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I argue that it is more efficient for the US economy to end corporate income tax entirely. All that wasted effort of thousands of tax attorneys and tax accountants employed by corporations to legally minimize their tax obligation could be recaptured as an increase to GDP. It is far more efficient to collect the same dollars of tax revenue through raising income taxes on people, who do not go through such gyrations.
So you bought a boatload of Fair Tax nonsense? It doesn't sound like that's the only one either. Despite third-grade claims by right-wing propagandists, individuals (even very wealthy ones) do not hop from one state to another in response to changes in marginal state tax rates. Neither do corporations move from one country to another for that reason alone. And no matter what you do, manufacturing jobs will never come back to America. They are, after all, disappearing everywhere. Just as agricultural jobs once did.
as an individual, i don't really pay income taxes, i just pass those costs along to my employer.
that's basically what you're arguing, when you say that "corporations pass on their costs to customers." in both cases you're WAY oversimplifying how supply and demand affects prices.
You are correct. The incidence of any tax on a supplier/manufacturer/distributor/retailer/end-customer is a function of the price-elasticities of demand, barriers to entry, etc.
There is a difference between who pays the tax to the government (actually writing the check) versus where the economic impact falls, which is a function of price-elasticities of demand.
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Partisan tax-haters may encourage you to believe such things, but in the real world, decisions about business location are made based on a wide range of factors, taxes not being particularly prominent among them.
It depends on the industry, but taxes are most certainly prominent.
Let's take Intel Corporation, the world's largest semiconductor manufacturer. The modern microprocessor is arguably the most complex thing ever designed by mankind. Manufacturing it is only >< that far away from magic. The manufacturing workers -- the guys in bunny suits -- are not low skilled; many have PhDs in electrical engineering, materials science, industrial engineering, chemical engineering, etc. It is high tech and high value add. These guys make very high wages.
Oh -- It costs north of $5 BILLION to build a fab.
Intel has manufacturing plants (semiconductor "fabs") in places such as Ireland and Israel. It located them there because of taxes. Other things need to be there such as access to water (lots used in manufacturing), electricity, transportation, etc. In the case of Israel, the USA provides billions of dollars of direct foreign aid to Israel, which turns around & grants a tax holiday to Intel in exchange for locating its plants there. Israel goes farther - it writes a check to Intel for hundreds of millions of dollars using the funds that the USA gave to Israel in foreign aid.
After semiconductor wafers are manufactured, they are sent to assembly/test factories where the individual wafers are cut into their chips (called "die"), tested, sorted, and put into packages. This is low-skilled. It happens in places such as Costa Rica and Vietnam. Actually, Intel announced it was closing the Costa Rica assembly test plant because it wasn't competitive on taxes.
Vietnam? Well, Vietnam moved a river to accommodate Intel, in addition to a tax holiday. That's right; it moved a river.
Taxes are absolutely part of the mix. You're right there are other issues (no major fabs in India because the electricity isn't reliable enough, and government corruption is rampant) that swamp the tax holiday offered.
the goal isn't to lower prices. the goal is to encourage more businesses to operate in America. encourage more businesses to keep more operations in America rather than abroad. that means jobs for people in America.
It is time to end Corporate Income Taxation. Corporations don't really pay taxes; they just collect them & forward them along to the IRS on behalf of end-customers, and this is not efficient. Note that end-customers (people) already are responsible for their own tax compliance, so from the point of view of efficiency, it makes far more sense to levy all the tax on the end-customer.
Corporate income tax accounts for about 11% of the total US Federal revenue. In the real world, if we were to eliminate this source of revenue, we must make it up somewhere, and the right place to do that is by raising income taxes on individuals, but we'll get to that in a minute.
Some major Tax Departments in the Fortune 500 employ as many as 2000 tax attorneys with a total of more than 3500 tax professionals. In total the Fortune 500 employ north of 250,000 people just to comply with the overly complex tax code. Businesses in total employs north 1 million people to prepare tax returns. Across the economy, the cost of businesses complying with the tax code adds about 30 cents per dollar to the price of goods & services sold in America (that's just the paperwork -- add to that the cost of the actual tax revenue forwarded to the IRS). North of $430 Billion per year just to comply. That is monumentally ridiculous and not sustainable.
As a result, corporations, behaving rationally, behave in odd ways - Apple, for example, has a ton of money off-shore that it will never repatriate because of onerous taxation, so instead it funds US operations by selling bonds. You can't turn on MSNBC without some talking head demonizing corporations for offshoring work, driven in part by our bizarre tax system. While most people focus on the wage differential between the USA and, say, China, that is a major factor only in certain low-value-add industries. Instead, look at very high-value-add industries such as semiconductor manufacturing. A modern semiconductor fab costs about $6 BILLION to build. The costs of all the manufacturing equipment is the same regardless where you buy it in the world. The cost of the skilled labor inside the plant is almost the same (we're talking PhDs in engineering & material science inside a fab) and at any rate is in the noise. The real driver of where the fab is located in the world is income tax (specifically, tax holidays & subsidies held out by foreign nations to encourage the fab to be built in their country).
All of the tax professionals involved in complex legal entity gymnastics and planning are bright, dedicated people. But at the end of the day, they don't actually produce anything towards generating GDP -- all they do is produce, you know, compliance.
Imagine a world where hundreds of thousands of tax professionals had instead gone into business to create real value - real products & services. Tens of thousands of new businesses created, employing millions, not to merely comply with the IRS but to actually contribute to GDP.
Instead of reading about corporations making rational decisions to move operations out of the USA, we would read about foreign corporations relocating more operations TO the USA, hiring hundreds of thousands of people. The types of businesses relocated to the USA would provide high-value add, high-paying jobs rather than low-wage, low-value add jobs such as assembling clothing.
Since corporations provide about 11% of US federal revenue, in the real world, that tax revenue must be replaced. The right way to do this is to increase income tax rates on people. People, for the most part, do not relocate from the USA to the 3rd world because of income taxes. All we need to do is increase the rates.
In the end, almost everyone is better off. End consumers will see prices drop because businesses who sell goods and services will see their compliance costs drop, and in a competitive economy, that will drive down the prices they charge by as much as 30%. State governments will see unemployment costs drop as expanding businesses expand their workforces. The reduced unemployment burden frees up cash at the state level for other projects & obligations. Anyone who is looking for a job (or a better job) is better off as they will see increased demand & increased hiring.
Businesses are better off as they can focus on creating & delivering goods & services for their customers.
The overall economy is better off - eliminating the drag of income tax compliance (not the tax itself) would add about 0.5% of growth to long-term GDP.
Who isn't better off? Well, there are several classes of people who would object to this:
1) Income Tax professionals. Corporations would reduce headcount, and many tax professionals must learn to compete in the economy for real jobs instead of compliance jobs.
2) The IRS. Government employees would need to find new jobs.
3) Lobbyists. Right now, everyone from political groups to businesses lobby the government for special tax breaks by employing, you know, lobbying firms. If you make your living by getting money from business & funneling to politicians' re-election campaigns, you might need to find a new job.
4) Elected Politicians (House of Representatives, Senate, President & VP). Today, Senators & Congressmen/Congresswomen visit businesses saying, "I am interested in providing tax reform for your industry; please contribute to my re-election campaign." Politicians obviously want to shake-down businesses for legal bribes, er, re-election campaign funds the way they do today, and this removes a vehicle.
Clearly, the time has come to eliminate corporate income tax as a revenue source for the Federal Government.
Another fine post from the non sense 1% playbook. Why should I pay taxes for others voracious appetite for corporate goods. Those who use those items should pay for it not me. My taxes already support enough deadbeats, and you want me to support more?
corporations shouldn't pay tax on income. we all know that to be true. its really a matter of how to handle the tax on money when it gets into people's hands. you want to incentivize business to be in America, but you still want the 1% to pay as much as you can squeeze out of them. im not sure there is as much overlap in this issue as people think. just because corporations wont pay income tax, doesn't mean the 1% have to get a better deal. of course, you cant stop the 1% from getting richer or that will also impact their willingness to do business here and you need them also.
corporations shouldn't pay tax on income. we all know that to be true. its really a matter of how to handle the tax on money when it gets into people's hands. you want to incentivize business to be in America, but you still want the 1% to pay as much as you can squeeze out of them. im not sure there is as much overlap in this issue as people think. just because corporations wont pay income tax, doesn't mean the 1% have to get a better deal. of course, you cant stop the 1% from getting richer or that will also impact their willingness to do business here and you need them also.
Jack dividend tax? Essentially its pre-tax for dividends.
Raising income taxes goes from affecting companies/shareholders to everyone else. Jacking up dividend taxes I'd gander to be the "fairest" way to do it.
You confuse 2 separate concepts: (a) what is the most efficient way to collect tax revenue required to operate the government minimizing bizarre corporate gyrations, and (b) what is the desired level of governmental services.
Sweden's answer to (b) above is different than the USAs, but (b) has nothing to do with (a).
I wasn't confusing anything, I was being cheeky. I fully admit that corporate taxation is an inefficient form of taxation, but I'm unwilling to lower any taxes unless we raise other taxes. I don't worship the God of GDP growth, only at the font of utility growth. An inefficient tax that nonetheless provides more revenue for social services than there would be GDP growth (accruing without utility to the wealthier members of society) without it... I'm willing to stand that.
Our overall tax rate as a nation is FAR too low to support what I would consider to be an adequate level of social welfare spending (given that military spending above a certain rate appears to be a "fixed cost" at this point).
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