Corporate income taxes
 

I've been thinking about this subject the past few days, and I wanted to get some opinions from people I admire and respect. But I settled for you guys. Anyway, pick the answer that best describes your feelings. Maybe I'll be back later. Thanks.

I don't understand how these companies are allowed to set up dummy corporations in other countries to avoid paying taxes here. Or is that just an internet mememememe.

Don't tax on revenue, it is an ugly mal-incentive, and doesn't jive with basic economics. Businesses operate at different levels of marginal profitability, and there is nothing wrong with that, in fact in most cases it is economically efficient. A tax on revenue punishes low margin business, unfortunately low margin businesses (such as basic food and materials) are often the most necessary for the success of an economy.

Meanwhile, businesses where revenue is high margin and over imaginary goods, say high-finance, the tax makes less of an impact on their operations, so these businesses actually get an increase in demand. We have it bad enough as it is letting the bankers run wild, for the love of whatever god(s) or principles you may believe in, don't make it worst.

I'd say the corporate tax is fine where it is, the problem is the insanity of the tax code and the massive corporate pork that offsets those taxes. Eliminate the targetted handouts that make some businesses larded up, use that to first reduce tax burdens on the working classes (leads to increased consumption and saving in the economy), and when economic efficiencies result in growth and larger tax revenues, selectively reduce federal obligations or reduce tax rates on corporations to potentially further grow the economy (that is a tough debate, most conservative stooges think you can lower taxes to grow the economy indefinately, but empirical evidence suggests otherwise to myself).

I guess you could argue I'm voting for option two, a tax raise (because I'd eliminate special deductions and corporate welfare)... and I do want to see individual burdens decrease (not for my bracket, and not for the ultra poor, but rather the oft neglected middle brackets). But I don't feel an increase in the rate itself is necessary, the businesses that end up paying that tax more often than not are the honest ones that are creating jobs. The loopholes are helping out the megarich businesses that won't end paying an increased rate anyway.

Also I could gripe about non-profits (I feel many of them are just money laundering fronts)... but I guess that is off topic.

Some perhaps, but not at the excessively high rates current levied (2nd highest in industrialized nations only to Japan)

Good gawd no on taxing revenue.

You can't look at marginal rates. Our effective rate in 2006(the latest I could find) was 22.2%, so the marginal rate of 39.5% isn't very meaningful.

I would agree with what SportsDino said and just add a little. Placing taxes on "revenue" is an instant jump in inflation for the good or service being taxed.

It is more beneficial to have a corporation employing people, who contribute to the economy, and not be taxed if they (the corp) have legitimately not made profit.

You will also create a massive disincentive for innovative entrepreneurs to form startup businesses and take any risk. This would lead to stale markets, larger/entrenched legacy companies, etc.

I'd like to see the number of deductions/credits/exemptions reduced by 80% or more with a corresponding reduction in the marginal rate to keep it overall revenue neutral.

Not sure which option I should vote for.

Yup. The system as a base is ok. It's the tax dodges that need working (Deliberately sending money out of the country to avoid paying taxes on it)

Besides sending money to other countries, corporations can also send money through TIME! Time-shifting of income and cash flows is some tricky business, prone to abuse... while I can see some value in straightforward applications (smoothing losses/gains in time), often it is loopholed to the point of making highly dubious corporate reports and I'm somehow doubtful as to how the IRS can be sure they really collected all the tax they are entitled to.

Right now tax dodges are a better target than rate hikes. Rate hikes by themselves are mostly going to hurt small businesses and startups (what we could use more of perhaps) that have to play by the rules because they aren't big enough to break them yet.

At a conceptual level, increasing taxes on corporations simply shifts resources to the government for spending and decreases incentives and ability to grow business in the private sector. Corporations will either pass through the cost in the form of reduced employment or reduced salaries.

So it ends up hurting the "peasants" in the end. Unless you work for the government.

There are some simple truths that "the peasants" need to know.

Corporations making money = good
Corporations losing money = bad

I would agree that we need to enforce our tax laws, not take earned profits away and give it to the government.

Wow, is that really true? What other awesome gild mines of knowledge can you share with us? I'm so curious I can hardly keep my pants on.

What about corporations making lots of money, but sticking it in foreign banks so it can't be taxed. Is that = good, bad, tough crap, awesome blossom?

Keep your pants on tiger, I answered your question already. :)

Except that when corporations can run a sinking ship but don't go under because of massive size and loopholes that they usually have a hand in crafting; this decreases competition and erects entry barriers so that new competitors cannot come into a marketplace; the government then has to get money from somewhere and that's typically going to be the "peasants" so not only do you have increased taxes on the peasants but market inefficiency that creates a sort of artificial inflation for them as well.

Or was that not glib enough for the last few posts?

SI

In the abstract, the idea of taxing corporations is somewhat odd--by taxing this legal entity, you're really just imposing a double-taxation on the shareholders of the company (which, in large part, are mutual funds and pension funds investment retirement money for regular people). After the money gets taxed when it comes into the corporation, it once again gets taxed when it is passed on to shareholders. And, in practice, it seems like the complex tax laws only create lots of wealth for accountants and attorneys that figure out ways to avoid paying the taxes.

That said, I'm not sure the alternative of a lower tax rate is better. If we were to lower corporate tax rates, the savings won't necessarily accrue to shareholders or the bulk of employees--rather, the managers (already paid salaries far beyond their value) will be in place to capture it.

Also, I'd caution against any concerns corporate taxation squelches the "entrepreneurial spirit". Most small businesses are going to be arranged in structures so that they don't pay a corporate income tax--the owners simply report the income on their own tax returns. Thus, the S-Corporation (which allows for up to 100 shareholders), for instance, avoids the problems of "double taxation." Changing corporate tax law probably wouldn't have an impact on many entrepreneurs--the individual income tax level is what matters to them. The same is true for businesses set-up as partnerships.

Corporate personhood is strange and a bit ridiculous. I understand it, but...I don't that I think that makes it okay. Of course, that's a really stripped down answer.

Corporate personhood is a joke and needs to be abolished, not strengthened. That's how dystopian futures start, not sound fiscal management. But the joke of a court we have now seems intent on going the other way.

SI