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You’re not mentioning the outsize influence that corporations have on government which leads to them permitting these loopholes. It can be fixed by legislation.

In 1952 corporate tax in the US was 33% of total revenue. Today it’s less than 9%.

Corporate taxes abroad were also often higher than the US rate at the time. Now they are much lower. If you sell X in, say, the UK -- as a company you often have the option: book the profit in the UK, or in the US.

There's not much laws can do to change that, that is just the way having the flexibility to structure your business in whatever way you prefer works.

If you were to reduce the US corporate tax rate to 10%, a lot more profit would be booked in the US again.

That’s all true, however corporations exist at the behest of the government. They could make laws against that, against taking money outside. For an extreme example, South Korea had the death penalty for capital flight. Quite extreme, I’m not advocating it but it did work.

Furthermore most major corporations have had government involvement to attain their status, whether in the forum of subsidy, bailout or military procurement. Unfortunately most people aren’t aware of this “corporate welfare”.

Basically corporations which are unaccountable concentrations of public power, should not be allowed to dictate to the government, which is at least in theory accountable to the public. Unfortunately the trend has been in the opposite direction.

>If you were to reduce the US corporate tax rate to 10%, a lot more profit would be booked in the US again.

Until other countries lower theirs, then it's just a race to the bottom, no?

It's always a race to the bottom. Smaller countries (e.g. Ireland, Luxembourg, Malta, Cyprus) need a less broader tax base to cover their outgoings and thus will always be able to offer a low tax base. As a (larger) country, you can decide not to participate, but you'd be pricing yourself out of the market.

Imo, it's smarter to tax shareholders more, and corporations less. Corporations are generally productive and having the statutory seat of a multinational company in your country leads to an increase of tax revenue, because 1) people will have jobs, 2) those people will pay income tax, sales tax, will spend at (mainly local) businesses whose shareholders will be taxed, etc.

Dividend and capital gain taxes are generally also harder to avoid for the wealthy. At best you can defer them, so you'll always have to pay some tax if you want to spend $1-2-5m a year. Corporate taxes and income taxes are (very) easy to avoid.

I wonder how much it would cost to completely eliminate corporate taxes but increase dividend and capital gain taxes to say, 35-40%. Now, that said, I don't think this will ever happen. People in power love their tax breaks too much.

Capital gains are taxed at the same level as income tax, except when they are long-term investments, meaning longer than a year. The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability.

Take that away and I have no incentive to invest in stability but have every reason to disrupt the market and take advantage of the swings. I'm not sure you want that.

As capital holders we will always have an incentive to invest. It's a way to let our money work for us, without having to put in time. Also don't forget companies wouldn't get taxed; the companies you hold would not have to pay corporate tax, so there would be more $$'s available to distribute to shareholders. You wouldn't actually be receiving less money after tax.

> The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability.

Since most equities are held by tax exempt entities (whether that is domestic or abroad, e.g. pension funds or hedge funds in a tax haven), this argument doesn't make sense. The stock price of AAPL or YELP is not going to tank because an individual investors sells (barring perhaps the CEO).

The tax rate is lower generally to account for inflation. But not all countries have sliding capital gains tax rates. The UK has a 28% rate, most capital gains are exempt in Belgium and the Netherlands (but the latter has a small wealth tax), France just introduced a 30% rate, etc.

then it's just a race to the bottom, no?

The "race to the bottom" is the reason why free markets are so prosperous. Each business independently works to reduce costs and competition forces companies to share those savings with consumers.

The best example of the "race to the bottom" stopping are monopolies (often gov't supported) like Comcast where they can sit fat and happy raking in a ton of profits and telling consumers to shove it.

Tax at the end of the day is just another cost for any business of significant size. Often the largest.

But in this case, we're not talking about business. We're talking about the funding to pave our roads, run our schools, be able to fight fires, and all that other good stuff we need.

The gov't is well within their right to change the tax code as they see fit. And they do all the time. It's not like we're seeing tax receipts declining. They've done nothing but increase over the last 100 years.

> They've done nothing but increase over the last 100 years.

Have they increased in line with the larger national budgets required for basic public services?

"If you were to reduce the US corporate tax rate to 10%, a lot more profit would be booked in the US again."

Which would do what, exactly, for most people? Precisely nothing.

And they'd use loopholes to bring their tax burden down to 0 anyway.

You're right, it would do nothing. The reduced tax base is just the result of increased tax competition, offering businesses a better alternative. I don't believe you can bring it back.

If you want to lower or eliminate corporate taxes (with a positive effect for people), you would need to increase dividend and capital gains taxes to compensate. You don't need to collect more corporate tax than is collected today, but if you can create more jobs, that's a net win.

Corporations have outsize influence on the government because they control jobs, which is the single thing Americans care about more than anything else. The Fortune 500 directly employ 17% of the U.S. workforce, and indirectly employ many more (e.g. employees of parts companies that sell to Ford/GM, contractors who install fiber for AT&T). The tax provisions companies take advantage of aren't "loopholes," they exist by design for the benefit of the companies that control the jobs.

Comparing the corporate tax rate in 1952 to today is pointless. In 1952, the U.K. was a shell burned out from WWII. Today, it's a tax haven luring American companies to reincorporate there. You cannot fight this process with legislation--you'll just shoot yourself in the foot and drive companies out to other countries that will be happy to receive them. This isn't just a U.S. thing--even accounting for deductions and tax breaks, the U.S. has higher corporate tax rates than our competitor countries: http://www.npr.org/2017/08/07/541797699/fact-check-does-the-.... The "real" amount of taxes paid in the U.S. is about 18.6%, versus 8.5% for Canada, 11.2% for France, and 4.1% for South Korea.

"Corporations have outsize influence on the government because they control jobs, which is the single thing Americans care about more than anything else."

They have influence on government because they pay politicians bribes that get them elected. Endless evidence to support that where companies or industries give money, politicians get elected, and politicians pass laws to give those companies benefits they want that aren't good for voters or even the voters money. The politicians get wealth and power in return. End of story.

The rest is narrative the politicians use to distract from that. Now, they do like bringing jobs and contracts into their districts to increase their votes. They operate on money, though. Recent example with ISP's:

https://www.theverge.com/2017/3/29/15100620/congress-fcc-isp...

The oil companies make it even more obvious. They're making insane profits but still get tax subsidies from the politicians they paid off.

https://www.theguardian.com/environment/2015/may/12/us-taxpa...

I don’t think so. Why then the phenomenon which the government has permitted of outsourcing US jobs? Have the tax cuts created more jobs? Was there a condition attached that they need to employ more people?

It’s quite simple, with financial power comes political power. Elections cost a lot of money these days and if you look at the donor list of both parties it’s dominated by large corporations.

Edit: a more useful metric will be the percentage of total revenue paid by corporations. As can be seen the tax rate is misleading.

> Why then the phenomenon which the government has permitted of outsourcing US jobs?

The government doesn't "permit" outsourcing of U.S. jobs. Thanks to the technology created by folks here on HN, there is nothing the government can really do if IBM decides to fire a worker in New York and hire one in Bangalore. The only thing the government can really do is offer concessions and incentives to reduce the bleeding.

> It’s quite simple, with financial power comes political power. Elections cost a lot of money these days and if you look at the donor list of both parties it’s dominated by large corporations.

The party that spent the most money just lost the most recent major election, so I'm not convinced money really matters much. In reality, we spend a minuscule amount on politics given the size of the country. About 0.0037% of GDP on Presidential elections, and 0.019% of GDP on lobbying. For context, we spend less on lobbying each year than we do on specialty coffee.

If money really bought elections, companies would spend a lot more of it trying to do so.

Well this election was different in two radical ways, two candidates who were not the first choice of corporate donors - Trump and of Bernie Sanders. It must not be forgotten that Trump is a billionaire who largely financed his own election. Bernie Sanders on public contribution. But this has been the exception rather than the rule.

This scholarly study found that “economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.“

Hardly a surprising fact. Polls show most Americans believe the government is dominated by a small group of special interests who are looking out for themselves.

https://www.cambridge.org/core/journals/perspectives-on-poli...

> If money really bought elections, companies would spend a lot more of it trying to do so.

Even the threat of money buys politicians. Case in point: the repeal of Obamacare is wildly unpopular with the US public, but the Koch brothers got a majority of the house of representatives to vote for it. How? Simple: they threatened that any GOP representative who voted against it, would face a primary opponent in their district next year with $millions in funding. They don't even have to spend the millions (although they do), because simply the threat of a well funded primary challenger is enough for them to buy votes.

It's a great tragedy that the supreme court has effectively taken our democracy away from us by ruling that money is speech, and protected by the first amendment.

Obviously, Republicans in Congress only care about what Republican voters want. And a significant majority of registered republicans want Obamacare to be repealed. So that’s a bad example of money driving politics.

Also, you’ve got it backwards about Citizens United. The Supreme Court didn’t rule that money is speech. Instead, detractors are trying to convince people that speech (the case was about a political movie) is actually money.

> In 1952, the U.K. was a shell burned out from WWII. Today, it's a tax haven luring American companies to reincorporate there. You cannot fight this process with legislation--you'll just shoot yourself in the foot and drive companies out to other countries that will be happy to receive them.

And this is one of the many reasons I despise the UK currently (I'm British). The citizenry do not benefit from these arrangements. If anything people seem to becoming more aware of it and more pissed off about it.

I love how the UK likes to torpedo any EU attempt to overhaul and address these greedy little sweetheart deals as well.

So, the same people who are already heavily influenced by corporations are somehow going to wave a magic wand to limit the influence of those who are influencing them? Not sure I believe that will happen (at least, not as long as free speech is still a thing). I don't doubt that it could happen - at least in theory - but in my opinion, we're already too far down that rabbit hole.

The United States typically goes through cycles of corporate vs government control. This also mirrors the cycle of state vs federal control. Arthur Schlesinger Jr, who won two Pulitzer prizes, wrote extensively about this.

I know it’s hard to believe, but the next 15 years will see a dramatic rise of government power and higher corporate taxes. This will happen very suddenly with one party taking complete control of all the branches of government along with having a dominant ideology at their back. Doesn’t really matter if Republicans or Democrats are in control, we can see the progressives on the left like Sherrod Brown, and populists like Steve Bannon on the right (who has spoken highly of Senator Brown), advocating shockingly similar proposals.

No they won’t do it by themselves, they will only do it under pressure from the population.

I’m also pessimistic but that doesn’t mean we should give up. There’s nothing about this that’s writ in stone.

Well, I think it's absurd to compare the post war (or the Korean war) tax rates to that of today. I think the effective corporate tax rates during the Reagan era would be more appropriate -- which then got whittled down again during the Clinton/Bush era.

But I agree with you that you can't ignore corporations' outsized influence on corporate taxes.

so if if someone takes performance enhancing drugs that has not yet been discovered isn't cheating, they are being innovative.

treat it like the olympics. if an athlete that takes a performance enhancing drug that has yet to be prohibited, they still loose their medals and cannot compete.

Except this game isn't governed by just one body. It's a global economy, so even if your own country "strips your medals", you just move to the country that won't do that.

>you just move to the country that won't do that.

The US leverage is limiting access to US markets for companies that do that.

Well, the problem is "companies that do that" is a matter of legal interpretation, and companies will find loopholes in that definition as well. If you get too restrictive, that can also have some pretty serious political consequences, so there's not as much leverage as one might think.

And face the possibility of being banned from doing business with that one body, or the country that body governs.

As bad as China is to foreign companies, they're still bashing away at the doors to be let in. Imagine any of GAFA being blocked from doing business in the US.

That's essentially what is happening when people talk about inversions.

You have multinationals getting around a design flaw in the US tax system, by acquiring a foreign entity and going abroad.

And those design flaws are being addressed. Google can no longer do the "dutch sandwich" and "double irish" after 2020.

Of course those companies will just search out another legal alternative to avoid paying taxes. And that is well within their rights.

Frankly, it doesn't matter. Tax avoidance is as old as man himself. There will always be another way. Often set up and operating costs are a major driver for tax strategies, and for a company the size of Google, this doesn't matter.

> hint: it's not manufacturing anymore in the US

I highly doubt that is true. I mean, there are only 3 basic economics sectors, and you just stroke an entire one out of the question.

It is way more likely that the reality is more nuanced, and the US can not efficiently manufacture some things, while keeping the lead on some other things.