Should Corporate Tax Be Lowered in US?

For years now American corporations have been moving their headquarters to foreign countries to avoid paying the federal income tax in the United states, which is 20 to 25 percent higher than foreign countries. Should the federal income tax for corporations be lowered to keep corporations in the United States? If so to what percentage and why?

 

Corporations can structure their business so the profits are made in the low tax countries, no need to move headquarters. Those profits get invested, growing the economy in the countries where they are spent. Lower our corporate tax rate to less than the other countries, and more of those profit dollars come to the US.

What are profits? In some cases they are as you would expect, money above and beyond operating costs. But, another example of "profits" is money spent on capital equipment that is depreciated over 3 to 20 years. If I make enough to buy a $1M piece of equipment, that depreciates over 20 years, I "made" a $950K profit, and pay taxes on that profit. In the US, that $1M piece of equipment costs $1.3325M.

Where do corporations get the money they pay taxes with? From the people they sell to. If the customer is in the US, then the government is taxing that money twice. In many cases, consumer products exist only after raw materials were processed (and taxed) by multiple companies. Profits are taxed multiple times before the product reaches the end user, increasing the price to that end user, and reduces global competitiveness.

If business is the economic engine, why would we want to strangle it? Wouldn't income taxes from increased employment, and reduced spending on unemployment and welfare, offset the 9% of federal income corporations pay?

Wouldn't we reduce lobbyist, and corporate interferance in government if there wasn't a payback in the form of loop holes?

And, for those that think taxing the corporation reduces executive compensation - executive compensation is one way corporations avoid paying corporate tax.

 

What are you using in support of that premise? To make a fair comparison you will have to refer to effective tax rates.

 

Yes.

And close the loopholes.

 

We should pass the FairTax. If the FairTax was the law of the land, US Corporations will come back to the US. Why would a company open up shop overseas and pay taxes on their profits, when they can operate tax free in the US.

 

I looked up some information on FairTax and it looks interesting. Could you send me the links on it that you found? I would like to learn more.

 

http://www.fairtax.org/site/PageServer

The logic of the fair tax is simple. Why would a corporation go overseas and pay taxes on their profits if they can operate in the US tax free. This tax will turn the US into a job creating machine.

 

Eliminating taxes paid at every step of the process from raw material to sales to the final seller, reduce costs significantly. As does eliminating the accounting / legal department in all those companies, dedicated to tax minimization. Lower costs / price, more competitive on the global market, exports.

Concentrating taxes at the point of sale, puts the same increase on imports, effectively a tarrif. Protectionist may like that - but I think that could cause trade retaliation.

 

Trade retaliation? Maybe not because the "tarriff" is applied evenly on both domestic and international companies. Usually trade retaliation happen when there is unfair trade practices.

 

How is a 30% VAT different from a 30% tarrif?

Shifting taxes from income to VAT doesn't reduce taxes on international companies the way it does domestic companies.

Don't get me wrong, I like a VAT as the only form federal and state income. International companies won't stop the transition, special interest will.

 

Would that hurt our economy to not have that tax on their profit?

 

Tariffs are just cretinous; VAT are regressive and therefore- unless aggressive progressive taxes are used elsewhere- are also cretinous

 

I believe those are the current numbers. I haven't been able to find anything that says anything different. So, until I can find anything else on it, and trust me I'm searching, I believe those are the effective tax rates for corporations.

 

Some people say that we should let corporations leave the USA because its good for us to branch out. I think thats a ridiculous notion. America needs to stop thinking about branching out to everyone else and take care of our own country. We should try to make sure corporations stay here to help us enrich our economy. Besides, leaving America is a mistake for most corporations anyways. Because the costs add up, things like shipping to the US, having a place for directors of the companes to stay, training he foreign work force to use the machines, etc. It all adds up to more than what most corporations would pay with their current income tax. What do you all think?

 

Corporations respond to their customers, their suppliers, to government perks and punishments.

Moving is a huge expense, so when a corporation leaves, it is has evaluated the cost of shipping, of creating enclave communities for management (when necessary), relative tax rates, etc.

There is no "letting" them stay. You can't even force them to stay.

 

Okay oddly I agree lower the taxes by 10% and reduce paperwork but in return they have to pay taxes on ALL income regardless where it is earned in or outside the US.

 

I would agree to lower corporate taxes on one condition.

Loopholes are closed and penalties for tax dodging hugely increased. Your rate is your rate. If you try to get around it, you get penalized big time. The penalty in all cases would be more than what you would have originally owed had you not tried trickery. It would also accumulate, so if you get caught multiple times, your penalty increases automatically.

 

It doesn't matter how you spin it, corporations will do what is required to minimize taxes.

If your goal is to increase the profits a corporation brings into the US, you have to reduce the total tax burden below the other countries they have facilities in.

Do you think taxing profits made out of the US (causing double taxation) will force profits into the US? It could result in selling those off shore divisions to a newly formed off shore corporation. The same for closing loop holes.

What is more important, tax revenue or jobs? Jobs reduce the cost of safety nets, while providing more income.

What does taxing corporations get you?

 

Lowering the tax rate will benefit corporations. Expecting them to follow the tax laws isn't too much to ask in return.

 

Corporations follow the rules to the letter, and not one penny more. Which is why as many corporate profits are realized offshore.

What is more important, tax revenue from corporations, or jobs?

 

Both are important, and both can be had at the same time.

 

Please describe how.

 

Many corporations shift their profits overseas and only do so because the tax code and international trade and finance laws allow it. Changes in the corporate tax rates should not even be considered until there are enough changes to the tax code that taxes are actually paid on income from sales within the nation.

This is a huge problem all over the world and was a point of discussion at the last G20 meeting where there were many complaints about corporations paying no taxes on huge profits by transferring income to subsidiaries in other nations that exist solely to dodge taxes. It is easy enough to set up a shell corporation in Ireland, where corporate income tax is 5%, and then transfer to it all the company's intellectual property. That way all the profits made in all other nations can be funnelled into Ireland through payment of licensing and franchise fees. It is dodges like this that allow corporations like Starbucks ans Google to pay little to no taxes on their income to the nations they garner their income from.

I think there will be some changes. The adoption of a uniform international corporate tax regime, either through the WTO or by other international treaty would seem the only way to really address this problem if nations are to ever receive revenues from the profits of international corporations operating withing their borders.
The best would be to tax corporations based on gross profit percentages from sales volumes as reported through audited annual statements on a nation by nation basis.

 

Lets assume all contries agree to one global corporate tax. There is a huge incentive to be the first to offer a lower tax rate, and receive a huge windfall.

For that matter, why would all countries agree to a global agreement.

 

yes, but only after the loopholes and subsidies are removed