7 ms·

You Can't Engineer Around Taxes

48 points by pragmatic 14y ago

fidotron 14y ago
The same was true of Raspberry Pi, in that the complete item got taxed once if made completely in China, whereas to assemble it in the UK would've resulted in them being taxed more on separate components pushing the price up. It really is utterly stupid.
- rprasad 14y ago
  VAT is imposed only once, albeit at multiple levels in smaller amounts. In effect, the VAT is a more hasslesome sales/services tax. Imported items are subject to higher VAT, but usually only once...if importation was a way to avoid VAT, the EU would not have any manufacturing facilities at all because it would always be cheaper to manufacture in Asia.
  - DanBC 14y ago
    VAT is different to import duties. There will be a customs duty to pay on imported goods over a certain value (as well as VAT (chargeable to the end user, rather than each person in the chain.)) VAT (and import VAT) are easy enough - there's a few different rates so as long as you're careful describing the goods it's okay. But customs duty is complex. Each item has a commodity code, and that code has its rate of duty. There are 14,000 different commodity codes. (http://www.hmrc.gov.uk/customs/tax-and-duty.htm http://www.hmrc.gov.uk/customs/tax-and-duty.htm)
    - wisty 14y ago
      I've heard in some countries, it's cheaper to buy a cordless drill with a battery pack, then the battery pack alone, because batteries have a huge duty, but cordless drills (even including batteries) aren't.
    - tonyedgecombe 14y ago
      I wouldn't say VAT is that easy, for instance I'm in the UK but if I sell enough into Germany then I'm obliged to register for VAT in Germany, and the same again for each of the other EU states. Then there is additional paperwork to fill for every EU sale, each needs the customers VAT number and if it is wrong the paperwork gets rejected.
      - rprasad 14y ago
        VAT is "easy" in the sense that it is easy to figure out, but it is difficult in the sense that the administrative burdensome exceeds the burden associated with a sales tax by many orders of magnitude.
- ktizo 14y ago
  That's insane import taxes rather than corporation tax. It is good to incorporate in London, (and Dublin, of course), and as long as you don't actually try to make anything in Britain and just ship it all in when it's done, then everything's fine. Meanwhile, the country falls to shit cos less and less people know how to do anything.
andrewem 14y ago
Fascinating, because the Wall Street Journal said on February 3 "Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That's the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008." [1] So I would argue that the title of the article is false, and in aggregate US corporations have engineered around taxes. Alternatively, you could say that they haven't engineered around anything, and the system is operating as designed, it's just that you can't characterize its behavior by a single number. EDIT: To make the point more explicit, OP says the US is losing business to China because of China's 15% corporate tax rate, and yet that rate is higher than the effective tax rate in the US. Perhaps there's an argument to be made that US taxes really are higher, but the evidence cited in this article isn't it. [1] http://online.wsj.com/article/SB10001424052970204662204577199492233215330.html http://online.wsj.com/article/SB1000142405297020466220457719...
- james4k 14y ago
  That effective tax rate of 12% is not by design, though. It is due to loopholes that have been thoroughly exploited. A big one being foreign profits are not taxed until it enters the country, so many companies now take their income outside the US and keep it there. So, I would say the tax system was more...hustled around than it was engineered around.
  - einhverfr 14y ago
    This should be closed. Corporations should pay US income taxes on foreign retained earnings or other changes in equity.
    - james4k 14y ago
      Yes, but it was meant to prevent double taxation, so unfortunately it's not as simple as just revoking it.
      - 14y ago
rprasad 14y ago
The linked article is inaccurate. While the US has the highest base corporate tax rate, it has the lowest effective corporate tax rate of any major nation. The US favors a deduction/credit-based system for lowering taxes. Manufacturing and research deductions/credits are especially generous. Ultimately, service-based businesses pay the highest effective rates, but few properly advised service businesses pay a 35% effective rate. (For example, choose a tax entity other than a corporation unless you have a compelling reason for being a corporation.) It is very possible to engineer around taxes. This is what I and others in my field do for a living.
- forrestthewoods 14y ago
  "it has the lowest effective corporate tax rate of any major nation" Can you provide a source on that? I'd love to see a good list.
  - xiaoma 14y ago
    Sure! Let me google that for you. The first couple of links have your answer. http://lmgtfy.com/?q=corporate+tax+rate+by+country http://lmgtfy.com/?q=corporate+tax+rate+by+country
    - forrestthewoods 14y ago
      Dude, are you serious? Did you read anything before making that reply? An outlandish claim regarding EFFECTIVE tax rate was made without any citations. Your snarky link does nothing to resolve the claim. A similar search for "effective corporate tax rate by country" also provides no evidence to defend rprasad's claim. Adventureful dug up quotes with sources fully debunking the claim in question.
      - xiaoma 14y ago
        You have access to the same internet the rest of us do. I'm happy to find some resources, like a wiki page with relevant links, but obviously there's a limit to how much research you can expect strangers to do for you. I will try to help though: http://lmgtfy.com/?q=effective+tax+rate+by+country http://lmgtfy.com/?q=effective+tax+rate+by+country The first link brings up this report (which shows the US effective tax rate towards the top): http://businessroundtable.org/uploads/studies-reports/downloads/Effective_Tax_Rate_Study.pdf http://businessroundtable.org/uploads/studies-reports/downlo... Is that the kind of info you're looking for? If not, maybe you could share the citations that you've dug up and enlighten the rest of us?
rcthompson 14y ago
So I think the concept here is that nations are in competition with each other to attract businesses by undercutting each other on "price" (i.e. tax rates). If true, does this mean that corporations, as the buyers in this "market", are beginning to dictate prices? I can see how some science fiction writers (Neal Stephenson comes to mind) have extrapolated this trend to futures where corporations supplant nations and governments as the dominant political entity.
- sageikosa 14y ago
  To an extent, this happens withing larger nations and federated economic blocks such as the United States and the EU. Businesses that have mobility will move to where they have more favorable conditions. Automobile manufacturing in the US has been shifting southward (mainly to lower labor costs), companies incorporate in tax-favorable states such as Delaware and Nevada, insurance companies operate as an entirely different entity in the state of New York to avoid encumbering the rest of their business with New York's insurance regulations.
  - rcthompson 14y ago
    Yes, that certainly occurs, but then the question becomes whether this increased choice for companies due to globalization makes it a buyer's market, forcing the sellers (states and countries) to lower their prices (corporate taxes and such) to the point of eventually going bankrupt, leaving the corporations a the dominant organizing force of civilization as some sci-fi authors have predicted. (Obviously this would take probably hundreds of years to happen in reality, on contrast to the sci-fi stories which are frequently "near-future".)
adventureful 14y ago
The 12.1% effective tax rate being claimed in multiple posts here is a temporary number due to a one time tax break for 2010 and 2011 that will expire. After which the effective US corporate tax rate will skyrocket back up to around 25% to 26% or so. And it's worth noting, it's a front loaded expensing, versus expensing over a period of years, so that 12.1% is completely deceiving. "In 2010 and 2011, companies were allowed to deduct the full cost of the purchases of new equipment, while normally these costs would be expensed over several years. In 2012, this deduction will go down to 50% and be eliminated altogether thereafter, causing the effective tax rate to return to roughly the 25.6% average effective tax rate corporations paid since the late 1980s, according to CBO forecasts." http://business.time.com/2012/02/06/the-corporate-tax-rate-is-at-its-lowest-in-decades-is-big-business-paying-its-fair-share/ http://business.time.com/2012/02/06/the-corporate-tax-rate-i...
- adgar 14y ago
  My father started a small roofing business in 1980, selling it just recently to an employee; that tax break was absolutely crucial to getting work going again. Luckily, my father's now-sold business had the bankroll to take full advantage of it. The credit others needed wasn't trivial to come by.
  - adventureful 14y ago
    Just to clarify, I wasn't arguing for or against the expensing tax adjustment break (nor whether it was a benefit to the economy). I was pointing out that the claimed 12.1% effective tax rate isn't an accurate representation of corporate taxation in the US.
    - adgar 14y ago
      Yep, I know, just chiming in with some relevant experience.
robomartin 14y ago
This is the part that really confuses me. You only have to run a business --any business-- for a few quarters to understand the negative impact that taxation and over-regulation can have on the decisions you make, the risks you take, your ability to compete and how quickly you can grow. You really don't need a study from Harvard to get data on this. If you don't get it because of a lack of business experience, go talk to your local high-school-educated baker, mechanic or gas-station owner for a quick round-down. The evidence is overwhelming. Yet, we keep dicking around and supporting policies, politicians and people who somehow think they can violate the laws of physics and make things better by shafting everyone with more taxes. When are we going to learn and act? When it is too late? I owned a manufacturing business for nearly a decade. We designed and assembled electronics, embedded systems, FPGA's, lots of code. Hell, we even had a full-blown CNC shop with the latest equipment. As an engineer it was fun to go to the office. As a business person, it was painful. Example: One day this guy from the County of Los Angeles Business Property Tax department shows up in our industrial area going from door to door. The guy comes into our office and informs us that he was there to confirm how much we owned in business property taxes. I told him that we leased the 10,000 square foot building. We didn't own it. He then says: "Do you own desks, computers, tools, machinery, fax machines, chairs...?". Sure. "Well, you have to pay the County of L.A. taxes on these and other items". The only thing that I could say to him was "You have to be fucking joking! I have to pay you taxes on my desks and chairs, forever? Why?" Think I am making this up? Here: http://lacountypropertytax.com/portal/contactus/ppa.aspx http://lacountypropertytax.com/portal/contactus/ppa.aspx Being in manufacturing during the last several years has been a very painful experience. The supply chain is royally fucked. A lot of what you have to source you just can't get in the US any more. More an more suppliers are closing their doors every day. It's painful, difficult and you are getting killed by product coming from China. I won't go into the details that led to my decision to abandon hardware/electronics manufacturing. I, ultimately, decided that it was a far better idea to transform into a software-only enterprise and move away from making real physical goods. Because what we made involved everything from electronics, FPGA's, embedded, web and workstation software it really wasn't too difficult to shed the hardware portion of things and stick to software. I pains me because I love making things, but we, in the US, have somehow managed to FUBAR our system to such an extent that people like me have to say "fuck it" and move on. If you continue voting for policies that promote higher taxation and regulation, more government involvement and government programs you are going to get exactly the country you are voting for: A third world mess with rats jumping ship faster than humans. Mark my words. Think about it. What cracks me up is that you guys are arguing percentages and technicalities. Coming from my side of the table reading this would be funny if it wasn't so tragic. Go make something. Then come back and re-read your comments to see what they sound like.
leot 14y ago
Perhaps the simplest and fairest tax scheme is: 1) a VAT (10-25%). Mandate that it be built-in to prices (c.f. pre-deduction of income taxes) 2) an annual wealth tax (1-3% of household net worth) (note: total federal US tax receipts are ~$2T; a 20% VAT and a 2% w.t. would generate ~$1.1T each) Eliminate: - all income taxes - all cap gains - all corporate taxation - all inheritance taxes. Use laws to prevent "wealth flight". Be flexible to make sure that gentrification doesn't lead retirees to lose their home. Strictly enforce disclosure of assets. Use assessors and insurance data to discourage noncompliance. This policy incentivizes (and rewards) work, investing, and wealth creation, and penalizes decadent leisure and letting assets lie fallow. In any true meritocracy, the deservedly wealthy can earn far more than the wealth tax (+ inflation) in return on capital, and any entrepreneur should be far happier to be taxed on the end-result of having wealth than on the work they performed to get it. The simplicity of a wealth tax consolidates and smooths issues of income volatility, depreciation, carry-overs, etc. etc.
- meric 14y ago
  I don't think that is fair. Inheritance tax should be 100%. Why should a person be rich just because their parents were rich? What about the people without rich parents? How about: The only taxes are: 1) VAT X% 2) 100% inheritance tax. 3) No capital or dividend tax. 4) A "basic salary" of a fixed X dollars to every individual. 5) Inflation of 1-3% a year via increase in monetary supply. (This is the wealth tax). 1. X depends on how much energy consumed for product/service; this is the carbon tax. 2. If you don't want to give all your money to the government when you die - just donate it to a charity not related to any of your relatives. Your children will not be left with nothing. See 4. 3. Encourages people to work and save for passive income for a better than minimum living conditions, as there will not always be jobs available. 4. The salary should be the bare minimum to live on. This takes care of social welfare. It'll be needed as technology increases and unskilled people have no ability to find jobs.
  - einhverfr 14y ago
    I am against inheritance taxes because they privilege corporate ownership above individual ownership. Corporations never die, so they never have to pay these taxes. Small family farmers OTOH... well they will be extinct under such a plan within a generation or two. What I'd like to see is a 100% exemption from inheritance taxes for productive land and property (family owned businesses, business assets, office space for family or individually owned business and land contained thereon, farmland, etc), and a tax on income derived from renting out land and housing (this is designed to make it harder to make money from buying up housing to rent, and thus tilting the balance towards home ownership rather than renting). It would also help tilt the balance from corporate ownership to individual ownership of productive assets.
rdl 14y ago
While I'd say I'm quite libertarian, I don't see how this affects a startup all that much, at least directly. 1) Corporate income tax is a (slightly progressive) tax on profits. Most tech startups aren't immediately profitable (nor are most businesses), and even then, profits are relatively low as a percentage of total revenue, especially early on. 2) Higher taxes do prevent capital accumulation/formation, but that's more an effect of personal income taxes. A rich consultant/engineer/etc. paying 40% income taxes (state+fed) plus inflated cost of living, making $150k/yr, won't realistically be able to save the $100k/yr he would potentially otherwise be able to. Being able to use your work to accumulate capital, then invest that capital in starting a business, is key for income mobility. At least in tech the cost in capital of starting new businesses is falling dramatically, so $5-10k in savings to the business, plus a low personal burn rate, is probably enough. 3) Capital gains rates are generally low enough that they don't substantially disincent investment. 4) The overseas earnings repatriation issue is an issue, but most large and international US corporations are sitting on huge amounts of capital both inside AND outside the US. The low interest rate environment makes issuing US bonds to fund US operations, while sitting on huge amounts of international pre-tax cash, also an option. In short, taxes are an issue, but definitely not the low hanging fruit. There are many regulatory issues to fix first, and systemic problems with the economy (it's absurd that we have 10-40% unemployment and underemployment, while at the same time we can't hire anywhere near enough qualified engineers -- THAT is the big structural defect which 100% of the society's effort should be going to fix.)

48 points by pragmatic 14y ago

The same was true of Raspberry Pi, in that the complete item got taxed once if made completely in China, whereas to assemble it in the UK would've resulted in them being taxed more on separate components pushing the price up. It really is utterly stupid.

rprasad 14y ago
VAT is imposed only once, albeit at multiple levels in smaller amounts. In effect, the VAT is a more hasslesome sales/services tax. Imported items are subject to higher VAT, but usually only once...if importation was a way to avoid VAT, the EU would not have any manufacturing facilities at all because it would always be cheaper to manufacture in Asia.
- DanBC 14y ago
  VAT is different to import duties. There will be a customs duty to pay on imported goods over a certain value (as well as VAT (chargeable to the end user, rather than each person in the chain.)) VAT (and import VAT) are easy enough - there's a few different rates so as long as you're careful describing the goods it's okay. But customs duty is complex. Each item has a commodity code, and that code has its rate of duty. There are 14,000 different commodity codes. (http://www.hmrc.gov.uk/customs/tax-and-duty.htm http://www.hmrc.gov.uk/customs/tax-and-duty.htm)
  - wisty 14y ago
    I've heard in some countries, it's cheaper to buy a cordless drill with a battery pack, then the battery pack alone, because batteries have a huge duty, but cordless drills (even including batteries) aren't.
  - tonyedgecombe 14y ago
    I wouldn't say VAT is that easy, for instance I'm in the UK but if I sell enough into Germany then I'm obliged to register for VAT in Germany, and the same again for each of the other EU states. Then there is additional paperwork to fill for every EU sale, each needs the customers VAT number and if it is wrong the paperwork gets rejected.
    - rprasad 14y ago
      VAT is "easy" in the sense that it is easy to figure out, but it is difficult in the sense that the administrative burdensome exceeds the burden associated with a sales tax by many orders of magnitude.
ktizo 14y ago
That's insane import taxes rather than corporation tax. It is good to incorporate in London, (and Dublin, of course), and as long as you don't actually try to make anything in Britain and just ship it all in when it's done, then everything's fine. Meanwhile, the country falls to shit cos less and less people know how to do anything.

andrewem 14y ago

Fascinating, because the Wall Street Journal said on February 3 "Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That's the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008." [1] So I would argue that the title of the article is false, and in aggregate US corporations have engineered around taxes. Alternatively, you could say that they haven't engineered around anything, and the system is operating as designed, it's just that you can't characterize its behavior by a single number. EDIT: To make the point more explicit, OP says the US is losing business to China because of China's 15% corporate tax rate, and yet that rate is higher than the effective tax rate in the US. Perhaps there's an argument to be made that US taxes really are higher, but the evidence cited in this article isn't it. [1] http://online.wsj.com/article/SB10001424052970204662204577199492233215330.html http://online.wsj.com/article/SB1000142405297020466220457719...

james4k 14y ago
That effective tax rate of 12% is not by design, though. It is due to loopholes that have been thoroughly exploited. A big one being foreign profits are not taxed until it enters the country, so many companies now take their income outside the US and keep it there. So, I would say the tax system was more...hustled around than it was engineered around.
- einhverfr 14y ago
  This should be closed. Corporations should pay US income taxes on foreign retained earnings or other changes in equity.
  - james4k 14y ago
    Yes, but it was meant to prevent double taxation, so unfortunately it's not as simple as just revoking it.
    - 14y ago

rprasad 14y ago

The linked article is inaccurate. While the US has the highest base corporate tax rate, it has the lowest effective corporate tax rate of any major nation. The US favors a deduction/credit-based system for lowering taxes. Manufacturing and research deductions/credits are especially generous. Ultimately, service-based businesses pay the highest effective rates, but few properly advised service businesses pay a 35% effective rate. (For example, choose a tax entity other than a corporation unless you have a compelling reason for being a corporation.) It is very possible to engineer around taxes. This is what I and others in my field do for a living.

forrestthewoods 14y ago
"it has the lowest effective corporate tax rate of any major nation" Can you provide a source on that? I'd love to see a good list.
- xiaoma 14y ago
  Sure! Let me google that for you. The first couple of links have your answer. http://lmgtfy.com/?q=corporate+tax+rate+by+country http://lmgtfy.com/?q=corporate+tax+rate+by+country
  - forrestthewoods 14y ago
    Dude, are you serious? Did you read anything before making that reply? An outlandish claim regarding EFFECTIVE tax rate was made without any citations. Your snarky link does nothing to resolve the claim. A similar search for "effective corporate tax rate by country" also provides no evidence to defend rprasad's claim. Adventureful dug up quotes with sources fully debunking the claim in question.
    - xiaoma 14y ago
      You have access to the same internet the rest of us do. I'm happy to find some resources, like a wiki page with relevant links, but obviously there's a limit to how much research you can expect strangers to do for you. I will try to help though: http://lmgtfy.com/?q=effective+tax+rate+by+country http://lmgtfy.com/?q=effective+tax+rate+by+country The first link brings up this report (which shows the US effective tax rate towards the top): http://businessroundtable.org/uploads/studies-reports/downloads/Effective_Tax_Rate_Study.pdf http://businessroundtable.org/uploads/studies-reports/downlo... Is that the kind of info you're looking for? If not, maybe you could share the citations that you've dug up and enlighten the rest of us?

rcthompson 14y ago

So I think the concept here is that nations are in competition with each other to attract businesses by undercutting each other on "price" (i.e. tax rates). If true, does this mean that corporations, as the buyers in this "market", are beginning to dictate prices? I can see how some science fiction writers (Neal Stephenson comes to mind) have extrapolated this trend to futures where corporations supplant nations and governments as the dominant political entity.

sageikosa 14y ago
To an extent, this happens withing larger nations and federated economic blocks such as the United States and the EU. Businesses that have mobility will move to where they have more favorable conditions. Automobile manufacturing in the US has been shifting southward (mainly to lower labor costs), companies incorporate in tax-favorable states such as Delaware and Nevada, insurance companies operate as an entirely different entity in the state of New York to avoid encumbering the rest of their business with New York's insurance regulations.
- rcthompson 14y ago
  Yes, that certainly occurs, but then the question becomes whether this increased choice for companies due to globalization makes it a buyer's market, forcing the sellers (states and countries) to lower their prices (corporate taxes and such) to the point of eventually going bankrupt, leaving the corporations a the dominant organizing force of civilization as some sci-fi authors have predicted. (Obviously this would take probably hundreds of years to happen in reality, on contrast to the sci-fi stories which are frequently "near-future".)

adventureful 14y ago

The 12.1% effective tax rate being claimed in multiple posts here is a temporary number due to a one time tax break for 2010 and 2011 that will expire. After which the effective US corporate tax rate will skyrocket back up to around 25% to 26% or so. And it's worth noting, it's a front loaded expensing, versus expensing over a period of years, so that 12.1% is completely deceiving. "In 2010 and 2011, companies were allowed to deduct the full cost of the purchases of new equipment, while normally these costs would be expensed over several years. In 2012, this deduction will go down to 50% and be eliminated altogether thereafter, causing the effective tax rate to return to roughly the 25.6% average effective tax rate corporations paid since the late 1980s, according to CBO forecasts." http://business.time.com/2012/02/06/the-corporate-tax-rate-is-at-its-lowest-in-decades-is-big-business-paying-its-fair-share/ http://business.time.com/2012/02/06/the-corporate-tax-rate-i...

adgar 14y ago
My father started a small roofing business in 1980, selling it just recently to an employee; that tax break was absolutely crucial to getting work going again. Luckily, my father's now-sold business had the bankroll to take full advantage of it. The credit others needed wasn't trivial to come by.
- adventureful 14y ago
  Just to clarify, I wasn't arguing for or against the expensing tax adjustment break (nor whether it was a benefit to the economy). I was pointing out that the claimed 12.1% effective tax rate isn't an accurate representation of corporate taxation in the US.
  - adgar 14y ago
    Yep, I know, just chiming in with some relevant experience.

robomartin 14y ago

This is the part that really confuses me. You only have to run a business --any business-- for a few quarters to understand the negative impact that taxation and over-regulation can have on the decisions you make, the risks you take, your ability to compete and how quickly you can grow. You really don't need a study from Harvard to get data on this. If you don't get it because of a lack of business experience, go talk to your local high-school-educated baker, mechanic or gas-station owner for a quick round-down. The evidence is overwhelming. Yet, we keep dicking around and supporting policies, politicians and people who somehow think they can violate the laws of physics and make things better by shafting everyone with more taxes. When are we going to learn and act? When it is too late? I owned a manufacturing business for nearly a decade. We designed and assembled electronics, embedded systems, FPGA's, lots of code. Hell, we even had a full-blown CNC shop with the latest equipment. As an engineer it was fun to go to the office. As a business person, it was painful. Example: One day this guy from the County of Los Angeles Business Property Tax department shows up in our industrial area going from door to door. The guy comes into our office and informs us that he was there to confirm how much we owned in business property taxes. I told him that we leased the 10,000 square foot building. We didn't own it. He then says: "Do you own desks, computers, tools, machinery, fax machines, chairs...?". Sure. "Well, you have to pay the County of L.A. taxes on these and other items". The only thing that I could say to him was "You have to be fucking joking! I have to pay you taxes on my desks and chairs, forever? Why?" Think I am making this up? Here: http://lacountypropertytax.com/portal/contactus/ppa.aspx http://lacountypropertytax.com/portal/contactus/ppa.aspx Being in manufacturing during the last several years has been a very painful experience. The supply chain is royally fucked. A lot of what you have to source you just can't get in the US any more. More an more suppliers are closing their doors every day. It's painful, difficult and you are getting killed by product coming from China. I won't go into the details that led to my decision to abandon hardware/electronics manufacturing. I, ultimately, decided that it was a far better idea to transform into a software-only enterprise and move away from making real physical goods. Because what we made involved everything from electronics, FPGA's, embedded, web and workstation software it really wasn't too difficult to shed the hardware portion of things and stick to software. I pains me because I love making things, but we, in the US, have somehow managed to FUBAR our system to such an extent that people like me have to say "fuck it" and move on. If you continue voting for policies that promote higher taxation and regulation, more government involvement and government programs you are going to get exactly the country you are voting for: A third world mess with rats jumping ship faster than humans. Mark my words. Think about it. What cracks me up is that you guys are arguing percentages and technicalities. Coming from my side of the table reading this would be funny if it wasn't so tragic. Go make something. Then come back and re-read your comments to see what they sound like.

leot 14y ago

Perhaps the simplest and fairest tax scheme is: 1) a VAT (10-25%). Mandate that it be built-in to prices (c.f. pre-deduction of income taxes) 2) an annual wealth tax (1-3% of household net worth) (note: total federal US tax receipts are ~$2T; a 20% VAT and a 2% w.t. would generate ~$1.1T each) Eliminate: - all income taxes - all cap gains - all corporate taxation - all inheritance taxes. Use laws to prevent "wealth flight". Be flexible to make sure that gentrification doesn't lead retirees to lose their home. Strictly enforce disclosure of assets. Use assessors and insurance data to discourage noncompliance. This policy incentivizes (and rewards) work, investing, and wealth creation, and penalizes decadent leisure and letting assets lie fallow. In any true meritocracy, the deservedly wealthy can earn far more than the wealth tax (+ inflation) in return on capital, and any entrepreneur should be far happier to be taxed on the end-result of having wealth than on the work they performed to get it. The simplicity of a wealth tax consolidates and smooths issues of income volatility, depreciation, carry-overs, etc. etc.

meric 14y ago
I don't think that is fair. Inheritance tax should be 100%. Why should a person be rich just because their parents were rich? What about the people without rich parents? How about: The only taxes are: 1) VAT X% 2) 100% inheritance tax. 3) No capital or dividend tax. 4) A "basic salary" of a fixed X dollars to every individual. 5) Inflation of 1-3% a year via increase in monetary supply. (This is the wealth tax). 1. X depends on how much energy consumed for product/service; this is the carbon tax. 2. If you don't want to give all your money to the government when you die - just donate it to a charity not related to any of your relatives. Your children will not be left with nothing. See 4. 3. Encourages people to work and save for passive income for a better than minimum living conditions, as there will not always be jobs available. 4. The salary should be the bare minimum to live on. This takes care of social welfare. It'll be needed as technology increases and unskilled people have no ability to find jobs.
- einhverfr 14y ago
  I am against inheritance taxes because they privilege corporate ownership above individual ownership. Corporations never die, so they never have to pay these taxes. Small family farmers OTOH... well they will be extinct under such a plan within a generation or two. What I'd like to see is a 100% exemption from inheritance taxes for productive land and property (family owned businesses, business assets, office space for family or individually owned business and land contained thereon, farmland, etc), and a tax on income derived from renting out land and housing (this is designed to make it harder to make money from buying up housing to rent, and thus tilting the balance towards home ownership rather than renting). It would also help tilt the balance from corporate ownership to individual ownership of productive assets.

rdl 14y ago

While I'd say I'm quite libertarian, I don't see how this affects a startup all that much, at least directly. 1) Corporate income tax is a (slightly progressive) tax on profits. Most tech startups aren't immediately profitable (nor are most businesses), and even then, profits are relatively low as a percentage of total revenue, especially early on. 2) Higher taxes do prevent capital accumulation/formation, but that's more an effect of personal income taxes. A rich consultant/engineer/etc. paying 40% income taxes (state+fed) plus inflated cost of living, making $150k/yr, won't realistically be able to save the $100k/yr he would potentially otherwise be able to. Being able to use your work to accumulate capital, then invest that capital in starting a business, is key for income mobility. At least in tech the cost in capital of starting new businesses is falling dramatically, so $5-10k in savings to the business, plus a low personal burn rate, is probably enough. 3) Capital gains rates are generally low enough that they don't substantially disincent investment. 4) The overseas earnings repatriation issue is an issue, but most large and international US corporations are sitting on huge amounts of capital both inside AND outside the US. The low interest rate environment makes issuing US bonds to fund US operations, while sitting on huge amounts of international pre-tax cash, also an option. In short, taxes are an issue, but definitely not the low hanging fruit. There are many regulatory issues to fix first, and systemic problems with the economy (it's absurd that we have 10-40% unemployment and underemployment, while at the same time we can't hire anywhere near enough qualified engineers -- THAT is the big structural defect which 100% of the society's effort should be going to fix.)