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Any money that a corporation earns is either paid out as dividends (at which point it's taxable as individual income) or reinvested into growing the company Or

Any money that a corporation earns is either paid out as dividends (at which point it's taxable as individual income) or reinvested into growing the company Or goes into a giant pile of cash sitting somewhere offshore. How would you feel about a "you haven't paid out that money as a dividend and haven't reinvested it, fork it over now" tax?

philwelch 9y ago
It's only sitting offshore because of the corporate taxes. "Offshore" just means, "in a country with low or no corporate tax". Often, the offshore money is used as collateral for loans which are then used to reinvest in the company, because the interest is often cheaper than the tax. Eliminate corporate tax and the cash hoarding problem goes away. If it doesn't, then maybe there can be an evidence-based solution to that problem.
- ubernostrum 9y ago
  You presented an argument which relied on there being only the two options -- pay out a dividend, or reinvest. There aren't only two options, and zero corporate tax would not change that; a corporation could still choose to sit on a pile of cash if the corporate tax were zero, and it might well make sense to do so as a way for the investors to avoid personal tax on dividends.
  - philwelch 9y ago
    And if we removed part of the incentive for them to do that, and they did it less but still more often than we would like, then we would obviously want to solve that problem through a more targeted mechanism than the thing we are currently doing (namely high corporate taxes) which are making the problem worse.
    - ubernostrum 9y ago
      To be honest this feels like the same thing that's been sold as a miracle cure my entire life. Cut taxes, and if that doesn't work cut them more, then try a tax cut, and if you're still not getting what you hoped for then maybe a tax cut will work, and have you tried cutting taxes? We have decades of evidence that this doesn't work. I used to live in Kansas where the governor made a priority of his "March to Zero" on taxes, as a guaranteed sure-fire can't-fail way to make businesses happy and lead to more investment in business in the state, more businesses relocating there, more jobs, etc. And it was a complete and utter failure. It is now in the process of being repealed by people who were left with no choice other than to admit it failed. It is time for people who advocate this to understand that while it may sound great when deduced theoretically from first principles, it does not work in the real world.
      - philwelch 9y ago
        I'm not suggesting any kind of supply-side Laffer Curve argument. My argument is that corporate taxes are less efficient than individual taxes, not that taxes should be lower overall. I would prefer to increase income and capital gains taxes on high-income, high-net-worth individuals to offset the loss in revenue from reduced or eliminated corporate taxes.
        ubernostrum 9y ago
        What you're missing is that the "March to Zero" plan included implementing the things you're talking about. It did not have the effects you claim it would have. Your theories of why your proposals would be good have been empirically discredited. One big example: the elimination of taxes on business income did not suddenly result in much more efficient taxation, scrupulous payment of what was owed, and a boom in investment and expansion of businesses. It resulted in everybody and their brother scrambling to reclassify their personal income as the right kind of business income, in order to pay less tax. Revenue fell off a cliff and the state's deficit projections soared.
        philwelch 9y ago
        I'm claiming that corporations hold cash offshore to avoid paying federal corporate taxes. Kansas is categorically incapable of doing anything to solve that problem, so I don't see how your Kansas example is in any way relevant, unless there was an epidemic of Kansas businesses keeping stockpiles of cash in Nebraska for the purpose of avoiding state taxes.

philwelch 9y ago

It's only sitting offshore because of the corporate taxes. "Offshore" just means, "in a country with low or no corporate tax". Often, the offshore money is used as collateral for loans which are then used to reinvest in the company, because the interest is often cheaper than the tax. Eliminate corporate tax and the cash hoarding problem goes away. If it doesn't, then maybe there can be an evidence-based solution to that problem.

ubernostrum 9y ago
You presented an argument which relied on there being only the two options -- pay out a dividend, or reinvest. There aren't only two options, and zero corporate tax would not change that; a corporation could still choose to sit on a pile of cash if the corporate tax were zero, and it might well make sense to do so as a way for the investors to avoid personal tax on dividends.
- philwelch 9y ago
  And if we removed part of the incentive for them to do that, and they did it less but still more often than we would like, then we would obviously want to solve that problem through a more targeted mechanism than the thing we are currently doing (namely high corporate taxes) which are making the problem worse.
  - ubernostrum 9y ago
    To be honest this feels like the same thing that's been sold as a miracle cure my entire life. Cut taxes, and if that doesn't work cut them more, then try a tax cut, and if you're still not getting what you hoped for then maybe a tax cut will work, and have you tried cutting taxes? We have decades of evidence that this doesn't work. I used to live in Kansas where the governor made a priority of his "March to Zero" on taxes, as a guaranteed sure-fire can't-fail way to make businesses happy and lead to more investment in business in the state, more businesses relocating there, more jobs, etc. And it was a complete and utter failure. It is now in the process of being repealed by people who were left with no choice other than to admit it failed. It is time for people who advocate this to understand that while it may sound great when deduced theoretically from first principles, it does not work in the real world.
    - philwelch 9y ago
      I'm not suggesting any kind of supply-side Laffer Curve argument. My argument is that corporate taxes are less efficient than individual taxes, not that taxes should be lower overall. I would prefer to increase income and capital gains taxes on high-income, high-net-worth individuals to offset the loss in revenue from reduced or eliminated corporate taxes.
      - ubernostrum 9y ago
        What you're missing is that the "March to Zero" plan included implementing the things you're talking about. It did not have the effects you claim it would have. Your theories of why your proposals would be good have been empirically discredited. One big example: the elimination of taxes on business income did not suddenly result in much more efficient taxation, scrupulous payment of what was owed, and a boom in investment and expansion of businesses. It resulted in everybody and their brother scrambling to reclassify their personal income as the right kind of business income, in order to pay less tax. Revenue fell off a cliff and the state's deficit projections soared.
        philwelch 9y ago
        I'm claiming that corporations hold cash offshore to avoid paying federal corporate taxes. Kansas is categorically incapable of doing anything to solve that problem, so I don't see how your Kansas example is in any way relevant, unless there was an epidemic of Kansas businesses keeping stockpiles of cash in Nebraska for the purpose of avoiding state taxes.