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Comment by TAForObvReasons | Hacker News Reader

> Who wants to repatriate 2-4 trillion in liquidity back in the US where its very likely to benefit small business growth?

The last time there was a tax holiday, the money was basically paid back to investors in the form of dividends and share buybacks.

Unfortunately the WSJ link is 404'ing, but https://web.archive.org/web/20140117143531/https://online.ws... you can see the first paragraph:

> The 15 companies that benefited the most from a 2004 tax break for the return of their overseas profits cut more than 20,000 net jobs and decreased the pace of their research spending

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... and immediately went back to stashing profits in overseas tax shelters like Ireland, awaiting the next amnesty.

And do you think investors just flushed that dividend/share buyback money down the toilet?

No, they invest it somewhere else, and for most wealthy investors the best returns can often be found in tech start-ups. So it still makes it easier for start-ups to obtain capital.

Is it actually difficult for tech startups to obtain capital? My impression is that it's not. Non-tech small businesses are the ones that seem to have more difficulty getting off the ground with loans, and it's not clear to me that shareholders/corporate executives getting fat bonuses from dollar repatriation would put that cash into small businesses.

In theory dividends and share buybacks will be reinvested by the stockholders. In practice I wonder how much just further inflates various asset bubbles.

That's the crux of the "trickle down" theory, that eventually money will make its way to normal Americans. Arguably, the rising inequality in the post-Reagan years is proof that the theory is flawed and that very few individuals and small businesses actually see any benefit.

Taxation theories aside, parent proposed repatriation as a solution but past experience showed it to be less effective than the proponents claim.

It really doesn't matter where the money goes though. Even if an investor spends the money on golden bathtubs and private jets, the money is being spent in the economy. If they keep it in the bank it's getting leant out to small businesses.

The sharp influx should even help with the velocity of money.

I am not an economist but I've been trying to learn a bit about it and a bit about financial management/investing. I'm currently at the velocity of money stage of my learning.

https://en.m.wikipedia.org/wiki/Velocity_of_money

It's not really the same thing as the trickle down that the parent poster mentioned. From what I can tell, you hit the nail on the head.

An influx of money will mean the money moves. Also, when money moves is when the government taxes it. So, the influx will increase the velocity of money and will have an effect on the economy.

That's not the same as the parent post implied, where there's a reduction in taxes and that is supposed to result in the money trickling down. That's not the same as an influx of money. One is people keeping their money, the second is people getting more money.

If I understand correctly, they are different things. Then again, I may not understand correctly. As I said, I am still learning.

That's a theory, but it does not hold up in practice. The issue seems to be money just pools in specific areas like money markets where only a percentage can be lent out.

The other issue is velocity. If loans last 10 years but it takes 1 year to find someone to lend the money to. Then effectively only 90% of the money is loaned out on average.

Hi, I turn up in these discussions to represent the hard money advocates.

In practice you might well be right about velocity, but there is no "the money" of which 90% is lent out.

America & most other countries use fractional reserve banking. A pretty reasonable interpretation of this is that making a loan is nearly equivalent to creating the money needed to make the loan.

All the existing money that can be lent that exists is, in fact, currently lent out.

The average americans checking accounts has high fluctuations over a month so it can be used for overnight interbank loans but not directly turned into home loans. This means two banks need to cover their reserve requirements so ~(90% of 90%) of the money in checking accounts can be loaned out. Savings accounts are more stable so ~(90%) of the money of the money can be loaned.

Also, banks may make loans, but they can also sell them to other groups without reserve requirements. Allowing for a near endless streams of new loans.

Thus the total amount of loans is not fixed and depends on where in the economy the actual currency is.

But it does matter where it goes. What if it all goes into real estate (again), for example? Then you get another housing bubble and even more unaffordable housing for middle Americans. You're also assuming that cash being spent on things like luxury goods is flowing into the US economy as opposed to the global economy. Globalization has changed that dynamic significantly.

The housing bubble wasn't because of rich people buying real estate. It was because of middle class and poor people over-leveraging.

Sorry, I don't see how that rebuts my statement. Also, that's a gross oversimplification of what actually happened. My point is that if the windfall from dollar repatriation goes into real estate and we get another bubble, how does that help middle Americans? We can't assume that everyone will go out and put their repatriated dollars into economically productive places.

Also, I've said this before and no one has given me a good answer yet. Corporations already have record amounts of cash on hand [1], but they're largely not doing anything with it. What reason do we have to believe that getting cash back on shore would change this behavior at all? After all, taxes are on profits - companies could effectively repatriate their money tax free today by spending it on hiring more people, building factories, etc.

[1] https://www.spglobal.com/our-insights/US-Corporate-Cash-Reac...

“Mounting evidence suggests that the notion that the 2007 crash happened because people with shoddy credit borrowed to buy houses they couldn’t afford is just plain wrong. The latest comes in a new NBER working paper arguing that it was wealthy or middle-class house-flipping speculators who blew up the bubble”

https://qz.com/1064061/house-flippers-triggered-the-us-housi...

>rising inequality

Rising inequality means that higher incomes are rising faster, not that lower incomes aren't rising. No one claims that trickle down effects will fall to the lower half of the income distribution as quickly as the upper half (i.e. flat inequality). It's right there in the name!

They might argue that the bottom half of the distribution grows as quickly as it possibly can via "trickle down," because in a more regulated and redistributive world, the productivity gains that the left wants to to redistribute wouldn't be made.

I don't think this is right either, but inequality isn't a signal you can use to assess that.

But adjusted for inflation, wages haven't kept pace well either, so either way, it's worse for the lower classes in terms of quality of life.

But it's nonsense to pretend that the only factor that's been driving inflation-adjusted wage stagnation is Reagan's economic policies.

Globalization, automation, Baby Boomers retiring, healthcare costs, education costs, and a million other factors are influencing that too. Trying to parse the effect of Reaganomics economic policy by looking at one country in one 20-30 year period among all the other effects is an impossible task.

In lack of any significant empirical evidence, I'd rather rely on reasonable economic theories than politicians trying to win the votes of an angry mob.

Wages excluding healthcare costs haven't, wages including healthcare costs have. https://www.bloomberg.com/view/articles/2016-09-28/health-ca...

That’s a cutting your nose to spite your face argument. Even if every penny of the repatriated cash goes to dividends for investors, that’s strictly better than the money sitting abroad.

That seems untrue. If the margin of benefit to non-shareholders is so small as to be negligable, one can very reasonably not want to "reward" these companies for tax-dodging business practices, and seek reconciliation that actually ensures some sort of effective outcome instead of just hoping; especially given past repatriations as the parent poster notes.

To suggest otherwise seems to lead that Trickle Down can be effective, which I believe history has well and truly laid to rest.

As a holder of invested capital, I will still speak out against efforts that I think would exclusively benefit that class and not the core participants of the working economy. The latter historically seems to motivate much better long term trends.

> That seems untrue. If the margin of benefit to non-shareholders is so small as to be negligable, one can very reasonably not want to "reward" these companies for tax-dodging business practices, and seek reconciliation that actually ensures some sort of effective outcome instead of just hoping; especially given past repatriations as the parent poster notes.

There is no effective outcome. Countries are engaged in a race to the bottom where it comes to favorable tax treatment for international corporations. We either bring the money back here, or it'll just stay over there.

By that logic we set corporate tax rate to 0 and throw our hands in the air. Having missed out on some percent of corporate tax revenue does not mean to me that our entire regimen is worth discarding, but could be adapted.

That's exactly what we should do. All taxes are taxes on people. Corporate taxes are an inefficient and not especially progressive tax on people. We'd be better off without them.

Convince me, why should I buy that argument? I've not seen any compelling justification that reducing the corporate tax would do anything but create a further deficit which would need to be filled with a much more direct tax on people less able to pay. What precedent is there for this sort of strategy actually showing long term benefit across the broad economic spectrum, and not just to the upper percentile?

(This is fantastic, I can't even get 2 seconds into asking for discussion without being in the negative. This is not the HN I normally applaud. I'd hope readers recognize that I'm actually looking to have my opinion changed here and not just spark an unproductive argument, and am saddened that I have to clarify this.)

Yes, if we eliminated corporate taxes we would need to raise individual taxes in order to maintain government revenue.

But we could do so in a way that was:

A) Far more efficient - The deadweight loss of corporate taxes is higher than individual taxes. Corporate taxes are crazy complicated by necessity and lead to all sorts of crazy behaviors.

B) More fair - A millionaire should pay higher taxes on his profits from stock ownership than a middle class person. When a corporation pays its taxes those two people are taxed at the same rate.

A sister poster suggests offsetting with higher cap gains, which could be a component of what you're suggesting and I could see how that would work as a concept, but I have issue with pragmatism within the US. As far as I understand it, didn't both the prior tax holiday come essentially in isolation of balancing factors, alongside a broader tax plan that de-emphesized the higher tax brackets and cap gains? (and from a brief reading, seems to have added a significant amount to the national debt via lost tax revenue, during a period of drastically increasing inequality) This was my original concern when posting earlier, that I haven't seen a history of positive outcomes, or strategies that offset like you're suggesting.

Oh I agree with you - the current tax holiday plan is just a dramatic wealth transfer from the rich to the poor. In an increasingly globalized environment, trickle down economic gains are diffused over investors all over the world. The current Republican tax plan has a 1950's era view of the world. With the current proposal, the only way to sustain the middle class is to close our border and become more nativistic - which is what happening.

I agree that a "tax holiday" is a bad plan. I also agree that from a political standpoint my plan might be unworkable. I think it's a good plan from an economic standpoint though.

I have some thoughts about this. If we think about the strengths of the U.S. economy, it's the transparency, rule of law, and easy access to capital that U.S. companies have. We should encourage all companies to be formed here.

I would drop corporate taxes as much as possible. Now, let's say we've done this. What next? In this age of the global economy, I think the problem with trickle down economics is that while companies are localized, the trickle down is globalized. Investors from overseas take their gains and re-invest it into their own economies at a much higher rate than the U.S. economy.

So, I would tax them on the way out. Make corporate tax rate low, but capital gains higher. This encourages companies to stay here, re-invest their profits here, and investors "pay their fair share" when they take their profits out.

By law, corporations are people. Why should they be taxed differently than human people? Why not just form a corporation that is in the sole business of making your life better, earn all income through and charge everything through the corporation, and never pay a penny in tax yourself?

> By law, corporations are people.

This is a commonly held belief, but it is not true.

> Why not just form a corporation...

Your idea won't work because a company buying something for an employee (or owner) is considered a taxable benefit to that person just like paying them a salary.

>> By law, corporations are people. >This is a commonly held belief, but it is not true.

"Are corporations people? The U.S. Supreme Court says they are, at least for some purposes. And in the past four years, the high court has dramatically expanded corporate rights.

It ruled that corporations have the right to spend money in candidate elections, and that some for-profit corporations may, on religious grounds, refuse to comply with a federal mandate to cover birth control in their employee health plans.

These are personal rights accorded to corporations. To many, the concept of corporations as people seems odd, to say the least. But it is not new."

http://www.npr.org/2014/07/28/335288388/when-did-companies-b...

"has some of the rights of people" != "are people"

My pet dog does some things that people do. He eats, he walks, he poops. That doesn't mean he's a person.

You seem to be conflating "person" with "human". The two are entirely separate. And this is where being pedantic is important. For legal purposes on important points like entering contracts, free speech, freedom of religion, being sued, etc. corporations are people. The case law is very clear on this. Can your dog be sued? No.

So when we talk about legally bound responsibilities like paying taxes, suddenly making a distinction between corporations and humans with respect to personhood seems really strange.

We already make distinctions between "legally bound responsibilities like paying taxes." There is an entire separate tax code for corporate taxes vs taxes on individuals.

This is because they are not the same legally. They might have similarities in some respects, but they are not the same.

Please provide examples here of how they are different. There are entire separate tax codes for you filing individually vs. jointly. That does not mean that if you get married you're not a person anymore. Same with corporations - just because the specifics of the tax code differ for filing does not mean they are not legally people.

Also note that you yourself are already changing language here. You said "separate tax code for corporate taxes vs taxes on individuals". Both are legally people. If we want to make a distinction, we have to use other terms, like "individual".

> There are entire separate tax codes for you filing individually vs. jointly.

This is not true. The tax brackets are different but essentially everything else is the same. The same things are counted as income. You have the same deductions. You use the same forms.

Some other ways that corporations are different from people (just off the top of my head):

- A corporation can't get a driver's license.

- A corporation can't get federal loans to go to college

- A corporation isn't expected to register for the draft at a certain age (does that make a corporation a woman? Hah!).

- A corporation cannot "take the 5th" and refuse to testify against itself.

- A corporation cannot be sentenced to a prison term as punishment

- Corporate free speech rights are more limited than individuals

I think you might be confused by the idea of "corporate personhood." This idea doesn't mean that a corporation is a person, it means that corporations have some (but not all!) aspects of being a person.

I feel like you're getting into No True Scotsman territory here, especially since you're providing examples that have zero relevance to the matter at hand. However, I'll tackle your rebuttals in order:

- I don't think you actually understand the nuances of filing separately vs. jointly. It's a lot more complicated than just different tax brackets and "essentially everything else is the same". For example, filing jointly you cannot take the credit for child and dependent care expenses, you cannot take the earned income credit, you cannot take education credits or deduct student loan interest, etc. There are many more differences as well. It is, in fact, a separate code, not just a separate bracket.

- Individuals under the age of 15 also cannot get a drivers license. Does that mean they are not people?

- Obtaining loans has no bearing at all on legal status. But even so, a corporation can get all kinds of loans. What difference does it make if the loans are for capital or education?

- As you point out, women also are not expected to register for the draft, are they not people?

- The 5th amendment is a very interesting case with respect to corporations. You're kind of getting at the Collective Entity Rule, which basically says that an agent acting on behalf of a corporation cannot always exercise his or her personal rights, such as the 5th amendment. Here's what the courts had to say about the justification for the current state of affairs, "The privilege is limited to its historic function of protecting only the natural individual from compulsory incrimination through his own testimony or personal records" (emphasis mine). Note that it says nothing about "person". Also note that there is quite a bit of activity on this particular point, and in the near future the 5th amendment might be allowed to apply to corporations as well [1].

- Minors cannot be sentenced to prison terms, either. Are they not people?

- More limited does not mean non-existent.

No, I am not confused. In legal status, a corporation is a person. Period. The difference you're missing is that a corporation is an artificial person vs. a natural person (or if you prefer, a statutory person vs. a constitutional person). But still a person.

I'll also point you to the definition of Person from Black's law dictionary. Person. In general usage, a human being (i.e. natural person), though by statute term may include labor organizations, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers.

[1] https://www.law360.com/articles/634828/high-court-may-take-o...

> filing jointly you cannot take the credit for child and dependent care expenses

Yes you can. I file jointly and do this.

> you cannot take the earned income credit

Yes you can. Just google it.

> You cannot take education credits or deduct student loan interest, etc.

Yes you can. Again, google it. You are wrong.

I am tired of arguing with you when you keep saying things that are factually incorrect. Anyone reading this thread will clearly see that you are wrong. Goodbye.

I was incorrect on the above - the differences I noted were for married filing separately, not jointly. However, that goes further to prove my point. There are multiple tax codes that apply based on marital and filing status (single, married filing separately, married filing jointly, head of household, etc.) it is far more complicated than just being in a different bracket.

That being said, you ignored 90% of my comment, including the legal dictionary definition of Person and are now walking away to prove that I am wrong? Just, wow. This is not the level of debate I expect from HN.

Citing an NPR article for a legal point is like citing NPR for a programming point. Just, no.

Corporations and humans both implement the ILegalPerson interface. So for some purposes where you need a legal person, they are interchangeable. But they are not in general people.

Would you suggest I cite Supreme Court decisions directly then in the future? I'm happy to cite whatever documentation you treat as canonical when we have these sorts of discussions.

While it's true corporations are not "people", legal interpretation in the United States has shown that they have been given many rights of personhood.

Yes, it is true. The only question is extent, not of being - take a look through some of the case law summaries on wikipedia [1]. And you only addressed the expenditure portion of the hypothetical, not the income portion.

[1] https://en.wikipedia.org/wiki/Corporate_personhood

The 2004 tax holiday was a bad idea for trying to grow the economy. However, there is a clear difference between a short-term tax holiday and a long-term lowering of repatriated fund taxes. The problem is that investment isn't spurred by short-term windfalls, it's a slow, long-term strategy to insure a particular business is competitive.

If I was coincidentally looking to invest in something in the US during the tax holiday, I'd be in luck. But if I was looking the previous year or the following year, I'd still be facing a massive 35% burden over leaving the funds overseas. This creates a pervasive attitude that businesses don't even begin thinking about investing foreign funds domestically.

http://www.heritage.org/taxes/report/would-another-repatriat...

You and rrggrr are not arguing opposite things. "Theoretically", these investors who have received the profits from dividends and share buybacks will then turn around and invest money back into the economy.

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