7 ms·

Obama presses to end corporate trick for evading taxes

36 points by dataminer 12y ago

icehawk219 12y ago
Maybe I've just become jaded about American politics but every time a politician says something like this I tend to just assume that they're doing it to gain favor with the public while knowing there's nearly a 0% chance it will actually happen.
- jasonwocky 12y ago
  These things look the same even when there is an actual chance of it happening.
alwaysdoit 12y ago
It's ridiculous that lawmakers to try to guilt or shame companies into paying more taxes. If they want companies to pay more or not use loopholes they should raise taxes or close the loopholes. Otherwise they are penalizing any company that tries to "be patriotic" or "pay its fair share" by forcing it to compete on an uneven playing field with companies that aren't paying those higher taxes.
- bitJericho 12y ago
  How do you expect bills to get passed if the President doesn't talk about them?
- jasonwocky 12y ago
  He's not trying to guilt companies into paying more taxes. Fairly certain he knows that would be a colossal waste of time. He's trying to stir up support for closing the loopholes.
- mmanfrin 12y ago
  To change a law, you don't just put up a bill for a vote; you first need to drum up support, which means getting politicians motivated for it which means riling up their political base. That is to say, to change a law, you have to get citizens caring about it -- hence the rhetoric about 'economic patriotism'.
  - deleted 12y ago
    [deleted]
doctorwho 12y ago
Sounds good, but they damned well better apply the same rules to individuals who use offshore tax shelters too. How unpatriotic is that? Deserters!
- wyager 12y ago
  >How unpatriotic is that? Deserters! Yeah! Nationalism! Everyone should put the interests of a blob of land delineated by imaginary lines above their own! Can we stick to arguments not based on nationalist fervor?
  - diminoten 12y ago
    ...he says while sipping a glass of nationally funded water, on his computer which arrived via nationally funded sea ports, which sends data over nationally funded computer networks, using a protocol developed with national funding.
    - wyager 12y ago
      >he says while sipping a glass of nationally funded water The water wasn't created by the government, the government didn't build the pipes carrying it to my house, and any first world country could have helped to facilitate this glass of water just as much as the country I happen to inhabit. >using a protocol developed with national funding Along with contributions from Xerox, BBN, UCL, a number of US universities... And why, exactly, does the fact that a government partially funded a nice project mean that nationalism is a good motive?
      - diminoten 12y ago
        This is a tax debate, and with any tax debate, it's worth remembering what our tax dollars get us. It seems like you're equating "nationalism" with "government", which is most certainly too broad.
        wyager 12y ago
saosebastiao 12y ago
The corporate tax is an absolute mess. Compliance costs are insane. Closing one loophole opens up another. It creates incentives for "paying" executives with look-the-other-way corporate jets and luxury hotels and conferences in the Bahamas. It is also indeterminate in how regressive it is[1]...some companies and industries can offload almost all of the tax burden (incidence) onto their workers, while others offload it onto their shareholders. Even in the case where shareholders shoulder the majority of the burden, ownership distribution can still heavily affect how progressive it is in reality. The worst part is that it just isn't that great of a form of revenue. Doubling our effective corporate tax rate would be impossible politically. Superficially, rates can be raised, but tax lawyers will exploit the shit out of it anyway. A coalition might be able to raise it by an effective 25% max before every corporation in the US teams up to vote them six feet under. Seems like a lot of political capital to waste just to get a measly $80B/year. [2]. IMO, the perfect solution would be to eliminate the corporate tax altogether, and tax capital gains and dividends as income instead. At least then you can be assured that it is progressive, and you have more direct control over how progressive it is. [1] http://www.urban.org/uploadedpdf/1001349_corporate_tax_incidence.pdf http://www.urban.org/uploadedpdf/1001349_corporate_tax_incid... [1] http://www.kc.frb.org/Publicat/RegionalRWP/RRWP07-01.pdf http://www.kc.frb.org/Publicat/RegionalRWP/RRWP07-01.pdf [2] http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=203 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...
- chimeracoder 12y ago
  > IMO, the perfect solution would be to eliminate the corporate tax altogether, and tax capital gains and dividends as income instead. We already tax capital gains on short-term investments as income. Taxing long-term capital gains at the same rate as income would have a number of other unpleasant consequences - It would eliminate the incentive to hold investments for longer than 365 days - It would reduce the incentive to invest in the market (since you would quite literally be paying double taxes on this income, instead of more like 1.5x the tax (which is what we sometimes misleadingly refer to as "double taxation")) Regarding point #1 - if you sell a stock before 1 year, you already pay normal income tax on any gains. This encourages buy-and-hold, long-term investing, which I believe most people on HN would agree is good for the economy at large, as it reduces volatility and ensures that shareholder incentives are better aligned with growing the company. Regarding point #2, which is mildly controversial (but IMHO only because it is misunderstood): it is good to encourage investments in the economy, because this is literally how business raise capital. Readers of Hacker News should be well aware of the importance of this in the private equity markets (ie, venture capital, which is technically a form of private equity). Similarly, in the public markets, it is good to create incentives for people to park their money in places which help spur the economy[0]. [0] In theory (obviously not always in practice), providing capital to a business has the potential to stimulate the economy more than providing capital to an individual, as the business uses that capital to pursue a profit, hire employees, etc.
crazy1van 12y ago
"Economic Patriotism" as described here is a ridiculous concept. There is nothing patriotic about demanding that another guy pay more taxes. Its like signing up someone else for the military. Want to show patriotism? Write a check of your own money to the Treasury Dept. Edit: I don't mean to suggest the tax code shouldn't be changed. I just mean compelling others to sacrifice, doesn't make a person patriotic.
- deleted 12y ago
  [deleted]
- SolarNet 12y ago
  But the argument here is that corporations are not paying their fair share of the taxes. To pay your share of taxes is patriotic. Hence avoiding taxes, while reaping the benefits, is not patriotic. People get angry when poor people abuse welfare, why aren't they annoyed when wealthy companies abuse a countries benefits. We have an educated base of people, a leading technology base, a law structure which favors corporations in many ways, and a secure place to put offices, all of which the government is directly responsible for. (I would have also put, infrastructure but... we don't have that anymore, nor do we have low crime rates, at least in comparison to other modern industrial nations). We aren't calling Obama patriotic for suggesting or implementing this. We are calling the companies who do this anyway, who pay U.S. taxes when they could avoid them, patriotic, and those who don't, who mainly operate here, who reap the benefits of our country and don't pay their share? Parasites.
  - Millennium 12y ago
    But what does it mean to pay one's fair share? What criteria should be used to determine it? Are taxes the only way that one's fair share can be paid? How should we treat outliers on both ends of the spectrum? We haven't even finished debating questions like these. Yet taxation is needed in some form, so people do the best they can. Unfortunately, that means planning based on the assumptions of specific answers to unsettled questions.
    - 12y ago
peapicker 12y ago
Bad headline. The "trick" is not a trick, it is allowed under the current law. Should read, had the headline been written by an objective journalist, "Obama presses to close corporate tax loophole."
- talmand 12y ago
  I would even say that referring to it as a loophole is not fair. "Obama presses to reform badly written corporate tax laws."
mark_l_watson 12y ago
Actually, the US government is behaving very rationally. Realizing the pressure on the US dollar, especially since progress is already happening in moving to SDRs (special drawing rights) as the world's reserve "currency" and trading blocs are increasingly using their own currency for bilateral trade. President Clinton signed a bill that confiscates part of someone's net worth over a threshold for renouncing US citizenship and moving to another country. Bush and Obama are taking similar steps to keep assets in the USA. While it is reasonable to go after money laundering, it is becoming increasing difficult to do some business transactions internationally, open bank accounts in countries where one spends a lot of time on vacation or has residency, etc.
nateabele 12y ago
I feel compelled to bring up, as a public service, that 'patriotism' has nothing to do with one's government, and using it in an attempt to manipulate people into financing more and more mass murder is disingenuous and disgusting.
deleted 12y ago
[deleted]
tyoma 12y ago
Wait, US corporations are moving to Europe for lower taxes? I thought taxes there had to be extraordinarily high to support their free healthcare systems, paid maternity/paternity leave, and lengthy vacations?! On a serious note, I wish articles like this actually gave some mechanics about the actual 'tax evasion'. The issue is that the US taxes worldwide earnings at the US tax rate. Other countries, such as the UK[1] don't do this. So if you're a multinational with sizable non-US earnings, it makes a lot of sense not to be domiciled in the US. [1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/183408/A_guide_to_UK_taxation.pdf https://www.gov.uk/government/uploads/system/uploads/attachm...
- talmand 12y ago
  I believe you answered your own non-serious question. If the foreign nation only taxes the company for profit inside the nation and the US taxes profit worldwide, then it isn't too hard to see the better deal even if the foreign nation's tax rate is higher.
  - tyoma 12y ago
    The UK corporate tax rate is lower, 21% vs 35% in the US.

36 points by dataminer 12y ago

Maybe I've just become jaded about American politics but every time a politician says something like this I tend to just assume that they're doing it to gain favor with the public while knowing there's nearly a 0% chance it will actually happen.

jasonwocky 12y ago
These things look the same even when there is an actual chance of it happening.

alwaysdoit 12y ago

It's ridiculous that lawmakers to try to guilt or shame companies into paying more taxes. If they want companies to pay more or not use loopholes they should raise taxes or close the loopholes. Otherwise they are penalizing any company that tries to "be patriotic" or "pay its fair share" by forcing it to compete on an uneven playing field with companies that aren't paying those higher taxes.

bitJericho 12y ago
How do you expect bills to get passed if the President doesn't talk about them?
jasonwocky 12y ago
He's not trying to guilt companies into paying more taxes. Fairly certain he knows that would be a colossal waste of time. He's trying to stir up support for closing the loopholes.
mmanfrin 12y ago
To change a law, you don't just put up a bill for a vote; you first need to drum up support, which means getting politicians motivated for it which means riling up their political base. That is to say, to change a law, you have to get citizens caring about it -- hence the rhetoric about 'economic patriotism'.
- deleted 12y ago
  [deleted]

doctorwho 12y ago

Sounds good, but they damned well better apply the same rules to individuals who use offshore tax shelters too. How unpatriotic is that? Deserters!

wyager 12y ago
>How unpatriotic is that? Deserters! Yeah! Nationalism! Everyone should put the interests of a blob of land delineated by imaginary lines above their own! Can we stick to arguments not based on nationalist fervor?
- diminoten 12y ago
  ...he says while sipping a glass of nationally funded water, on his computer which arrived via nationally funded sea ports, which sends data over nationally funded computer networks, using a protocol developed with national funding.
  - wyager 12y ago
    >he says while sipping a glass of nationally funded water The water wasn't created by the government, the government didn't build the pipes carrying it to my house, and any first world country could have helped to facilitate this glass of water just as much as the country I happen to inhabit. >using a protocol developed with national funding Along with contributions from Xerox, BBN, UCL, a number of US universities... And why, exactly, does the fact that a government partially funded a nice project mean that nationalism is a good motive?
    - diminoten 12y ago
      This is a tax debate, and with any tax debate, it's worth remembering what our tax dollars get us. It seems like you're equating "nationalism" with "government", which is most certainly too broad.
      - wyager 12y ago

saosebastiao 12y ago

The corporate tax is an absolute mess. Compliance costs are insane. Closing one loophole opens up another. It creates incentives for "paying" executives with look-the-other-way corporate jets and luxury hotels and conferences in the Bahamas. It is also indeterminate in how regressive it is[1]...some companies and industries can offload almost all of the tax burden (incidence) onto their workers, while others offload it onto their shareholders. Even in the case where shareholders shoulder the majority of the burden, ownership distribution can still heavily affect how progressive it is in reality. The worst part is that it just isn't that great of a form of revenue. Doubling our effective corporate tax rate would be impossible politically. Superficially, rates can be raised, but tax lawyers will exploit the shit out of it anyway. A coalition might be able to raise it by an effective 25% max before every corporation in the US teams up to vote them six feet under. Seems like a lot of political capital to waste just to get a measly $80B/year. [2]. IMO, the perfect solution would be to eliminate the corporate tax altogether, and tax capital gains and dividends as income instead. At least then you can be assured that it is progressive, and you have more direct control over how progressive it is. [1] http://www.urban.org/uploadedpdf/1001349_corporate_tax_incidence.pdf http://www.urban.org/uploadedpdf/1001349_corporate_tax_incid... [1] http://www.kc.frb.org/Publicat/RegionalRWP/RRWP07-01.pdf http://www.kc.frb.org/Publicat/RegionalRWP/RRWP07-01.pdf [2] http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=203 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...

chimeracoder 12y ago
> IMO, the perfect solution would be to eliminate the corporate tax altogether, and tax capital gains and dividends as income instead. We already tax capital gains on short-term investments as income. Taxing long-term capital gains at the same rate as income would have a number of other unpleasant consequences - It would eliminate the incentive to hold investments for longer than 365 days - It would reduce the incentive to invest in the market (since you would quite literally be paying double taxes on this income, instead of more like 1.5x the tax (which is what we sometimes misleadingly refer to as "double taxation")) Regarding point #1 - if you sell a stock before 1 year, you already pay normal income tax on any gains. This encourages buy-and-hold, long-term investing, which I believe most people on HN would agree is good for the economy at large, as it reduces volatility and ensures that shareholder incentives are better aligned with growing the company. Regarding point #2, which is mildly controversial (but IMHO only because it is misunderstood): it is good to encourage investments in the economy, because this is literally how business raise capital. Readers of Hacker News should be well aware of the importance of this in the private equity markets (ie, venture capital, which is technically a form of private equity). Similarly, in the public markets, it is good to create incentives for people to park their money in places which help spur the economy[0]. [0] In theory (obviously not always in practice), providing capital to a business has the potential to stimulate the economy more than providing capital to an individual, as the business uses that capital to pursue a profit, hire employees, etc.

crazy1van 12y ago

"Economic Patriotism" as described here is a ridiculous concept. There is nothing patriotic about demanding that another guy pay more taxes. Its like signing up someone else for the military. Want to show patriotism? Write a check of your own money to the Treasury Dept. Edit: I don't mean to suggest the tax code shouldn't be changed. I just mean compelling others to sacrifice, doesn't make a person patriotic.

deleted 12y ago
[deleted]
SolarNet 12y ago
But the argument here is that corporations are not paying their fair share of the taxes. To pay your share of taxes is patriotic. Hence avoiding taxes, while reaping the benefits, is not patriotic. People get angry when poor people abuse welfare, why aren't they annoyed when wealthy companies abuse a countries benefits. We have an educated base of people, a leading technology base, a law structure which favors corporations in many ways, and a secure place to put offices, all of which the government is directly responsible for. (I would have also put, infrastructure but... we don't have that anymore, nor do we have low crime rates, at least in comparison to other modern industrial nations). We aren't calling Obama patriotic for suggesting or implementing this. We are calling the companies who do this anyway, who pay U.S. taxes when they could avoid them, patriotic, and those who don't, who mainly operate here, who reap the benefits of our country and don't pay their share? Parasites.
- Millennium 12y ago
  But what does it mean to pay one's fair share? What criteria should be used to determine it? Are taxes the only way that one's fair share can be paid? How should we treat outliers on both ends of the spectrum? We haven't even finished debating questions like these. Yet taxation is needed in some form, so people do the best they can. Unfortunately, that means planning based on the assumptions of specific answers to unsettled questions.
  - 12y ago

peapicker 12y ago

Bad headline. The "trick" is not a trick, it is allowed under the current law. Should read, had the headline been written by an objective journalist, "Obama presses to close corporate tax loophole."

talmand 12y ago
I would even say that referring to it as a loophole is not fair. "Obama presses to reform badly written corporate tax laws."

mark_l_watson 12y ago

Actually, the US government is behaving very rationally. Realizing the pressure on the US dollar, especially since progress is already happening in moving to SDRs (special drawing rights) as the world's reserve "currency" and trading blocs are increasingly using their own currency for bilateral trade. President Clinton signed a bill that confiscates part of someone's net worth over a threshold for renouncing US citizenship and moving to another country. Bush and Obama are taking similar steps to keep assets in the USA. While it is reasonable to go after money laundering, it is becoming increasing difficult to do some business transactions internationally, open bank accounts in countries where one spends a lot of time on vacation or has residency, etc.

nateabele 12y ago

I feel compelled to bring up, as a public service, that 'patriotism' has nothing to do with one's government, and using it in an attempt to manipulate people into financing more and more mass murder is disingenuous and disgusting.

deleted 12y ago

[deleted]

tyoma 12y ago

Wait, US corporations are moving to Europe for lower taxes? I thought taxes there had to be extraordinarily high to support their free healthcare systems, paid maternity/paternity leave, and lengthy vacations?! On a serious note, I wish articles like this actually gave some mechanics about the actual 'tax evasion'. The issue is that the US taxes worldwide earnings at the US tax rate. Other countries, such as the UK[1] don't do this. So if you're a multinational with sizable non-US earnings, it makes a lot of sense not to be domiciled in the US. [1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/183408/A_guide_to_UK_taxation.pdf https://www.gov.uk/government/uploads/system/uploads/attachm...

talmand 12y ago
I believe you answered your own non-serious question. If the foreign nation only taxes the company for profit inside the nation and the US taxes profit worldwide, then it isn't too hard to see the better deal even if the foreign nation's tax rate is higher.
- tyoma 12y ago
  The UK corporate tax rate is lower, 21% vs 35% in the US.