Yellen calls for a global minimum corporate tax rate
nytimes.com
nytimes.com
Wanting a global minimum tax is like one mafia asking the others to increase their protection charges so their clients don't leave. Such collusion is frowned upon for good reasons in free markets as it leads to worse outcomes due to reduced competition.
I'm hopeful that this idea will not work due to the profitability of breaking the deal and the big number of countries that exist. The US also shouldn't overestimate its importance which seems high but ever-declining.
No, it's to ensure that countries with extremely low operating costs thanks to few citizens and not a lot of space (Luxembourg, Switzerland, Ireland come to my mind) don't run price dumping on everyone else, allowing the rich elites to concentrate and extract profits while the countries that made that profit possible (by, for example, providing an educated workforce or a secure legal framework to solve conflicts) get nothing in return.
I think the frustration is in part due to a corporation conducting business in one country, and playing games so the profits occur and are taxed in a lower tax one.
In a functioning market, this might work, but it overlooks the ability of corporations to game the system via one or two self-interested jurisdictions.
The key problem is that corporations can avail themselves of the public goods (infrastructure, public education, public order) and then use accounting maneuvers to shift profits to jurisdictions that will not tax them.
Some jurisdictions don't provide much in the way of public goods (small island states) or see an opportunity to raise some modest taxes on money they would otherwise never see (eg the Netherlands).
So you end up with the (individual) taxpayers of some countries subsidising these corporations, other countries profiting modestly and the corporations keeping most of the tax money.
Is this what an efficient market would deliver? An unfair and unsustainable situation? According to your theory the countries should compete with each other until their taxes are very low and their subsidies are very high, because that would reflect "efficiency". But what is the incentive for countries to do this? A rational country in the this market would set taxes to balance out the public goods provided. But because of profit shifting this is impossible, no matter how efficient they are. Yellen's plan is a rational response to this.
Countries can easily tax income generated by foreign corporations within their jurisdiction.
What you and Yellen are advocating risks imposing on the entire world an economic and tax system that may be far from optimal, to address a risk that can be mitigated through numerous other methods.
Why would e.g. an integrated software/hardware business pay significant taxes in the US if their value chain isn't strictly bound to it?
Sure, if developers live and work there you can tax their income to a certain degree before they leave and work remotely. Hardware is built abroad anyway (and probably taxed there), you can only levy import taxes at your own detriment. But if the business is successful most of the added value comes from the integration of these aspects and that can happen wherever because it's an idea not bound to a place to be executed. If something doesn't require physical presence taxing it becomes very hard and morally dubious (on what grounds would you tax it all if e.g. only 10% of your profits need physical infrastructure that is funded through these taxes?).
Globalization means that a society's most successful people aren't stuck with it any longer. They can go where they aren't seen as subjects to milk to keep the less productive happy. I don't owe my country of origin anything, they need to be competitive to keep me as I can take my business everywhere. In that sense directly investing in your population's higher education might be misguided to some degree because it creates more people capable enough to leave with the acquired knowledge, increasing the tax burden, making the country less competitive.
This is a feature of the market system and not a bug.
> Some jurisdictions don't provide much in the way of public goods (small island states) or see an opportunity to raise some modest taxes on money they would otherwise never see (eg the Netherlands).
Again, this is a feature and not a bug.
> So you end up with the (individual) taxpayers of some countries subsidising these corporations, other countries profiting modestly and the corporations keeping most of the tax money.
I do not understand the use of the word "subsidy" here. Corporations are keeping the money they have earned themselves is not a subsidy. Not to mention all the money that corporations earn eventually belongs to the individuals who receive them in the form of dividends or capital gains.
> A rational country in the this market would set taxes to balance out the public goods provided.
There is zero restraint on what is a "public good". Governments like to take over everything and control everything. Without corporations being able to influence policy and be able to move their money abroad we would end up in pretty bad state like California where you spend billions of dollars on a high speed train that goes from nowhere to nowhere and will never really complete to transport anything useful.
I am not sure why leaving more money in hands of people like Joe Biden or Donald Trump should be seen as anything but pure evil at this point.
These jurisdiction brands are in competition with each other and they need to stay more attractive than the next.
The tax collection expectation is based on hubris, and seems to misunderstand that countries have to figure out their own revenue structures, with national formalized taxes on profits being a new scheme, and international taxes being newer. This obviously brushes up against the capabilities of the nation state concept, as enforcing it even by the wealthiest country is an impractical game of whack-a-mole.
Countries should revisit how they are funded, because they are in competition. Its only a couple of the biggest countries that have egos about it.
But that said the US has pushed a lot of countries into tax treaties and it sounds like they can effectively embargo countries that don't comply with US tax policies. So I think the US has ways of getting what it wants.
Wanting tax loopholes and government competition is like one mafia asking the others to increase their protection charges so their clients don't leave. Such collusion is frowned upon for good reasons in free markets as it leads to worse outcomes due to reduced competition.
I'm hopeful that this idea will not work due to the profitability of breaking the deal and the big number of companies that exist.
That's true for me, because if I decide US taxes are too high and leave the country, I don't get to keep using US roads. That's not true of Amazon.
Edit to add: more generally, this is a coordination problem[0], and mutual agreements against defection are a well-studied solution to such problems. Comparing such an agreement to mafia extortion is way off base.
https://www.irs.gov/individuals/international-taxpayers/taxp...
But it's not unthinkable that the EU could do something within the EU.
And if big developed economies adopt it, then it's no problem sanctioning tiny island nations that don't.
The natural outcome is that the entity makes every effort to meet the needs of the corporations, and zero effort to meet the needs of the citizens. Indeed, it can reduce services to the citizens while increasing their costs, at the same time as doing the opposite for the corporations: reducing their costs while granting them monopolies and regulatory protection, for example.
People forget that the only way to level the playing field between Amazon and local shops is to cut taxes to 0 rather than layering on increasingly complex tax rules. Amazon thrives in the presence of corporate taxes.
Corporate taxes also create huge incentive to offshore jobs to tax havens.
Not to mention no corporate tax rates would mean no need for all sorts of expenses on legal and accountants for tax optimisation.
In the UK I think we acknowledge they are a bad idea by having a plan to step them down over time to some low level (and potentially even 0 eventually). Covid derailed that plan.
With the stroke of a pen, you would eliminate a huge industry (tax attorneys, tax consultants, etc)
You can bet they will not go down without a fierce fight
This makes total sense. Except it cannot happen.
Same as term limits. Incredible idea. Never going to happen.
In most fields of activity after 2-3-5 years you should you should be a reasonable journeyman and after 10 you should have a decent mastery of your field.
To me a term limit of 15-20 years should be more than enough.
Hardly comparable with software development work which is generally completely out of sight and therefore hard to quantify or verify. And I say this as someone who's been through the whole interview dance a bunch of times.
We shall proceed to ignore you and continue with our obviously bad ideas, to the detriment of everyone.
Maybe in 20-30 years another person, let's call that person Pasteur, will come back with much the same ideas and everyone will listen to them.
For the benefit of other readers: the corporate tax is pointless because in the long run, all corporate profits go to capital gains. So you can just raise the capital gains tax and get rid of the corporate tax. This is why the personal income tax is higher than the capital gains tax, because corporate profit has already been taxed while corporate expenses have not. Just equalize the capital gains tax and income tax and get rid of the corporate tax and you basically have the same revenue and way less bullshit.
No, they do not. Rather than belabor the point, which you repeat over and over, just do a little more cursory research.
https://www.accounting-degree.org/accounting-tricks/ https://www.brookings.edu/blog/up-front/2017/11/30/the-next-... https://www.cbpp.org/research/federal-tax/substantial-income...
If you have the assets, you can do it too. Trump takes advantage of it, for all the good it does him.
Repeat over and over?
If it were up to me I'd bring income, cap gains, and dividend tax rates in line with eachother (or just call them all income), and be done with it.
Edit: i might be wrong but I think bringing those three taxes in line is another one of these Cummings-era UK policy ideas
I think, pre-COVID, they're aiming for 12.5% to compete with the Republic of Ireland. Northern Ireland was already granted permission to lower corporate tax rates to 12.5% [1]. The UK is looking at reversing cuts in the wake of COVID [2].
[1] - https://www.ft.com/content/129e7687-20d7-449f-bde1-3455015de...
[2] - https://www.independent.co.uk/news/uk/politics/corporation-t...
If a company wants to do business in the US, just stipulate that they have to be paying a corporate rate of X% somewhere. If that X is 21% and they are only paying 12.5% then in order to do business in America they would need to pay the US the difference.
Just like California can dictate emissions standards in vehicles across the rest of the states, the US has power to dictate standards across the world. No need to get everyone on board.
Note: I'm not commenting on whether corporate tax is good/bad. I'm just asking if the US wants something done why not.. do it.. and restrict those that don't from doing business here? We do that already for corruption (see the FIFA case[0]) Same could apply to carbon tax. If they don't pay a carbon tax for their GLOBAL business dealings, pay it to the US or your not welcome.
The tax haven could even get around an “enforcer” or governing board. For instance, such a country might change what it considers to be “profit” so that you’re paying $2 on $100 of revenue, whereas in the neighboring country you’d be paying $6. Same nominal tax rate, different effective tax rates. There are even more ways to play this: “Sure, we tax you at the required 20%, but you can then direct how those funds are used to reduce costs you’d otherwise have to pay directly.”
And this happens a ton— see the WTO and “effective” but not nominal tariffs.
Whether or not we see such a harmonized tax rate emerge and even if we could find a way to have some governing body try to “enforce” it, you’ll still see countries lowering their effective tax rates to lure firms or bolster growth. I bet there’s a maximum sustainable effective corporate tax rate, but I have no idea what it is (and for all I know it could be zero or negative).
Why should other countries make concessions for the American politicians (esp republicans) unwillingness to properly enforce the existing tax rules, make better tax code, increase funding for IRS etc?
I don't think I understand her logic, can someone ELI5?
Well, logically, you wouldn't. Until all sort of levers start turning and you start feeling pain.
How do you think this kind of thing happened historically? See: Commodore Matthew Perry & co.
All they have to say: no business in my country, are allowed to do any business with little loophole country, and no trade will be allowed between our countries. Good luck little dip-shit country, you are on your own.
Which will defeat the purpose of your small tax heaven strategy. Unless your little country is a full blown 'autarky' (which is impossible now days, unless you want to look like Cuba), you will have to play by the rules of the big boys.
(ducks from the rotten vegetables that are being thrown at me)
Here me out...
America offsets the revenue loss by increasing tax burden on (rich) individuals, not corporations [1]. Hopefully, that would bring offshore profits back and increase hiring, r&d spend, capex, etc etc positive feedback loop etc. More likely, corps use the profits to buy back stock and layoff people (which has happened in the past with tax holidays [2]), but hey, at least those profits don't just sit in a bank account in Ireland or the Cayman Islands.
Here is a really crazy idea that won't work - Janet Yellen trying to compel the world to adopt a global tax rate standard, thinking that tax haven countries would comply for America's benefit. Yeah, not happening... the baby boomer generation really don't have any capability of second order thinking.
[1] The irony is that republicans love to say corps are people. With that logic they should be taxed like people. Dumb. They are not people, they are institutions. Don't tax institutions, just tax people more.
https://www.npr.org/sections/money/2012/07/19/157047211/six-...
> Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
This is a bit of a side issue, but if a company really does reinvest the money into its business, in most cases that reinvestment will be spent on things that are deductible as a business expense, so that portion of revenue won't be profit and not subject to corporate income tax. That's one reason Amazon pays close to zero corporate income tax: they book very little in profit, since they reinvest most of the their revenue into qualifying business expenses to expand the business.
This makes profit tax-free. Profit is usually split with the shareholders or invested back. Shareholders are taxed if a capital gains event occurs. Why tax profits on money that will be invested back into the company?
If you dislike this situation, what you need is wealth tax, not profit tax. As the value of John Smith Inc. grows over time, John Smith the person will have to pay increasing amount of wealth taxes...
What's the difference between investing post-tax income vs pre-tax income? The amount of income tax you paid...
Their solution: > Instead, impose a consumption tax, designed to be progressive to protect lower-income households.
I would hope also that this methodology may de-politicize government spending by achieving a baseline result that is hard to argue against: zero taxes, high productivity, and no inflation. Any cuts would be foolish, and any additional tax or spending is forced charity.
Re: “helluva stretch to argue...”
I see this pattern a lot in politics. Merely stating that something is hard to argue against, is not at all a convincing argument for that thing. It is simply an intimidation tactic, or an attempt to shift the burden of proof to the contrapositive. All contrapositives are hard to argue for, even if the positive is hard to argue for. For instance, prove to me why it is a bad idea to invade France. I have absolutely no reason at all to invade France, and now I’ve given you the chance to fail at your argument and thereby start a ridiculous war. The “hard to argue” pattern is even more convincing because it’s objectively true despite having no rational power to convince on its own. It’s hard to argue that we will never have to invade France. It’s much harder to argue that we will ever have to invade France, but somehow the former statement is interpreted as support for the latter.
Now a consumption tax is easy and indiscriminate. Everything is taxed at Y% at the cash register.
I think I read somewhere like a 23% tax would be sufficient to offset all income/corporate taxes.
And no, it won't be simple to audit. Can you prove that all the food you ate last year came from the grocery store? That you didn't buy any from your neighbor's cousin, who works at a wholesale warehouse?
Did these economists think this idea through?
You can renounce your citizenship, but you'll be subject to exit tax on the way out.
Yes, they've thought this through.
If you move to Monaco but stay a US citizen, you still owe US taxes on income. If you move and renounce your citizenship, you have to pay a significant sum of money based on your wealth (including stocks and ownership in companies).
Your scenario has nothing to do with the corporate tax rate.
I couldn't pull off 0% taxes without using corporate entities that are untaxed, all countries (at least try to) tax all income produced within their jurisdictions.
Not just that, but fine, you win your arguments as they are perfect. So now, this founder/owners have pallets of US dollars. Where does one spend those funny looking pieces of paper?
Poof. There goes that argument of “sucking billions out” as those dollars are FORCED to come back to the US.
Spotify is a great example.
>We have significant net operating loss carry-forwards in Sweden and the United States. As of December 31, 2020, we had net operating loss carry-forwards of €100 million in Luxembourg, €1,293 million in Sweden, €461 million in the United States relating to federal taxes, and €315 million in the United States relating to state taxes.
>We have initiated and are in negotiations of an APA between Sweden and the United States governments for tax years 2014 through 2020 covering various transfer pricing matters. These transfer pricing matters may be significant to our consolidated financial statements. In addition, we are subject to the continuous examination of our income tax returns by various tax authorities which could result in assessments against us.
Those two lines more or less tell me that Spotify will not pay meaningful US corporate taxes for the next decade.
Might as well lose that non-existent tax revenue if that's the 'carrot' that gets the public on board with a wealth tax.
However... there's a great problem with this proposal. We're decreasing individual agency and increasing corporate agency.
Corporations are massive evolutionary self-defending systems. As this kind of system, they don't fundamentally care (i.e. their survival and reward isn't directly connected) about the wellbeing of their employees or the general population; their success doesn't mean success of employees or our progress as a society. Think about how our bodies don't really regard the wellbeing of our cells (only that they do their jobs to sustain what we do care about) -- and of course that's fine because cells don't think (individually).
Since corporations are non-conscious as individual entities (as far as I can tell), they don't have a well-defined wellbeing we should care for, unlike their employees and the population at large.
In this sense, they can indeed be seen as AGI overlords fighting with us. If they could replace humans with non-questioning (and without consciousness or well-defined wellbeing) robots they wouldn't bat an eye, as entities.
I call this The Great Problem of Consciousness: there are a great many of (abstract) forces and incentives in the Universe, and almost none of them care about the only thing that really matters, the Collective Conscious experience. Profit, nationalism, bureaucracy, authoritarianism, entropy, natural selection, energy gradients, and so on. None of that really cares about our experience (well being), yet they are the major driving forces of the Universe. The great battle is to try to align those gargantuan monsters into our own service. We only have control now because of the precarious situation where:
Power ~ Intelligence ~ Consciousness
[1]: https://slatestarcodex.com/2014/07/30/meditations-on-moloch/
Nah.
Every-hypothetical-body in the US paying you billions is getting more in value from your SaaS product than they're paying you for your SaaS product.
Otherwise they wouldn't buy it.
If you are running the SaaS from Monaco and only selling things in the US, isn't it right that you'd only pay sales tax?
It's the mismatch when work is done in one place (for some definition of work), but profits taxed elsewhere that's the issue, as I understand it.
0% corporate tax and higher individual income tax works as long as a company and its employees have to use the "full stack" of taxes, and can't mix and match across borders.
No one pays income or capital gains taxes in Monaco, but my SaaS is genius remember, so I have only a small number of employees at any rate.
I don't think anything of what I'm proposing is right, I'm just thinking though the consequences of a 0% corporate tax.
So, the government of Monaco would tax the corporate profit from Year 3 onward, assuming your genius SaaS is a startup, at a rate of at least 25%. You wouldn't evade taxes altogether.
For the corporate tax, you'd either convert to Euros to pay taxes (at which point, your USDs flow back into the international monetary system that eventually leads back to Uncle Sam), or you'd pay in USDs, and the government of monaco would do the same dance.
But, you'd get 75%ish tax-free USDs, to pay yourself an untaxed salary with! That's a good amount.
[1]: https://en.service-public-entreprises.gouv.mc/Tax/Other-taxe...
I assume you have employees in the U.S.? Suppliers? Payroll and sales tax didn't go to zero.
If you don't, if you're supplying a product that has zero footprint in the U.S., and making a killing off it, I mean, sure. Fine. Keep your money. You aren't costing our system anything. And you're providing us with something of value.
More pointedly, if you have such a business, one which has zero assets or employees in the U.S., only income, it's trivial to zero out your taxable corporate income today. The only difference between that and this is the amount of accounting and legal paperwork required.
So your company makes a ton of income and it's not taxed - but if every viable path of taking money out of the company is taxed, economists will argue it works better.
So in your scenario they are arguing for a system where your apartment in Monaco either came from direct payments to you (taxed) or is a taxable benefit for you, etc.
It's a good policy, and you should be for it even if you want to soak the rich.
If corporate tax is zero their ability to investigate companies sending money to each other to buy yachts is diminished
What if they don't? We will accelerate inequality further. Then, spend another decades to get "correct it" unsuccessfully.
Unfortunately, for us non-uber-rich people, uber-rich people have a lot of money to hire people to help them "avoid" taxes, under the euphemism of "minimizing tax burdens".
I think we'd probably need to address that first, by simplifying the US tax code (perhaps making it X% full stop, across the board, no loopholes, applied to all income earned beyond Y/year), before experimenting with such a strategy.
Of course, there will still be some sleazy people hiding their wealth (and income) behind personally-directed "non-profits" and "charities". But, these are probably easier to litigate than the corporations those people work at/for.
This has been floated for some time, usually followed by a discussion of a sales tax increase. However, the groups floating these ideas tends to be the more fringe types, so they are almost always dismissed out of hand.
Stepping back, to look at whether such a tax would be useful.
The chief risk that thinktanky-people raise is that there are many desirable countries to live in, which don't levy taxes as such. So you'd get a lot of assets fleeing $TAXING_COUNTRY, which, the argument goes, would have a deleterious impact on people inside that country.
In practice, most income of these people is not circulated in the American economy, but immediately invested into "stationary" assets, such as securities issued by US Corporations or the Treasury. Regardless of where these people live or hold citizenship, much of that stationary income will continue to be invested in the US, where real growth rates have historically been sustainably-high.
(a simultaneous tax on US-held-wealth, not income, would throw a big wrench into this argument!)
In addition, I doubt many people would actually give up their American citizenship to avoid this tax (simply having a residence abroad would not be enough to escape this tax, if you're a citizen, since our country taxes citizens living abroad).
IMO, most of the people who would give up citizenship to avoid a mandatory income tax, would have already given up (or avoided obtaining) their American citizenship anyways, because of the tax implications that exist today.
---
This talk of emigration reminds me of a fun thought experiment.
I remember reading some argument whose thesis was, roughly, "one reason the US is able to accrue so much debt, well past the reasonable point of leverage for the average country, is because the US is the only nation with sufficiently-international tax-collecting, finance-monitoring, and military potential to effectively implement a wealth tax".
From the buyer's perspective, Country X can buy our debt, essentially as a securitization of a future wealth tax against the US. Furthermore, this effectively doubles as insurance against wealthy emigres leaving your country, since most of them take their assets to the US when they go! This means that the likelihood of US Debt being paid back is extremely high, even past the normal metrics of over-leverage (debt as a % of GDP).
To avoid a hypothetical tax on wealth generated in the US since the 1940s, you'd need to move yourself and your assets to a location outside the combined military+financial influence of the USA, that is willing to take your now-contraband, non-USD assets. Any USD assets held by most banks would be de facto seized.
Presently, maybe North Korea and Iran fit this bill. Russia, to a lesser extent, but this is a roll of the dice. Not the best places to peg a long-term future on. It's possible to imagine China (and the countries under its sphere of Belt+Road influence) fitting into this category one day, which would be interesting and probably invoke a war.
One interesting feature of this lens, is that the US shouldn't ever need to implement a wealth tax to justify the borrowing ability, the US simply needs to make it clear that such a tax would be possible to levy, if absolutely necessary.
Another interesting implication is that, if the US should ever lose its power to levy this tax (due to a sharp decline in military, economic, or financial policy strength), the US's ability to borrow way above our annual-GDP could evaporate overnight: causing all kinds of mayhem, probably.
Wouldn't that be a "win" situation as well? Because at least it will reduce the incentive to go all NIMBY on new denser development, which seems to be the main blocker when it comes to housing pricing (and, consequentially, ownership/renting).
Unless I misunderstood what you said, it seems like you are saying that this policy won't completely solve the issue. But it would make it at least better, while, at the same time, making "property as a store of wealth" less viable. Which would (in my estimation) make housing cheaper (directly) just due to people not hoarding the land anymore and (indirectly) due to decreased NIMBYism blocking denser housing developments.
So while it might not be a win-win-win, situation, it could definitely be a win-win situation. Or at least a singular win situation without much losses or negatives attached to it (at least as far as I am seeing this, which could definitely be wrong; in which case, please correct me, as I am thinking through this as I am going; I am far from being the expert on the situation).
It's not a new idea either. You just need to get the idea of "evil corps need to pay" mindset.
The rich threatening to live is just that - a threat.
Both your proposal (corp rate of 0%) and the objections to your proposal (that individual income will be shifted onto corporate ledgers) are already extant, and addressed, in US tax code.
Any business can incorporate under subchapter-S, or as a form of LLC/LLP and pay zero taxes. Very common. Happens all the time.
The catch is, you cannot carry income on the books arbitrarily. For the most part, you are forced to distribute the proceeds among the shareholders/partners before the end of the year - thus subjecting it to regular and frequent taxation.
On the other hand, if you want to carry proceeds forward in the business and park them there, for whatever reason, you need to be a C-Corporation and are subject to double-taxation: corporate taxes and then, later, individual taxes once the monies are finally distributed.
So you have that choice. If you want the flexibility and fewer shareholder restrictions of a "C" corporation, you need to pay corporate taxes.
Personally, I prefer the simplicity of an S-corp and, as a bonus, the income is not double taxed.
Fair point, but then why are US companies still parking their profits off shore?
Taxation is hard, so far Sam Altman's capital tax is least worst option I've heard: https://moores.samaltman.com/ . It does have it's deficiencies... It's wealth redistribution, it might slow down or even completely stunt economic growth, and given current political climate and corruption and is highly unlikely to be implemented. At the same time humanitarian value alone it would bring is so astronomical that I believe we must try it. It would also greatly expand middle class which should boost the economy long term.
It's not really race to the bottom. It's just a terrible tax.
If you want to strike nearer the trunk, nevermind root, of the issue... the place to start is corporation law. Once a cascade of tax entities of different types/jurisdictions can own or control each other in cascades... it becomes impossible to tax anything in a simple way. Without that, it's impossible for corporate tax just apply to the individuals with a share. If it was, than we could (as you suggest) think of corporate income tax as a +/- to regular income tax. As it stands, it is a different sum and applies to different people/ tax entities.
In terms of economic efficiency.... I don't think any abstract economic theory beats current reality observations. If you look at some of the biggest current companies... they are obviously undertaxed. A company like google doesn't accumulate 10s of $bns cash unless they cannot find ways of putting it to work. In theory, no matter what their tax burden, they would have "produced^" and invested what they did anyway. The same is not (necessarily) true fro TSLA or JNJ. It probably is for FB or MSFT.
In any case... as "mainstream" macroeconomics rapidly turns in a loose money direction, "bring the money home, we don't have enough money here" is less of a thing. The federal reserve is making however much money they think the economy needs for monetary purposes anyway...
^Scare quotes because "production" measured in ad sales is a little abstract for me.
Saying “tax the rich” doesn’t make it happen.
It’s almost as if these politicians and celebrities that come along and vomit hashtags into their twitter feed are under the impression it’s never been done because no-one thought of it before.
Tax the rich how, exactly?
Lowering exemptions and allowances to raise duties is a tax on the working poor.
Raising income tax rates is a tax on the working middle class (we hear plans to do this all the time because fiscally conservative politicians believe their voters are too stupid to notice the difference between income and wealth).
If you want to “tax the rich” you need to tax actual wealth - and you need to figure out a way to do that which doesn’t cause capital flight. This has proven very difficult to do successfully.
So, we can either re-visit wealth inequality when we have unilaterally matched global tax rates with no loopholes a few centuries from now after the robots have completely taken over, or act like grown-ups, put some work in and figure out a solution.
Tweeting shallow nonsense like “tax the rich” without offering a plan while ignoring the massive complexity in taxing wealth in a global economy is a cynical ploy on the poor while laughing hysterically in the face of the working middle.
The loopholes are the problem, and it’s a job for governance to fix.
Every time a politician says “tax the rich” or “Company X only paid Y last year and should apologise and pay more” all I can hear is “we can’t be bothered to do the job you elected us to do”.
Imagine if the police didn’t respond to crimes in progress but instead made sternly worded public statements after the fact saying that criminals should be very disappointed with themselves and should apologise and pay back 10% of what they stole as restitution.
The status quo is absurd.
land.
For example a C corporation can tap into highly liquid and well developed capital markets, limit and separate the owners and lenders to a business from management and associated liability beyond their initial investment, and thanks to certain legal decisions like Citizens United, corporations still seem to enjoy what seem to me more like personal rights such as freedom of speech, ability to participate in politics anonymously , and likely more I don't know about.
With all the aforementioned advantages, is it any wonder that a huge proportion of firms above a certain size limit are C corporations despite the obvious downside to contend with of double taxation? [1]
It seems like the relevant question is the value of those advantages to the tax rate legislated by congress, net of costs related to the right accounting, legal, and lobbying teams.
[1]: https://fas.org/sgp/crs/misc/R44086.pdf (page 7 and 8)
This is just an excuse to not pass strong controls preventing local companies from moving their money overseas. Start taxing companies based on where their employees and executives live, not which mailbox they stuff money into.
Charter of the United Nations [1], for one.
At the point one is discussing non-signatories to it one is debating the definition of a country. That seems like a fair line at which to delineate the entire globe, more or less.
[1] https://en.m.wikipedia.org/wiki/Member_states_of_the_United_...
Arguably the WTO is both the rationale for a "minimum corporate tax" (if it wasn't for WTO rules, countries could introduce tariffs and other trade barriers specific to certain countries to deter registration in tax havens) and the most likely way such a thing would be realised (in practice it would probably be "you can set your rate below this, but if you do WTO members are free to set higher tariffs on your produce than other countries")
The only way we will be able to close all of the complex tax loopholes that large corporations take advantage of is to coordinate tax rates across nations.
https://www.investopedia.com/terms/d/double-irish-with-a-dut...
How often have these loopholes come up and people say "don't get mad at the corporations, we need to change the rules"
This is exactly the type of rule change we need to get this done.
(I know this particular loophole is closed now, but there are new ones I haven't taken the time to learn about yet.)
Gotcha. Good luck with that.
Yeah good luck with that
* efficiently collected
* dissuade waste of scarce resources
* are impossible to evade
* don't necessitate global mass-surveillance
* don't violate private property rights
* and don't disincentivize productivity
It would be great to understand why lack of choice in tax regimen is different, particularly from people that are of the opinion that FAANGs are monopolies that should be broken up
What are the state-given benefits that they get, and other entities have no access to?
what makes them worse than say an LLP or an LP?
Corporations wholly creations of the state. They have no meaning or existence absent it. We shouldn't empower our government to grant the privileges of incorporation unless it's in the polity's interest, surely? There's no repulsion. They're not bad. But we don't owe them anything whatsoever, either, and we shouldn't hesitate to ask what we think we can or should in return.
> A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law 'born out of statute"; a legal person in legal context) and recognized as such in law for certain purposes.[1]:10 Early incorporated entities were established by charter (i.e. by an ad hoc act granted by a monarch or passed by a parliament or legislature).
Webster's 1913:
> A body politic or corporate, formed and authorized by law to act as a single person, and endowed by law with the capacity of succession; a society having the capacity of transacting business as an individual.
Modern Merriam-Webster's retains essentially the same definition.
That's why I hold that position about their relationship with the rest of society, and in particular with their parent government. I'll grant some other kind of organization, not being definitionally a creation of government, may not have the same relationship.
This can be common law, recognizing the legal authority the shareholders grant the corporate entity to act on their behalf.
There is a common law justification to treat that entity as a legal person because it acts as a single entity, as willed by the shareholders.
I am not suggesting that the corporate legal structure has never come into existence by legislation. I am just saying that the corporate structure can also emerge entirely through the common law enforcement of contracts.
Thats a big start
So if my math is right, at constant prices, the 2021 US military budget would be $443 bn (constant 1997 prices) vs $282 bn (1997 budget), which doesn't seem as drastic.
I'm a bit shocked, to be honest, I checked the inflation just to compare the two budgets and the difference is far lower than I was expecting.
This coming after a $2T pork stimulus with another $2T on the way. Obviously this has nothing to do with prudent financial management. Punishing evil capitalists? Maybe. Trying to prevent a mass exodus of investment from the US? Probably.
I’m sure they tried to close loopholes regarding offshoring profits, but realized the corporations would just exit faster. This is desperation. It won’t work. Capital can’t be controlled and threatened the way that people can be. Capital will always go where it’s treated best.