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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 hav

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.
  - KGIII 9y ago
    Capital gains are taxed at the same level as income tax, except when they are long-term investments, meaning longer than a year. The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability. Take that away and I have no incentive to invest in stability but have every reason to disrupt the market and take advantage of the swings. I'm not sure you want that.
    - charlesdm 9y ago
      As capital holders we will always have an incentive to invest. It's a way to let our money work for us, without having to put in time. Also don't forget companies wouldn't get taxed; the companies you hold would not have to pay corporate tax, so there would be more $$'s available to distribute to shareholders. You wouldn't actually be receiving less money after tax. > The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability. Since most equities are held by tax exempt entities (whether that is domestic or abroad, e.g. pension funds or hedge funds in a tax haven), this argument doesn't make sense. The stock price of AAPL or YELP is not going to tank because an individual investors sells (barring perhaps the CEO). The tax rate is lower generally to account for inflation. But not all countries have sliding capital gains tax rates. The UK has a 28% rate, most capital gains are exempt in Belgium and the Netherlands (but the latter has a small wealth tax), France just introduced a 30% rate, etc.
- refurb 9y ago
  then it's just a race to the bottom, no? The "race to the bottom" is the reason why free markets are so prosperous. Each business independently works to reduce costs and competition forces companies to share those savings with consumers. The best example of the "race to the bottom" stopping are monopolies (often gov't supported) like Comcast where they can sit fat and happy raking in a ton of profits and telling consumers to shove it.
  - charlesdm 9y ago
    Tax at the end of the day is just another cost for any business of significant size. Often the largest.
  - s73ver_ 9y ago
    But in this case, we're not talking about business. We're talking about the funding to pave our roads, run our schools, be able to fight fires, and all that other good stuff we need.
    - refurb 9y ago
      The gov't is well within their right to change the tax code as they see fit. And they do all the time. It's not like we're seeing tax receipts declining. They've done nothing but increase over the last 100 years.
      - ionised 9y ago
        > They've done nothing but increase over the last 100 years. Have they increased in line with the larger national budgets required for basic public services?
s73ver_ 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." Which would do what, exactly, for most people? Precisely nothing. And they'd use loopholes to bring their tax burden down to 0 anyway.
- charlesdm 9y ago
  You're right, it would do nothing. The reduced tax base is just the result of increased tax competition, offering businesses a better alternative. I don't believe you can bring it back. If you want to lower or eliminate corporate taxes (with a positive effect for people), you would need to increase dividend and capital gains taxes to compensate. You don't need to collect more corporate tax than is collected today, but if you can create more jobs, that's a net win.

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.
- KGIII 9y ago
  Capital gains are taxed at the same level as income tax, except when they are long-term investments, meaning longer than a year. The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability. Take that away and I have no incentive to invest in stability but have every reason to disrupt the market and take advantage of the swings. I'm not sure you want that.
  - charlesdm 9y ago
    As capital holders we will always have an incentive to invest. It's a way to let our money work for us, without having to put in time. Also don't forget companies wouldn't get taxed; the companies you hold would not have to pay corporate tax, so there would be more $$'s available to distribute to shareholders. You wouldn't actually be receiving less money after tax. > The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability. Since most equities are held by tax exempt entities (whether that is domestic or abroad, e.g. pension funds or hedge funds in a tax haven), this argument doesn't make sense. The stock price of AAPL or YELP is not going to tank because an individual investors sells (barring perhaps the CEO). The tax rate is lower generally to account for inflation. But not all countries have sliding capital gains tax rates. The UK has a 28% rate, most capital gains are exempt in Belgium and the Netherlands (but the latter has a small wealth tax), France just introduced a 30% rate, etc.
refurb 9y ago
then it's just a race to the bottom, no? The "race to the bottom" is the reason why free markets are so prosperous. Each business independently works to reduce costs and competition forces companies to share those savings with consumers. The best example of the "race to the bottom" stopping are monopolies (often gov't supported) like Comcast where they can sit fat and happy raking in a ton of profits and telling consumers to shove it.
- charlesdm 9y ago
  Tax at the end of the day is just another cost for any business of significant size. Often the largest.
- s73ver_ 9y ago
  But in this case, we're not talking about business. We're talking about the funding to pave our roads, run our schools, be able to fight fires, and all that other good stuff we need.
  - refurb 9y ago
    The gov't is well within their right to change the tax code as they see fit. And they do all the time. It's not like we're seeing tax receipts declining. They've done nothing but increase over the last 100 years.
    - ionised 9y ago
      > They've done nothing but increase over the last 100 years. Have they increased in line with the larger national budgets required for basic public services?

s73ver_ 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." Which would do what, exactly, for most people? Precisely nothing. And they'd use loopholes to bring their tax burden down to 0 anyway.

charlesdm 9y ago
You're right, it would do nothing. The reduced tax base is just the result of increased tax competition, offering businesses a better alternative. I don't believe you can bring it back. If you want to lower or eliminate corporate taxes (with a positive effect for people), you would need to increase dividend and capital gains taxes to compensate. You don't need to collect more corporate tax than is collected today, but if you can create more jobs, that's a net win.