Comment by mdorazio | Hacker News Reader

Comment by mdorazio | Hacker News Reader

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I think you missed the point of my #3. This is like the underpants gnomes in South Park: Step 1: Tax-free repatriation Step 2: ???? Step 3: Economic pizza party

What is step 2 here? Is there any actual evidence that repatriated funds would go back to productive things in the US economy? When we had a tax holiday in 2004, it was a complete failure for jobs and development [1], and only helped shareholders and executives. Is that really what we want? For that matter, is there even a guarantee that companies would distribute all the money back to shareholders in a way that would lead to personal income tax?

Your argument that the money is not being spent overseas implies lack of confidence in other economies is exactly what I'm saying - there is no productive use of those funds available, or else the holders would already be spending it. I would personally much rather some portion of that money go back to the government for expenditure directly on public projects than have all of it go who knows where when it gets repatriated.

I and may other people opposed to tax-free repatriation are perfectly aware of the economics and simply disagree with you on desired outcomes. My opinion is that if you don't want to pay US taxes, don't do business in the US. If you want the benefits of the US labor force, infrastructure, education, legal and military protection, etc. then you should be willing to pay taxes to enjoy those benefits. What other countries do or do not do is irrelevant, as are the desires of necessarily selfish investors. I also disagree that tax-free repatriation is the only long-term solution available - it's just the one you personally like the most. For example, there's nothing stopping Congress from enacting laws to tax stockpiled funds.

[1] http://www.wsj.com/articles/SB100014240529702036331045766237...

If they repatriate the cash, the company can

a) pay dividends, which are taxed on the recipient

b) buy back shares, generating a capital gain for the seller, which is taxed

c) park it in a bank, which boosts reserves and indirectly stimulates the economy

d) make alternative investments such as corporate venture capital, real estate etc

I personally think there should be no corporate income tax. Instead, taxes should be paid by citizens when the money hits their personal bank account.

Yes, there would be opportunities for evasion by people incorporating themselves. No, I don't know what the ultimate solution to that is.

BUT... right now there is an army of accountants and lawyers who are able to charge companies like Apple exorbitant fees because the potential tax savings is so huge. If you have a $100 million tax liability, using accounting tricks to lower that liability by $20 million justifies paying a lot of lawyers.

If those gains were distributed instead of taxed at the corporate level, suddenly those lawyers will find they have to service a thousand, probably tens of thousands of customers to realize the same payoff they get from one big customer. That changes the economics of tax evasion considerably.

Thank you for laying out the likely outcomes. My issue is two-fold: 1) we're basically saying "I guess 15% (dividend and long term cap gains tax) at most (probably less) is good enough" instead of the 35% they would normally pay, which just generally seems like bad thinking to me when it comes to setting policy, rather than finding a different solution. And 2) I'm not aware of any evidence that b, c, and d are likely to have a positive outcome for the US as a whole rather than for individuals. (b) assumes that capital gains will be realized and taxed within a short-term time frame, (c) assumes that banks are actually in need of reserves, which I don't believe is true [1], and (d) assumes that alternate investments would actually be pursued that aren't being funded right now, which I'm also not sure is true to any significant extent (ex. Google already has Tech Stars and spends mountains of cash on real estate)

[1] https://twitter.com/dallasfed/status/433408941947494400

That "15 percent" dividend tax is on top of venture returns that are taxed at 35%. It's like if people were saying you have it easy because you only pay 5% taxes, without mentioning that you have to pay regular income/FICA taxes, before it hits your bank account, and the 5% attaches the second you start to spend it.

Maybe the whole point is to force corporate profits out of the country, thus giving US companies a motive to purchase assets or companies in other places. The US dollar is different in that it is a reserve currency so there are forces in play here that do not make sense unless you take reserve status into account. I think it is advantageous to keep USD outside the US because it can then circulate in other countries further cementing its position as a reserve currency, its a feedback loop.

> I think it is advantageous to keep USD outside the US because it can then circulate in other countries further cementing its position as a reserve currency, its a feedback loop.

I have never heard of this. Anything I can read or Google about this?

>My opinion is that if you don't want to pay US taxes, don't do business in the US.

The do business in the US and they pay taxes on the business they do in the US. The US tax laws are absurd on this issue.

> there's nothing stopping Congress from enacting laws to tax stockpiled funds.

I am sure that would be help up in the courts for so long it would never see the light of day.

Absurd why? Just because you disagree with the policy doesn't make it stupid. Personally, I think the US tax laws are perfectly reasonable in intent on the issue, they're just poor on execution which results in the situation we currently have. I think we could both agree that a large chunk of the "business" being done abroad by many tech companies is fabricated nonsense based on shuffling IP around, building shell companies, and other tricks that have nothing to do with where money is actually generated in reality. The big losers here are small businesses that don't have the option to play tax avoidance games, not giant companies with multi-billion dollar profits year over year.

And I agree with you that we're unlikely to see meaningful forced taxation anytime soon based on the current political climate, but that doesn't mean we shouldn't try.

How is its execution considered "poor"? Do you have any idea how difficult it is for an American to open a non-American bank account outside of America due to FATCA?

If your an American in the UK Banks wont touch you with a barge pole and you are effectively excluded from things like ISA's

The problem is not that they aren't paying taxes on their foreign income. They are evading taxes even on the income earned in US.

They setup a subsidiary in a offshore tax heaven, transfer their patents and intellectual property to offshore tax heaven, and then route the profits from US company to their offshore subsidiary with transfer pricing tricks.

Some of these companies claim that their headquarters are in Switzerland, Ireland or Cayman Islands. But in reality they are nothing more than a PO box and bank account.

Countries with territorial systems have to monitor transfer pricing scams. The US actually ends up with much less revenue because it doesn't care as much about internal pricing abuse.

> and only helped shareholders and executives

Isn't a large fraction of the US (40% or more?) shareholders? I am one, and I'm certainly not a member of the business elite.

Indeed a large fraction which doubtless correlates with the wealthiest. Dropping taxes means greater wealth disparity is built in - the poor get poorer because they can't afford to invest.

Why should you allow tax free repatriation of money that's largely accrued abroad as a result of choosing not to invest locally and avoiding taxes on profits with IP trickery. The only reason I can see that the demos has to allow such repatriation is if trickle-down theory weren't false.

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