Wealth taxes?

[pb4uski]

....regarding tax breaks, I specifically meant the breaks that promote favoritism in the marketplace.

Still unclear what tax breaks you mean, and i'm not even sure if you really have an idea beyond generic tax breaks.

One example of a tax break that promotes favoritism in the marketplace that comes to mind would be tax credits for sustainable energy investments like wind and solar.

 

[timo2]

One example of a tax break that promotes favoritism in the marketplace that comes to mind would be tax credits for sustainable energy investments like wind and solar.

That would be one, but all breaks for energy production should be deleted, including tax credits for one of my former employers, oil. Farm subsidies would be another area to stop preferential tax treatment There are lots more examples, and a lot of specific little loopholes for specific little industries. Sen. Coburn had a nice list a couple of years ago.

 

[pb4uski]

I would be fine with phasing out all you mentioned and let the free market decide what is valuable or not. I've never understood the relevance of current day subsidies for oil given the profitability of oil companies. There certainly would be some initial shocks of ending any of these. For example, IIRC the price of milk would likely skyrocket if subsidies were removed.

That said, IIRC part of the reasoning behind some of the farm subsidies at one time was to ensure/expand food production in country so we don't ever get into a situation where an enemy can hold us hostage economically/gouge us for food which seems sensible.

But I suspect that many of these corporate welfare elements could be phased out in a way that would create minimal chaos/harm.

 

[meierlde]

Actually several states have wealth taxes, called intangibles taxes, including MI, IN and others. Several states also tax intagables as part of regular property taxes. The Mi tax only brings in a few million a year which suggests it may not apply to stock of a corp not incorporated in Mi. (There also is a tax of 25 basis points on bank accounts, that apparently many banks pay directly).

 

[meierlde]

Actually several states have wealth taxes, called intangibles taxes, including MI, IN and others. Several states also tax intagables as part of regular property taxes. The Mi tax only brings in a few million a year which suggests it may not apply to stock of a corp not incorporated in Mi. (There also is a tax of 25 basis points on bank accounts, that apparently many banks pay directly).

Note that MI apparently repealed the tax for individuals in 1998. Also it appears the tax was not cost effective.

 

[aja8888]

I am not commenting on the subsidies for oil companies, but just making a comment on the profit side. If you were to run an oil company and have oil in the ground, selling it means you must continue to replace it or you will be out of business once your pumps run dry.

Oil companies spend large sums of dollars trying to find replacement oil reserves. And that is just to find the oil in the ground. Getting it to market is another process altogether, and very costly.

Until the last 5 years or so, we were very dependent on foreign supplies of crude oil and some refined product. Now we have increased our domestic crude production thru horizontal drill techniques (and shale plays) so we are not so dependent on foreign oil (went from 70% to maybe 60% dependent). This dependency decrease will continue, but it is still very costly to find new oil. That is where most of the profits go.

It may be time to review the subsidies for domestic production, but that's a political task.

 

[anethum]

Not sure what tax breaks you are referring to but if you are referring to the preferential rate for qualified dividends and capital gains, much of the reason for the preferential rate is because the income has already been tax at the corporate level and the same income would be taxed twice if not for the preferential rate.

Most of us know that the effective corporate tax rate in the US is quite low. The last figure I read was that in 2011 (by which time corporate profits had bounced back nicely), the effective corporate tax was only 12.2%. For an entire decade, GE paid an average of only 1.8%. Of course, GE pays a healthy dividend to its shareholders. We've all read stories of some highly profitable corporations avoiding US corporate taxes altogether.

Moreover, I've never bought the argument that taxing dividends is taxing twice. It's routine for every transaction to be subject to a tax in many financial circumstances. There is even less of an argument that can be made for capital gains having a preferential rate.

Having said that, I certainly attempt to take advantage of these skewed rates. OTOH, I'm getting pummeled by my property tax. One tax law giveth, the other taketh away.

 

[Midpack]

Most of us know that the effective corporate tax rate in the US is quite low.

We do? Care to provide some evidence to support your claims?

In May, the NYT reported an average of 29.1% overall for S&P 500 corporations from 2007-2012, with a lot of supporting detail... http://www.nytimes.com/interactive/2013/05/25/sunday-review/corporate-taxes.html?_r=0, including 16% for GE.

Don't get me wrong, I think we need simplification of our individual and corporate tax codes, though I am not holding my breath. But I'm very wary (and weary) of numbers reported seemingly from out of thin air...

The last figure I read was that in 2011 (by which time corporate profits had bounced back nicely), the effective corporate tax was only 12.2%. For an entire decade, GE paid an average of only 1.8%. Of course, GE pays a healthy dividend to its shareholders. We've all read stories of some highly profitable corporations avoiding US corporate taxes altogether.

Moreover, I've never bought the argument that taxing dividends is taxing twice. It's routine for every transaction to be subject to a tax in many financial circumstances. There is even less of an argument that can be made for capital gains having a preferential rate.

Having said that, I certainly attempt to take advantage of these skewed rates. OTOH, I'm getting pummeled by my property tax. One tax law giveth, the other taketh away.

 

[timo2]

I am not commenting on the subsidies for oil companies, but just making a comment on the profit side. If you were to run an oil company and have oil in the ground, selling it means you must continue to replace it or you will be out of business once your pumps run dry.

Oil companies spend large sums of dollars trying to find replacement oil reserves. And that is just to find the oil in the ground. Getting it to market is another process altogether, and very costly.

Until the last 5 years or so, we were very dependent on foreign supplies of crude oil and some refined product. Now we have increased our domestic crude production thru horizontal drill techniques (and shale plays) so we are not so dependent on foreign oil (went from 70% to maybe 60% dependent). This dependency decrease will continue, but it is still very costly to find new oil. That is where most of the profits go.

It may be time to review the subsidies for domestic production, but that's a political task.

Of course there are valid reasons for every single tax credit. All tax credits have some good reason at some time. The horse tracks in Kentucky have one, because they like those there. I got nice one for re-insulating my house a couple of years ago. But it never ends, no matter what party is in power. Government is always using the tax code to promote one objective or another. Instead of using the tax code for industrial and social policy, why not just pass the appropriate law instead? Then maybe we could have a tax code that made some sense.

 

[anethum]

We do? Care to provide some evidence to support your claims?

In May, the NYT reported an average of 29.1% overall for S&P 500 corporations from 2007-2012, with a lot of supporting detail... http://www.nytimes.com/interactive/2013/05/25/sunday-review/corporate-taxes.html?_r=0, including 16% for GE.

Don't get me wrong, I think we need simplification of our individual and corporate tax codes, though I am not holding my breath. But I'm very wary (and weary) of numbers reported seemingly from out of thin air...

Here's one:

The Corporate Tax Rate Is Lowest in Decades; Is Business Paying Its Fair Share? | TIME.com

Here's a link for the GE claim:
Press Release: General Electric's Ten Year Tax Rate Only Two Percent | Tax Justice Blog

 

[bUU]

Tax credits don't preclude the tax code from making sense. People object more to being told what to do by government than being rewarded by government for doing a good thing. For that matter, another way of handling the same things would be to tax doing a bad thing, but again, people object more to being punished by government for doing something instead of being rewarded by government for doing the opposite.

 

[Gatordoc50]

Using the tax code to promote growth or change behaviors can be a good thing. But we are learning that it is too difficult politically to end tax cuts and credits and expenditures when the economy improves or spending needs increase. Even looking ahead and just having them expire is a political nightmare. So we are left with Fed actions to spur the economic engine or slow it down.

 

[youbet]

Tax credits don't preclude the tax code from making sense.

Of course not. But I think it depends on where you're from and the local political culture. I'm from Chicago, Illinois. When I see tax credits rewarding special interest groups connected to the legislators that sponsored the tax credit, it makes perfect sense. That's how the world works. The folks in political power take care of the folks who keep them there. Everybody's back gets scratched. That's what a tax credit is.

Now to some country bumpkin holding some naïve idea that a tax credit is there to promote an activity beneficial to the overall public good laugh, seeing what's actually happening with tax credits and the tax code isn't going to make sense at all.

It's all in the eyes of the beholder.

 

[bUU]

When I see tax credits rewarding special interest groups connected to the legislators that sponsored the tax credit....

How about fixing that?

And if such injustice literally cannot be remedied, or if doing so causes an even less tolerable consequence, then recite the serenity prayer.

 

[youbet]

How about fixing that?

And if such injustice literally cannot be remedied, or if doing so causes an even less tolerable consequence, then recite the serenity prayer.

"Fixing that" would eliminate the grease that allows the wheels to turn. Politics in the good ole U S of A would stop. People would be confused. And their backs would itch horribly with no one to scratch them.

 

[FIRE'd@51]

That would be one, but all breaks for energy production should be deleted, including tax credits for one of my former employers, oil. Farm subsidies would be another area to stop preferential tax treatment There are lots more examples, and a lot of specific little loopholes for specific little industries. Sen. Coburn had a nice list a couple of years ago.

You failed to mention the biggest tax expenditure of all - tax-free employer provided health insurance and healthcare.

 

[Midpack]

We do? Care to provide some evidence to support your claims?

In May, the NYT reported an average of 29.1% overall for S&P 500 corporations from 2007-2012, with a lot of supporting detail... http://www.nytimes.com/interactive/2013/05/25/sunday-review/corporate-taxes.html?_r=0, including 16% for GE.

Don't get me wrong, I think we need simplification of our individual and corporate tax codes, though I am not holding my breath. But I'm very wary (and weary) of numbers reported seemingly from out of thin air...

Here's one:

The Corporate Tax Rate Is Lowest in Decades; Is Business Paying Its Fair Share? | TIME.com

Here's a link for the GE claim:
Press Release: General Electric's Ten Year Tax Rate Only Two Percent | Tax Justice Blog

Thanks for the links, though CTJ may have an agenda (CTJ’s funding comes from donations by individuals, labor unions, and other organizations).

However, though you didn't draw the comparison yourself, the 29.1% after federal, state & local taxes is more likely comparable to corporate taxes in other (competing) countries since few if any other countries have state & local taxation as I understand it.

And it's interesting that GE reports paying more in taxes than the media, even while admitting their tax rates are legally very low. Interesting which source(s) we choose to quote/believe.

 

[anethum]

Thanks for the links, though CTJ may have an agenda (CTJ’s funding comes from donations by individuals, labor unions, and other organizations).

However, though you didn't draw the comparison yourself, the 29.1% after federal, state & local taxes is more likely comparable to corporate taxes in other (competing) countries since few if any other countries have state & local taxation as I understand it.

And it's interesting that GE reports paying more in taxes than the media, even while admitting their tax rates are legally very low. Interesting which source(s) we choose to quote/believe.

FWIW, here's a link to a NY Times article from 2011 which cites the same GE numbers for 2010 as the CTJ article cites for that year:

http://www.nytimes.com/2011/03/25/business/economy/25tax.html?pagewanted=all&_r=0

I agree that it would be great if there were simplification (as well as more fairness) of both corporate and individual tax laws, but like yourself, I'm not holding my breath waiting for it to happen.

It's slightly encouraging that there are now international talks in an attempt to control the tax avoidance which many multinational companies engage in.

 

[pb4uski]

Here's one:

The Corporate Tax Rate Is Lowest in Decades; Is Business Paying Its Fair Share? | TIME.com

Here's a link for the GE claim:
Press Release: General Electric's Ten Year Tax Rate Only Two Percent | Tax Justice Blog

While the headline suits your fancy, you need to dig deeper.

.....According to the Wall Street Journal’s recent study of Congressional Budget Office numbers, corporations are paying an effective rate of 12.1%, the lowest in at least 40 years. So why are some of the biggest and most powerful entities in our society getting away with paying so little? The story is complicated, but the biggest factor in the recent collapse in corporate tax receipts appears to be a set of tax breaks built into recent stimulus efforts.

In 2010 and 2011, companies were allowed to deduct the full cost of the purchases of new equipment, while normally these costs would be expensed over several years. In 2012, this deduction will go down to 50% and be eliminated altogether thereafter, causing the effective tax rate to return to roughly the 25.6% average effective tax rate corporations paid since the late 1980s, according to CBO forecasts.

Of course that 25.6% number is still quite a bit lower than the nominal tax rate of 35%, the highest in the world behind only Japan....

Also, IIRC US corporate taxes are among the highest in the world and many believe adversely affect our competitiveness in the new global economy.

So if the average corp pays 25% and the remaining 75% is dividended to shareholders and the shareholders pay 15% then more than 1/3 of corporate profits are ultimately paid to the feds. I think that is plenty. If there were no preferential tax rate then the rate woudl be almost half [46% = 25% + 28%*(1-25%)]

 

[pb4uski]

T.... For that matter, another way of handling the same things would be to tax doing a bad thing, but again, people object more to being punished by government for doing something instead of being rewarded by government for doing the opposite.

You mean, like [-]penalizing[/-] taxing people who don't buy health insurance?

 

[anethum]

While the headline suits your fancy, you need to dig deeper.



Also, IIRC US corporate taxes are among the highest in the world and many believe adversely affect our competitiveness in the new global economy.

So if the average corp pays 25% and the remaining 75% is dividended to shareholders and the shareholders pay 15% then more than 1/3 of corporate profits are ultimately paid to the feds. I think that is plenty. If there were no preferential tax rate then the rate woudl be almost half [46% = 25% + 28%*(1-25%)]

You used a lot of "ifs". I would hope that you are aware that few corporations actually pay those high tax rates. Or perhaps that doesn't suit your fancy?

http://www.nytimes.com/2013/07/02/business/big-companies-paid-a-fraction-of-corporate-tax-rate.html

Here's one quote: "The report found that even when foreign, state, and local taxes were included, the tax rate of large companies rose only to 16.9 percent of total income, still well below the official 35 percent."

Here's another: "As a percentage of federal tax revenue, corporate taxes have fallen to 9 percent from more than 30 percent in the 1950s."

The GAO report the NYTimes article cites has the following line:

For tax year 2010 (the most recent information available), profitable U.S. corporations that filed a Schedule M-3 paid U.S. federal income taxes amounting to about 13 percent of the pretax worldwide income that they reported in their financial statements (for those entities included in their tax returns).

Also this line:

However, GAO's 2008 report on corporate tax liabilities (GAO-08-957) found that nearly 55 percent of all large U.S.-controlled corporations reported no federal tax liability in at least one year between 1998 and 2005.

 

[pb4uski]

You used a lot of "ifs". ....

Perhaps, but only one of the "if"s was really relevant.

Actually, all corporations pay 35% of their taxable income (before applicable credits) - that is just the way it works.

Any comparison of taxes paid to financial statement income is of questionable relevance - sort of like comparing apples and oranges. They are both measured very differently which is why deferred income taxes are accounted for in company financial statements and there is a reconciliation of the 35% statutory rate (in most cases) to the effective rate in the financial statement footnotes. In most cases the effective rates are lower because taxable income is lower than accounting income because of accelerated depreciation incentives, income not subject to tax, and other book/tax differences all of which are disclosed in the financial statement footnotes. Most of these differences will ultimately reverse (which is why they are required to be accounted for) and when they do the taxes will be paid.

 

[HawkeyeNFO]

...I don't see anyone who would benefit from inflation, but perhaps I'm missing something.

I recommend you take the perspective of a borrower. Especially one who has a mortgage with the recent rates.

...A fourth option is to start vigorously negotiating with those who provide what the government pays for, either directly or indirectly, forcing prices down wherever there are significant profits being earned at the public expense, as Medicare already does.

This is the myth of socialism. If Medicare is already doing this, isn't it obvious that it is failing? Seen the medical prices lately?

 

[meierlde]

This is the myth of socialism. If Medicare is already doing this, isn't it obvious that it is failing? Seen the medical prices lately?

Actually medicine decided that the hotel business represents how to go there is a rack rate that few pay, the medicare rate which is a lot lower, medicaid which is lower still, and then the rate insurance pays which is between medicare and the rack rate. The uninsured get the shaft in the system by paying the rack rate. I am suprised some insurnace companies don't introduce a discount card for maybe $50 a year that gets one their rates on all of medicine, after all the more business they do the more their negotiating power.
I recall seeing my late mothers hospital bill there was a total it was zeroed out and then the medicare rate was substituted which was a lot lower. Hospitals claim they don't make any money on this rate, but I would like to hear a discussion on what would happen if everyone got to pay this rate. Physicians who don't like it could leave the business that is all.

Of course perhaps the future of medicine might well be more like the college medical clinic, as it becomes more proceedure oriented and good electronic records come in, the physician in a given appointment may make little difference.

 

[bUU]

If Medicare is already doing this, isn't it obvious that it is failing?

Your implication is a myth.

See how easy putting forward one's own personal opinion is?

Let's just agree to disagree.