Why is this a surprise to anyone? The bigger the company, the more incentive it has to create a tax-avoidance strategy, and the more resources it has to do so successfully.
Avoiding taxes by legal means, is neither illegal nor immoral.
Avoiding taxes by legal means, is neither illegal nor immoral.
This is a bizarrely uncharitable take. Posting an article implies some form of novelty, which is why we don't see articles posted saying things like "if you don't water your plants, they die" or "companies with large valuations tend to have high profits or revenue".
The parent comment isn't claiming that the lack of novelty makes an otherwise-bad thing acceptable; he's saying that any reasonable model of the current state of corporate taxation should already have assumed something like this.
He _separately_ makes the claim that legally minimizing one's tax burden isn't immoral; this is a claim that you can disagree with, but pretending that he's dismissing this entirely due to its lack of novelty is a bizarre non sequitur.
Consider... If I pay for a politician to run for office and they get elected and then I write a bill that lowers my taxes for him to push through into law, and then I donate to all (or even just enough of) those in congress to vote for it and it gets passed that may not illegal (right now) but many (me included) would certainly consider it immoral.
For example... if that reduction in taxes collected was offset by firing hundreds of workers in, say, the Center for Disease Control, and then we are left unprepared for a serious and deadly viral disease outbreak and 100s of 1000s of citizens die as a result... yeah, that qualifies as immoral for me.
That is the premise of Andrew Yang's Democracy dollars. Every American gets $100 to donate to a campaign.
It's not that they don't want to pay tax, it's just better for shareholder value that they don't.
No matter where you stand in the hypothetical debates on taxation and public spending in the real world it boils down to government will spend tax money, taxes should adjust for the ability to participate and avoiding them just shifts the burden from people that should be able to afford them to others - I think this is immoral by most accounts. And IMO, arguing that it's not not worsens the problem, laws have a limited impact and will always have flaws - morality and social judgment (as absurd as these things are getting these days) are another correction mechanism for undesirable behaviour.
This argument falls apart when you recognize how and why companies become eligible for tax deductions. The top 3, according to the CBO, are exclusions stemming from providing health insurance, pension contributions, and capital gains & dividends. By doing so, companies actually accept a huge burden that would otherwise be left to taxpayers, like paying healthcare costs and providing an income for eligible retirees & spouses.
Cap gains & dividends -- while they certainly enrich corporate management and wealthy owners -- are the primary means through which massive public pension funds (like CalPERS) provide the benefits promised to public employees. And if you want to take it further, probably the biggest incentive to get people to work in the public sector at all, is the promise of a generous pension post-retirement. (and even further -- all that money is taxed at the individual level, albeit at a different rate, but certainly not tax-free)
One might even make the argument that a company that refused to provide any retirement benefits, refused to offer health insurance, and which refused to return any capital to investors, is the one that is immoral.
that's a 180 from your initial comment
>> Avoiding the behaviour they were supposed to stimulate but avoiding taxes
I very clearly stated that I was talking about legal means. If a company claims a tax deduction for an action it did not actually perform, that would be illegal.
>> recent crisis tax reliefs
I can't speak to non-US policy, but in the US, the recent stimulus is not a tax relief bill, and thus inapplicable (though I will agree there is likely to be a lot of fraud).
That's an assertion. Getting your congressman to treat you more favourably than others will certainly benefit you, but it's not guaranteed that everyone else will also benefit.
Plenty of people have left CA for UT/NV to do the same.
The solution to all of this is to fix the tax code to represent what we actually intended, not blame those who are following the rules.
Tax is simply math, calling tax avoidance immoral is as silly as calling encryption immoral.
> U.S. Royal Caribbean is based in Liberia, Norwegian Cruise Lines is based in Bermuda, and Carnival/Princess is based in Panama.
More specifically, I think the immorality comes when someone who already is able to provide for themselves is enriched at the expense of societies ability to provide for those who cannot provide for themselves.
There are discounts for capital gains and extra taxes for gasoline, travel and cigarettes.
So companies act the way they are told to act.
Why are you assuming that anyone is surprised?
Sometimes research is conducted to confirm what we already suspect.
And if that were the whole story, it'd be no surprise that those with more taxable income and resources would pay lower tax rates. It's true for individuals too.
However, that's not the whole story. It all depends on tax systems that are complex and gameable. And that in turn depends on political systems that are gameable, where big players can create the tax systems that they can game.
Somewhere in there we at least get to immoral.
Create a pension system to provide income stability for longtime employees? Good for you, take a tax credit.
Give money to charity? Good, take a tax credit.
Offer health insurance? Tax credit.
Invest in green energy? Tax credit.
Build a factory or office in a distressed community? Tax credit.
Pay for employees to go to school? Tax credit.
etc. etc.
But that doesn't mean that they're all the same.
Edit: why was this downvoted? HN is a site where not explaining yourself thoroughly often leads to mod intervention. The parent post didn't explain themselves even remotely.
If businesses operated in a vacuum from politics, then maybe you could have an argument that taxes have “nothing” to do with morality. In the real world, businesses are lobbying for changes to the tax codes to benefit them, holding disingenuous or rigged contests to extract the maximum concessions from tax authorities, relocating or transferring intellectual property and licensing it back to subholdings to min/max gains and losses, and a myriad of other schemes.
To directly answer the questions you posed: Corporations which incorporate in a state like South Dakota or Delaware to take advantage of incorporation policies, with no intention of operating primarily in those states, the majority of their business conducted in a higher tax state like California, and trying to avoid contributing back to the society of the states that they primarily operate in - yes, those corporations are less moral. They are less moral than companies which are incorporated in e.g. South Dakota where the owner lives in South Dakota, and serves primarily South Dakota residents.
Hungary is harder to answer. Did the corporations of Hungary lobby for lower taxes which resulted in that tax decrease? Does the tax decrease adversely impact Hungary as a whole, or was there a budget surplus which allows the state to lower the rate? Does the relaxed rate improve the lives of “normal” Hungarians? The answers to those, and probably more, questions would guide the answer to the question of morality.
Anyway, this is a long winded way of saying that morality is not a binary choice. It’s the perception of right and wrong guided by context.
The fact that businesses can shop around, or move to other jurisdictions, or lobby politicians, is a good thing. It is a necessary check on government power.
The alternative would be the government having absolute power to raise taxes. I don't trust the government, especially state and local governments, to handle that well. Many would raise taxes to a level that would strangle businesses and harm the economy.
Is there any evidence to support the claim that state and local governments would raise taxes to a level that harm the economy? I’m sure you could find some examples, but does the evidence support that claim in more than a few outlying cases? There’s ample logical reasoning (The Federalist Papers, for example) that state and local governments are more responsive to their populations and that the federal government should be the culprit that “shoots itself in the foot”. Outliers can exist in the inverse as well, as Kansas showed us that it’s possible to reduce taxes so much that it harms the economy!
Also, and I don’t want to come off as too nitpicky here, but I’m pretty sure governments already have absolute power to raise taxes. That is, a non-government organization cannot levy a compulsory fine on you. And don’t take this as a personal attack, but if people don’t know those sorts of things, they are not a very engaged citizen. Since the government is elected by the people, if we have uninformed and disengaged citizens, we should distrust the government. The best way to gain trust, in my opinion, is to be an engaged and informed citizen (and encourage others to be as well!), and to only elect “the best”.
edit: I may have misinterpreted your “absolute power to raise taxes”. I think now that you meant the power to raise taxes with no regard for its consequences vice meaning that another entity could raise taxes. Sorry if I put words in your mouth. In that case, yes “voting with your feet” can influence tax policy, but there are still other methods of doing that which do not require moving. I also want to point out that there’s an injustice in the ability to move in order to lower tax burdens. For example (and IANAL so someone please correct me if I am wrong), Bob’s LA Auto Shop, LLC can’t pick up and relocate its headquarters to Delaware to take advantage of lower taxes like a multinational corporation can to the Isle of Man. Is it moral that a large MNC can, but a mom and pop shop can’t?
I'm not the one claiming it is. I've stated that morality and taxes have no connection. Others in this thread, including you, are claiming that paying less taxes = immoral.
>> Corporations which incorporate in a state like South Dakota or Delaware
A grand total of 3 of the Fortune 500 are incorporated in SD or DE. 110 are in NY or CA. It would appear that by your reasoning, the number of immoral companies who "take advantage of incorporation policies" are overwhelmingly outnumbered by companies with such high morals, they selected the highest tax states.
https://www.statista.com/statistics/303696/us-fortune-500-co...
Looks like your data is paywalled. Is it the same that’s available here? https://hifld-geoplatform.opendata.arcgis.com/datasets/fortu...
Because if so, I think it’s a little bit more complicated. For example, Alphabet’s corporate headquarters is located in Mountain View, but it looks like it is incorporated in Delaware [1].
1: https://abc.xyz/investor/static/pdf/alphabet-certificate-of-...
https://www.delawarebusinessincorporators.com/pages/delaware...
>Second, Delaware’s tax system gives businesses several ways to legally minimize their tax bills. Companies that are incorporated in Delaware but do business in other states don’t have to pay state corporate income tax to Delaware. Some groups accuse Delaware of being a tax haven because the “Delaware loophole” allows companies to declare certain types of revenue in Delaware rather than in the state where the business actually occurred. Delaware also doesn’t tax profits on royalty payments, trademarks, or copyrights.
https://www.mentalfloss.com/article/76951/why-are-so-many-us...
This is hilarious.
Can you explain why that is immoral?
*Call it campaign contributions, or lobbying, or whatever you want. It's paying money to get rules made in your favor, which is bribery.
What is immoral is when someone decreases their contribution to society (in the form of taxes) through something that either does not benefit society as a whole or which is actually harmful.
That clearly benefits the homeowner (lower taxes), while is harmful to society (less tax revenue).
So are people who take the mortgage tax deduction being immoral?
I would argue it a selective tax break that benefits the homeowner 100%.
As I see it, it's not so much that a given instance of home ownership benefits society as a whole so much as it is that I see enabling its members to own a home is a core purpose of society. So I guess I could say it as: it benefits society as a whole because if it doesn't exist then, in my opinion, the society is by definition dysfunctional.[1]
When I say that enabling its members to own a home is a core purpose of society, I don't so much mean this from a white picket fence "American dream" perspective or from a home as investment perspective; although I think both of those perspectives have merit.
Rather, I think it's important that an individual has somewhere that they have autonomy, that they can modify as they see fit, that they cannot be arbitrarily evicted from, where they are their own boss, etc.
Without that:
- I think that it would be difficult for an individual to have enough autonomy to really be a full member of society.
- I think it would be difficult to say that an individual really has any stake in a capitalist society if they do not own any capital.[2]
[1] A more obvious example of similar reasoning might be food. The fact that a given person is able to eat isn't necessarily particularly beneficial to society as a whole. However, I think that most people would say that unless the vast majority of people are able to eat, then a society is dysfunctional.
Clearly in this instance there is some benefit to society as a whole from an individual being able to eat; since that allows them to work more efficiently. However, I think you could also say that home ownership provides psychological and practical benefits that allow individuals to work more efficiently.
[2] I realize that strictly speaking a home isn't capital (unless the owner runs a business out of it); however, I still feel that it can provide a "stake in the system" in the way that other property like clothing or even a car do not.
This was after a huge media outrage about a certain pop star allegedly being a sexual predator in countries where it was legal.
The EU also forced those cookie notices on pages and GPDR about movement of data globally.
Being a holocaust denier will get you arrested in Germany, even if you broke that law in another country.
That's just three examples off the top of my head.
And, in similar vein, determining how much value one created is again a general problem.
Economics is full of these problems, where the theorem/definition/principle is easy to state, but hard to compute. That said, it's not impossible to estimate these things and use those to guide policy.
My first thought would be, it is. Only a naive reading of the law reaches the conclusion that "if it's legal, it must be moral."
And morality 101 is kind of, "with great power comes great responsibility."
And these big corporations have great power. Therefore, avoiding their responsibility to contribute to society via taxes, even if legal, is immoral.
I don't mean to imply this is black-and-white. I'm sure these corporations are smart enough to figure out a reasonable balance between paying as little as legally possible, versus as much as legally possible.
I'm curious to hear your logic why it is not immoral for a major corporation to attempt to pay as little tax as possible.
Especially when we consider that, via lobbying, corporations have a huge influence on the laws to which they are subject!
Not only do they have great latitude within the law, they also have significant influence in creating the laws which govern them!
More influence than the citizens of the U.S. where many of these corporations operate.