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A zero corporate tax rate would highly disincentivise corporate reinvesting into things like capex for expansion or R&D. Right now if they don't plow money back

A zero corporate tax rate would highly disincentivise corporate reinvesting into things like capex for expansion or R&D. Right now if they don't plow money back into such things then they would have to book it as profit and pay taxes on it. Zero tax rates would remove that incentive. If there were no taxes on them at all then it would just sit there as people at the top find even more creative ways to give it to themselves while still avoiding a lot of personal taxes. There's also the fact that corporations are only made possible in the first places because of the infrastructure and services provided by the government, and those must be paid for. If we moved to a model where companies were responsible to building and maintaining the proportion. Of infrastructure resources they used then indirect funding of such things via taxes would be required as much.

cj 5y ago
> A zero corporate tax rate would highly disincentivise corporate reinvesting into things like capex for expansion or R&D. Valid point, but are there other ways to incentivize companies to reinvest profits without the incentive being tax avoidance? I would be a proponent of 0% tax on small-ish corporations, perhaps with profits under $1 million (or maybe $5-10 million), so that small businesses who can’t afford an army of accountants to hide profits are brought up to a slightly more level playing field with bigger corps.
- ineedasername 5y ago
  The problem with taxing based on profits is they can be obfuscated in too many ways. I'm not opposed to what you're saying in theory, but I think there would need to be massive changes to the tax code to make that work.
ajmadesc 5y ago
spending on RnD is equally incentivised. RnD increases share price which would tax free increase net worth. >find even more creative ways to give it to themselves This is not a good argument.
- tomrod 5y ago
  Acknowledging real behavior is not a good argument?
- ineedasername 5y ago
  >This is not a good argument. That is not a good rebuttal, it ads nothing to the conversation except to say "I disagree" in a slightly more adversarial tone. It need more explanation: Is it a bad argument because you think giving it to themselves is okay? Or is it a bad argument because you don't think that would happen? If it's the later, recent events show you're incorrect: corporate tax reductions were used in stock buybacks that significantly benefited upper management by selling their own stock back into the stock price increases. And clearly R&D was not incentivised under those tax reductions. Also R&D is a long term investment. There's no reason to believe the short term thinking that often governs corporate decisions wouldn't also win out here. Companies that try value R&D would continue, and those using it simply to avoid taxes would reduce or stop investing in it.
- deleted 5y ago
  [deleted]
anonuser123456 5y ago
>A zero corporate tax rate would highly disincentivise corporate reinvesting into things like capex for expansion or R&D This is simply not true. The investment equilibrium would change in favor of less investment in _lower_ return expenditures. Corporate managers would likely distribute more capital, which would then be reallocated efficiently in the market. The only hitch here is that the government would likely collect higher tax receipts, and thus lower total investment. But that's an argument for lowering the tax rate on investment income, not creating bad incentives for corporate managers to spend money with a lower marginal rate of return than their core business. >There's also the fact that corporations are only made possible in the first places because of the infrastructure and services provided by the government, and those must be paid for. Corporations pay property taxes, use taxes and payroll taxes already (e.g. truckers pay gas taxes, and that's reflected in retain prices etc). And since the proposal is for revenue neutrality, the delta revenue is still collected on the distribution end. >Of infrastructure resources they used then indirect funding of such things via taxes would be required as much. You can simply look at the budget. The vast majority of government spending is on income transfers, administrative expenses for social programs and jobs programs (the largest of which is bombing people in foreign countries). A very tiny sliver is infrastructure that corporations use. And as pointed out above, most of that can be paid for via use taxes they already pay.
- deleted 5y ago
  [deleted]
- ineedasername 5y ago
  Your viewpoint is fairly well contradicted by recent experience with corporate tax cuts that were not reinvested back into the company and were instead used for massive stock buy backs that gave the money to investors and upper management with their own shares to sell back into the rising prices, which is what I said happens with zero tax rates. Do you think if they went even lower that would change? The use taxes you're referring to are mostly going to state-level entities and state infrastructure. They're not going to pay for the federal resources, and I mentioned services, not just infrastructure. Heck, the amount of resources they use in government legal services, courts etc alone are significant costs that companies pay practically nothing but miniscule filing fees to use. Further, even those state level taxes are often minimal in the race to the bottom of states giving massive tax cuts that negate much of the revenue for the sources you mention. As for annual spending on infrastructure: yes, that is at least partially right and is exactly why we have an infrastructure crisis in the country with aging facilities, bridges, etc and no money to pay for it. Whatever companies are paying in use taxes, it's certainly not enough to keep pace with our needs. Are you an advocate for use taxes, or was that just a rhetorical device? Because if you really believe they are appropriately paying use tax, and given the infrastructure crisis, you should be all for increases to those use taxes.

cj 5y ago

> A zero corporate tax rate would highly disincentivise corporate reinvesting into things like capex for expansion or R&D. Valid point, but are there other ways to incentivize companies to reinvest profits without the incentive being tax avoidance? I would be a proponent of 0% tax on small-ish corporations, perhaps with profits under $1 million (or maybe $5-10 million), so that small businesses who can’t afford an army of accountants to hide profits are brought up to a slightly more level playing field with bigger corps.

ineedasername 5y ago
The problem with taxing based on profits is they can be obfuscated in too many ways. I'm not opposed to what you're saying in theory, but I think there would need to be massive changes to the tax code to make that work.

ajmadesc 5y ago

spending on RnD is equally incentivised. RnD increases share price which would tax free increase net worth. >find even more creative ways to give it to themselves This is not a good argument.

tomrod 5y ago
Acknowledging real behavior is not a good argument?
ineedasername 5y ago
>This is not a good argument. That is not a good rebuttal, it ads nothing to the conversation except to say "I disagree" in a slightly more adversarial tone. It need more explanation: Is it a bad argument because you think giving it to themselves is okay? Or is it a bad argument because you don't think that would happen? If it's the later, recent events show you're incorrect: corporate tax reductions were used in stock buybacks that significantly benefited upper management by selling their own stock back into the stock price increases. And clearly R&D was not incentivised under those tax reductions. Also R&D is a long term investment. There's no reason to believe the short term thinking that often governs corporate decisions wouldn't also win out here. Companies that try value R&D would continue, and those using it simply to avoid taxes would reduce or stop investing in it.
deleted 5y ago
[deleted]

anonuser123456 5y ago

>A zero corporate tax rate would highly disincentivise corporate reinvesting into things like capex for expansion or R&D This is simply not true. The investment equilibrium would change in favor of less investment in _lower_ return expenditures. Corporate managers would likely distribute more capital, which would then be reallocated efficiently in the market. The only hitch here is that the government would likely collect higher tax receipts, and thus lower total investment. But that's an argument for lowering the tax rate on investment income, not creating bad incentives for corporate managers to spend money with a lower marginal rate of return than their core business. >There's also the fact that corporations are only made possible in the first places because of the infrastructure and services provided by the government, and those must be paid for. Corporations pay property taxes, use taxes and payroll taxes already (e.g. truckers pay gas taxes, and that's reflected in retain prices etc). And since the proposal is for revenue neutrality, the delta revenue is still collected on the distribution end. >Of infrastructure resources they used then indirect funding of such things via taxes would be required as much. You can simply look at the budget. The vast majority of government spending is on income transfers, administrative expenses for social programs and jobs programs (the largest of which is bombing people in foreign countries). A very tiny sliver is infrastructure that corporations use. And as pointed out above, most of that can be paid for via use taxes they already pay.

deleted 5y ago
[deleted]
ineedasername 5y ago
Your viewpoint is fairly well contradicted by recent experience with corporate tax cuts that were not reinvested back into the company and were instead used for massive stock buy backs that gave the money to investors and upper management with their own shares to sell back into the rising prices, which is what I said happens with zero tax rates. Do you think if they went even lower that would change? The use taxes you're referring to are mostly going to state-level entities and state infrastructure. They're not going to pay for the federal resources, and I mentioned services, not just infrastructure. Heck, the amount of resources they use in government legal services, courts etc alone are significant costs that companies pay practically nothing but miniscule filing fees to use. Further, even those state level taxes are often minimal in the race to the bottom of states giving massive tax cuts that negate much of the revenue for the sources you mention. As for annual spending on infrastructure: yes, that is at least partially right and is exactly why we have an infrastructure crisis in the country with aging facilities, bridges, etc and no money to pay for it. Whatever companies are paying in use taxes, it's certainly not enough to keep pace with our needs. Are you an advocate for use taxes, or was that just a rhetorical device? Because if you really believe they are appropriately paying use tax, and given the infrastructure crisis, you should be all for increases to those use taxes.