10 ms·

I have a crazy and unpopular idea - America drops the corporate income tax to 0%, full stop, across the board, no loopholes, no exceptions. (ducks from the rot

I have a crazy and unpopular idea - America drops the corporate income tax to 0%, full stop, across the board, no loopholes, no exceptions. (ducks from the rotten vegetables that are being thrown at me) Here me out... America offsets the revenue loss by increasing tax burden on (rich) individuals, not corporations [1]. Hopefully, that would bring offshore profits back and increase hiring, r&d spend, capex, etc etc positive feedback loop etc. More likely, corps use the profits to buy back stock and layoff people (which has happened in the past with tax holidays [2]), but hey, at least those profits don't just sit in a bank account in Ireland or the Cayman Islands. Here is a really crazy idea that won't work - Janet Yellen trying to compel the world to adopt a global tax rate standard, thinking that tax haven countries would comply for America's benefit. Yeah, not happening... the baby boomer generation really don't have any capability of second order thinking. [1] The irony is that republicans love to say corps are people. With that logic they should be taxed like people. Dumb. They are not people, they are institutions. Don't tax institutions, just tax people more. [2] https://en.wikipedia.org/wiki/Repatriation_tax_holiday https://en.wikipedia.org/wiki/Repatriation_tax_holiday

gogopuppygogo 6y ago
Great in theory till you realize that a corporate entity could just shelter profits for individuals in basically perpetuity. Want a house? Have very profitable company get into real estate and buy a building/housing development/etc... and use some for corporate execs as R&D for future projects. Want a luxury vacation? Have company pay for trips or heck buy a boat/plane so the company can make it an executive retreat. Income taxes shouldn’t exist in my opinion. The government can already tax consumption. Why do they need to bilk citizens out of both ends? To pay for war. That is always the answer in the USA.
- tchalla 6y ago
  > Income taxes shouldn’t exist in my opinion. The government can already tax consumption. Why do they need to bilk citizens out of both ends? If you tax ONLY consumption, taxes will simply be passed on to the last mile which is consumers.
  - rcpt 6y ago
    Tax incidence is not that simple.
  - AdrianB1 6y ago
    All the taxes are always paid by the consumers, corporations don't bring money from home to pay taxes, they just pass it to consumers.
- jbay808 6y ago
  Consumption taxes are harder to make progressive; that is, they tend to have a disproportionate burden on the poor, whose consumption is a higher fraction of their income. But that could potentially be countered by something like a UBI, which is a progressive measure.
  - rcpt 6y ago
    Progressive consumption taxes are a thing. Flat sales tax, yes, those are regressive.
- oblio 6y ago
  > Income taxes shouldn’t exist in my opinion. The government can already tax consumption. Why do they need to bilk citizens out of both ends? > To pay for war. That is always the answer in the USA. Almost every country in the world has income taxes, even neutral countries such as Switzerland ( https://home.kpmg/xx/en/home/insights/2011/12/switzerland-income-tax.html https://home.kpmg/xx/en/home/insights/2011/12/switzerland-in... ), which haven't been in a war for 200 years. I imagine most folks here are American, but not everyone is out to get the average US citizen, some ideas just are good ideas and at some point they basically become universal. The US government is not some special meanie, in this case :-)
  - AdrianB1 6y ago
    Some countries have no personal income tax for citizens and residents. US did not have one for half of its existence and when one was created it was tiny. Now most governments treat their citizens as 2 classes: those that can be taxed to death and those that can receive for nothing in return. This is a big divide that is growing, not closing.
    - oblio 6y ago
      "Some countries" = maybe 10-15 microstates and tax havens. https://en.wikipedia.org/wiki/Income_tax#Around_the_world https://en.wikipedia.org/wiki/Income_tax#Around_the_world > US did not have one for half of its existence and when one was created it was tiny. The US also didn't have highways, a public healthcare system, public education, etc. for a large chunk of its existence. When all you needed was a homestead and a rifle... you didn't need much to finance the government.
- coredog64 6y ago
  If a corporation owns my house and doesn’t charge me rent, then imputed rent is a taxable benefit. Same with a car. If my corporation owns a biz jet, then there has to be a purpose to the travel it offers. The IRS is going to look askance at trips to Hawaii with your spouse and kids being explained as “for business”. Best case, they identify it as a taxable benefit and then you pax tax, interest, and penalties. In general, I think there’s an overestimation of what the IRS hasn’t already cottoned to WRT people trying to live within a corporation. Now family trusts are different, but that’s not the subject of discussion.
  - nodamage 6y ago
    The corporation doesn't have to pay for these things for you to recognize a massive tax benefit from a 0% corporate tax rate. If you can route your earnings through corporation in this scenario then you effectively pay zero taxes on the delta between your income earned minus your annual expenses.
- treespace88 6y ago
  Yes, at a high enough level of wealth you don’t need to own anything other then controlling shares in a corporation. Your spending cash is just a loan from a bank to you backed by the value of your corporation. All major assets are held by the corporation. A global tax of some kind is the only way to slow the divide. As the growth of wealth is finally taxed, and inflation can start to eat away at it.
tchalla 6y ago
> Hopefully, that would bring offshore profits back and increase hiring, r&d spend, capex, etc etc positive feedback loop etc. What if they don't? We will accelerate inequality further. Then, spend another decades to get "correct it" unsuccessfully.
ipsum2 6y ago
According to Planet Money, dropping the corporate income tax to 0% is one of the most popular policies among economists. https://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate https://www.npr.org/sections/money/2012/07/19/157047211/six-... > Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
- _delirium 6y ago
  > If companies reinvest the money into their businesses, that's good. This is a bit of a side issue, but if a company really does reinvest the money into its business, in most cases that reinvestment will be spent on things that are deductible as a business expense, so that portion of revenue won't be profit and not subject to corporate income tax. That's one reason Amazon pays close to zero corporate income tax: they book very little in profit, since they reinvest most of the their revenue into qualifying business expenses to expand the business.
  - zdragnar 6y ago
    Which is intentional- Amazon grew as a company, and we want companies to grow. Growing companies hire more people, and pay the people they hire more.
  - game_the0ry 6y ago
    That's a good point. You think most of corporate america would notice Amazon and try to do similar, instead they buy back stock. Buying back stock is a less risky short term strategy to improve stock performance. Maybe tax stock buy backs?
- mc32 6y ago
  Didn’t we have lots of people complaining that the Trump admin was giving away tax money by lowering the Corp tax rate down to 23%? I can only imagine the wild heckling of any present of future admin if they were so bold as to lower it to 0%. Krugman would probably have a fit.
- 6y ago
whytaka 6y ago
Doesn’t that just further incentivize using corporations as tax avoidance vehicles?
- coredog64 6y ago
  The IRS already takes a very dim view of people trying this. There are still some avenues for avoidance at the margins (e.g. meals for the benefit of the employer), but in many cases the IRS has already closed the loopholes.
  - notahacker 6y ago
    The IRS gets to take a very dim view of people trying this because it audits corporations for tax purposes. If corporate tax is zero their ability to investigate companies sending money to each other to buy yachts is diminished
gen220 6y ago
I think it's an interesting idea, and not a terribly poor on the face of it. Unfortunately, for us non-uber-rich people, uber-rich people have a lot of money to hire people to help them "avoid" taxes, under the euphemism of "minimizing tax burdens". I think we'd probably need to address that first, by simplifying the US tax code (perhaps making it X% full stop, across the board, no loopholes, applied to all income earned beyond Y/year), before experimenting with such a strategy. Of course, there will still be some sleazy people hiding their wealth (and income) behind personally-directed "non-profits" and "charities". But, these are probably easier to litigate than the corporations those people work at/for.
- dylan604 6y ago
  > perhaps making it X% full stop, across the board, no loopholes, applied to all income earned beyond Y/year This has been floated for some time, usually followed by a discussion of a sales tax increase. However, the groups floating these ideas tends to be the more fringe types, so they are almost always dismissed out of hand.
  - gen220 6y ago
    I think it'd be popular among citizens who make under Y/year. You can make Y arbitrarily high, like $10m/year, and make X quite reasonable, like 30%. Stepping back, to look at whether such a tax would be useful. The chief risk that thinktanky-people raise is that there are many desirable countries to live in, which don't levy taxes as such. So you'd get a lot of assets fleeing $TAXING_COUNTRY, which, the argument goes, would have a deleterious impact on people inside that country. In practice, most income of these people is not circulated in the American economy, but immediately invested into "stationary" assets, such as securities issued by US Corporations or the Treasury. Regardless of where these people live or hold citizenship, much of that stationary income will continue to be invested in the US, where real growth rates have historically been sustainably-high. (a simultaneous tax on US-held-wealth, not income, would throw a big wrench into this argument!) In addition, I doubt many people would actually give up their American citizenship to avoid this tax (simply having a residence abroad would not be enough to escape this tax, if you're a citizen, since our country taxes citizens living abroad). IMO, most of the people who would give up citizenship to avoid a mandatory income tax, would have already given up (or avoided obtaining) their American citizenship anyways, because of the tax implications that exist today. --- This talk of emigration reminds me of a fun thought experiment. I remember reading some argument whose thesis was, roughly, "one reason the US is able to accrue so much debt, well past the reasonable point of leverage for the average country, is because the US is the only nation with sufficiently-international tax-collecting, finance-monitoring, and military potential to effectively implement a wealth tax". From the buyer's perspective, Country X can buy our debt, essentially as a securitization of a future wealth tax against the US. Furthermore, this effectively doubles as insurance against wealthy emigres leaving your country, since most of them take their assets to the US when they go! This means that the likelihood of US Debt being paid back is extremely high, even past the normal metrics of over-leverage (debt as a % of GDP). To avoid a hypothetical tax on wealth generated in the US since the 1940s, you'd need to move yourself and your assets to a location outside the combined military+financial influence of the USA, that is willing to take your now-contraband, non-USD assets. Any USD assets held by most banks would be de facto seized. Presently, maybe North Korea and Iran fit this bill. Russia, to a lesser extent, but this is a roll of the dice. Not the best places to peg a long-term future on. It's possible to imagine China (and the countries under its sphere of Belt+Road influence) fitting into this category one day, which would be interesting and probably invoke a war. One interesting feature of this lens, is that the US shouldn't ever need to implement a wealth tax to justify the borrowing ability, the US simply needs to make it clear that such a tax would be possible to levy, if absolutely necessary. Another interesting implication is that, if the US should ever lose its power to levy this tax (due to a sharp decline in military, economic, or financial policy strength), the US's ability to borrow way above our annual-GDP could evaporate overnight: causing all kinds of mayhem, probably.
thebean11 6y ago
How do you stop the ultra rich from renouncing citizenship while their companies generate free profit in the US? Or even easier just keep all their cash sheltered in corporations?
- dylan604 6y ago
  Make the tax penalty for the renouncing much more severe than it is now?
  - bluecalm 6y ago
    Tax consumption, land, pollution. If those sneaky mega rich start founding companies in US that are clean, don't sell in US and thus don't pay taxes it's just a huge win for everyone. Once you sell to the area with consumption taxes you pay those. Couple that with some Ubi/reverse income tax to offset consumption taxes hitting the poor/middle class more and it's a simple and fair tax system. It's not a new idea either. You just need to get the idea of "evil corps need to pay" mindset.
  - AdrianB1 6y ago
    They are usually just people that give up to a citizenship they did not chose, not slaves. You are supporting slavery in a modern form, the government is the new master.
    - thebean11 6y ago
      I don't think comparing exit taxes for billionaires to slavery is very reasonable
      - dylan604 6y ago
        Such an odd comment you replied to. I'm not touching the slavery part, but I do lean toward the 'I did not choose my country'. I'm not one for blind allegiance, and personally get creeped out by watching all of the school children that have no true idea what a 'pledge of allegience' really means. I also do not believe a child should be able to enter into that type of agreement.
rsync 6y ago
"America drops the corporate income tax to 0% ..." Both your proposal (corp rate of 0%) and the objections to your proposal (that individual income will be shifted onto corporate ledgers) are already extant, and addressed, in US tax code. Any business can incorporate under subchapter-S, or as a form of LLC/LLP and pay zero taxes. Very common. Happens all the time. The catch is, you cannot carry income on the books arbitrarily. For the most part, you are forced to distribute the proceeds among the shareholders/partners before the end of the year - thus subjecting it to regular and frequent taxation. On the other hand, if you want to carry proceeds forward in the business and park them there, for whatever reason, you need to be a C-Corporation and are subject to double-taxation: corporate taxes and then, later, individual taxes once the monies are finally distributed. So you have that choice. If you want the flexibility and fewer shareholder restrictions of a "C" corporation, you need to pay corporate taxes. Personally, I prefer the simplicity of an S-corp and, as a bonus, the income is not double taxed.
- nodamage 6y ago
  This doesn't really address the underlying proposal. If the corporate tax rate was lowered to 0% no one would choose to operate an S-corp anymore.
- game_the0ry 6y ago
  > Both your proposal (corp rate of 0%) and the objections to your proposal (that individual income will be shifted onto corporate ledgers) are already extant, and addressed, in US tax code. Fair point, but then why are US companies still parking their profits off shore?
TrainedMonkey 6y ago
I think that is a terrible idea because it does nothing to address the real problem - economic growth being largely captured by ultra rich people. Sure everyone who is invested in stock market will be richer, but people who need most help are not buying stocks. Taxation is hard, so far Sam Altman's capital tax is least worst option I've heard: https://moores.samaltman.com/ https://moores.samaltman.com/ . It does have it's deficiencies... It's wealth redistribution, it might slow down or even completely stunt economic growth, and given current political climate and corruption and is highly unlikely to be implemented. At the same time humanitarian value alone it would bring is so astronomical that I believe we must try it. It would also greatly expand middle class which should boost the economy long term.
bluecalm 6y ago
Yeah, I was commenting on this for a few years now. It's just obvious corporate tax on profits is one the worst taxes you can come up with. It imposes big regulatory/accounting burden. It's completely impossible to police/enforce fairly (who the government officials are to decide if buying this licence from a Cyprus based company is worth 20 million or 30 million). It encourages behaviors we don't want (ballooning costs by hiding compensation as various perks). It makes it easier to go around for bigger players while being a disproportionately bigger burden for smaller players. It's not really race to the bottom. It's just a terrible tax.
dalbasal 6y ago
It's very hard to reason about this stuff from first principles... everything means something complex in the complex. If you want to strike nearer the trunk, nevermind root, of the issue... the place to start is corporation law. Once a cascade of tax entities of different types/jurisdictions can own or control each other in cascades... it becomes impossible to tax anything in a simple way. Without that, it's impossible for corporate tax just apply to the individuals with a share. If it was, than we could (as you suggest) think of corporate income tax as a +/- to regular income tax. As it stands, it is a different sum and applies to different people/ tax entities. In terms of economic efficiency.... I don't think any abstract economic theory beats current reality observations. If you look at some of the biggest current companies... they are obviously undertaxed. A company like google doesn't accumulate 10s of $bns cash unless they cannot find ways of putting it to work. In theory, no matter what their tax burden, they would have "produced^" and invested what they did anyway. The same is not (necessarily) true fro TSLA or JNJ. It probably is for FB or MSFT. In any case... as "mainstream" macroeconomics rapidly turns in a loose money direction, "bring the money home, we don't have enough money here" is less of a thing. The federal reserve is making however much money they think the economy needs for monetary purposes anyway... ^Scare quotes because "production" measured in ad sales is a little abstract for me.
deleted 6y ago
[deleted]
headmelted 6y ago
edit: This turned into a bit of a rant so putting a note here to say this isn’t personally ranting at the OP, just the standard of dialogue around this problem. Saying “tax the rich” doesn’t make it happen. It’s almost as if these politicians and celebrities that come along and vomit hashtags into their twitter feed are under the impression it’s never been done because no-one thought of it before. Tax the rich how, exactly? Lowering exemptions and allowances to raise duties is a tax on the working poor. Raising income tax rates is a tax on the working middle class (we hear plans to do this all the time because fiscally conservative politicians believe their voters are too stupid to notice the difference between income and wealth). If you want to “tax the rich” you need to tax actual wealth - and you need to figure out a way to do that which doesn’t cause capital flight. This has proven very difficult to do successfully. So, we can either re-visit wealth inequality when we have unilaterally matched global tax rates with no loopholes a few centuries from now after the robots have completely taken over, or act like grown-ups, put some work in and figure out a solution. Tweeting shallow nonsense like “tax the rich” without offering a plan while ignoring the massive complexity in taxing wealth in a global economy is a cynical ploy on the poor while laughing hysterically in the face of the working middle.
- nerdkid93 6y ago
  So 2 ideas, 1) make capital gains over $1 million a year taxed as regular income and 2) get rid of Stepped-Up cost basis from estate tax exemptions
  - headmelted 6y ago
    It would certainly be a start, although I can think of at least three mechanisms just off the top of my head that are available to people with that kind of money to make a capital gain not a capital gain. The loopholes are the problem, and it’s a job for governance to fix. Every time a politician says “tax the rich” or “Company X only paid Y last year and should apologise and pay more” all I can hear is “we can’t be bothered to do the job you elected us to do”. Imagine if the police didn’t respond to crimes in progress but instead made sternly worded public statements after the fact saying that criminals should be very disappointed with themselves and should apologise and pay back 10% of what they stole as restitution. The status quo is absurd.
tlear 6y ago
It is just normal pandering to the base, at least I hope it is and they are not that dumb.
cliftonk 6y ago
The reason I'd object to this is that you'd be able to indefinitely defer taxes by using C-corps as holding cos.
deleted 6y ago
[deleted]
mempko 6y ago
Except the reason governments tax is to create markets and to provide sticks (or carats) to certain behaviors. Taxes are not for revenue. Read the 'Deficit Myth' by Stephanie Kelton or Debt the First 5000 Years by David Graeber.

gogopuppygogo 6y ago

Great in theory till you realize that a corporate entity could just shelter profits for individuals in basically perpetuity. Want a house? Have very profitable company get into real estate and buy a building/housing development/etc... and use some for corporate execs as R&D for future projects. Want a luxury vacation? Have company pay for trips or heck buy a boat/plane so the company can make it an executive retreat. Income taxes shouldn’t exist in my opinion. The government can already tax consumption. Why do they need to bilk citizens out of both ends? To pay for war. That is always the answer in the USA.

tchalla 6y ago
> Income taxes shouldn’t exist in my opinion. The government can already tax consumption. Why do they need to bilk citizens out of both ends? If you tax ONLY consumption, taxes will simply be passed on to the last mile which is consumers.
- rcpt 6y ago
  Tax incidence is not that simple.
- AdrianB1 6y ago
  All the taxes are always paid by the consumers, corporations don't bring money from home to pay taxes, they just pass it to consumers.
jbay808 6y ago
Consumption taxes are harder to make progressive; that is, they tend to have a disproportionate burden on the poor, whose consumption is a higher fraction of their income. But that could potentially be countered by something like a UBI, which is a progressive measure.
- rcpt 6y ago
  Progressive consumption taxes are a thing. Flat sales tax, yes, those are regressive.
oblio 6y ago
> Income taxes shouldn’t exist in my opinion. The government can already tax consumption. Why do they need to bilk citizens out of both ends? > To pay for war. That is always the answer in the USA. Almost every country in the world has income taxes, even neutral countries such as Switzerland ( https://home.kpmg/xx/en/home/insights/2011/12/switzerland-income-tax.html https://home.kpmg/xx/en/home/insights/2011/12/switzerland-in... ), which haven't been in a war for 200 years. I imagine most folks here are American, but not everyone is out to get the average US citizen, some ideas just are good ideas and at some point they basically become universal. The US government is not some special meanie, in this case :-)
- AdrianB1 6y ago
  Some countries have no personal income tax for citizens and residents. US did not have one for half of its existence and when one was created it was tiny. Now most governments treat their citizens as 2 classes: those that can be taxed to death and those that can receive for nothing in return. This is a big divide that is growing, not closing.
  - oblio 6y ago
    "Some countries" = maybe 10-15 microstates and tax havens. https://en.wikipedia.org/wiki/Income_tax#Around_the_world https://en.wikipedia.org/wiki/Income_tax#Around_the_world > US did not have one for half of its existence and when one was created it was tiny. The US also didn't have highways, a public healthcare system, public education, etc. for a large chunk of its existence. When all you needed was a homestead and a rifle... you didn't need much to finance the government.
coredog64 6y ago
If a corporation owns my house and doesn’t charge me rent, then imputed rent is a taxable benefit. Same with a car. If my corporation owns a biz jet, then there has to be a purpose to the travel it offers. The IRS is going to look askance at trips to Hawaii with your spouse and kids being explained as “for business”. Best case, they identify it as a taxable benefit and then you pax tax, interest, and penalties. In general, I think there’s an overestimation of what the IRS hasn’t already cottoned to WRT people trying to live within a corporation. Now family trusts are different, but that’s not the subject of discussion.
- nodamage 6y ago
  The corporation doesn't have to pay for these things for you to recognize a massive tax benefit from a 0% corporate tax rate. If you can route your earnings through corporation in this scenario then you effectively pay zero taxes on the delta between your income earned minus your annual expenses.
treespace88 6y ago
Yes, at a high enough level of wealth you don’t need to own anything other then controlling shares in a corporation. Your spending cash is just a loan from a bank to you backed by the value of your corporation. All major assets are held by the corporation. A global tax of some kind is the only way to slow the divide. As the growth of wealth is finally taxed, and inflation can start to eat away at it.

tchalla 6y ago

> Hopefully, that would bring offshore profits back and increase hiring, r&d spend, capex, etc etc positive feedback loop etc. What if they don't? We will accelerate inequality further. Then, spend another decades to get "correct it" unsuccessfully.

ipsum2 6y ago

According to Planet Money, dropping the corporate income tax to 0% is one of the most popular policies among economists. https://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate https://www.npr.org/sections/money/2012/07/19/157047211/six-... > Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.

_delirium 6y ago
> If companies reinvest the money into their businesses, that's good. This is a bit of a side issue, but if a company really does reinvest the money into its business, in most cases that reinvestment will be spent on things that are deductible as a business expense, so that portion of revenue won't be profit and not subject to corporate income tax. That's one reason Amazon pays close to zero corporate income tax: they book very little in profit, since they reinvest most of the their revenue into qualifying business expenses to expand the business.
- zdragnar 6y ago
  Which is intentional- Amazon grew as a company, and we want companies to grow. Growing companies hire more people, and pay the people they hire more.
- game_the0ry 6y ago
  That's a good point. You think most of corporate america would notice Amazon and try to do similar, instead they buy back stock. Buying back stock is a less risky short term strategy to improve stock performance. Maybe tax stock buy backs?
mc32 6y ago
Didn’t we have lots of people complaining that the Trump admin was giving away tax money by lowering the Corp tax rate down to 23%? I can only imagine the wild heckling of any present of future admin if they were so bold as to lower it to 0%. Krugman would probably have a fit.
6y ago

whytaka 6y ago

Doesn’t that just further incentivize using corporations as tax avoidance vehicles?

coredog64 6y ago
The IRS already takes a very dim view of people trying this. There are still some avenues for avoidance at the margins (e.g. meals for the benefit of the employer), but in many cases the IRS has already closed the loopholes.
- notahacker 6y ago
  The IRS gets to take a very dim view of people trying this because it audits corporations for tax purposes. If corporate tax is zero their ability to investigate companies sending money to each other to buy yachts is diminished

gen220 6y ago

I think it's an interesting idea, and not a terribly poor on the face of it. Unfortunately, for us non-uber-rich people, uber-rich people have a lot of money to hire people to help them "avoid" taxes, under the euphemism of "minimizing tax burdens". I think we'd probably need to address that first, by simplifying the US tax code (perhaps making it X% full stop, across the board, no loopholes, applied to all income earned beyond Y/year), before experimenting with such a strategy. Of course, there will still be some sleazy people hiding their wealth (and income) behind personally-directed "non-profits" and "charities". But, these are probably easier to litigate than the corporations those people work at/for.

dylan604 6y ago
> perhaps making it X% full stop, across the board, no loopholes, applied to all income earned beyond Y/year This has been floated for some time, usually followed by a discussion of a sales tax increase. However, the groups floating these ideas tends to be the more fringe types, so they are almost always dismissed out of hand.
- gen220 6y ago
  I think it'd be popular among citizens who make under Y/year. You can make Y arbitrarily high, like $10m/year, and make X quite reasonable, like 30%. Stepping back, to look at whether such a tax would be useful. The chief risk that thinktanky-people raise is that there are many desirable countries to live in, which don't levy taxes as such. So you'd get a lot of assets fleeing $TAXING_COUNTRY, which, the argument goes, would have a deleterious impact on people inside that country. In practice, most income of these people is not circulated in the American economy, but immediately invested into "stationary" assets, such as securities issued by US Corporations or the Treasury. Regardless of where these people live or hold citizenship, much of that stationary income will continue to be invested in the US, where real growth rates have historically been sustainably-high. (a simultaneous tax on US-held-wealth, not income, would throw a big wrench into this argument!) In addition, I doubt many people would actually give up their American citizenship to avoid this tax (simply having a residence abroad would not be enough to escape this tax, if you're a citizen, since our country taxes citizens living abroad). IMO, most of the people who would give up citizenship to avoid a mandatory income tax, would have already given up (or avoided obtaining) their American citizenship anyways, because of the tax implications that exist today. --- This talk of emigration reminds me of a fun thought experiment. I remember reading some argument whose thesis was, roughly, "one reason the US is able to accrue so much debt, well past the reasonable point of leverage for the average country, is because the US is the only nation with sufficiently-international tax-collecting, finance-monitoring, and military potential to effectively implement a wealth tax". From the buyer's perspective, Country X can buy our debt, essentially as a securitization of a future wealth tax against the US. Furthermore, this effectively doubles as insurance against wealthy emigres leaving your country, since most of them take their assets to the US when they go! This means that the likelihood of US Debt being paid back is extremely high, even past the normal metrics of over-leverage (debt as a % of GDP). To avoid a hypothetical tax on wealth generated in the US since the 1940s, you'd need to move yourself and your assets to a location outside the combined military+financial influence of the USA, that is willing to take your now-contraband, non-USD assets. Any USD assets held by most banks would be de facto seized. Presently, maybe North Korea and Iran fit this bill. Russia, to a lesser extent, but this is a roll of the dice. Not the best places to peg a long-term future on. It's possible to imagine China (and the countries under its sphere of Belt+Road influence) fitting into this category one day, which would be interesting and probably invoke a war. One interesting feature of this lens, is that the US shouldn't ever need to implement a wealth tax to justify the borrowing ability, the US simply needs to make it clear that such a tax would be possible to levy, if absolutely necessary. Another interesting implication is that, if the US should ever lose its power to levy this tax (due to a sharp decline in military, economic, or financial policy strength), the US's ability to borrow way above our annual-GDP could evaporate overnight: causing all kinds of mayhem, probably.

thebean11 6y ago

How do you stop the ultra rich from renouncing citizenship while their companies generate free profit in the US? Or even easier just keep all their cash sheltered in corporations?

dylan604 6y ago
Make the tax penalty for the renouncing much more severe than it is now?
- bluecalm 6y ago
  Tax consumption, land, pollution. If those sneaky mega rich start founding companies in US that are clean, don't sell in US and thus don't pay taxes it's just a huge win for everyone. Once you sell to the area with consumption taxes you pay those. Couple that with some Ubi/reverse income tax to offset consumption taxes hitting the poor/middle class more and it's a simple and fair tax system. It's not a new idea either. You just need to get the idea of "evil corps need to pay" mindset.
- AdrianB1 6y ago
  They are usually just people that give up to a citizenship they did not chose, not slaves. You are supporting slavery in a modern form, the government is the new master.
  - thebean11 6y ago
    I don't think comparing exit taxes for billionaires to slavery is very reasonable
    - dylan604 6y ago
      Such an odd comment you replied to. I'm not touching the slavery part, but I do lean toward the 'I did not choose my country'. I'm not one for blind allegiance, and personally get creeped out by watching all of the school children that have no true idea what a 'pledge of allegience' really means. I also do not believe a child should be able to enter into that type of agreement.

rsync 6y ago

"America drops the corporate income tax to 0% ..." Both your proposal (corp rate of 0%) and the objections to your proposal (that individual income will be shifted onto corporate ledgers) are already extant, and addressed, in US tax code. Any business can incorporate under subchapter-S, or as a form of LLC/LLP and pay zero taxes. Very common. Happens all the time. The catch is, you cannot carry income on the books arbitrarily. For the most part, you are forced to distribute the proceeds among the shareholders/partners before the end of the year - thus subjecting it to regular and frequent taxation. On the other hand, if you want to carry proceeds forward in the business and park them there, for whatever reason, you need to be a C-Corporation and are subject to double-taxation: corporate taxes and then, later, individual taxes once the monies are finally distributed. So you have that choice. If you want the flexibility and fewer shareholder restrictions of a "C" corporation, you need to pay corporate taxes. Personally, I prefer the simplicity of an S-corp and, as a bonus, the income is not double taxed.

nodamage 6y ago
This doesn't really address the underlying proposal. If the corporate tax rate was lowered to 0% no one would choose to operate an S-corp anymore.
game_the0ry 6y ago
> Both your proposal (corp rate of 0%) and the objections to your proposal (that individual income will be shifted onto corporate ledgers) are already extant, and addressed, in US tax code. Fair point, but then why are US companies still parking their profits off shore?

TrainedMonkey 6y ago

I think that is a terrible idea because it does nothing to address the real problem - economic growth being largely captured by ultra rich people. Sure everyone who is invested in stock market will be richer, but people who need most help are not buying stocks. Taxation is hard, so far Sam Altman's capital tax is least worst option I've heard: https://moores.samaltman.com/ https://moores.samaltman.com/ . It does have it's deficiencies... It's wealth redistribution, it might slow down or even completely stunt economic growth, and given current political climate and corruption and is highly unlikely to be implemented. At the same time humanitarian value alone it would bring is so astronomical that I believe we must try it. It would also greatly expand middle class which should boost the economy long term.

bluecalm 6y ago

Yeah, I was commenting on this for a few years now. It's just obvious corporate tax on profits is one the worst taxes you can come up with. It imposes big regulatory/accounting burden. It's completely impossible to police/enforce fairly (who the government officials are to decide if buying this licence from a Cyprus based company is worth 20 million or 30 million). It encourages behaviors we don't want (ballooning costs by hiding compensation as various perks). It makes it easier to go around for bigger players while being a disproportionately bigger burden for smaller players. It's not really race to the bottom. It's just a terrible tax.

dalbasal 6y ago

It's very hard to reason about this stuff from first principles... everything means something complex in the complex. If you want to strike nearer the trunk, nevermind root, of the issue... the place to start is corporation law. Once a cascade of tax entities of different types/jurisdictions can own or control each other in cascades... it becomes impossible to tax anything in a simple way. Without that, it's impossible for corporate tax just apply to the individuals with a share. If it was, than we could (as you suggest) think of corporate income tax as a +/- to regular income tax. As it stands, it is a different sum and applies to different people/ tax entities. In terms of economic efficiency.... I don't think any abstract economic theory beats current reality observations. If you look at some of the biggest current companies... they are obviously undertaxed. A company like google doesn't accumulate 10s of $bns cash unless they cannot find ways of putting it to work. In theory, no matter what their tax burden, they would have "produced^" and invested what they did anyway. The same is not (necessarily) true fro TSLA or JNJ. It probably is for FB or MSFT. In any case... as "mainstream" macroeconomics rapidly turns in a loose money direction, "bring the money home, we don't have enough money here" is less of a thing. The federal reserve is making however much money they think the economy needs for monetary purposes anyway... ^Scare quotes because "production" measured in ad sales is a little abstract for me.

deleted 6y ago

[deleted]

headmelted 6y ago

edit: This turned into a bit of a rant so putting a note here to say this isn’t personally ranting at the OP, just the standard of dialogue around this problem. Saying “tax the rich” doesn’t make it happen. It’s almost as if these politicians and celebrities that come along and vomit hashtags into their twitter feed are under the impression it’s never been done because no-one thought of it before. Tax the rich how, exactly? Lowering exemptions and allowances to raise duties is a tax on the working poor. Raising income tax rates is a tax on the working middle class (we hear plans to do this all the time because fiscally conservative politicians believe their voters are too stupid to notice the difference between income and wealth). If you want to “tax the rich” you need to tax actual wealth - and you need to figure out a way to do that which doesn’t cause capital flight. This has proven very difficult to do successfully. So, we can either re-visit wealth inequality when we have unilaterally matched global tax rates with no loopholes a few centuries from now after the robots have completely taken over, or act like grown-ups, put some work in and figure out a solution. Tweeting shallow nonsense like “tax the rich” without offering a plan while ignoring the massive complexity in taxing wealth in a global economy is a cynical ploy on the poor while laughing hysterically in the face of the working middle.

nerdkid93 6y ago
So 2 ideas, 1) make capital gains over $1 million a year taxed as regular income and 2) get rid of Stepped-Up cost basis from estate tax exemptions
- headmelted 6y ago
  It would certainly be a start, although I can think of at least three mechanisms just off the top of my head that are available to people with that kind of money to make a capital gain not a capital gain. The loopholes are the problem, and it’s a job for governance to fix. Every time a politician says “tax the rich” or “Company X only paid Y last year and should apologise and pay more” all I can hear is “we can’t be bothered to do the job you elected us to do”. Imagine if the police didn’t respond to crimes in progress but instead made sternly worded public statements after the fact saying that criminals should be very disappointed with themselves and should apologise and pay back 10% of what they stole as restitution. The status quo is absurd.

tlear 6y ago

It is just normal pandering to the base, at least I hope it is and they are not that dumb.

cliftonk 6y ago

The reason I'd object to this is that you'd be able to indefinitely defer taxes by using C-corps as holding cos.

deleted 6y ago

[deleted]

mempko 6y ago

Except the reason governments tax is to create markets and to provide sticks (or carats) to certain behaviors. Taxes are not for revenue. Read the 'Deficit Myth' by Stephanie Kelton or Debt the First 5000 Years by David Graeber.