Just One Way to Stop Corporate Inversions: Cut Taxes

[DEAD7]

Just One Way to Stop Corporate Inversions: Cut Taxes

Chris Edwards is tax policy director at the Cato Institute and co-author of "Global Tax Revolution." He is on Twitter.
Updated July 22, 2014, 12:04 PM
The corporate inversion trend tells us that global tax competition is intense and that U.S. tax reform is long overdue. Our combined federal-state corporate tax rate of 40 percent is far higher than the rates of our trading partners. Inversions are a bid by companies to create self-help tax reform while Congress sits on its hands.
Our high tax rate is scaring away investment and reported profits.
U.S. companies compete in foreign markets against firms based in countries that have lower tax rates and that exempt foreign business income from tax. Thus, a U.S. firm competing in China against a firm based in Britain (which has a 21 percent tax rate) will be at a disadvantage, and may lose market share as a result. Since the domestic jobs of U.S. companies partly depend on sales in such foreign markets, our uncompetitive tax system ends up hurting U.S. workers.

Inversions help U.S. firms compete by shaving off our extra layer of tax on foreign operations. Some inversions have merged U.S. companies into companies based in Europe, which has an average corporate tax rate of just 20 percent. Other U.S. companies have merged into corporations based in Canada.
Why Canada? Because it slashed its federal corporate tax rate from 28 percent in the 1990s to just 15 percent today. Businesses have responded by shifting more reported profits into Canada and boosting investment. That response has meant that Canada collects more in corporate tax revenues today (1.9 percent of gross domestic product) than it did in the 1990s (1.7 percent) when it had a higher tax rate. The government and businesses both gained from the reform.
Meanwhile, our federal corporate tax will raise only 1.8 percent of G.D.P. in revenue this year — about the same as Canada — even though our federal tax rate is far higher at 35 percent. Our high tax rate is scaring away investment and reported profits.
The solution to the inversion problem is the same as for our economic growth problem: cut the corporate tax rate. The good news for policymakers — as Canada has shown — is that federal coffers won’t be drained with such a reform, and may even gain from it.

http://www.nytimes.com/roomfordebat...ne-way-to-stop-corporate-inversions-cut-taxes

 

[Type Username Here]

Sure, we can have the European corporate tax rates when we get their labor laws, social safety nets and fair taxing of the wealthy.

Motherfukkers conveniently leave that part out.

 

[DANKTHRONE]

http://www.latimes.com/business/hiltzik/la-fi-hiltzik-20140803-column.html#page=1

Inversions aren't about improving competitiveness, Kleinbard observes. They're about making use of the huge cash hoards American companies have accumulated overseas. Kleinbard estimates this "stateless income" at roughly $1 trillion. It can't be spent directly in the United States without incurring a steep tax, and it's too large a sum to be profitably deployed outside the U.S.

Inversions allow companies to use these stockpiles in the U.S., at much lower cost.

Inversions also allow companies to use their overseas money as intracorporate loans to their domestic operations, charging the loan cost to their U.S. subsidiaries. This effectively pares down their U.S. domestic tax base, Kleinbard explains, which reduces their domestic taxes. Technically, the company's U.S. tax rate doesn't change, as White says. But it's applied to a smaller amount of declared income.

Also, there's no evidence that U.S. companies are hobbled by a higher corporate tax than their overseas competitors. U.S. companies are masters at reducing their effective U.S. tax rates to levels consonant with those in other big markets, such as Western Europe and Asia. (Tax warriors will cite statutory tax rates — where the U.S. is near the top of the list — but almost no one ever pays those.) And there's no evidence that corporate growth rates or access to capital have any real correlation to domestic tax rates.
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Cato Institute

 

[Domingo Halliburton]

just simplify the tax code. You would collect more tax revenue.

and the irony of the government getting pissed off about this when this country was founded by a bunch of guys trying to dodge taxes.

 

[unit321]

Chris Edwards is a dikk wiggler.

 

[Consigliere]

I'm running a couple projects for my job in Florida. You know how they get around not raising taxes? They bury you in fees. Government is gonna get you coming and going either way.

Ideally, you'd bring down the cost of everything to reduce the need for taxes instead of moving money into different pots.

 

[BillBanneker]

Due to the complexity of the tax code in this country (for businesses and persons), tax rates don't mean much. What is the actual tax burden for these companies? That's the real question.

 

[Jhoon]

http://business-news.thestreet.com/philly/story/employers-can-legally-lie-workers-court-rules-0/1

O.P. is such a fakkit.

 

[DEAD7]

http://business-news.thestreet.com/philly/story/employers-can-legally-lie-workers-court-rules-0/1

O.P. is such a fakkit.

I haven't commented,

 

[Piff Perkins]

If you believe US companies are paying 40% in corporate taxes you don't know anything about the economy. Multiple corporations pay around 20-30% at best. Anyone who hand wrings over "the US has the highest corporate tax rate" is shilling for a corporate agenda.

I'd have no problem with lowering the rate under one circumstance: close all corporate loop hopes to ensure the new rate is properly respected. But that's not going to happen.