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It’s interesting to see a multinational standard to set a “standard” for taxation. Seems odd to start with corporate income taxes as it seems pretty efficient
by prepend 5y ago
It’s interesting to see a multinational standard to set a “standard” for taxation.
Seems odd to start with corporate income taxes as it seems pretty efficient to not tax corporations and encourage more distribution to individuals and tax there.
I remember in my microeconomics101 course how taxes on corporate profit are easy to squish around with tax deductible benefits that reduce profit (eg, country club dues are an expense, corporate jets are an expense, 5000 square foot offices are an expense). Since it’s hard to police these expenses, it’s more efficient to just push all profits to salary and dividends to individuals and tax there since there are so many fewer individual exemptions.
- trdtaylor1 5y agoThere's no other way then to establish AMT for corporations. Otherwise countries will apply deductions around this 15% global minimum anyway.
- prepend 5y agoI tried to call out the other way is to push the income to individuals so corporate profits are always near zero. So to apply energy on taxing individuals rather than corps. For corps income is so fluid, I think we get more revenue with tariffs, usage taxes, property tax, VAT, sales, etc. Profit isn’t as important to corporations as it is to individuals.
- dannyw 5y agoWealthy individuals will just keep all their wealth in a company and accumulate forever. It's terrible for wealth inequality.
- prepend 5y agoCorporate income taxes don’t matter with this as corporate income gets deferred even longer than individuals. So I think it’s neutral for wealth inequality, since an individual getting $1B in income or a corporation getting $1B in income to a single individual is the same. Or deferring income with trusts, credits, etc. I think for wealth inequality, the goal is to have more individuals with greater wealth, so this doesn’t seem to affect the number of people impacted.
- djbebs 5y agoPunitive taxes and regulation is what heightens wealth inequality. In any case I find that any appeals to decrease wealth inequality is ultimately no more than greedy appeals to take from the responsible and give to the irresponsible, so I've long since stopped seeing that as a legitimate argument.
- ojbyrne 5y agoHow would taxing individuals make the use of expensing 5000 square foot offices, country club dues and private jet travel less attractive for executives? They would just pile up the deductible expenses and take less taxable compensation.
- prepend 5y agoLower corporate tax rates make it more likely to distribute profit to employees (bonuses) and shareholders (dividends, stock repurchase). My reasoning is that people prefer direct compensation over perks, and shareholders can’t get perks. With a high tax rate, there’s more of a benefit to pay deductible benefits rather than bonuses. With lower tax rate, the incentive goes away so corps can just pay directly. The goal is to get max tax revenue, so whatever equilibrium results in the highest government revenue is preferred. So the comparison should be what brings in the most revenue.
- Retric 5y agoYou’re assuming a 1:1 relationship between company country and stockholder’s country. That’s simply no longer even remotely true. So, in practice lowering US corporate taxes is a tax break on the Saudi royal family etc and a net increase in taxes for American citizens.
- bpodgursky 5y agoThe US could tax dividends and cap gains for foreign shareholders, if it wanted.
- Retric 5y agoThe backlash of foreign countries taxing both their companies and US investors would also make such a change a net loss for American citizens. By far the best option is to just raise taxes on US companies and thus lower taxes on American citizens.
- Retric 5y agoThe issue is not all owners live within a country. So, in practice it’s significantly less efficient to tax people than companies even if in theory it’s beneficial. Also, increasing employ income tax rates incentives the company to provide tax deductible benefits and lower salary. The actual solution is to make employee benefits non tax deductible. For example personal use of a Company Car by an employee is taxable to the employee as a non-cash fringe benefit, which is why company provided cars have become uncommon.
- wkrsz 5y agoOn the other hand, pushing too much the tax burden to one payer (corporation, shareholder, employee, consumer) creates strong incentives for tax optimization for that payer. If tax burden is spread over many different taxes will decrease profitability of dodging each individual tax.