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The traditional solution is to lower taxes and simplify the tax code. Large corporations have an effective tax rate below the nominal one due to antics with ex

The traditional solution is to lower taxes and simplify the tax code. Large corporations have an effective tax rate below the nominal one due to antics with exceptions — while smaller businesses get hit harder. What’s called “progressive” often ends up regressive due to the imbalance in ability to do finance trickery. Rich people will always find or create exploits in the law, so those “high taxes on mega corps and billionaires!” hit the middle class and medium sized businesses: they’re who bear the brunt of taxes, in the US. You get out of doing that unnecessary damage by removing the game: no whatever exceptions, just a flat rate everyone pays. What’s called “regressive” is actually progressive in that it lightens the tax burden on the middle class and medium businesses, while making the richest pay a fair share. (Also, simpler codes are harder to cheat.) Discussing the tax burden of the poorest is a misdirection used by politicians: the poorest in the US receive more benefits than they pay, so it’s a question of how that burden is split between the middle class and the upper class.

mcv 6y ago
It's not that simple. As far as I know, corporate taxes are already flat. (If they weren't, corporations could easily split into several smaller ones to keep their profits below some threshold.) The big issue is with "just a flat rate that everyone pays". What do you pay that rate over? Big corporations manage to pay that rate over nothing. Generally those corporate taxes are paid over profits, so corporations avoid taking profits in countries that tax them. They sit on their money, pay it out as bonuses to executives, and take their profits in tax havens. The issue isn't the tax rate, it's the loop holes. It's that the amount that's taxed is easily manipulated. Instead of easily manipulatable profits, the tax should be levied on something less easily manipulatable. Like revenue. Of course that already happens: VAT taxes, only because you pay them on all products, they are effectively paid by consumers, not corporations. But how about allowing corporations to deduct their local external costs from their revenue? Not easily manipulatable foreign external costs, but simply the costs made in the same market as where the revenues come from? Then you're effectively still taxing profit, but tied to the local market, cutting tax havens and internal trickery out of the picture. A company on the other side of the world selling in your country but not making any costs there; no labour, manufacturing, rent, etc; would pay tax over their entire revenue, whereas a local shop that has does have all those costs, and therefore cannot help but invest in the local economy, gets to deduct those costs and pay less taxes. I think that could do a lot to even out the imbalance and make the playing field a lot fairer.
- nicoburns 6y ago
  > If they weren't, corporations could easily split into several smaller ones to keep their profits below some threshold I think we need to address this somehow. Perhaps by counting size by which actual people control and/or own the companies rather than the current arbitrary legal structure.
  - mcv 6y ago
    Part of the problem with corporations is definitely that they're a massive concentration of money and power, with no person being responsible for it. If every company was just a small business of one or a handful of people working together, instead of this artificial legal construct that concentrates power and assets with no liability, these things would be a lot easier. But then you also can't do the massive investments that corporations do.
- sokoloff 6y ago
  How does international trade work under such a system? Does my iPhone get taxed as 100% profit with no allowance for cost-of-goods-sold? If a country doesn’t make automobiles or refrigerators, are those taxed as if they were pure profit for the retailer? It’s not like a local retailer is going to manufacture even refrigerators, let alone cars or phones.
  - mcv 6y ago
    Countries could decide they have enough in common in terms of taxes and trade that they calculate this over all those countries combined, as long as they exclude tax havens and other countries that seem to take a parasitic advantage of the markets of other countries.
- bopbeepboop 6y ago
  > It's that the amount that's taxed is easily manipulated Did you even read my post? It’s entirely about this fact: you wrote a long rant concurring, but phrased as violent agreement. You just pulled a single phrase out of a multiparagraph post, then strawmanned my argument. That’s not up to the standards expected of HN posts.

mcv 6y ago

It's not that simple. As far as I know, corporate taxes are already flat. (If they weren't, corporations could easily split into several smaller ones to keep their profits below some threshold.) The big issue is with "just a flat rate that everyone pays". What do you pay that rate over? Big corporations manage to pay that rate over nothing. Generally those corporate taxes are paid over profits, so corporations avoid taking profits in countries that tax them. They sit on their money, pay it out as bonuses to executives, and take their profits in tax havens. The issue isn't the tax rate, it's the loop holes. It's that the amount that's taxed is easily manipulated. Instead of easily manipulatable profits, the tax should be levied on something less easily manipulatable. Like revenue. Of course that already happens: VAT taxes, only because you pay them on all products, they are effectively paid by consumers, not corporations. But how about allowing corporations to deduct their local external costs from their revenue? Not easily manipulatable foreign external costs, but simply the costs made in the same market as where the revenues come from? Then you're effectively still taxing profit, but tied to the local market, cutting tax havens and internal trickery out of the picture. A company on the other side of the world selling in your country but not making any costs there; no labour, manufacturing, rent, etc; would pay tax over their entire revenue, whereas a local shop that has does have all those costs, and therefore cannot help but invest in the local economy, gets to deduct those costs and pay less taxes. I think that could do a lot to even out the imbalance and make the playing field a lot fairer.

nicoburns 6y ago
> If they weren't, corporations could easily split into several smaller ones to keep their profits below some threshold I think we need to address this somehow. Perhaps by counting size by which actual people control and/or own the companies rather than the current arbitrary legal structure.
- mcv 6y ago
  Part of the problem with corporations is definitely that they're a massive concentration of money and power, with no person being responsible for it. If every company was just a small business of one or a handful of people working together, instead of this artificial legal construct that concentrates power and assets with no liability, these things would be a lot easier. But then you also can't do the massive investments that corporations do.
sokoloff 6y ago
How does international trade work under such a system? Does my iPhone get taxed as 100% profit with no allowance for cost-of-goods-sold? If a country doesn’t make automobiles or refrigerators, are those taxed as if they were pure profit for the retailer? It’s not like a local retailer is going to manufacture even refrigerators, let alone cars or phones.
- mcv 6y ago
  Countries could decide they have enough in common in terms of taxes and trade that they calculate this over all those countries combined, as long as they exclude tax havens and other countries that seem to take a parasitic advantage of the markets of other countries.
bopbeepboop 6y ago
> It's that the amount that's taxed is easily manipulated Did you even read my post? It’s entirely about this fact: you wrote a long rant concurring, but phrased as violent agreement. You just pulled a single phrase out of a multiparagraph post, then strawmanned my argument. That’s not up to the standards expected of HN posts.