raise income tax bracket rates to create economic/job growth

[Hamlet]

Corporate income tax revenues are plummetting in part because our large multinational companies are shifting expenses to their US subsidaries to lower their US income, while shifting their revenues/earnings to lower tax jurisdictions.

Here is an article about Microsoft--

Insight: Microsoft use of low-tax havens drives down tax bill | Reuters

Their effective tax rate is less than 20% because they book large portions of their revenue through Ireland, Singapore, and Puerto Rico.

The world has become global and virtual. Which country that Microsoft (or any large company) books revenue or expenses is becoming fairly arbitrary.

We need a new system for corporate income taxes (or we can just set them to zero and make it up elsewhere), because the current system allows international companies to avoid a large portion of their taxes, while a US-only company can be crushed by our tax rates.

Quote:

Originally Posted by sheehs1 It would seem that for any corporation to pay ZERO in taxes, that corporation has enough deductions, depreciation and tax credits that bring their profit to zero. Now ...when one thinks about this ...one might realize that all those credits and/or depreciation for capital equipment either 179 or otherwise and/or other loop holes go into the "economy to stimulate growth". So the question becomes which do we want? Do we want all the tax credits and depreciation and/or so called loop holes to go away which results perhaps in corporations paying more effective tax but leads to less economic stimulation because the corporations won't buy things or do things that stimulate the economy...or do you want it similar to the way it is today...where the corporations get some benefit via the reduced taxation granted them by the federal government for doing their part in stimulating the economy. We can't have both IMHO. We should be reminded that "for every action there is a reaction" and "consequence". Now that said, it is extremely "one sided" to present one side of the data by saying they pay zero in taxes. The other side of that are the reasons why...and what those reasons stimulate. They stimulate the economy.

[MasterBlaster]

So 121 Posts later....

has anyone changed their mind ?

Anything been decided yet ?

I'll check back in another 121 posts.

Meanwhile, don't mind me, Carry on... Pip Pip !

[sheehs1]

Quote:

Originally Posted by Hamlet Corporate income tax revenues are plummetting in part because our large multinational companies are shifting expenses to their US subsidaries to lower their US income, while shifting their revenues/earnings to lower tax jurisdictions. Here is an article about Microsoft-- Insight: Microsoft use of low-tax havens drives down tax bill | Reuters Their effective tax rate is less than 20% because they book large portions of their revenue through Ireland, Singapore, and Puerto Rico. The world has become global and virtual. Which country that Microsoft (or any large company) books revenue or expenses is becoming fairly arbitrary. We need a new system for corporate income taxes (or we can just set them to zero and make it up elsewhere), because the current system allows international companies to avoid a large portion of their taxes, while a US-only company can be crushed by our tax rates.

Agreed...+1 Hamlet.
60 minutes did a big segment on this last year...interviewing CSCO.
For those companies that can do this (and all of them don't but the mega corps do) ...their revenues don't stimulate our economy here in the U.S....since they keep them offshore due to the tax rates.
This is such a glaring problem with a logical solution that ...

JDW...Hamlet has brought up another key issue that is important to your original concept....in that...increasing tax rates on profits will not do anything for the megacorps that keep their profits offshore. They still legally will owe little or no tax to the U.S.

[ERD50]

Quote:

Originally Posted by MasterBlaster So 121 Posts later.... has anyone changed their mind ? Anything been decided yet ? I'll check back in another 121 posts. Meanwhile, don't mind me, Carry on... Pip Pip !

Well, I'll wait a few days to see if jdw_fire can come up with a concise, lucid response to my last post #112. After that, I may start a thread on "What should be done to create economic/job growth?".

It's being touched on here, but I think it deserves its own thread. It's a sticky wicket - people need good paying jobs in order to drive demand, but w/o demand, businesses don't want to hire/invest to make more stuff that people can't buy.

-ERD50

[Alan]

Quote:

Originally Posted by MasterBlaster So 121 Posts later.... has anyone changed their mind ? Anything been decided yet ? I'll check back in another 121 posts. Meanwhile, don't mind me, Carry on... Pip Pip !

Quote:

Originally Posted by ERD50 Well, I'll wait a few days to see if jdw_fire can come up with a concise, lucid response to my last post #112. After that, I may start a thread on "What should be done to create economic/job growth?". It's being touched on here, but I think it deserves its own thread. It's a sticky wicket - people need good paying jobs in order to drive demand, but w/o demand, businesses don't want to hire/invest to make more stuff that people can't buy. -ERD50

You guys turning British?

[Alan]

Quote:

Originally Posted by MasterBlaster Is that like Ebola or something ?

Worse, it means you are turning into socialists

[MasterBlaster]

Quote:

Originally Posted by Alan Worse, it means you are turning into socialists

Socialists are quite nice really, Until they run out of other people's money.

So thank you.

[HFWR]

Too much to read carefully, so I read carelessly...

Pulling all this from my...

Large corps with buttloads of cash they have no productive use for should be encouraged to return that money to shareholders, who would either use it more "productively", or spend it on "stuff", increasing aggregate demand, possibly resulting in higher employment and increased tax revenues for the gubmit.

While granting that "uncertainty" over future tax rates, healthcare liabilities, and all that are a concern, the largest concern is lack of customers. If money is there to be made, someone will step in to make it. Again, lack of demand...

And, finally (hold the applause), we could shrink government spending by, what, 40%, and not return a single dime to taxpayers, since we're borrowing that portion. What we would do, however, is remove about half a trillion from circulation, which would likely not do wonders for the economy, at least in the short-to-mid term...

So, the solution, it seems to me, is to not tax that money sitting around doing nothing, but to figure out a way to get it into the economy.

[rescueme]

Quote:

Originally Posted by HFWR So, the solution, it seems to me, is to not tax that money sitting around doing nothing, but to figure out a way to get it into the economy.

Something DW does quite well ..

Heck, I'm waiting for the companies holding a bunch of cash to start re-purchasing their outstanding shares, and increasing current shareholder's value in the company...

That way they could not risk investment in infrastructure that may not be needed in the future, and also slience the critics on the amount of "excess" held.

[FinanceDude]

Quote:

Originally Posted by HFWR Large corps with buttloads of cash they have no productive use for should be encouraged to return that money to shareholders, who would either use it more "productively", or spend it on "stuff", increasing aggregate demand, possibly resulting in higher employment and increased tax revenues for the gubmit.

Sounds like "redistribution". If the shareholders don't like the company holding cash, then SELL the stock.........

[HFWR]

I don't know, a one-time distribution at a low/no tax rate seems plenty "supply-side" to me.

I should know better than to frequent this forum...

[FinanceDude]

Quote:

Originally Posted by HFWR I don't know, a one-time distribution at a low/no tax rate seems plenty "supply-side" to me. I should know better than to frequent this forum...

We are thinking as shareholders, not corporate management. If I can build a facility in Ireland at 1/3 the US corporate tax rate, why would I fight OSHA and EPA and those nice folks to build it here for a lot more money?

[HFWR]

Quote:

Originally Posted by FinanceDude We are thinking as shareholders, not corporate management. If I can build a facility in Ireland at 1/3 the US corporate tax rate, why would I fight OSHA and EPA and those nice folks to build it here for a lot more money?

Quote:

Large corps with buttloads of cash they have no productive use for..

...is what I said. If they're building in Ireland, I'll assume that is a productive use. I did not say anything about the government taxing/confiscating it.

As for the rest, our history of self-policing speaks for itself...

[FinanceDude]

Quote:

Originally Posted by HFWR ...is what I said. If they're building in Ireland, I'll assume that is a productive use. I did not say anything about the government taxing/confiscating it.

I know you didn't, but that is WHY these things are happening. The uncertainty in what direction Congress is going makes those businesses with cash nervous, so they are acting like consumers are cutting back and holding tight.

[HFWR]

Quote:

Originally Posted by FinanceDude I know you didn't, but that is WHY these things are happening. The uncertainty in what direction Congress is going makes those businesses with cash nervous, so they are acting like consumers are cutting back and holding tight.

Okay... I believe it's much more complicated than that...

From a WSJ article (hardly the liberal media):

U.S. Firms Build Up Record Cash Piles - WSJ.com

Quote:

U.S. companies are holding more cash in the bank than at any point on record, underscoring persistent worries about financial markets and about the sustainability of the economic recovery.

Quote:

The Federal Reserve reported Thursday that nonfinancial companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March...

Quote:

While renewed confidence in corporate-bond markets has allowed big companies to raise a record amount of money, many are still hesitant to spend the cash on hiring or expansion amid doubts about the strength of the recovery.

But back to my point, plenty of conservatives think that a "tax holiday" would be a good way to get companies to repatriate cash from foreign operations. How is this different?

[Hamlet]

I don't think that is what is really happening though. I think they are building the facilities based on where it is cheapest/best to build them, and then booking the revenues in whichever place has the lowest tax rates.

I doubt Microsoft actually has a large footprint in Ireland. But there Ireland corporate subsidiary is booking a larger and larger portion of their revenue. Any overhead expenses get booked to the US subsidiary, thus reducing their taxable income.

It's mostly an accounting trick. When you sell software, what is to prevent you from shifting global expenses to the US company (all of the software development costs), while booking revenues via your tax haven shells?

Quote:

Originally Posted by FinanceDude We are thinking as shareholders, not corporate management. If I can build a facility in Ireland at 1/3 the US corporate tax rate, why would I fight OSHA and EPA and those nice folks to build it here for a lot more money?

[jdw_fire]

Quote:

Originally Posted by ERD50 jdw - I responded that your example was flawed, as it ignored the after-tax value of the profits. You can't ignore the after-tax values, in a discussion on the effects of tax rates! I gave the following example in post #69 - (I added a few notes in "()" for clarity in this context and some underlining for emphasis. Note that we agreed that the increased profits would increase the business value at a 10x rate), showing the effects of tax rates: The above shows that at higher tax rates, the business persons income is lower (a demotivator), and that the value of added investment in the business is lower (a demotivator). You said in post #71: And I responded in post #74: Maybe you missed all that in the flurry of posts and cross-quoting. I tried to break it out here as concisely as I could, so hopefully it is clear. So, how can higher tax rates motivate a business person to invest in their business more than lower tax rates would, when those higher tax rates bring fewer $ into their pocket, whether they sell their business or not? -ERD50

i stand by my response of

Quote:

this isnt correct. the taxes due on the business' profit by the potential buyer of the business may influence whether that buyer does in fact buy it but when the business owner is do an analysis of his/her business to determine its value for sale a business owner doesnt include the personal income taxes s/he would be paying on the profit if s/he still owned it.

however i have noticed that all the posts arguing against my premise dont even attempt to really address it. my premise is basicly that tax payer psychology is the main driver for the investment in small business that i am suggesting will take place and i have mentioned it several times.

Quote:

Originally Posted by jdw_fire at the moment companies are having good revenue reports and, as i said in my 1st post on this thread, the highest profits/GDP in 60 years. why have they been realizing these profits instead of investing in their companies? maybe it is because the tax rates are so low that it makes more sense to book the profit.

Quote:

Originally Posted by jdw_fire i dont understand how you cant see the tax payer psychology i am pointing out when you actually give examples of that very psychology in your post. i highlighted in red where you give an example of a business owner making a decision about his businesses based overwelmingly on the tax implications. you also mentioned lot of schemes that were used to reduce taxes, which you called "stupid". so therefore you are acknowledging that tax payers will do "stupid" things to avoid paying taxes. that is exactly the tax payer psychology i based my premise on.

Quote:

Originally Posted by jdw_fire ... so i will try to address what i think you are thinking by first suggesting you look at my last 2 posts, in which i try to get my point across that i am talking about a tax payer psychology. i have said this to you over and over again and since it is a psychology the proof may not be in the dollar and cents numbers. ...

Quote:

Originally Posted by jdw_fire it is clear you dont agree with, nor like my idea, and unfortunately you also seem to not be seeing the tax payer psychology i have been talking about. granted the example that i highlighted in red was a CG example but so what? i pointed it out because it shows the psychology i am trying to get you all to see. just because it is a CG example doesnt invalidate it in showing that psychology. the other "stupid" schemes to lowering taxes that were also in the post i highlighted, also show that psychology. i have to believe he used the word "stupid" when mentioning those schemes because, to him, they didnt make financial sense. so if people are willing to follow "stupid" schemes to avoid paying personal income taxes, how can you all claim that they wont do something like just plowing those expected profits back into their company (making them expenses instead) in order to reduce their personal income taxes when it carries the added benefit of growing their business?

and the type of response to that i got was an off handed dismissal

Quote:

Originally Posted by ERD50 Yes, but I feel that any view of tax payer psychology is too subjective to be used to convince anyone. So I keep saying (over and over), show me the kinds of numbers a business person would review with an accountant to say "Yes, let's make this investment!"

well i have allowed you all to do that by not bringing that part of the premise to the forefront and instead i actually provided you with numbers supporting my view. in my opinion your counters to them didnt invalidate them but as they werent my main reason for having this premise i am going back to that part of the premise, tough that it isnt numbers.

it is the tax payer psychology that will provide the stimulus because tax payers in high tax brackets where the actual rates are high will want to pay less in taxes and when they have a small business, an easy way to do that is spend dollars that would otherwise be taxed on something that can be deducted. other posters in this thread have also provided examples of people doing this so i dont see why it wouldnt cause the same reaction if the higher tax brackets had their rates raised now.

[jdw_fire]

i said earlier

Quote:

Originally Posted by jdw_fire it is the tax payer psychology that will provide the stimulus because tax payers in high tax brackets where the actual rates are high will want to pay less in taxes and when they have a small business, an easy way to do that is spend dollars that would otherwise be taxed on something that can be deducted. other posters in this thread have also provided examples of people doing this so i dont see why it wouldnt cause the same reaction if the higher tax brackets had their rates raised now.

and here another poster provides explanation of that very thing, i.e. taxpayers (in this case corps.) spending money (expenses, capital investment) to reduce their tax burden via "deductions, depreciation and tax credits".

Quote:

Originally Posted by sheehs1 It would seem that for any corporation to pay ZERO in taxes, that corporation has enough deductions, depreciation and tax credits that bring their profit to zero. Now ...when one thinks about this ...one might realize that all those credits and/or depreciation for capital equipment either 179 or otherwise and/or other loop holes go into the "economy to stimulate growth". So the question becomes which do we want? Do we want all the tax credits and depreciation and/or so called loop holes to go away which results perhaps in corporations paying more effective tax but leads to less economic stimulation because the corporations won't buy things or do things that stimulate the economy...or do you want it similar to the way it is today...where the corporations get some benefit via the reduced taxation granted them by the federal government for doing their part in stimulating the economy. We can't have both IMHO. We should be reminded that "for every action there is a reaction" and "consequence". Now that said, it is extremely "one sided" to present one side of the data by saying they pay zero in taxes. The other side of that are the reasons why...and what those reasons stimulate. They stimulate the economy.

and to top it off, she even says (see the red highlight above) that such spending "stimulate(s) the economy". my premise seems well defended by the above post.

[jdw_fire]

Quote:

Originally Posted by sheehs1 JDW...Hamlet has brought up another key issue that is important to your original concept....in that...increasing tax rates on profits will not do anything for the megacorps that keep their profits offshore. They still legally will owe little or no tax to the U.S.

my premise was increasing the individual's tax rates in the higher brackets (i said that many times). it is not as easy for an american citizen to get around paying income taxes.

[ERD50]

Quote:

Originally Posted by jdw_fire i stand by my response of Quote: this isnt correct. the taxes due on the business' profit by the potential buyer of the business may influence whether that buyer does in fact buy it but when the business owner is do an analysis of his/her business to determine its value for sale a business owner doesnt include the personal income taxes s/he would be paying on the profit if s/he still owned it.

Well, I figured it would come to this, but at this point I must bow out. I've made my case with numbers, and you won't accept them. You say 'psychology' out weighs the numbers. I don't agree, I think successful business owners who would be the source of growth are generally smart enough to look at the numbers and make business decisions based on those numbers.

For closure, I will summarize my position:

Quote:

however i have noticed that all the posts arguing against my premise dont even attempt to really address it. my premise is basicly that tax payer psychology is the main driver for the investment in small business... ... and the type of response to that i got was an off handed dismissal

I disagree that it was an offhand dismissal. It was a reasoned dismissal, which I described above (a business looks at numbers).

Quote:

well i have allowed you all to do that by not bringing that part of the premise to the forefront and instead i actually provided you with numbers supporting my view.

And as I replied at the time - your numbers ignore the effect (on income) of the very taxes that you apply. So no, they don't support your view, they counter it. I'll repeat the criteria this needs to meet to be convincing:

Quote:

I think you have a number of steps to make your case: A) That it is possible for most businesses to consistently (year after year) shift their income from a higher tax rate classification to a lower tax rate classification. B) That this shift would generally result in economic/job growth. C) That increasing the tax rates would create more of this activity than would occur at lower tax rates.

Ring me if you have a new format to make those cases.

On one hand, I don't think it means much that others have not jumped in to support you. Sometimes the lone wolf is correct. But it is surprising, considering the number of vocal 'tax the rich' supporters on this forum, I would have expected more support for you if this was supportable.

Oh well, at least I got out before the thread was closed. It's been an 'interesting' discussion. Thanks for the challenges. Thanks for the insight into how others think. Thanks for keeping it civil.

-ERD50