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They could wait around for a tax-repatriation holiday. There was one in 2004 that brought in about $312 billion. Companies paid 5% tax, instead of 35%, on all
by vellum 14y ago
They could wait around for a tax-repatriation holiday. There was one in 2004 that brought in about $312 billion. Companies paid 5% tax, instead of 35%, on all foreign revenue brought back to the states.
The theory was that companies would use that money to create jobs, but instead they bought back a lot of stock. So it's unlikely that there will be another one in the near future, unless the political winds change.
http://online.wsj.com/article/SB10001424052702303339904576404183763158882.html http://online.wsj.com/article/SB1000142405270230333990457640...
- jacquesm 14y agoWhat they should do instead of a holiday is simply seize assets statesside with rouhgly the same bookvalue until the money was brought in and taxed in the normal way. That would close this loophole pdq. All this pussyfooting around just underscores that private individuals are on the hook but as a company you can do just about anything. I don't like taxes, I disagree with plenty of them, I disagree with how they are spent. But I still pay my taxes and the fact that I pay more tax on my income (which is a very small fraction of their turn-over) than some well known multi-nationals has me seriously ticked off.
- gadders 14y agoNah, what should happen is that governments lower their extortionate tax rates so that these avoidance measures aren't neccessary. http://en.wikipedia.org/wiki/Laffer_curve http://en.wikipedia.org/wiki/Laffer_curve
- wavefunction 14y agoThe Laffer curve has never been shown to be true, and in fact has always been shown to be false in the real world.
- davidw 14y agoSo... if it's "not true", what sort of curve would you get if you plot government revenue as a function of tax rates? The Laffer curve makes a lot of sense. What is difficult about it, and where politicians are likely to try and push their own agenda, is finding where revenues are maximized, which is a far more difficult proposition than proposing that there is a revenue curve with a high point somewhere in the middle, which makes intuitive sense.
- lukasLansky 14y agoWell, you do not get a curve, and there is no maximum. https://en.wikipedia.org/wiki/Hysteresis https://en.wikipedia.org/wiki/Hysteresis Same taxes with different history of taxation yield wildly different results.
- sbmassey 14y agoIt would form a curve for a given state at a given time period. Obviously you wouldn't get the exact same curve for different states and times.
- gadders 14y agoIt's self-evidently true as a concept, even if the exact shape of the curve and the values aren't known.
- ubernostrum 14y ago"Taxes shouldn't be too high, and shouldn't be too low" is about the most precise statement anyone can make about the Laffer curve and still be able to have it hold up in the face of the real world. Pardon me if I'm not bowled over by that.
- gadders 14y agoWell, given that plenty of governments seem to think taxation can be increased indefitely in order to support their "client state" of government employees, I'd say that was a valuable result.
- vidarh 14y agoIf "plenty of governments" believed that, I'd expect to see far higher tax rates.
- jeltz 14y agoSince we have no clue about the shape of the curve apart from the two extremes it is a quite useless tool. EDIT: According to the Wikipedia page some studies indicate that the maximum for the laffer curve in Sweden was about 70% tax.
- twoodfin 14y agoThat's a believable number. But I also imagine that the curve flattens considerably before topping out: Sweden probably wouldn't get a lot of additional revenue out of that last 5-10% in tax rates. If you were picking the "right" level of taxation, you'd presumably want it to set it somewhere near the point where the economic cost of the taxes was equal to the benefits of the government's use of the revenue, and not at the point of maximum revenue. A 70% marginal rate is not outrageously far from where the top bracket in California will be if Washington decides the best Social Security reform includes lifting the payroll tax cap. Today's effective top marginal rate in CA is ~52% in Fed+State income taxes and another 3.8% for the high-earner Medicare tax. If SS goes uncapped, adding another 12.4%, your $1M earner is hitting 68.2%. I'm dispensing with the accounting fantasy that the "employer-paid" portion of the tax isn't actually a tax on the worker.
- sgift 14y agoEven if the Laffer curve is true (see the comment by wavefunction) no one knows where the maximum revenue point is. Look at "Empirical data" in the Wikipedia article: There are many possible values for "optimal tax rate" and companies have many options to play the system, e.g. always hold back enough money that there is justification for a lower tax rate.
- gadders 14y agoNo, nobody knows what the exact shape of the curve is, but governments should bear in mind when screwing more cash out of companies and people in order to fund pork barrell projects.
- vajrabum 14y agoGiven that company's minimize their tax liability any amount of tax over zero is going to be enough to induce them to such shenanigans.
- adventured 14y agoNo they shouldn't seize anything. That overseas money is not owed to the US Government and does not belong to the US Government. Taxes are only owed if you repatriate it. You're advocating theft as it is. It's not a loophole, it would be double taxation. If Microsoft earns $10 billion in China, they should pay taxes to China on that, not pay China + the US Government. Unless you're advocating confiscatory level taxation, of perhaps 60% to 70% on corporate profits.
- jacquesm 14y agoMicrosoft never earned $10 billion in China, they sold $10 billion worth of goods to an overseas entity using a tax avoidance scheme. Different thing. I understand that parent/daughter company relationships are hard but the only thing that matters is who holds the final holdings shares. Everything else is just window dressing and obfuscation.
- outside1234 14y agoSo by your argument, when we purchase a physical book, we should pay taxes in every locality that that book passed through. So let's say it was manufactured in Florida, shipped from New York, and sold in California, by your logic we should be paying state taxes in Florida, New York, and California. Is that right?
- Cushman 14y agoSounds right to me. The manufacturer will pay tax in Florida, the shipping company will pay tax in New York, and the retailer will pay tax in California— all those taxes get sent down the line to me. If any of these entities are legally based out of somewhere else, I would expect them to pay tax there in addition. If the shipping company and the retailer are owned by the same entity, and they said that their revenue from shipping was $0 so they don't owe New York any tax, I'd expect New York to take a different view. If I live in Massachusetts and earn money in New York, both states expect me to pay income tax.[0] And why shouldn't they? I'm using both of their resources. [0] The amount paid to NY is deducted from the MA tax, down to 0. That might be different elsewhere?
- cpursley 14y agoCompanies don't pay taxes even if they do. Their customers do through increased pricing.
- eurleif 14y agoIndividuals don't pay taxes even if they do. The companies they buy from do through reduced sales.
- Retric 14y agoYou mean cost 1.8 trillion? At some point shareholders want here money back so companies have little choice in the long term. Until then it's reasonable to keep an offshore buffer which they refill after a tax holiday.