The article identifies the problem, but the conclusion appears to be that we should win the race to the bottom by going straight down. If the USA adopts Ireland's tax code, what happens when another country goes even lower?
The real solution IMO is to tax US companies for world wide profits and have punitive taxes on foreign companies to keep US companies from pretending to move offshore.
Believe me, US citizens working abroad and US companies doing business abroad suffer through similar pain when it comes time to file tax returns. Resolving differences in two completely different systems is very hard.
The US benefits GREATLY from its open market while China's semi closed market in turn hurts it a lot. Ya, foreign companies still operate there, but only with an expectation that it will open in the future, not given today's situation!
Having a different tax rate for foreign companies would basically destroy the WTO, all those treaties that benefit the USA in lopsided ways go away, and we will just lose a lot of wealth in one swoop. All the other countries will retaliate of course, taking a significant chunk of global GDP that relates to trade down, almost probably causing a few wars and such.
PS: In a wider context, the benefits of free trade are overstated. Not all industries have equal long term benefits even if the short term looks great. https://en.wikipedia.org/wiki/Phosphate_mining_in_Nauru
The problem of Nauru presents a paradox. The striking contrast is between a superficially happy state of affairs and an uncertain and indeed alarming future... But this picture of peace and well-being and security is deceptive. Indeed it is a false paradise. For these gentle people are dominated by the knowledge that the present happy state of affairs cannot continue. (1962)
Ya, we could go back to local production, isn't that what North Korean juche is all about?
I still think that VAT with offsets is the best taxation form available (and universal income the best offset form). But it alone is disastrous.
And, while we are at it, make sure the VAT is really a VAT, not a sale-value tax. Because it usually is, and it's the one tax form worse than a VAT.
Apple's US tax already is proportional to its US sales. The major strategy that it and other US tech companies use is keeping overseas profits off-shore, not avoiding taxes on US sales.
Most famously, General Electric has hundreds or low thousands of IRS employees on-site performing audit functions continuously. It's a waste of everyone's time.
IMO, it makes more sense to apply excise taxes, consumption taxes or taxes on corporate treasury balances. Or not to tax them at all.
Agreed. I challenge anyone who complained that Congress should not have 'default' back in 2013 (in other words, continue to issue debt forever) to explain why the tax rate ought to be nonzero? I mean, if people continue to purchase Federal bonds, why tax corporations (or anyone)?
If you want to tax people and corporations to 'reduce inequality', consider your position on fairness...
For example, our navy is mighty and far-flung across the globe, and it's not because we're proud of our maritime traditions but because the force of the US Navy ensures stability for commerce.
The average American benefits to a small degree from this international commerce, but the corporations (and by extension the wealthy who own the corporations) benefit far more. This is why we have progressive taxation schemes where the wealthy pay more, at more levels. Or they're supposed to, at least.
This tax will then be added to the cost of shipped goods.
If the wealthy are actually the people consuming those shipped goods, then they will in fact be the ones to pay. If you are wrong, and the primary beneficiaries of international trade are actually middle class consumers, then middle class consumers will pay.
My original point was that we have a system today where a significant portion of the economy is devoted to calculating taxes. I'm not saying don't tax corporations. I'm saying tax corporations on a basis that can be enforced in a reasonable way.
I do care about the overall integrity of the system. The notion that my uncle's carwash probably pays more in income tax than General Electric undermines the integrity of the system as a whole.
If they decide to be tax resident in Ireland the 12.5% corporation tax is hardly a 'tax haven' but it's still better than most. Another big draw is the amount of money the Irish government puts up to attract FDI through their Industrial Development Authority (IDA).
If only physical persons could relocate to a better place with the same ease corporations do now the governments would suck so much less.
If physical persons could relocate to a different country with the same ease as corporations then the instability of their tax bases combined with the difficulty of ensuring compliance with their taxing regime might very well spell the end of nation states.
But the human condition is such that I do not think it's not going to happen anytime soon :(
Really? And would global average wages double, or would the profit margins on ever-cheaper labor do all the growing?
Variables rarely remain constant in the real world in the way that they do in ceteris paribus thought-experiments.
Imagine if investors in startups couldn't take equity, but were limited to taking a percentage of current profits. That would create a huge disincentive to be an early-stage investor, and a huge incentive to be an investor that could come in with the cheapest rates at the last round of investment for a company that already had established growth and revenues.
In the alternate, consider the hypothetical of tax rate auctions at the time of birth. I.e. what tax rate would people bid in order to be born and try to become successful in the U.S. instead of somewhere else?
If a company headquartered in Singapore makes use of US labor (and implicitly our effective, but extremely overpriced schools), it pays a fair rate of taxation on it. It simply doesn't have to pay taxes to the US on profits from selling goods manufactured in the Philippines to citizens of Japan.
That's ultimately the reason for moving corporate registration overseas, and that's the reason my next corporation will probably be headquartered in Singapore. Global taxation is insane; it's taxing US corporations for services that other governments have already provided and taxed them for.
What do these (non-economic benefits) have to do with efficient corporate tax rates or your claims about freeloading?
Indeed, even those wealth transfers to old people create economic value. Those wealth transfers still exist in countries without Social Security--they just happen "off the books" through familial relationships. And that has a lot of downside. The burden of caring for elderly parents disincentivizes young people from taking career risks and limits geographic mobility. Not to mention: try creating Tindr in a society where everyone lives with their elderly parents.
Being born in the U.S. (or Germany or a handful of other countries), has an enormous impact on your lifetime income, keeping everything else constant. That has intrinsic value.
Creating social order costs money. Benefiting from that social order up through the point you're successful, then taking that success--which society has invested in--to the lowest bidder tax jurisdiction is freeloading. That's why I presented the hypothetical about people bidding on tax rates at birth. Choice is fine and competition between countries is fine, but letting people and capital move freely after they've found out how everything turns out does not incentivize countries to create the conditions that maximize prosperity and opportunity. It incentivizes countries to poach successful people (and companies) from other places, after another country has put in the initial investment and taken the initial risk.
First, most of the benefits you describe (e.g., ample vegetarian food in NYC, very little in Singapore) are not paid for with taxes or provided by the government. The fact that the US govt happens to be the strongest bandit in a region where hookups are easy is not a justification for giving them profits earned by manufacturing goods in Bangladesh and selling them in Malaysia.
Second, if growing up/being born under the US/German social order were actually important, then there is a very easy way to measure it. Take people born outside this order but give them permission to work in global markets and compare their income to natives. Indian and Chinese immigrants tend to outperform Americans, which pretty much solidly refutes this claim.
Third, you seem to be conflating the purchase of services with equity investments. All your critiques of freeloading should apply equally if I build V1 of my software on AWS but switch to Softlayer for V2.
The U.S. government, and the American public on behalf of who it spends tax money, did not just come along and take over an existing liberal productive society. It created that society. That society wouldn't exist without it.
> Second, if growing up/being born under the US/German social order were actually important, then there is a very easy way to measure it. Take people born outside this order but give them permission to work in global markets and compare their income to natives. Indian and Chinese immigrants tend to outperform Americans, which pretty much solidly refutes this claim.
The U.S. immigration system, by design, is very selective about which Indians and Chinese it allows to emigrate. Their performance says nothing about the value of growing up in the U.S. Besides that, your argument proves the opposite of your intended point. If there is no value to the U.S. besides the economic value of the government services people receive, why would the best and brightest from India and China struggle to come here to start their careers? Is it because of our fantastic public transit?
> Third, you seem to be conflating the purchase of services with equity investments. All your critiques of freeloading should apply equally if I build V1 of my software on AWS but switch to Softlayer for V2.
Amazon will charge you $X for AWS whether or not your product ever generates any revenue. The U.S. government's investment into education, infrastructure, and the social safety net will be there for you whether or not you succeed. It's much more like an equity investment than a simple exchange of services for money.
> In your hypothetical, companies have a strong incentive to start in countries that have strong infrastructure and services (safety nets to reduce risk for founders and early employees, higher-education to ensure a supply of educated workers, etc), then move to a low-tax jurisdiction once they are successful.
In this hypothetical, governement will know that a company will migrate away once it find a better one. This will be reflected in how gov't will charge. It will probably mean the end to "% of income" based taxes instead fixed taxes.
Think of government as a corporation providing some services because that what it will be once movement and /citizenship/ becomes easy. The people who stay (i.e. actual citizens) will play the role of shareholders and (hopefully) will be more critical of their goverment.
Although I didn't imply immigration restrictions are the only problem either- indeed the language and other cultural barriers as well as our tendency to form bonds that are painful to break all work against mobility.