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You’re not mentioning the outsize influence that corporations have on government which leads to them permitting these loopholes. It can be fixed by legislation.

You’re not mentioning the outsize influence that corporations have on government which leads to them permitting these loopholes. It can be fixed by legislation. In 1952 corporate tax in the US was 33% of total revenue. Today it’s less than 9%.

curiousgeorgio 9y ago
So, the same people who are already heavily influenced by corporations are somehow going to wave a magic wand to limit the influence of those who are influencing them? Not sure I believe that will happen (at least, not as long as free speech is still a thing). I don't doubt that it could happen - at least in theory - but in my opinion, we're already too far down that rabbit hole.
- Synaesthesia 9y ago
  No they won’t do it by themselves, they will only do it under pressure from the population. I’m also pessimistic but that doesn’t mean we should give up. There’s nothing about this that’s writ in stone.
- Top19 9y ago
  The United States typically goes through cycles of corporate vs government control. This also mirrors the cycle of state vs federal control. Arthur Schlesinger Jr, who won two Pulitzer prizes, wrote extensively about this. I know it’s hard to believe, but the next 15 years will see a dramatic rise of government power and higher corporate taxes. This will happen very suddenly with one party taking complete control of all the branches of government along with having a dominant ideology at their back. Doesn’t really matter if Republicans or Democrats are in control, we can see the progressives on the left like Sherrod Brown, and populists like Steve Bannon on the right (who has spoken highly of Senator Brown), advocating shockingly similar proposals.
charlesdm 9y ago
Corporate taxes abroad were also often higher than the US rate at the time. Now they are much lower. If you sell X in, say, the UK -- as a company you often have the option: book the profit in the UK, or in the US. There's not much laws can do to change that, that is just the way having the flexibility to structure your business in whatever way you prefer works. If you were to reduce the US corporate tax rate to 10%, a lot more profit would be booked in the US again.
- Synaesthesia 9y ago
  That’s all true, however corporations exist at the behest of the government. They could make laws against that, against taking money outside. For an extreme example, South Korea had the death penalty for capital flight. Quite extreme, I’m not advocating it but it did work. Furthermore most major corporations have had government involvement to attain their status, whether in the forum of subsidy, bailout or military procurement. Unfortunately most people aren’t aware of this “corporate welfare”. Basically corporations which are unaccountable concentrations of public power, should not be allowed to dictate to the government, which is at least in theory accountable to the public. Unfortunately the trend has been in the opposite direction.
- Clubber 9y ago
  >If you were to reduce the US corporate tax rate to 10%, a lot more profit would be booked in the US again. Until other countries lower theirs, then it's just a race to the bottom, no?
  - charlesdm 9y ago
    It's always a race to the bottom. Smaller countries (e.g. Ireland, Luxembourg, Malta, Cyprus) need a less broader tax base to cover their outgoings and thus will always be able to offer a low tax base. As a (larger) country, you can decide not to participate, but you'd be pricing yourself out of the market. Imo, it's smarter to tax shareholders more, and corporations less. Corporations are generally productive and having the statutory seat of a multinational company in your country leads to an increase of tax revenue, because 1) people will have jobs, 2) those people will pay income tax, sales tax, will spend at (mainly local) businesses whose shareholders will be taxed, etc. Dividend and capital gain taxes are generally also harder to avoid for the wealthy. At best you can defer them, so you'll always have to pay some tax if you want to spend $1-2-5m a year. Corporate taxes and income taxes are (very) easy to avoid. I wonder how much it would cost to completely eliminate corporate taxes but increase dividend and capital gain taxes to say, 35-40%. Now, that said, I don't think this will ever happen. People in power love their tax breaks too much.
    - 9y ago
rayiner 9y ago
Corporations have outsize influence on the government because they control jobs, which is the single thing Americans care about more than anything else. The Fortune 500 directly employ 17% of the U.S. workforce, and indirectly employ many more (e.g. employees of parts companies that sell to Ford/GM, contractors who install fiber for AT&T). The tax provisions companies take advantage of aren't "loopholes," they exist by design for the benefit of the companies that control the jobs. Comparing the corporate tax rate in 1952 to today is pointless. In 1952, the U.K. was a shell burned out from WWII. Today, it's a tax haven luring American companies to reincorporate there. You cannot fight this process with legislation--you'll just shoot yourself in the foot and drive companies out to other countries that will be happy to receive them. This isn't just a U.S. thing--even accounting for deductions and tax breaks, the U.S. has higher corporate tax rates than our competitor countries: http://www.npr.org/2017/08/07/541797699/fact-check-does-the-u-s-have-the-highest-corporate-tax-rate-in-the-world http://www.npr.org/2017/08/07/541797699/fact-check-does-the-.... The "real" amount of taxes paid in the U.S. is about 18.6%, versus 8.5% for Canada, 11.2% for France, and 4.1% for South Korea.
- Synaesthesia 9y ago
  I don’t think so. Why then the phenomenon which the government has permitted of outsourcing US jobs? Have the tax cuts created more jobs? Was there a condition attached that they need to employ more people? It’s quite simple, with financial power comes political power. Elections cost a lot of money these days and if you look at the donor list of both parties it’s dominated by large corporations. Edit: a more useful metric will be the percentage of total revenue paid by corporations. As can be seen the tax rate is misleading.
  - rayiner 9y ago
    > Why then the phenomenon which the government has permitted of outsourcing US jobs? The government doesn't "permit" outsourcing of U.S. jobs. Thanks to the technology created by folks here on HN, there is nothing the government can really do if IBM decides to fire a worker in New York and hire one in Bangalore. The only thing the government can really do is offer concessions and incentives to reduce the bleeding. > It’s quite simple, with financial power comes political power. Elections cost a lot of money these days and if you look at the donor list of both parties it’s dominated by large corporations. The party that spent the most money just lost the most recent major election, so I'm not convinced money really matters much. In reality, we spend a minuscule amount on politics given the size of the country. About 0.0037% of GDP on Presidential elections, and 0.019% of GDP on lobbying. For context, we spend less on lobbying each year than we do on specialty coffee. If money really bought elections, companies would spend a lot more of it trying to do so.
tooltalk 9y ago
Well, I think it's absurd to compare the post war (or the Korean war) tax rates to that of today. I think the effective corporate tax rates during the Reagan era would be more appropriate -- which then got whittled down again during the Clinton/Bush era. But I agree with you that you can't ignore corporations' outsized influence on corporate taxes.

curiousgeorgio 9y ago

So, the same people who are already heavily influenced by corporations are somehow going to wave a magic wand to limit the influence of those who are influencing them? Not sure I believe that will happen (at least, not as long as free speech is still a thing). I don't doubt that it could happen - at least in theory - but in my opinion, we're already too far down that rabbit hole.

Synaesthesia 9y ago
No they won’t do it by themselves, they will only do it under pressure from the population. I’m also pessimistic but that doesn’t mean we should give up. There’s nothing about this that’s writ in stone.
Top19 9y ago
The United States typically goes through cycles of corporate vs government control. This also mirrors the cycle of state vs federal control. Arthur Schlesinger Jr, who won two Pulitzer prizes, wrote extensively about this. I know it’s hard to believe, but the next 15 years will see a dramatic rise of government power and higher corporate taxes. This will happen very suddenly with one party taking complete control of all the branches of government along with having a dominant ideology at their back. Doesn’t really matter if Republicans or Democrats are in control, we can see the progressives on the left like Sherrod Brown, and populists like Steve Bannon on the right (who has spoken highly of Senator Brown), advocating shockingly similar proposals.

charlesdm 9y ago

Corporate taxes abroad were also often higher than the US rate at the time. Now they are much lower. If you sell X in, say, the UK -- as a company you often have the option: book the profit in the UK, or in the US. There's not much laws can do to change that, that is just the way having the flexibility to structure your business in whatever way you prefer works. If you were to reduce the US corporate tax rate to 10%, a lot more profit would be booked in the US again.

Synaesthesia 9y ago
That’s all true, however corporations exist at the behest of the government. They could make laws against that, against taking money outside. For an extreme example, South Korea had the death penalty for capital flight. Quite extreme, I’m not advocating it but it did work. Furthermore most major corporations have had government involvement to attain their status, whether in the forum of subsidy, bailout or military procurement. Unfortunately most people aren’t aware of this “corporate welfare”. Basically corporations which are unaccountable concentrations of public power, should not be allowed to dictate to the government, which is at least in theory accountable to the public. Unfortunately the trend has been in the opposite direction.
Clubber 9y ago
>If you were to reduce the US corporate tax rate to 10%, a lot more profit would be booked in the US again. Until other countries lower theirs, then it's just a race to the bottom, no?
- charlesdm 9y ago
  It's always a race to the bottom. Smaller countries (e.g. Ireland, Luxembourg, Malta, Cyprus) need a less broader tax base to cover their outgoings and thus will always be able to offer a low tax base. As a (larger) country, you can decide not to participate, but you'd be pricing yourself out of the market. Imo, it's smarter to tax shareholders more, and corporations less. Corporations are generally productive and having the statutory seat of a multinational company in your country leads to an increase of tax revenue, because 1) people will have jobs, 2) those people will pay income tax, sales tax, will spend at (mainly local) businesses whose shareholders will be taxed, etc. Dividend and capital gain taxes are generally also harder to avoid for the wealthy. At best you can defer them, so you'll always have to pay some tax if you want to spend $1-2-5m a year. Corporate taxes and income taxes are (very) easy to avoid. I wonder how much it would cost to completely eliminate corporate taxes but increase dividend and capital gain taxes to say, 35-40%. Now, that said, I don't think this will ever happen. People in power love their tax breaks too much.
  - 9y ago

rayiner 9y ago

Corporations have outsize influence on the government because they control jobs, which is the single thing Americans care about more than anything else. The Fortune 500 directly employ 17% of the U.S. workforce, and indirectly employ many more (e.g. employees of parts companies that sell to Ford/GM, contractors who install fiber for AT&T). The tax provisions companies take advantage of aren't "loopholes," they exist by design for the benefit of the companies that control the jobs. Comparing the corporate tax rate in 1952 to today is pointless. In 1952, the U.K. was a shell burned out from WWII. Today, it's a tax haven luring American companies to reincorporate there. You cannot fight this process with legislation--you'll just shoot yourself in the foot and drive companies out to other countries that will be happy to receive them. This isn't just a U.S. thing--even accounting for deductions and tax breaks, the U.S. has higher corporate tax rates than our competitor countries: http://www.npr.org/2017/08/07/541797699/fact-check-does-the-u-s-have-the-highest-corporate-tax-rate-in-the-world http://www.npr.org/2017/08/07/541797699/fact-check-does-the-.... The "real" amount of taxes paid in the U.S. is about 18.6%, versus 8.5% for Canada, 11.2% for France, and 4.1% for South Korea.

Synaesthesia 9y ago
I don’t think so. Why then the phenomenon which the government has permitted of outsourcing US jobs? Have the tax cuts created more jobs? Was there a condition attached that they need to employ more people? It’s quite simple, with financial power comes political power. Elections cost a lot of money these days and if you look at the donor list of both parties it’s dominated by large corporations. Edit: a more useful metric will be the percentage of total revenue paid by corporations. As can be seen the tax rate is misleading.
- rayiner 9y ago
  > Why then the phenomenon which the government has permitted of outsourcing US jobs? The government doesn't "permit" outsourcing of U.S. jobs. Thanks to the technology created by folks here on HN, there is nothing the government can really do if IBM decides to fire a worker in New York and hire one in Bangalore. The only thing the government can really do is offer concessions and incentives to reduce the bleeding. > It’s quite simple, with financial power comes political power. Elections cost a lot of money these days and if you look at the donor list of both parties it’s dominated by large corporations. The party that spent the most money just lost the most recent major election, so I'm not convinced money really matters much. In reality, we spend a minuscule amount on politics given the size of the country. About 0.0037% of GDP on Presidential elections, and 0.019% of GDP on lobbying. For context, we spend less on lobbying each year than we do on specialty coffee. If money really bought elections, companies would spend a lot more of it trying to do so.

tooltalk 9y ago

Well, I think it's absurd to compare the post war (or the Korean war) tax rates to that of today. I think the effective corporate tax rates during the Reagan era would be more appropriate -- which then got whittled down again during the Clinton/Bush era. But I agree with you that you can't ignore corporations' outsized influence on corporate taxes.