the site guidelines: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newswelcome.html https://news.ycombinator.com/newswelcome.html It's important to understand the purpose of HN: to gratify intellectual curiosity. That means it's not a site for political or ideological battle. Accounts that use it primarily for the latter purpose eventually get banned here.
wav-part 10y ago
Or have vote share = tax paid - service/goods provided. The democracy is weird corporation structure, the more share you have the less power you wield.
cmrdporcupine 10y ago
The USA has some of the highest corporate taxes in the developed world while simultaneously being the state that is arguably the most controlled and dominated by capitalist interests. It seems like a paradox until you put it under a different lens... As a Marxist I'm actually for the abolition of corporate taxes. I think they're an ineffective and counter-producitve means of raising revenue and simply make the state more dependent on corporate profits and power. But in return for the lowering of corporate taxes, I'm for socialization (which is not necessarily nationalization) of a whole bunch of key assets, legal and state support for worker-owned business and cooperatives, and broadly the transfer of power of much of what is now in corporate hands into the hands of the population as a whole.
- cmrdporcupine 10y ago
  Hah, downvoted for simultaneously pissing off libertarians and liberals. Gotta love hackernews.
- dragonwriter 10y ago
  > The USA has some of the highest corporate taxes in the developed world The US has low (substantially below average within the OECD) actual corporate taxes, though it has a high nominal rate of corporate taxation. (Various tax deductions, credits, etc. make the actual ultimate tax rate low.)
aplomb 10y ago
Increased wages (for the average worker) is the last thing companies will do with more cash - it's the gift that keeps taking if incentives are considered. We Americans manufactured and believe in a host of fables to explain the prosperity of the last 70 years...
jSully24 10y ago
Is the real question not about taxes but what to do about all this cash? Taxes are necessary. But in the case of corporations I think the problem is not about what the right corporate tax rate should be but instead what does a company do when they effectively have so much cash they can not find good options to invest that money in. If one of these companies suddenly reports a significant drop in cash due to aggressive investments in something that is failing (say, perhaps building an autonomous car) their stock will be punished, a very negative incentive. The real question: is a company investing this cash the right thing to do? IMO it is, we want that money at work, building something. I don’t believe taxes can solve this. Instead can we need to find a way for companies to be able to invest this money in new ideas but not be so punitive via the markets when they try things that fail.
soVeryTired 10y ago
I'd like to propose a rule for politicos to follow when discussing fiscal policy. I don't expect them to follow it, but I suppose everyone can dream. The rule is this: all proposals for changes to government spending must be revenue-neutral. That is, if you propose a tax cut somewhere, you must propose a tax hike somewhere else to explain how the cut would be paid for. Or if you don't want to propose another tax hike, you must specify what service will get cut as a consequence. Conversely, if you wish to propose a service, you must specify how you will raise the funds to pay for it. Anything else is wishful thinking, and is storing up trouble for the future.
- bhickey 10y ago
  This presumes that deficit spending is necessarily bad. When your borrowing rate is sub-inflationary, you'd have to be a dope to spend today dollars. The UK is still servicing debt on perpetual bonds from the 17th or 18th century. They carry a low interest rate, so it's cheaper to make payments rather than paying off the debt.
  - soVeryTired 10y ago
    I agree that deficit spending can be useful in some circumstances, but I think it should be more like a last resort rather than a first port of call. Otherwise, how can you argue against the reductio-ad-absurdum that all spending should be deficit spending?
    - bhickey 10y ago
      > [I]t should be more like a last resort rather than a first port of call. The obvious retort is that if all spending were deficit spending, people would stop lending us money. Rather than attaching unnecessary ideological baggage to tax policy, we should do the math. When deficit spending is cheap, we should exercise it. When it's expensive, taxes are wiser.
heisenbit 10y ago
It is scary to what extent corporate taxes can be avoided. Something is there is seriously broken and radical ideas are worth contemplating when the there is such a discrepancy between plan and outcome. Should profit be accruing unchecked in corporations? Certainly there should be some pay back to society as society bears some external costs. Not only that but there may be better places capital could be deployed. These can be different at different times - management doing reinvestment, shareholders moving capital elsewhere, employees spending and taxman spending. A robust scheme would employ a balanced approach. At any time one may be preferable and some will argue for extremes. But things are changing - always - until this time it will be different - only to return shortly later violently to mean. Discussion of corporate profits requires to also be looking at income tax and the treatment of dividends and capital gains is always being simplistic. But the essay is not trying to propose a solution. It is simply pointing out that there is a systemic escalating credibility problem: > It could be argued that the existence of a tax that countries cannot properly enforce is one of the factors undermining trust in governments and feeding populist movements. Bloomberg is not known for its social attitude and one may argue that they are advancing here a very liberalist agenda by talking up a fake problem. I give some leeway this time due the next paragraph: > There are other ways governments can keep corporations in check -- for example, through environmental, safety and labor regulations, which U.S. Republicans and Brexiters dislike but which ultimately benefit consumers in a way the corporate tax doesn't. There are also other ways governments can get the revenue -- for example, by paying more attention to private income from corporate dividends and pass-through entities, or the European way -- by placing an additional burden on consumption through a value-added tax. In the U.K., VAT contributes 10.7 percent of GDP to the budget. To compensate for the absence of a corporate tax, it would need to go up from 20 percent to 25 percent -- the level that currently exists in Sweden and Croatia, for example. Finding ways to tax that can not be escaped is critical. Also important is to find ways to tax that don't burden labor too much. However this approach needs to take into account that shifting (or acknowledging the fiat-accompli) of collecting tax from less sophisticated and mobile citizens and workers is putting pressure on well paid full time employment. Tariff free zones may not be so compatible with that approach. Last but not least - hoarding profits (most extreme in case of Apple) as it going on at the moment is a recent phenomena. There used to be a tax on that called inflation. Any balancing would need to look at where and with volume new money is entering the system and going nowhere.
mathattack 10y ago
I actually do get the core premise. Tax the owners via dividends and capital gains. An added tax in the middle is inefficient. Of course let's see this done in a revenue neutral way!
lazyjones 10y ago
Corporate taxes will be abolished soon by smart governments and replaced by (higher) personal income/wealth taxes. It's the only realistic solution to global tax competition because corporate entities are much more mobile and flexible than individuals (including shareholders). It's either higher taxes on dividends and lower/none on corporate profits, or diminishing tax income overall.
speeder 10y ago
The only problem I see with abolition of corporate taxes, is that it allow certain people to store their wealth "by proxy". advantages of zero corporate taxes: * lots of advantages for small business, too much to list. * big business don't need to shuttle cash offshore. * big business have more cash to worth with, if that is their intention... * less government money wasted on trying to collect those taxes. And probably several other advantages... but at least US have a major problem: stock ownership is counted as part of someone assets, but the value of those are only taxes if the person sells it or get dividends, with zero corporate taxes, it would be an incentive for CEOs, founders, etc... to just accumulate stock, never pay dividends, don't pay high salaries to themselves, but still throw their weigth around using their total assets as a hammer, for example by having their corporation buy stuff they want, or by taking loans to use the cash with the stock as collateral. This would effectively allow the richest to accumulate untold wealth while paying no taxes at all. The only way I can see zero corporate taxes working, is if you patch up some other areas first. Now, something I think is quite brilliant in US that already exists, is that US tends to tax only profits, for example lots of people upset with Trump not paying taxes when he had losses (at least when he said he had losses...) In Brazil you pay tax over your income, doesn't matter if you had profits with it, this leads to extreme price inflation, specially when production chains get longer, as people will charge for their stuff more and more to get over the taxes. For example, once I talked with a guy that made YoYos (the round toys on a string). The toys are simple, and cheap to make, but on the store where I met the guy, they wanted about 5 USD for a simple YoYo, and a better YoYo suitable for amateur competition was about 30 USD. The factory owner, told me that the 5 USD YoYo manufacturing cost was about 80 cents, but all the taxes summed when the factory sold to the distributor were in total about 40% of the INCOME, not the PROFIT, thus the factory sold to the distributor the YoYo for 3 USD, with 1.2 USD being paid in taxes, 80 cents covering the manufacturing costs, and 40 cents being their raw profits (ie: before paying employees, transport, dividends, marketing, whatnot). The storeowner, also aimed to have about 50 cents in profit, but his taxes were about 30% of the income (not profit). If it was in US, he could charge 3.5 USD, get 50 cents in profit, and tell the buyer he had to pay an extra 1 USD in taxes, but instead he had to charge 5 USD, he would pay 3 USD to the factory, earn 50 cents in profit, and pay 1.5 USD in taxes.
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figjamjam 10y ago
How about abolishing income tax in general and just have a consumption and land taxes. I live and run my company in a tax haven. I had to move here in order to be competitive internationally with other low tax jurisdictions. My only other option was to go out of business. In addition to not having to pay any income taxes I also don't have to report anything to the government or worry about the government, bank, isp, phone company etc spying on me. No need to worry about going to jail over a misinterpretation of the tax code. I don't have to worry about immigration issues. Healthcare is completely private and very affordable. Politics is a lot more boring when the parties are not fighting over who's in control over massive amounts of spending. Helps keep corruption down. Leaving SF and moving to a tax haven was the best decision I've ever made in my life. I'm culturally American, but I'm not a citizen. If the US were to adopt similar policies I'd love to move back. I'd bring money and jobs with me. But unless Texas succeeds I'm unlikely to see a western (anglosphere) country doing this in my lifetime.
- ridgeguy 10y ago
  Genuinely curious - what's your tax haven?
  - figjamjam 10y ago
    They're all rounghly the same. Some more expensive than others. I'm carribian based, I can't afford to be Switzerland based.
- deleted 10y ago
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kapauldo 10y ago
Two problems: 1) someone has to pay for the common roads, OSHA, FCC, etc., the things that enforce common consumer-business fairness, and 2) virtually no company pays this rate. Exxon, Facebook and verizon have paid 0% or close for years, so this is mostly a fake problem to disguise the real problem of tax loopholes.
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adhambadr 10y ago
"Besides, liberated from corporate taxes, they'd have more freedom to increase wages" yeah right .. we all know thats exactly what's going to happen!
barnacs 10y ago
Better yet, abolish for-profit corporations. Cap individual salaries at 1.5x median or something. Create a global or national direct crowdfunding platform. Have the population propose, vote on and fund causes with the excess money.
redler 10y ago
> Besides, liberated from corporate taxes, they'd have more freedom to increase wages. Are corporations desperately brainstorming to find ways to pay their employees more, only to be foiled by freedom-impinging corporate taxes? > The populist governments...need to deliver economic growth and benefits to the disenchanted workers who have brought them to power. One way to do it in a way everyone would understand would be to abolish the corporate tax The article posits replacing corporate tax with a 25% VAT. These disenchanted lower-income workers would see their cost of living increase substantially, but presumably they could dip into their newfound corporate tax savings to cover the difference.
zaroth 10y ago
The tax change I would like to see is a better way to support bootstrapped small companies whose working capital requirements are increasing as they grow. You start on Day 1 with $100 and sweat equity and grow your business. Year one you have $100k of revenue and $90k of expenses. You need that $10k in the bank as its now your monthly burn. Year 2 you grow to $400k and have $40k of net income. You need that $40k in the bank because it's now your monthly burn. Year 3 you grow to $1.2m and have $200k of net income. You need that $200k in the bank because... Ok, you get it. If you're funded you can burn those funds in the beginning and carry forward the losses as your capital requirements are growing. Otherwise you are stuck paying at least 40%, but can be much more depending on the states you do business in, not to mention the CPA cost is substantial just to make all the filings. It's really hard to bootstrap from $0 when every dollar you need to keep in the bank just to have 3 months expenses on hand, actually costs you $2. It's also really hard to get a line of credit that early in the business lifecycle, so it's quite a trap for bootstrapping companies. It would be really great if there was a way to defer the taxes on that early profit that is staying as working capital. Almost like the money shouldn't be taxed at the corporate level as long as the company is not holding more than X months of expenses. I've read there are taxes for holding "too much" money at the corporate level and not paying dividends, but apparently it's not really applied in practice? Or, again, only targeting smaller businesses who can't afford to play the necessary games.
matthew1471 10y ago
Okay I haven't spent very long thinking this through but if we think lower corporation taxes wouldn't lead to an increase in staff earnings (which I completely agree would be the case and for the article to suggest that is offensive) then why not change the corporation tax laws so that it'd be banded? The average salary across the whole organisation that people earn (with different bands for different sizes of businesses to prevent small groups of people making up shell businesses) are then factored into different corporation tax rates. You could financially incentivise companies to reward their workers, a big business giving its staff generous salaries could then pay almost no tax.. Then you go after the individual's tax instead. I'm sure there's flaws in this but I think the premise of financially incentivising companies to pay better wages could make the lower corporation tax idea more credible than just expecting it'll magically happen.
brownbat 10y ago
Eliminating corporate taxes ranked fairly well when Planet Money asked economists for policy proposals.[0] (All the proposals were things that have fairly broad agreement by left and right wing economists but are deeply unpopular to most people, like eliminating the mortgage interest deduction.) It wouldn't have been something I even considered before that episode, but one economist argued that people really find corporate taxes appealing because they're suspicious of concentrated wealth. But if we're trying to transfer wealth from the rich to the poor, we could just transfer wealth from the rich to the poor through more progressive income taxes. While I think they made a good prima facie case, there's one counterargument that I haven't seen explored. Cheating is positively correlated with tax rates. So if you have a variety of kinds of taxes, you can have lower rates than if you just have one source of revenue. You can reduce the incentive to cheat while collecting the same revenue. The "sweetheart deals" mentioned here are definitely aggravating though, they seem deeply unfair, and zero sum when states compete for the business.[2] I'd like more countries and states to adopt a "most favored company" rule, where any company can claim the same terms as the most favored company in that territory. Similar to how the WTO ensures fairness. If a state wants to eliminate corporate taxes, fine, whatever, but you can't just do it for one company whose execs took you out to a few ball games. [0] http://www.npr.org/sections/money/2012/10/18/163106924/a-tax-plan-that-economists-love-and-politicians-hate http://www.npr.org/sections/money/2012/10/18/163106924/a-tax... [1] Planet Money had another episode on that a few years back, on the state level.
- brownbat 10y ago
  Sorry, meant to attach this link for [1]/[2]. Also! My numbering is all wonky. :) http://www.npr.org/sections/money/2016/05/04/476799218/episode-699-why-did-the-job-cross-the-road http://www.npr.org/sections/money/2016/05/04/476799218/episo...
nathan_f77 10y ago
My knee-jerk reaction was that this sounds like a terrible idea. It sounds like something that very wealthy people would lobby for, in order to make themselves even wealthier and increase inequality. I had no idea that economists are almost unanimously in favor of this idea. (I listened to the NPR podcast mentioned here: https://news.ycombinator.com/item?id=13043744 https://news.ycombinator.com/item?id=13043744). So now I'm not sure why the majority of these comments are so opposed. Do people here not trust experts in the field of economics, in the same way that many people don't trust the scientists who warn about climate change?
ew 10y ago
I used to think this was the right move. Tax everyone personally and let corporations do what they do best. These days I have trouble reconciling the notion that in the near future we're going to need guaranteed minimum incomes for everyone as more and more jobs are automated. With fewer people working traditional jobs there will be even more incentive to shift the tax base toward the corporation and away from the individual. tldr: how does abolishing corporate tax jive with universal basic income?

135 points by aburan28 10y ago

> Besides, liberated from corporate taxes, they'd have more freedom to increase wages. We've already played the trickle-down economics game. I don't recall it being all that successful.

phkahler 10y ago
Agreed. They would have the freedom to increase wages, but without any incentive to do so they won't. Instead they'll just increase dividends which are taxed at a lower rate than income. Hence the rich get richer. Simple.
- witty_username 10y ago
  But non-rich people also invest in stocks. > They would have the freedom to increase wages, but without any incentive to do so they won't. Workers would go to the company with higher wages. And the company would be able to sustain higher wages as the tax is abolished.
  - 1_2__3 10y ago
    Not on any significant scale no. And trying to make the 99% buy into something by making that exact claim ("not only rich people own stocks") has been thoroughly debunked as propaganda. Yes, you are correct, but only academically. In practice the 99% benefit very little from the stock market while the 1% makes most of their money from it.
    - witty_username 10y ago
      Source for debunking? Many people indirectly purchase stocks through investments. For example, I might invest in a mutual fund which buys stock. Also, bonds and other instruments are linked to stock prices. So if stock prices go up, interest rates of bonds and debts go up too. Even if the 99% are not investing in stocks currently, they can in the future; so they can profit from corporate tax abolition.
      - phkahler 10y ago
        The key is to ask what portion of ones income is from investments. Or simply the ability to quit working and live on the investment income. For most of the middle class, their investments are hoped to fund their retirement, not any portion of their current lifestyle. That's why it doesn't matter that so much is in tax deferred retirement accounts.
        witty_username 10y ago
        But it funds their current lifestyle indirectly as without investments one would have to cut down on expenses to save more for retirement. If tomorrow investments doubled money in a year, then people would work far less.
        phkahler 10y ago
        So saving for the future "funds their current lifestyle"? I don't see a sarcasm tag on that.
        witty_username 10y ago
        No sarcasm; I gave an explanation how that occurs indirectly in some sense. Essentially, with better investment earnings, you need to save less for retirement; which allows better current lifestyle. What would you do if investments doubled your money in a year?
  - deleted 10y ago
    [deleted]
  - banach 10y ago
    The point is that this policy disproportionately benefits rich people, who invest a lot more, and thus stand to gain a lot more.
    - witty_username 10y ago
      It is not disproportionate with respect to stock invested so non-rich people can invest in stocks. I do not see why rich people gaining disproportionately is a problem.
      - banach 10y ago
        > I do not see why rich people gaining disproportionately is a problem. You are free to have that opinion, but I think that the majority of the people affected by these economic policies (who by definition cannot be rich) will disagree with you. I think that the debate of policy would be greatly improved if proposals started with a statement of fundamental axioms like these, from which the supposed merits of policies are derived.
        witty_username 10y ago
        > You are free to have that opinion, but I think that the majority of the people affected by these economic policies (who by definition cannot be rich) will disagree with you. Didn't you just say that rich people benefit? So the policy affects rich people positively.
        banach 10y ago
        It does, but they are a minority.
witty_username 10y ago
The article fails to point out that if corporate tax rates are reduced wages and/or shareholder profits have to increase—the money must go somewhere. So, if wages are not increased, company will make more profit after taxes and thus shareholders will make more money.
- nicky0 10y ago
  Or they just keep it in a cash pile like Apple.
  - bhickey 10y ago
    Apple's cash pile includes a lot of overseas holdings. There simply aren't enough things for them to spend $60bn on. They don't want to repatriate the money because they'd get hit with (wait for it) taxes. If we eliminated corporate taxes while raising capital gains taxes, Apple would have an incentive to repatriate the cash and the piper would still get paid.
- nicky0 10y ago
  Or they just keep it in a cash pile like Apple.
- forgottenpass 10y ago
  The article fails to point out that if corporate tax rates are reduced wages and/or shareholder revenues have to increase—the money must go somewhere. Of course they fail to point that out, because there is a strong counterfactual in the way many rich companies let cash sit in bank accounts for an indefinite amount of time.
  - witty_username 10y ago
    Perhaps your wording was metaphorical, but the cash does not sit in bank accounts. Apple is investing the cash pile in securities. (http://www.marketwatch.com/story/apple-isnt-really-sitting-on-216-billion-in-cash-2016-01-26 http://www.marketwatch.com/story/apple-isnt-really-sitting-o...) If corporate tax is abolished, Apple's cash pile would enlargen and thus Apple's investments would increase which would increase other company's stock prices or bond yields.

coldcode 10y ago

The problem will come when you collide a corporate tax rate of 0% with tax cuts for the wealthy. The end result will be higher taxes for the rest of the population and no more services of any kind. Or even higher national debt. I suppose you could always raise duties on foreign imports to insane levels which would no doubt be popular politically. No idea what type of country that would result in.

vinceguidry 10y ago

Fuck. That. Why do you think the planet's largest companies are still the planet's largest companies? Because they've gotten in bed with government. That's why there's no income tax, because of regulatory capture. Of course Bloomberg wants to just give up the fight. Sure, corporate tax right now doesn't contribute much, but there's no reason why it can't. Yes, it's hard to enforce laws on entities with ginormous amounts of resources, but that doesn't mean we shouldn't at least try. The audacity of these people...

131012 10y ago
Bloomberg L.P. would definitely love having to pay no taxes. So do I.
- kuschku 10y ago
  I wouldn’t. I’d gladly pay even more taxes, tbh. Because taxes are the best RoI I can get. Every Eurocent of my taxes goes back to better education of society, better infrastructure, more investment in innovative technologies. Sure, I don’t get more money directly from it, but a very educated, modern society, with perfectly maintained infrastructure can save a lot of costs in many places, and increase your income even more.
  - AznHisoka 10y ago
    Its hard to feel that way for me when it takes days to get a government organization to respond to your queries (ie status of immigration or status of obamacare application)
  - prkua 10y ago
    So why don't you pay more? Is there a law in your country that prevents you from paying more than your are forced to? Aren't you allowed to donate money to your government? Sounds like this is the best investment a person can make.
    - kuschku 10y ago

rectang 10y ago

What a repulsively regressive proposal. The article would be more interesting it explored replacing corporate taxes with a wealth tax rather than an income tax.

vixen99 10y ago
'repulsively regressive' is an uninteresting cliched opinion. How about explaining why you take this view taking into account that the tax means that someone has less money to play with - could be employees, shareholders, consumers who pay higher prices for the goods produced or all three groups who might otherwise gain from business expansion. The money could go into a pot of course but it's used in the same ways ultimately.
- pikzen 10y ago
  Because it doesn't happen. Employees are not going to be paid more. Shareholders are going to get more money, except that's it's going to be negligible if you're a small shareholder. Consumers are still going to pay the same price because they are already paying that price. Source: the last fifty years. At the very least.
- banach 10y ago
  > 'repulsively regressive' is an uninteresting cliched opinion. Note that "regressive" is technically an accurate description of the suggested policy. > The money could go into a pot of course but it's used in the same ways ultimately. It is not necessarily used in the same way. One reason why progressive taxation is both socially and economically beneficial is that poor people spend a larger proportion of their income, and thus generate demand. The same money, given to the rich, will largely end up as savings.

darpa_escapee 10y ago

> It may look unfair to tax consumers to compensate for a major business tax holiday -- but then such a move would give businesses a strong incentive to keep prices lower to avoid a drop in demand. Besides, liberated from corporate taxes, they'd have more freedom to increase wages. We tried this with Reagan and everyone is still waiting for their increased wages.

tobltobs 10y ago
I did read this whole article because I was really curious which arguments would be used. And everything I could find was this BS.
Amezarak 10y ago
Indeed, I've heard the reverse argument, that with extremely high corporate taxes, companies find paying their employees more money a better use of their money than giving it away to the government, since at least they get something out of it, however marginal they think the gains might be.
- blahi 10y ago
  So where are those high salaries in Denmark?
  - listentojohan 10y ago
    The corporate tax rate in Denmark is only around 23% (as far as I remember), a lot lower than the US tax rate.
  - Amezarak 10y ago
    Denmark's corporate tax rates don't appear to be that high. Their nominal tax rate is lower than the US tax rate. US corporate tax rates were once 52%, and it was in that context as well as very high income tax rates on top earners (i.e., the business elite) that this argument appeared to have generally been made.
- deelowe 10y ago

adamnemecek 10y ago

Bloomberg being Bloomberg.

spraak 10y ago

This post, also on the front page right now argues to increase corporate tax https://news.ycombinator.com/item?id=13037810 https://news.ycombinator.com/item?id=13037810

pfraze 10y ago

TL;DR: corporate taxes can not be collected effectively due to off-shoring, and so should be replaced with taxes on private income or on consumption. It doesn't make a very compelling case. Consumption taxes slow spending, and private wealth can also evade taxation. EDIT: corrected, thanks rectang

pfraze 10y ago
What the article doesn't do, is make the economic case that less corporate taxation will increase investment. Credit for that, I guess.
- 1_2__3 10y ago
  Almost certainly because they assume the reader takes that as fait accompli.
- deleted 10y ago
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Pica_soO 10y ago
It could be collected, by prohibiting company's unwilling to pay taxes to access the market of a state.
- pfraze 10y ago
  Im inclined to agree; the US market is too valuable for a corporation to ignore, and there's no simpler solution than rigorously pursuing collection.
  - nicky0 10y ago
    It's not so simple. How do you pursue collection of money that isn't owed?
- nicky0 10y ago
  It's not like companies are point blank refusing. They simply take advantage of the rules as they stand.

a3n 10y ago

I'd be on board with this if one thing resulted: corporations would be prohibited from making political donations, or any sort of political activity. Not being a tax paying entity, they should have no "voice" in politics as a corporation.

whatthesmack 10y ago
I've never understood the logic of silencing companies (banning political donations, participation, etc). Companies are groups of people. People are free to speak (legally enshrined in many locales). Restricting how a company speaks seems to be restricting the decisions of a group of people to speak, and thus an individual's right to speak. With regards to the statement about being a "tax paying entity" or not to have a voice, that is an extremely dangerous road to go down. See "poll taxes".
- maxxxxx 10y ago
  Considering that in corporations only a few people have a real say giving corporations political speech gives those few disproportional representation. They still can speak as much as they want but as individuals.
- bhickey 10y ago
  Companies aren't just groups of people. They're groups of people that are specially organized and granted limited liability and other privileges. I don't mean to claim that companies should or shouldn't have political voice, but let's not pretend that there's something sacrosanct about incorporation.
- a3n 10y ago
  > With regards to the statement about being a "tax paying entity" or not to have a voice, that is an extremely dangerous road to go down. See "poll taxes". Not at all. Every person has the potential to pay taxes, whether they do or not. We have wisely decided that people who make below some vague amount don't have to pay taxes. But they'd be eligible to pay if they made more money. As opposed to a theoretically non tax paying corporation. As for corporations "speaking", the people controlling the corporation are using the productivity of their workers to speak for those workers (if money is speech, that money came from the employees' productivity), whether their employees want the to or not. They're unjustly gaining extra speech, beyond their individual speech, which everyone already has a right to. EDIT: taxes and speech, I probably wasn't clear. Any person can vote, whether they pay taxes or not. They have skin in the game, because they're people. Their population determines congressional districts at every census, and corporations do not. I'm not saying you can't vote until you make enough to pay.

pg314 10y ago

The top five tech companies Apple, Microsoft, Alphabet, Cisco and Oracle had a total of $504bn of cash by the end of 2015. They have more money than they know what to do with. Lowering their tax rates will create exactly zero jobs and have no effect on wages.

tonyedgecombe 10y ago
They would probably return that money to shareholders which they don't feel they can do at the moment because it is mostly held outside the US.
- jbuzbee 10y ago
  And returning that money to shareholders (dividends) would incur income tax to the recipient, thus the tax-man gets his due. A much better outcome than just holding cash overseas
  - pg314 10y ago
    If they return money to shareholders via buybacks, there is no tax. Only when the shareholder sells will potential capital gains be taxed.
    - ryanworl 10y ago
      Someone has to sell shares for Apple to buy them. Those sellers pay tax.
      - pg314 10y ago
        If they realise capital gains and they live in the US. E.g. Belgian stockholders of Apple don't pay any taxes (not in Belgium, not in the US) on capital gains.
        jayd16 10y ago
        So now we'll just have private offshore holdings instead of business holdings?

raverbashing 10y ago

"liberated from corporate taxes, they'd have more freedom to increase wages" Really? Wages are a business expense, taxes are paid on profit. Hence wages have nothing to do with corporate tax.

matt4077 10y ago

There are literally two arguments in this waste of ink: 1. Enforcement is undermined by international competition and tax optimization ...which is like calling for the abolishment of the criminal code in the face of a rise in crime. There have actually been major advances in corporate taxation in the last decade or so. Switzerland is basically gone, so are Panama, Luxembourg, possibly Ireland and the Caymans as well. If the EU and US managed to cooperate, they could easily make the rules watertight. 2. liberated from corporate taxes, they'd have more freedom to increase wages ...which is complete BS because (a) it's never happened, and (b) only earnings (after costs such as wages) are taxed. If anything, the money could be better spend to lower associated costs of employment, such as health insurance. Or, you know, basically anything else: education, infrastructure, a decent life even for the less fortunate. His best argument is actually the counterargument he cites: you don't want corporations (...are people...) to sit on endless amounts of cash. It creates a power imbalance equal to that of billonaire dynasties. The "author" reaches new hights of asininity with his proposal to increase VAT instead, fully knowing that it is the most regressive possible taxation. You'd need VAT increases to 30%, which means a 30% tax on the lower third to half of society that lives paycheck-to-paycheck, but results in a 5% tax rate for the guy earning so much he can invest 3/4th of his income – no VAT on financial transactions etc.

cm2187 10y ago

Flat tax, no tax deductibility of debt. Let's make the system simpler, easier to enforce and comply with and eliminate all loopholes.

Tomte 10y ago
Flat tax ignores that people's ability to contribute differs vastly. Also, it ignores the decreasing marginal utility of money. That statement basically means "fuck the poor".

BillFranklin 10y ago

Their argument for abolishing the tax seems to be (a) it's not a big contibutor to GDP, (b) businesses might raise employee wages, and (c) we can control corps with other regulations. Reasons a and b seem to conflict. If corps already aren't paying tax, they have the cash ready to raise wages. Reason c ignores that there are similar loopholes to safety and environmental regulations too. Taxing corps is an answer to the problem that companies cost the government money (i.e. trucking companies use roads) while benefitting the state (employing people who consume and pay income tax). Maybe it's a good idea for the government to directly recoup the benefit of a company using state resources.

yabatopia 10y ago

Why stop at corporate taxes? Why not personal income taxes? Maybe it's time to transform myself into a corporation. No more taxes, limited liabilities, easy bankruptcy (student loans), can't go to jail even if I make a real mess (financial crisis of 2007, Wells Fargo, BP), welcome at exotic tax havens, tax breaks to move to another region... The ultimate lifehack: forget cloning yourself, just corporize!

_pferreir_ 10y ago
Why don't get why people are downvoting this. One may agree or disagree but it looks like a valid point.
- bhickey 10y ago
  Folks might be downvoting because it isn't a valid point. If you incorporate you're required to pay yourself. The IRS will come down on your like a ton of bricks if they believe you're underpaying yourself. Unless you're a tax attorney, it's a very hazardous line of thinking to believe yourself smarter than the tax man.
  - leni536 10y ago
    One can consult with a tax attorney though.
mypalmike 10y ago
Lots of people do exactly this, as least for some portion of their finances. Buying houses through an llc and renting to oneself is not uncommon. You lose the tax benefits of interest deduction, but if you're paying cash that doesn't matter anyhow. Other large purchases like cars and boats are owned in similar arrangements. When you are financially independent (not working a W2 job), many of your financials are easily categorized as business-related, with all the tax benefits that incurs.
- coredog64 10y ago

known 10y ago

No taxes; Just go and print currency;

deleted 10y ago
[deleted]
wav-part 10y ago
Only if they let https://en.wikipedia.org/wiki/Liberty_dollar_(private_currency) https://en.wikipedia.org/wiki/Liberty_dollar_(private_curren...

1_2__3 10y ago

It's extremely challenging not to read this article as satire.

strict9 10y ago

a few points made in original article, paraphrased: 1. lowering taxes will benefit consumers because corporations will lower prices (and definitely not maximize shareholder value) 2. taxes have loopholes and sweetheart deals, so we should level the playing field by rewarding their talents (or deep pockets) by eliminating everything 3. Only 10% of Federal tax revenue, despite the whales' best efforts at tax avoidance I think #1 is the most offensive. The idea of companies putting excess profit from tax removal into hands of consumers is the most laughable argument for removing corporate taxes I've ever heard.

nightcracker 10y ago

This rhetoric is ridiculous. If I were to stash trillions of income overseas to evade taxes, I'd go to jail, not have the law changed. > It may look unfair to tax consumers to compensate for a major business tax holiday -- but then such a move would give businesses a strong incentive to keep prices lower to avoid a drop in demand. A drop in demand? People are going to eat less food because taxes are now lower? Need less healthcare? Will move to a cheaper home? Just not use internet? Drive the car less to work and sit more at home? Supply/demand is crooked. It doesn't work for the majority of the goods the majority of the people purchase. Demand is fairly fixed and based on population, and supply is provided by the only bidder in your area. > Besides, liberated from corporate taxes, they'd have more freedom to increase wages. Does anyone still believe this 'trickle-down' hogwash? I really wonder when America will have its wake up call during its third part-time job to pay the rent that maybe change is needed, and that your government has no intention of making it.

beat 10y ago
If you had millions (much less trillions) in income to stash overseas, you wouldn't go to jail for it, even if it was flagrantly illegal. People don't go to jail for white-collar crime, generally. If you want to go to jail, try shoplifting.
- alphabettsy 10y ago
  https://www.theguardian.com/film/2013/apr/08/wesley-snipes-released-prison https://www.theguardian.com/film/2013/apr/08/wesley-snipes-r...
  - cheez 10y ago
    Black guy. Different thing. I've noticed that many of the scapegoats for the flash crash, and other similar things are not white.
    - MustardTiger 10y ago
      https://en.wikipedia.org/wiki/Confirmation_bias https://en.wikipedia.org/wiki/Confirmation_bias

avar 10y ago

NPR has a recent podcast called "The No-Brainer Economic Platform" which includes changes to the tax codes that have a unanimous approval of economists across the political spectrum (e.g. abolishing corporate tax), but which they show via focus groups would be impossible to present to the public: http://www.npr.org/sections/money/2016/10/26/499490275/episode-387-the-no-brainer-economic-platform http://www.npr.org/sections/money/2016/10/26/499490275/episo... Their other plans include things like abolishing housing and medical subsidies, which they claim just leads to price inflation in the longer term, but which are obvious political suicides to propose. A text summary of the podcast is available at: http://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate http://www.npr.org/sections/money/2012/07/19/157047211/six-p... They did a follow-up episode where they hired an actor to play a politician advocating these policies, and tried to convince focus groups of voters: http://www.npr.org/sections/money/2016/11/02/500413695/episode-413-our-fake-candidate-meets-the-people http://www.npr.org/sections/money/2016/11/02/500413695/episo... The point of these episodes was not to try to present some absolute truth about economic policies, but rather to demonstrate that while there are certain things experts universally or near-universally agree on, convincing voters of these policies can be a hard sell. E.g. they argue that eliminating mortgage tax deduction would have the counter-intuitive long-term benefit of making houses more affordable. But when you try to explain that to people you've lost most of them once they realize that in the shorter term their existing mortgage would go up.

Findeton 10y ago
No-brainer in the sense that it doesn't work and no one should support abolishing corporate taxes.
- deelowe 10y ago
  Good thing we got an expert to chime in and set those economists straight.
- avar 10y ago
  Ironically this entire podcast series is about how it's impossible for politicians to have an educated conversation with the public about certain policies, due to the prevalence of knee-jerk comments like yours.

crazygringo 10y ago

I think the main argument for abolishing corporate taxes is that they're inherently regressive, if we assume that the taxes get passed on to either consumers (who may be poor) in the form of higher prices, or investors (like grandma holding retirement shares) in the form of lower stock prices. There's certainly an argument to made that corporate taxes should be abolished, and personal taxes increased instead (income and capital gains), where we can ensure that the equivalent amount of taxation is applied progressively, through higher tax rates on the rich. Because the key thing to remember is, corporations don't exist on their own -- they have human owners. So if you tax the rich owners directly, instead of taxing the corporation, you can get the same money but with finer-grained control -- you can progressively tax the rich owners more, and grandma's pension less. (Of course, if you don't believe in progressive taxation, then corporate tax, sales tax, property tax, etc. are all just fine.)

moron4hire 10y ago
Also, most people aren't employed by the type of giganto corporations people are mentioning in this thread, like Google or Apple. Most people are employed by the very long tail of small businesses, whose owners are decidedly not ultrarich demigods. From your small consultancies to the sort of cafe I'm sitting in right now, lowering the corporate income tax will have a huge impact on how many people they can employ and what sort of prices they can charge. All of the small business owners I know don't want to make themselves absurdly rich. They just want to have a comfortable, middle-class life and help other people do the same.
tomp 10y ago
Why would taxes be passed onto customers? The goal of the company is to optimize pre-tax profit, regardless of what kind of tax is slapped on top of it (as long as that tax isn't 100%).
- crazygringo 10y ago
  "The cost of corporate taxes are usually split between the companies and the customers." http://www.cs.cmu.edu/~ref/econ101e.html http://www.cs.cmu.edu/~ref/econ101e.html

beat 10y ago

It's only half the picture. A major source - maybe the major source - of massive unfairness in the US tax code is the capital gains tax. Tax on capital gains is about half the tax on wage income. This is justified by the "double taxation" of corporate income tax. So abolish the corporate income tax, with its myriad loopholes and ineffectiveness, but treat capital gains as ordinary income. Wealthy individuals who make most of their income on capital gains rather than wages would then pay the same as the rest of us. I remember during the 2012 presidential election, when Mitt Romney finally released his tax returns, he paid less than 50% of my family's tax rate, on 100 times our income. How does that make any sense? If capital gains were taxed as ordinary income, his taxes would have been roughly the same as ours.

soVeryTired 10y ago
"Double taxation" is a crazy argument anyway. What's the difference between a tax of 40% and two successive taxations of 20%? (compounding aside)
- beat 10y ago
  It's not crazy. Just self-serving. It makes total sense if your goal is to get out of paying taxes by convincing people you're getting ripped off.
lazyjones 10y ago
> Wealthy individuals who make most of their income on capital gains rather than wages would then pay the same as the rest of us. I remember during the 2012 presidential election, when Mitt Romney finally released his tax returns, he paid less than 50% of my family's tax rate, on 100 times our income. How does that make any sense? It's not an entirely accurate/honest picture. Romney's tax rate is lower because the income from his capital gains has already been taxed as corporate profits (well, assuming no tax evasion). I.e. the double taxation you mentioned affects him too, but it's not contained in his tax rate.
- beat 10y ago
  Are you sure? What rate did those corporations pay? Remember, the article that triggered this is about how difficult it is to collect corporate taxes, how little revenue they really generate, and how they lead to tax-sheltering overseas. I think it's fair to say that Romney's effective tax rate, including the corporate taxes, do not rival the taxes my wife and I paid as middle class wage earners. And even if they did, what's wrong with my solution? It would be fair, and visibly fair, without the whiff of "Oh, you're just ignorant" to the naysayers.

coldplay 10y ago

The real enemy of the small-medium businesses http://failedevolution.blogspot.gr/2016/03/the-real-enemy-of-small-medium.html http://failedevolution.blogspot.gr/2016/03/the-real-enemy-of...

dang 10y ago
Please stop posting these links; most users here would consider that spamming HN, and get mad about it. You're welcome, of course, to participate in the community alongside the rest of us. However, please familiarize yourself with the site guidelines: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newswelcome.html https://news.ycombinator.com/newswelcome.html It's important to understand the purpose of HN: to gratify intellectual curiosity. That means it's not a site for political or ideological battle. Accounts that use it primarily for the latter purpose eventually get banned here.

wav-part 10y ago

Or have vote share = tax paid - service/goods provided. The democracy is weird corporation structure, the more share you have the less power you wield.

cmrdporcupine 10y ago

The USA has some of the highest corporate taxes in the developed world while simultaneously being the state that is arguably the most controlled and dominated by capitalist interests. It seems like a paradox until you put it under a different lens... As a Marxist I'm actually for the abolition of corporate taxes. I think they're an ineffective and counter-producitve means of raising revenue and simply make the state more dependent on corporate profits and power. But in return for the lowering of corporate taxes, I'm for socialization (which is not necessarily nationalization) of a whole bunch of key assets, legal and state support for worker-owned business and cooperatives, and broadly the transfer of power of much of what is now in corporate hands into the hands of the population as a whole.

cmrdporcupine 10y ago
Hah, downvoted for simultaneously pissing off libertarians and liberals. Gotta love hackernews.
dragonwriter 10y ago
> The USA has some of the highest corporate taxes in the developed world The US has low (substantially below average within the OECD) actual corporate taxes, though it has a high nominal rate of corporate taxation. (Various tax deductions, credits, etc. make the actual ultimate tax rate low.)

aplomb 10y ago

Increased wages (for the average worker) is the last thing companies will do with more cash - it's the gift that keeps taking if incentives are considered. We Americans manufactured and believe in a host of fables to explain the prosperity of the last 70 years...

jSully24 10y ago

Is the real question not about taxes but what to do about all this cash? Taxes are necessary. But in the case of corporations I think the problem is not about what the right corporate tax rate should be but instead what does a company do when they effectively have so much cash they can not find good options to invest that money in. If one of these companies suddenly reports a significant drop in cash due to aggressive investments in something that is failing (say, perhaps building an autonomous car) their stock will be punished, a very negative incentive. The real question: is a company investing this cash the right thing to do? IMO it is, we want that money at work, building something. I don’t believe taxes can solve this. Instead can we need to find a way for companies to be able to invest this money in new ideas but not be so punitive via the markets when they try things that fail.

soVeryTired 10y ago

I'd like to propose a rule for politicos to follow when discussing fiscal policy. I don't expect them to follow it, but I suppose everyone can dream. The rule is this: all proposals for changes to government spending must be revenue-neutral. That is, if you propose a tax cut somewhere, you must propose a tax hike somewhere else to explain how the cut would be paid for. Or if you don't want to propose another tax hike, you must specify what service will get cut as a consequence. Conversely, if you wish to propose a service, you must specify how you will raise the funds to pay for it. Anything else is wishful thinking, and is storing up trouble for the future.

bhickey 10y ago
This presumes that deficit spending is necessarily bad. When your borrowing rate is sub-inflationary, you'd have to be a dope to spend today dollars. The UK is still servicing debt on perpetual bonds from the 17th or 18th century. They carry a low interest rate, so it's cheaper to make payments rather than paying off the debt.
- soVeryTired 10y ago
  I agree that deficit spending can be useful in some circumstances, but I think it should be more like a last resort rather than a first port of call. Otherwise, how can you argue against the reductio-ad-absurdum that all spending should be deficit spending?
  - bhickey 10y ago
    > [I]t should be more like a last resort rather than a first port of call. The obvious retort is that if all spending were deficit spending, people would stop lending us money. Rather than attaching unnecessary ideological baggage to tax policy, we should do the math. When deficit spending is cheap, we should exercise it. When it's expensive, taxes are wiser.

heisenbit 10y ago

It is scary to what extent corporate taxes can be avoided. Something is there is seriously broken and radical ideas are worth contemplating when the there is such a discrepancy between plan and outcome. Should profit be accruing unchecked in corporations? Certainly there should be some pay back to society as society bears some external costs. Not only that but there may be better places capital could be deployed. These can be different at different times - management doing reinvestment, shareholders moving capital elsewhere, employees spending and taxman spending. A robust scheme would employ a balanced approach. At any time one may be preferable and some will argue for extremes. But things are changing - always - until this time it will be different - only to return shortly later violently to mean. Discussion of corporate profits requires to also be looking at income tax and the treatment of dividends and capital gains is always being simplistic. But the essay is not trying to propose a solution. It is simply pointing out that there is a systemic escalating credibility problem: > It could be argued that the existence of a tax that countries cannot properly enforce is one of the factors undermining trust in governments and feeding populist movements. Bloomberg is not known for its social attitude and one may argue that they are advancing here a very liberalist agenda by talking up a fake problem. I give some leeway this time due the next paragraph: > There are other ways governments can keep corporations in check -- for example, through environmental, safety and labor regulations, which U.S. Republicans and Brexiters dislike but which ultimately benefit consumers in a way the corporate tax doesn't. There are also other ways governments can get the revenue -- for example, by paying more attention to private income from corporate dividends and pass-through entities, or the European way -- by placing an additional burden on consumption through a value-added tax. In the U.K., VAT contributes 10.7 percent of GDP to the budget. To compensate for the absence of a corporate tax, it would need to go up from 20 percent to 25 percent -- the level that currently exists in Sweden and Croatia, for example. Finding ways to tax that can not be escaped is critical. Also important is to find ways to tax that don't burden labor too much. However this approach needs to take into account that shifting (or acknowledging the fiat-accompli) of collecting tax from less sophisticated and mobile citizens and workers is putting pressure on well paid full time employment. Tariff free zones may not be so compatible with that approach. Last but not least - hoarding profits (most extreme in case of Apple) as it going on at the moment is a recent phenomena. There used to be a tax on that called inflation. Any balancing would need to look at where and with volume new money is entering the system and going nowhere.

mathattack 10y ago

I actually do get the core premise. Tax the owners via dividends and capital gains. An added tax in the middle is inefficient. Of course let's see this done in a revenue neutral way!

lazyjones 10y ago

Corporate taxes will be abolished soon by smart governments and replaced by (higher) personal income/wealth taxes. It's the only realistic solution to global tax competition because corporate entities are much more mobile and flexible than individuals (including shareholders). It's either higher taxes on dividends and lower/none on corporate profits, or diminishing tax income overall.

speeder 10y ago

The only problem I see with abolition of corporate taxes, is that it allow certain people to store their wealth "by proxy". advantages of zero corporate taxes: * lots of advantages for small business, too much to list. * big business don't need to shuttle cash offshore. * big business have more cash to worth with, if that is their intention... * less government money wasted on trying to collect those taxes. And probably several other advantages... but at least US have a major problem: stock ownership is counted as part of someone assets, but the value of those are only taxes if the person sells it or get dividends, with zero corporate taxes, it would be an incentive for CEOs, founders, etc... to just accumulate stock, never pay dividends, don't pay high salaries to themselves, but still throw their weigth around using their total assets as a hammer, for example by having their corporation buy stuff they want, or by taking loans to use the cash with the stock as collateral. This would effectively allow the richest to accumulate untold wealth while paying no taxes at all. The only way I can see zero corporate taxes working, is if you patch up some other areas first. Now, something I think is quite brilliant in US that already exists, is that US tends to tax only profits, for example lots of people upset with Trump not paying taxes when he had losses (at least when he said he had losses...) In Brazil you pay tax over your income, doesn't matter if you had profits with it, this leads to extreme price inflation, specially when production chains get longer, as people will charge for their stuff more and more to get over the taxes. For example, once I talked with a guy that made YoYos (the round toys on a string). The toys are simple, and cheap to make, but on the store where I met the guy, they wanted about 5 USD for a simple YoYo, and a better YoYo suitable for amateur competition was about 30 USD. The factory owner, told me that the 5 USD YoYo manufacturing cost was about 80 cents, but all the taxes summed when the factory sold to the distributor were in total about 40% of the INCOME, not the PROFIT, thus the factory sold to the distributor the YoYo for 3 USD, with 1.2 USD being paid in taxes, 80 cents covering the manufacturing costs, and 40 cents being their raw profits (ie: before paying employees, transport, dividends, marketing, whatnot). The storeowner, also aimed to have about 50 cents in profit, but his taxes were about 30% of the income (not profit). If it was in US, he could charge 3.5 USD, get 50 cents in profit, and tell the buyer he had to pay an extra 1 USD in taxes, but instead he had to charge 5 USD, he would pay 3 USD to the factory, earn 50 cents in profit, and pay 1.5 USD in taxes.

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figjamjam 10y ago

How about abolishing income tax in general and just have a consumption and land taxes. I live and run my company in a tax haven. I had to move here in order to be competitive internationally with other low tax jurisdictions. My only other option was to go out of business. In addition to not having to pay any income taxes I also don't have to report anything to the government or worry about the government, bank, isp, phone company etc spying on me. No need to worry about going to jail over a misinterpretation of the tax code. I don't have to worry about immigration issues. Healthcare is completely private and very affordable. Politics is a lot more boring when the parties are not fighting over who's in control over massive amounts of spending. Helps keep corruption down. Leaving SF and moving to a tax haven was the best decision I've ever made in my life. I'm culturally American, but I'm not a citizen. If the US were to adopt similar policies I'd love to move back. I'd bring money and jobs with me. But unless Texas succeeds I'm unlikely to see a western (anglosphere) country doing this in my lifetime.

ridgeguy 10y ago
Genuinely curious - what's your tax haven?
- figjamjam 10y ago
  They're all rounghly the same. Some more expensive than others. I'm carribian based, I can't afford to be Switzerland based.
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kapauldo 10y ago

Two problems: 1) someone has to pay for the common roads, OSHA, FCC, etc., the things that enforce common consumer-business fairness, and 2) virtually no company pays this rate. Exxon, Facebook and verizon have paid 0% or close for years, so this is mostly a fake problem to disguise the real problem of tax loopholes.

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adhambadr 10y ago

"Besides, liberated from corporate taxes, they'd have more freedom to increase wages" yeah right .. we all know thats exactly what's going to happen!

barnacs 10y ago

Better yet, abolish for-profit corporations. Cap individual salaries at 1.5x median or something. Create a global or national direct crowdfunding platform. Have the population propose, vote on and fund causes with the excess money.

redler 10y ago

> Besides, liberated from corporate taxes, they'd have more freedom to increase wages. Are corporations desperately brainstorming to find ways to pay their employees more, only to be foiled by freedom-impinging corporate taxes? > The populist governments...need to deliver economic growth and benefits to the disenchanted workers who have brought them to power. One way to do it in a way everyone would understand would be to abolish the corporate tax The article posits replacing corporate tax with a 25% VAT. These disenchanted lower-income workers would see their cost of living increase substantially, but presumably they could dip into their newfound corporate tax savings to cover the difference.

zaroth 10y ago

The tax change I would like to see is a better way to support bootstrapped small companies whose working capital requirements are increasing as they grow. You start on Day 1 with $100 and sweat equity and grow your business. Year one you have $100k of revenue and $90k of expenses. You need that $10k in the bank as its now your monthly burn. Year 2 you grow to $400k and have $40k of net income. You need that $40k in the bank because it's now your monthly burn. Year 3 you grow to $1.2m and have $200k of net income. You need that $200k in the bank because... Ok, you get it. If you're funded you can burn those funds in the beginning and carry forward the losses as your capital requirements are growing. Otherwise you are stuck paying at least 40%, but can be much more depending on the states you do business in, not to mention the CPA cost is substantial just to make all the filings. It's really hard to bootstrap from $0 when every dollar you need to keep in the bank just to have 3 months expenses on hand, actually costs you $2. It's also really hard to get a line of credit that early in the business lifecycle, so it's quite a trap for bootstrapping companies. It would be really great if there was a way to defer the taxes on that early profit that is staying as working capital. Almost like the money shouldn't be taxed at the corporate level as long as the company is not holding more than X months of expenses. I've read there are taxes for holding "too much" money at the corporate level and not paying dividends, but apparently it's not really applied in practice? Or, again, only targeting smaller businesses who can't afford to play the necessary games.

matthew1471 10y ago

Okay I haven't spent very long thinking this through but if we think lower corporation taxes wouldn't lead to an increase in staff earnings (which I completely agree would be the case and for the article to suggest that is offensive) then why not change the corporation tax laws so that it'd be banded? The average salary across the whole organisation that people earn (with different bands for different sizes of businesses to prevent small groups of people making up shell businesses) are then factored into different corporation tax rates. You could financially incentivise companies to reward their workers, a big business giving its staff generous salaries could then pay almost no tax.. Then you go after the individual's tax instead. I'm sure there's flaws in this but I think the premise of financially incentivising companies to pay better wages could make the lower corporation tax idea more credible than just expecting it'll magically happen.

brownbat 10y ago

Eliminating corporate taxes ranked fairly well when Planet Money asked economists for policy proposals.[0] (All the proposals were things that have fairly broad agreement by left and right wing economists but are deeply unpopular to most people, like eliminating the mortgage interest deduction.) It wouldn't have been something I even considered before that episode, but one economist argued that people really find corporate taxes appealing because they're suspicious of concentrated wealth. But if we're trying to transfer wealth from the rich to the poor, we could just transfer wealth from the rich to the poor through more progressive income taxes. While I think they made a good prima facie case, there's one counterargument that I haven't seen explored. Cheating is positively correlated with tax rates. So if you have a variety of kinds of taxes, you can have lower rates than if you just have one source of revenue. You can reduce the incentive to cheat while collecting the same revenue. The "sweetheart deals" mentioned here are definitely aggravating though, they seem deeply unfair, and zero sum when states compete for the business.[2] I'd like more countries and states to adopt a "most favored company" rule, where any company can claim the same terms as the most favored company in that territory. Similar to how the WTO ensures fairness. If a state wants to eliminate corporate taxes, fine, whatever, but you can't just do it for one company whose execs took you out to a few ball games. [0] http://www.npr.org/sections/money/2012/10/18/163106924/a-tax-plan-that-economists-love-and-politicians-hate http://www.npr.org/sections/money/2012/10/18/163106924/a-tax... [1] Planet Money had another episode on that a few years back, on the state level.

brownbat 10y ago
Sorry, meant to attach this link for [1]/[2]. Also! My numbering is all wonky. :) http://www.npr.org/sections/money/2016/05/04/476799218/episode-699-why-did-the-job-cross-the-road http://www.npr.org/sections/money/2016/05/04/476799218/episo...

nathan_f77 10y ago

My knee-jerk reaction was that this sounds like a terrible idea. It sounds like something that very wealthy people would lobby for, in order to make themselves even wealthier and increase inequality. I had no idea that economists are almost unanimously in favor of this idea. (I listened to the NPR podcast mentioned here: https://news.ycombinator.com/item?id=13043744 https://news.ycombinator.com/item?id=13043744). So now I'm not sure why the majority of these comments are so opposed. Do people here not trust experts in the field of economics, in the same way that many people don't trust the scientists who warn about climate change?

ew 10y ago

I used to think this was the right move. Tax everyone personally and let corporations do what they do best. These days I have trouble reconciling the notion that in the near future we're going to need guaranteed minimum incomes for everyone as more and more jobs are automated. With fewer people working traditional jobs there will be even more incentive to shift the tax base toward the corporation and away from the individual. tldr: how does abolishing corporate tax jive with universal basic income?