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Old 03-17-2011, 02:06 AM
 
3,843 posts, read 7,815,000 times
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Default Why you can't tax the super rich and mega corporations.

I see this idea being pushed around alot lately, especially on more liberal media sources. Its basically the idea that we can tax the rich to solve our spending/deficit problems.

To the average joe this seems like a really great idea. We jack up the tax rates on anyone making over 1 million to 50% and viola we have billions more in revenue flowing into the government coffers and all problems solved!

Well, thats less than the truth. You have to look at who the rich are, their sources of income and what types of wealth they own.

The vast majority of people making over 1 million generally have the following attributes:

1. They are self-employed (small business/investor types)
2. Able to hire tax planners/attorneys to structure their assets in an efficient manner. Generally this means moving their assets offshore to tax havens.
3. They have the ability to control how much income they report on their 1040.

To understand the above you have to realize that the super rich have lots of assets (in the form of holding companies and business) and those assets generate lots of income. When your business assets generate income its not the same as personal income, its business income. Both are treated differently. The reason they are treated differently is because both humans and business are treated as separate ENTITIES. Literally speaking, a business has to file taxes and you have to file taxes. The major difference is that a business can be incorporated nearly anywhere in the world. Compared to yourself where you have to pay taxes to whatever your citizenship is.

So your business will be located in Bermuda and pay 0% income tax and you will be located in United States so you pay up to 35% tax + state tax.

Your Bermuda business will generate 1$ billion in net income but will pay 0% tax because Bermuda has no income taxes.

Yourself will take 1$ salary (very common salary for CEOs who own large stake in their corporation) and pay no taxes in the USA.

and that my friends is why you can't just tax the rich to viola solve all our financial troubles! Its impossible to tax the rich because they keep all their assets/income in the form of business entities. Any attempt to tax them and they just shift their income elsewhere. This is also one of the reason why I suggest cutting business/corporate taxes to 0%. They aren't paying any taxes anyways so we might as well make our taxes 0% to encourage those offshore entities to relocate back to the states. Likewise, 0% business/corporate tax would stimulate business activity as well as investing in the states. These activities will create US jobs, which we desperately need. These workers will pay taxes on their earned income and ultimately, increase tax revenue to offshore the 0% business/corporate tax.


http://www.youtube.com/watch?v=Xm3RTgItj4Y
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Old 03-17-2011, 02:14 AM
 
15,647 posts, read 9,341,701 times
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You can tax them, but it has to be through a sales tax. Tax their consumption, not their income. They have loopholes to avoid income tax.
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Old 03-17-2011, 04:44 AM
 
Location: A far, far better place
1,870 posts, read 1,758,479 times
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Quote:
Originally Posted by Bideshi View Post
You can tax them, but it has to be through a sales tax. Tax their consumption, not their income. They have loopholes to avoid income tax.
They have loop holes to avoid income tax because they have the means to influence the politicians.

That wouldn't be be any different under a consumption tax.

What needs to happen is to minimize the wealthy's obscenely overweighted influence on the political process.
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Old 03-17-2011, 05:03 AM
 
11,746 posts, read 10,617,097 times
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0% business tax? No thanks but I understand what you are saying... not all corporations have the luxury of going offshore... the easiest solution is a tax penalty... If the US is 35% and you shift to another country that is paying 10%, then you owe the US 35% (a 10% penalty), but if you are paying 25% tax rates at another country, then you owe the US (10% additional taxes)... that way if you are shifting to a 0% to 10% tax country (you are obviously being penalized for shifting to low cost workers).... but you cannot escape taxes from the US regardless of where your company is located...

Why? Its like buying a car in the US... if you go to another state with low car taxes and buy it... then come over to your state to register it, you have to pay the difference in tax rates... Its an easy solution but no politician wants to make the system more fair and what you are proposing is infinitely more unfair than fair... that is unless you propose to make federal and state income tax rates for regular people to 0% as well...
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Old 03-17-2011, 05:09 AM
 
18,001 posts, read 6,261,556 times
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Quote:
Originally Posted by Bideshi View Post
You can tax them, but it has to be through a sales tax. Tax their consumption, not their income. They have loopholes to avoid income tax.
Absolutely.
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Old 03-17-2011, 09:28 AM
 
Location: Victoria TX
38,728 posts, read 34,507,190 times
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The real reason is because the super rich and the corporations have the power to pass their taxes on to the consumer, so it wouldn't have any effect to tax them. Us bottom feeders would just have to pay it all anyway.

Let's say your dentist, in order to pay for his accustomed lifestlye, his student loans, and his palatial dental clinic in the high-rent medical park, needs to take in $200 for filling a tooth. But he is in a 33% bracket. Now, he has to charge you $300, so after taxes he will still have the $200 he needs.

See? You just paid his income tax for him. You pay everybody's income tax for them. If you raise the tax on the income of the CEO at Kraft Foods by a million dollars, he will add a penny to the price of a hundred million jars of mayonnaise, and you will pay his income tax for him. Who are you going to pass that penny along to? Nobody. The tax buck stops in your wallet.

Or do you think the CEO is going to just write IRS a check for another million, and sigh, and let them repossess his sailboat?
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Old 03-17-2011, 06:07 PM
 
Location: A far, far better place
1,870 posts, read 1,758,479 times
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Originally Posted by jtur88 View Post
The real reason is because the super rich and the corporations have the power to pass their taxes on to the consumer, so it wouldn't have any effect to tax them. Us bottom feeders would just have to pay it all anyway.
If that was so, why do corporations spend so much money and effort on lobbyists to influence Congress and obtain tax loopholes?

In your own words, it would be easier for them to pass on the tax expense.
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Old 03-17-2011, 06:08 PM
 
3,843 posts, read 7,815,000 times
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Quote:
Originally Posted by Bideshi View Post
You can tax them, but it has to be through a sales tax. Tax their consumption, not their income. They have loopholes to avoid income tax.
The sales tax would just get passed on to the consumer. Just like gasoline taxes. In USA gas taxes low so gas is cheap. In Canada gas taxes are high so gas is expensive.

However, I would agree that a universal sales consumption tax is better but only IF we eliminate all other taxes, including income tax.

But then again even the liberals wouldn't like that proposition as, "the poor pay more of their income in taxes than the rich."

Quote:
If that was so, why do corporations spend so much money and effort on lobbyists to influence Congress and obtain tax loopholes?

In your own words, it would be easier for them to pass on the tax expense.
They aren't just lobbying for tax loopholes. What they are lobbying for is favorable regulation for their business. For example, tobacco companies often agree to harsh anti-tobacco regulation simply because it keeps the mom and pop tobacco companies from ever entering the market. Likewise, they are also lobbying for federal tax dollars (ie. research grants, permits, so on so forth). The more tax dollars that flow to washington the more power Washington has. Thats why the politicians do whatever it takes to prevent cutting spending and they do whatever it takes to increase revenue. If Washington was 1/10th the size it is today then you would see significantly less lobbyists in Washington.

Quote:
Why? Its like buying a car in the US... if you go to another state with low car taxes and buy it... then come over to your state to register it, you have to pay the difference in tax rates... Its an easy solution but no politician wants to make the system more fair and what you are proposing is infinitely more unfair than fair... that is unless you propose to make federal and state income tax rates for regular people to 0% as well...
Actually, it is fair. You have to understand what a business does and its purpose. Its purpose is to generate goods/services and make a profit. Then they have a profit in their bank and pay 0% tax on that. So what does a company do with that profit? They have three options: Save it, invest it, or distribute to owners. If they save it then it stays in the bank and ultimately gets lent out in the form of loans. If they invest it then they spend it on research, building stuff, and doing other activities that ultimately creates jobs. The people who work those jobs pay the taxes. If they distribute to owners then the owners report the income on 1040 and pay taxes. Rarely any business will just sit with millions or billions worth of cash in their accounts. The only reason they save it is because they are waiting for opportunity to arise and when that opportunity arises then they spend it.

Also I wouldn't disagree with getting rid of income tax FOR EVERYONE. A universal consumption tax would be a good idea. Maybe like 1% real estate tax, 1% energy consumption tax, 1% service tax etc. Adjust rates as needed. However, I think its important that we don't penalize production and making a profit. The reason we shouldn't penalize those is because both are needed to increase the standard of living for a nation.

Last edited by killer2021; 03-17-2011 at 06:25 PM..
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Old 03-17-2011, 07:18 PM
 
1,999 posts, read 2,099,010 times
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Quote:
Originally Posted by jtur88 View Post
The real reason is because the super rich and the corporations have the power to pass their taxes on to the consumer, so it wouldn't have any effect to tax them. Us bottom feeders would just have to pay it all anyway.

Let's say your dentist, in order to pay for his accustomed lifestlye, his student loans, and his palatial dental clinic in the high-rent medical park, needs to take in $200 for filling a tooth. But he is in a 33% bracket. Now, he has to charge you $300, so after taxes he will still have the $200 he needs.

See? You just paid his income tax for him. You pay everybody's income tax for them. If you raise the tax on the income of the CEO at Kraft Foods by a million dollars, he will add a penny to the price of a hundred million jars of mayonnaise, and you will pay his income tax for him. Who are you going to pass that penny along to? Nobody. The tax buck stops in your wallet.

Or do you think the CEO is going to just write IRS a check for another million, and sigh, and let them repossess his sailboat?
Very good point, but two corrections: Irene Rosenfeld, a woman, is CEO of Kraft. Need to use "she" and "her" instead of "he" and "his", respectively. Heh heh....
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Old 03-17-2011, 07:24 PM
 
1,999 posts, read 2,099,010 times
Reputation: 1591
Quote:
Originally Posted by killer2021 View Post
I see this idea being pushed around alot lately, especially on more liberal media sources. Its basically the idea that we can tax the rich to solve our spending/deficit problems.

To the average joe this seems like a really great idea. We jack up the tax rates on anyone making over 1 million to 50% and viola we have billions more in revenue flowing into the government coffers and all problems solved!

Well, thats less than the truth. You have to look at who the rich are, their sources of income and what types of wealth they own.

The vast majority of people making over 1 million generally have the following attributes:

1. They are self-employed (small business/investor types)
2. Able to hire tax planners/attorneys to structure their assets in an efficient manner. Generally this means moving their assets offshore to tax havens.
3. They have the ability to control how much income they report on their 1040.
All good points. I note that the House Ways & Means committee is now looking at a flat 25% corporate and individual income tax which also reduces many of the deductions (loopholes) currently present. I like this idea. It is a good thing that there are some leaders out there (governors, congressmen) when the president is turning out to be a campaigner for re-election only.

Tax Plan Aims for 25% Cap - WSJ.com
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