The public has a right to know how companies that pay no taxes pull it off

http://larrysummers.com/2020/11/02/many-companies-pay-nothing-in-taxes-the-public-has-a-right-to-know-how-they-pull-it-off/

by chmaynard • 6 years ago

592 403 6 years ago

larrysummers.com

8bitsrule• 6 years ago

tldr; "If corporations are, in effect, U.S. citizens, surely their country is a stakeholder to whom they owe an obligation.... Based on public reporting, we calculate that in 2019, nearly 20 percent of large corporations that reported profits to shareholders of $100 million (or more) paid zero (or even negative) federal income taxes....

"there is no requirement for corporations to make public their taxable profits, or the ways in which they are avoided.... the IRS ... has since 2004 required the annual filing of Schedule M-3 .... this road map is available to the IRS alone, not to the public, who can hold companies accountable, nor to policymakers ...."

dmacedo• 6 years ago

I wonder how feasible it is for individuals (or groups of individuals?) in the US, to also incorporate themselves and, through the same or similar loopholes, also pay no tax...

How would the IRS respond in those instances.

Has that been tried? Is anyone aware of anything like that? Is the cost of such a scheme prohibitive for an individual vs. a large Corp? I'd be curious what the challenges and outcome of such an experiment would be.

jasonv• 6 years ago

It’s not expensive to incorporate, but full time employment can’t really be paid to an EIN. You need to be a contractor or a vendor.

Lots of people do it. Self employment comes with some risks, but if you own it, and convert your employment towards it, it can have benefits.

Its how landscapers drive F250s, for example.

ryanmarsh2• 6 years ago

LOL this is primarily why many self employed people eventually incorporate. Tax reduction.

You should try it some time.

MuffinFlavored2• 6 years ago

I can’t figure out what to deduct that is more than the $12.2k single filer deductible. I have $500k/yr I’d love to pay less taxes on at the moment due to a booming side business + healthy salary. Can’t find any deductions worth my time and the CPA filing fees.

stjohnswarts11• 6 years ago

It's not that big of a deal. It can help you with investing back into your business, especially if you have a lot of hardware to buy to operate it, as well as easier to write off business travel, rent, etc. However those are all practical. Your individual income will still be taxed at the same rate. It really just makes your paperwork a bit easier than if you went with a sole proprietorship, there's not a huge difference in overall tax rate.

gscott2• 6 years ago

People have tried and the problem is when you want to bring the money back to use it on something. Say you setup a licensing company on an island nation that use to then charge yourself $10,000 a month to license the software you wrote... that you transferred there. Now lets say you want to buy a house and you bring back a certain amount of money. That money is taxable and that is where people mess up they don't report it.

Big companies like Apple instead of bringing the money back they borrow billions of dollars at low interest rates. This lets them keep their money offshore where they invest it to make a bigger return then their interest rate on borrowing in the US.

Apple also has a routine for money in the US. You will find in Nevada Apple has an investment corporation. They will do the same thing, send the ownership of software to Nevada, charge their company in some xyz state (CA) and then they use that money in Nevada to invest it for more money then it costs them to borrow. So apple is covered both ways.

https://en.wikipedia.org/wiki/Braeburn_Capital#:~:text=Braeb....

https://www.businessinsider.com/how-apple-dodges-billions-in...

redis_mlc2• 6 years ago

You're partly correct but here's an overview of what's really going on.

The money is "brought back" (if it even left) into segregated accounts in the US. Most of that US off-shore money is in New York to avoid currency risks, etc. Then those accounts are used as collateral (if needed. I doubt if anybody says to Apple, "Where's your collateral?") for loans.

Also, the biggest money havens in the world are 2 US states, with special privacy laws. All those guys playing games in Panama, etc. were better off just using US state tax shelters.

gnicholas15• 6 years ago

The first point of failure is that if you are a US taxpayer, then you are already taxed on your worldwide earnings, including the earnings of your wholly-owned foreign subsidiary. Even if you could borrow domestically against your foreign earnings in order to finance your lifestyle, you would have already been taxed on those foreign earnings, as an individual.

avemuri• 6 years ago

I'm not very familiar with US taxation, but when you do this, don't the transfers end up taxable? Eg. Shouldn't the Nevada company license fee have some sort of CA sales tax on it?

vkou3• 6 years ago

There is no problem if you just don't bring the money back until congress declares a tax holiday. (Yet when another country, like, say, Greece declares a tax holiday, while running a large deficit, our financial press mocks it as populism and corruption...)

gnicholas15• 6 years ago

Former international tax lawyer here. This would not be possible because these benefits are largely based on international structures, and any non-US corporation owned by a few US-based individuals would be designated as a Controlled Foreign Corporation (CFC). This would prevent you from reaping the biggest benefits from a taxation perspective.

The reason that publicly-traded companies are not CFCs is that a CFC must have 50% of the vote or value of the company owned by US Shareholders. "US Shareholder" is defined as a US person that owns at least 10% of the company. So even if a conglomerate is almost entirely owned by US persons, it would not be a CFC unless the US persons that own it also meet the 10% threshold.

The reason for this cutoff is that the CFC rule is meant to prevent small groups of people who can actually exercise control over a foreign company from getting together and colluding to keep profits off-shore. But this is not a risk in the case of companies whose ownership is spread among many small shareholders. As a result, big companies are able to take advantage of complex international structures in ways that small groups of individuals cannot.

sooheon2• 6 years ago

So small groups of individuals can take advantage of this given they are international enough?

modeless• 6 years ago

So 7 people could form a corporation to do this? One owns 49% and the rest 8.5% each. Or 11 people if you want equal shares for all.

buzer• 6 years ago

The reason that publicly-traded companies are not CFCs is that a CFC must have 50% of the vote or value of the company owned by US Shareholders.

Aren't there some public companies where some people have over 50% of the votes? Facebook comes to mind as one. Or are their international subsidiaries designated as CFCs?

vmception• 6 years ago

See that’s your first problem, you think everyone has an adversarial relationship with the IRS and that’s simply not true.

These structures often require a very collaborative relationship with the IRS with many things approved, elected or notified of in advance. The IRS only cares about compliance, not a hardline on actual revenue collection. The IRS has many doors for compliance.

fyfy18• 6 years ago

As a US citizen it's somewhat tricky as you are taxed on your worldwide income, but the easiest way is probably to become a tax resident in a country with a low tax rate. Even in the UK, as a contractor/freelancer it's fairly simple to pay single digit percent effective taxes on incomes of £100k+. And that's without even delving into what could be considered a 'tax avoidance' scheme.

C1sc0cat2• 6 years ago

Not shure single digit effective is possible nowadays even outside IR35 - and HMRC has unliterally ruled that some professions are in side IR35 eg all it/developer contractors.

Actors, film / tv professionals and lawyers etc are for the large part still treated as "self employed"

2Gkashmiri2• 6 years ago

i am not in the US but "many" countries around the world use something called "MAT" or minimum alternate tax, wherein if you calculate taxes which is like zero or even a percentage lower than the limits mentioned, you are forced to pay MAT instead.

forced as in, you can claim a loss and all but you still pay MAT taxes which usually are around 18%.

cryptofistMonk• 6 years ago

If you claim a loss what are they taxing, revenue?

2Gkashmiri2• 6 years ago

yes. the idea of MAT is like you can claim all the "expenses" and the result would be a loss but when MAT is taken up, you get only "certain" expenses meaning you cant just pull expenses out of thin air. you have to prepare an altogether different p&L with only specified expenses and that always results in a profit and you pay taxes on that figure.

its like saying to a kid who doesnt want to go to school because his knee is bruised. cry all you want, you will go to school.

aww_dang2• 6 years ago

Imagine a world where instead of inventing new interpretations of the concept of 'rights', we respected private property rights.

Kbelicius• 6 years ago

"Lets not argue over the interpretation of the concept of rights, lets just accept my interpretation". Why didn't anybody think of it earlier!

aww_dang2• 6 years ago

Would you agree that a right to property would precede a right to interfere with another's property?

Would a right for the public to know the specific steps an entity uses to retain property go even further afield from the original premise?

Hopefully this clarifies my intent.

https://en.wikipedia.org/wiki/Negative_and_positive_rights#:....

Stacking new positive rights upon each other seems like an inferior solution as compared to the original, simple solution of respecting private property.

Where does the expansion of positive rights end?

an_opabinia• 6 years ago

Summers is right, of course releasing M3 would be a no-brainer.

Can we ever reconcile accounting and economics? With its excess cash reserves, if Apple paid tax, absolutely nothing about its business would change.

The more profound perspective is, who is really the tax collector then? Who is playing that economic role? Obviously these giant tax-evading companies. They are accumulating huge stockpiles of cash they cannot spend, a long-running surplus, they can't even effectively give it back to shareholders, and it's not because of tax policy. It's because they are the tax.

That's not controversial, some people call it simply rent seeking, but Summers should be going a few steps further: can we characterize the exact amount of non-tax compulsory payments (NTCPs) we are giving to Apple? Is there a policy process to convert the beneficiary of NTCPs from private ownership to the public, i.e. make it just a plain old tax?

RhodoYolo2• 6 years ago

Why does US tax money coming back into the country and at what rate? Wouldn't you want to encourage money to be made elsewhere and brought back to the states for investment? or am i fundamentally misunderstanding economics?

vkou3• 6 years ago

US citizens are taxed on global income regardless of whether they live in the US, or whether any of their money will ever enter the US.

It's only right for US corporations to be taxed the same way. Most of these insane financial contortions are done because they aren't taxed on foreign, non-repatriated earnings - creating an incentive to convert domestic earnings into 'foreign' ones, that get repatriated the next time there's a tax holiday.

I personally would love to earmark my personal income as foreign-sourced, and to not pay any taxes on it until I get a tax discount... But if I were to do that, I would go to jail for tax evasion.

chii4• 6 years ago

They are accumulating huge stockpiles of cash they cannot spend,

they (the corps) can use this asset that they cannot repatriate as collateral for cheap loans.

sokoloff9• 6 years ago

I agree with your point (probably), but disagree with the restatement. They can repatriate it; it just does not make business sense to do so. (If they actually couldn't repatriate it, it wouldn't be effective to use as collateral.)

ALittleLight• 6 years ago

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes.

My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some loophole, I would go to prison. Why isn't the same standard applied to rich companies?

"You're technically owned by an Irish company you invented to avoid taxes? Cool. The c-suite plus your accountants are going to prison for the next five years and we're seizing the X billion you actually owe plus a punitive fine."

These tax shenanigans would stop if laws were enforced.

gnicholas15• 6 years ago

This is a case of economies of scale. A fairly wealthy person could save maybe $50,000 per year with the advice of the smartest tax lawyers and accountants in the world. But it would cost them $500,000 per year to pay for the structure to be created/updated.

When I worked as a tax lawyer, we created structures and defended cases that saved our clients hundreds of millions of dollars. At this scale, paying for our services was a no-brainer.

On top of that, big companies lobby lawmakers to make the tax system favorable to them. This makes sense for the same reason: paying a couple million dollars to create/maintain a provision that saves $100M/yr is a no-brainer.

I'm not saying any of this is right or good (and I am no longer a tax lawyer; I now build tools that help people with disabilities). I'm just saying this is why it makes sense that companies can walk a fine line on taxes, save tons of money, and you and I cannot.

wiz21c2• 6 years ago

Maybe it's a little too much to ask, but are why are you "not saying any of this is right or good".

Part of my brain wishes that law would actually mean justice but somehow, if I trust only what I know, I cleary cannot judge, as you do, if finance engineering is good or bad.

I'd like to know what prevents you to choose if it's good or right (as person who have worked inside the business)

thx

gizzlon• 6 years ago

At this scale, paying for our services was a no-brainer.

What? I don't think so. If money is the only thing they care about, sure. But is it? Should it be? And if breaking the spirit of the law is fine, shouldn't breaking the letter of the law be fine as well? As long as the risk is low enough..

</rant>

harry84• 6 years ago

this is why it makes sense that companies can walk a fine line on taxes, save tons of money, and you and I cannot.

Nope, these are the reasons that cause the situation. This outcome does /not/ make sense nobody sane without a huge vested interest would design a system to achieve less tax paid when you earn more. It's entirely contrary to the intent and spirit of the tax code. This is not sensible. How to fix it? That's harder. Start with its a problem and morally and ethically wrong. It's really the only place to start from. I would say keep in mind two wrongs is not an improvement and unchecked government power is far worse than tax cheats but that does not change where this discussion should start.

hackeraccount• 6 years ago

This is why I've always been skeptical of high _income_ tax rates. First tax avoidance is at base a fixed cost. It's the price of a really tax lawyer (or at the extreme a couple of US Senators). If that fixed price is less then your tax bill only idiot pays the tax bill.

The second reason is that I don't believe people view money fractionally - I think they look at it absolutely. For me am million dollars is a lot of money. For Bill Gates though a million dollars is ... a lot of money. It doesn't matter that he's a billionaire he's still not going to throw around a million dollars the same way I'd throw around the same fraction of my wealth that a million is to him. He still recognizes the absolute value of that money and he can still see it's potential to make things happen in the world just as I can see what a hundred dollars (or whatever my fractional equivalent is) can do in the world.

dastx• 6 years ago

When is the right time to consult a tax lawyer for an average person that is paid quite a bit above average?

vishnugupta• 6 years ago

that saved our clients hundreds of millions of dollars.

Could you elaborate, from your experience, what happened to these $$$? Do they sit in banks without being used or do they get get invested and recirculated in the economy?

Also, given that just about every function of the US govt has been privatised, what would the US govt spend this money on? Spend it on defence (and channel the money back to private defense entities)? Pay off trade deficit? I'm not aware of US budget break down on expenditure side so any pointer would be great.

costcopizza• 6 years ago

Out of curiosity, what kind of disability tools?

Mumps2• 6 years ago

This has been on my mind for quite a while: is there a way to set up saving structures like those of Big Corp to poor people - i.e. find a way for the people least able to pay tax to pay less of it.

Would you mind chatting about your expertise here? Do you think there is any feasible way of generalizing these tax avoidance structures so that Joe and Jane can reap some of those sweet sweet loophole benefits as well?

api• 6 years ago

In practice this amounts to a regressive tax system.

tappio2• 6 years ago

Economies or scale... How about just power? These companies have too many people in their pocket. When you have enough power you can get away with this. These companies, even if not paying taxes directly, are huge contributors of economy. You threaten them, and they threaten you back. Do you want them to take their 10,000 jobs somewhere else? It's not tax laws and enforcing them, just rather just too much power on too few people's hands.

stjohnswarts11• 6 years ago

Do you have any input as to how they can be prevented from beating the system or do you think there will always be enough loop holes for them to get out of paying taxes because they essentially own the law makers?

neycoda3• 6 years ago

That's all great for business and terrible for the public interest.

akira2501• 6 years ago

Companies making many billions of dollars paying no taxes.

I feel like if that's the case, then you shouldn't expect the US Government to participate in the enforcement of your patent. You licensed in some tax haven? Then adjudicate it in that same tax haven, we want no part of your disputes over it.

gnicholas15• 6 years ago

There are actually some traps for the unwary at the intersection of tax optimization and patent enforcement. For example, if you aren't careful in how you offshore your patents and file your patent lawsuits, you can be ineligible for 'lost profits' as a measure of damages.

This is hugely impactful because the 'lost profits' method can generate much greater payouts than the 'reasonable royalty' method.

This isn't motivated by the sentiment you express, but it nonetheless illustrates that companies that are aggressive on taxes can end up getting bitten in other arenas.

MattGaiser• 6 years ago

The IRS tries and loses.

https://www.propublica.org/article/ultrawealthy-taxes-irs-in...

srtjstjsj15• 6 years ago

Because the legislature ties IRS hands behind their back.

Zarath• 6 years ago

If you are upper middle class it is possible to pay zero taxes. Between tax loss harvesting, 401ks, opportunity zones, and LLC formation, a citizen can legally pay no taxes some years. It's a bit of a learning curve but none of the mechanics are particularly difficult.

bagels• 6 years ago

Where can we learn how to do this?

srtjstjsj15• 6 years ago

"some years" is bearing quite a bit of load there.

closeparen• 6 years ago

If it's a real loophole, the government is out of luck; best it can do is remove it next year.

When the money flowing through a corporation actually makes someone rich, it becomes his personal income. It's not clear that corporations paying their own taxes is even a good idea vs. collecting the same revenue through higher marginal tax rates on the beneficial owners.

wolco22• 6 years ago

Expensives can be hidden at the corporate level but used personally. The company plane can be used for both personal/business and those are hard to separate.

hugh-avherald• 6 years ago

Tax loopholes can generally be closed retrospectively.

jusssi3• 6 years ago

An alternative to attempting to tax companies, is to tax people.

There is no company that would just exist to forever eat money away from the public. Eventually they intend to pay the profits to a real person (either in money, or other benefits). Taxing that dividend or salary transaction might be simple enough to just work. And you have a real person to put to jail when the taxes were avoided.

gnicholas15• 6 years ago

This could work, but it would have to be reconciled with the existing basis step-up at death, which is a key part of our intergenerational personal tax system. If you only taxed people when there is a dividend or salary payment, a savvy CEO of a private company could follow the tax advice of "borrow, buy, die". Instead of taking a huge salary, the CEO would borrow money to pay for everything, using the shares of the company as collateral. Then when the CEO dies, the loans are repaid out of the estate. And the basis in the remaining shares is stepped up when passed to heirs.

So while you can get rid of corporate taxation, the tax treatment of natural persons at death means that folks could greatly reduce the amount of income realized during their lifetime.

beefield4• 6 years ago

Forever is a long time. In practice there are wealthy people willing to pass vast majority of their wealth through generations.

Personally I don't think it is fair or likely healthy in the long term for the society to let vast majority of the income/wealth of wealthy and thus powerful people to go untaxed - even[1] if that income/wealth is not consumed.

[1] Actually it should be "especially if it is not consumed". In the old days there was a shortage of capital for investments indicated by relatively high interest rates. Nowadays there is shortage of consumption. But that to my understanding is a bit of a heterodox view, so I am just leaving it there.

berdario2• 6 years ago

Maybe?

Ingvar Kamprad net worth was "only" 3 billion $

That's about 25 billion $ lower than if he had unfettered access to all of IKEA's worth.

https://www.forbes.com/profile/ingvar-kamprad/

If you like how the company you built spends money more than how the state spends money, you're going to want your company to capture more money/worth without relinquishing it to the public. Another rationale could also be when you can give a stake in your company to your family, that way you won't ever have need to pay profits during your lifetime, since the company (which could be a charity) will actually work as a cross-generational fund.

Also, this works well with the ethos of some companies (like Amazon, allegedly) which reinvest a lot of their profits to cut margins/develop new products... And overall just tighten their hold on the market

kokey• 6 years ago

We already tax people and most of the noise about companies not paying tax basically ignores that because it makes a good headline. I'm of the opinion that taxes on corporations are a bit of a nonsense tax. If they sell goods or services, there's sales tax. If their employees and shareholders receive salaries and profits, they get income and dividend tax. When we see a headline of a company paying almost no taxes, they've usually paid more in sales taxes and their staff and shareholders will be paying more in taxes than corporation taxes can ever dream of bringing in. Taxes on profits is difficult, profits can be moved easily. Tax profits too much and companies simply won't make any profits. Sales tax is good since it goes to the actual market the product is sold into, it's the cost of having access to that market. Income/dividend taxes brings in the money where the employees and shareholders live and spend their money, so it's the cost of benefiting from the society they live in. We can quibble about loopholes and levels around those taxes because they make sense, but corporation taxes is never going to bring in enough money to warrant all the noise.

Cthulhu_• 6 years ago

My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some loophole, I would go to prison. Why isn't the same standard applied to rich companies?

I know of one "gotcha" that works in my country at least: work for low / no wage but instead have loads of assets like stocks; dividend taxes are much lower than income taxes.

I could be wrong. I'm just reminded of people like the Google founders who humblebragged about only earning $1 / year in salary. They still became multi-billionaires off of stocks.

In my country, assets are taxed by a percentage of a percentage (they tax estimated return on investment, which is ridiculous if you only have a savings account that nowadays has either no interest or even negative interest). I think there should be an additional tax on any money or assets moving out of said investment account.

Because that's how rich people do it; they hardly pay any taxes because they have hardly any taxable income or assets. They put their house into a corporation or foundation, funnel any cash they need through various shell organizations and tax havens, etc.

goatinaboat• 6 years ago

I know of one "gotcha" that works in my country at least: work for low / no wage but instead have loads of assets like stocks; dividend taxes are much lower than income taxes.

This is a common trick in the UK, or at least it was before the IR35 crackdown. Programmers, sportsmen, celebrities, even politicians and civil servants would run single-person companies and get their salaries paid to them. Then those companies in turn would pay them in dividends.

TheOtherHobbes2• 6 years ago

Really rich people do this with a complex network of shell organisations that's as opaque as possible.

It's not just that a corporation owns their house, it's that another corporation owns that corporation, and a holding company in the Cayman Islands with a nominee director who lives in a postbox owns everything, except the IP rights which are in Panama - this year. And personal spending goes through a credit card set up by their own personal offshore bank, which effectively makes it loan. Etc.

If there are enough shell companies you can decide your own tax payments, because you can hide everything you choose to hide. It's not that these networks can't be disassembled, it's that they can't be disassembled efficiently. It can literally take months or years of full-time auditing effort to trace all the relationships.

martin8412• 6 years ago

Well, you can blame the US governments for it being needed in the first place. If you're an American company operating in another country, you get to pay taxes twice on the same money. In the country where you sold the product, and in the US due to their worldwide taxation.

DanBC• 6 years ago

Why isn't the same standard applied to rich companies?

Prosecuting you is cheap and easy. Prosecuting a multinational billion dollar company is expensive and difficult.

One of the reasons it's difficult is that they're not (usually) outright evading tax. They're avoiding tax. The law is what's written, but also how that's interpreted by the courts. Sometimes the courts have not yet decided how to interpret a bit of the written law, and so companies will continue to use those bits in interesting ways.

Finally, some places have a "light touch" approach to regulation and they use courts as a measure of last resort, for the worst offenders. Everyone else will be persuaded to change their tax affairs. One consequence of this is that courts only rule on the obvious stuff, and we don't build up case law for the gray areas that get used in tax avoidance schemes.

I agree it's baffling that we let them get away with it. In the UK we think there are between £30bn and £120bn in tax that's evaded, avoided, or uncollected.

arethuza• 6 years ago

That's because there is so much effort highlighting benefit fraud - even though that is estimated to be about £2.3 billion a year.

Edit: Just for the record I'm against benefit fraud and tax evasion.

chrismcb• 6 years ago

If you found a cute gotcha, then you would do just fine. You would get thrown in jail if you lied, or didn't have the cute gotcha. But the odds that you find a loophole like that, that you could take advantage of, is fairly slim

ponker• 6 years ago

Well look at the Sacklers. Kill 500,000 people and you pay a $225 million fine out of the $8 billion you made from their deaths. Kill 10 people and they give you a lethal injection.

lordgrenville2• 6 years ago

Earlier this year I read the book The Chickenshit Club on the advice of someone on here. It has a lot of interesting information but I didn't agree with the author's summary, basically: "prosecutors are cowardly and don't fight cases that don't look easily winnable. They should be braver and go for the highest-profile cases to make a statement". This seems wrong to me because a) litigating a complex, lengthy case and losing is a huge waste of public funds (it isn't a deterrent if the defendants know they can hire expensive lawyers and get off) and b) it can often be counterproductive, since it leads judges to set precedents which make their work harder in future.

One regulatory ideas I thought of was a salary cap on criminal defence attorneys (lawyers can make as much money as they want in civil law, but letting the wealthy hire a different league of lawyers in criminal cases is a huge distortion of justice). This is all more about actual crimes than violating the spirit of the law, but maybe the same could apply to tax law. (I feel like there must be a flaw with this, would be happy to hear what it is.)

(Wrote more about the book here: https://www.goodreads.com/review/show/3507224023)

rapht2• 6 years ago

The flaw is simple: you'll end up with only having as criminal defence attorneys those people who didn't succeed at being civil case attorneys, as everyone will prefer to earn more money with mostly the same training. So you won't have any outstanding criminal defence attorneys, which is equivalent to undermining the rights of those of need to defend themselves in criminal cases.

If you want to go this way, you have to go for the full-fledged solution: either the defendant choses their attorney (at a capped price) or an attorney shall be selected at random among all attorneys registered with the bar and must take charge of the case, the only exception being if they have a valid conflict of interest in that case.

leetcrew2• 6 years ago

I would argue almost the opposite. I don't see how it serves the public interest to limit the amount of resources people are allowed to use to defend themselves against the state. it's sort of like combating inequality by burning down the nicest houses. you've made everyone more equal, but no one is better off for it.

I think the imbalance is actually much worse in civil cases, which are disputes between people who ought to be peers. the fact that people have to give up their right to see an opponent in court because they can't afford counsel seems much worse than some rich people getting a better defense against the state.

lordnacho• 6 years ago

I'd go further than this and make a positive case.

If we want the free market to work, business models need to be clear. We want people to see a successful business and say "hey, I can do that better". Part of that is transparent accounts, and part of that is transparent ownership.

Would also help againt some of the more egregious frauds we've seen in recent years. Some of them would have gotten caught if they'd just had more eyes on them, and you get more eyes if things are transparent.

rapht2• 6 years ago

Tax loopholes (and tax lawyers) exist only because there is sufficient complexity in the tax system/tax code.

This is because the tax system actually has 2 conflicting uses: (i) collect revenue for the gov't and (ii) create incentives/disincentives that are meant to push taxpayers in ways that are deemed beneficial, be it to the economy or to certain policy like environment, housing, etc.

If you drop (ii) you can end up with an extremely simple tax code as most of the tax code complexities deal with those incentives/disincentives.

So the question is: to what extent can you do away with (ii), or more generally with tax code complexity?

srtjstjsj15• 6 years ago

No, the tax system is complex because businesses are synthetic entities that can be arbitrarily complex. This is because corporations are allowed to exist unchecked since the 19th century. Return to the original intention of corporations, that they must be chartered and regulated in order to preserve their exemption from human individual law, and most of the problem goes away.

cywick• 6 years ago

Tax loopholes (and tax lawyers) exist only because there is sufficient complexity in the tax system/tax code.

I don't think this is entirely correct. Even if there were no deductions and no other complexities, and the corporate income tax was simply based on "all revenue minus all costs", a company could still reduce or even eliminate its tax burden entirely by simply paying IP licensing costs to a different company located in a tax haven.

kortilla• 6 years ago

My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some loophole, I would go to prison. Why isn't the same standard applied to rich companies?

The same standards do apply, the loopholes just don’t really exist down at a normal individual income level.

Calling it a “loophole” is a bit of a misnomer as well since it’s just the regular law. Being a subsidiary of another company is extremely common and isolating particular resources into subsidiaries with exclusive licensing/usage agreements for liability/accounting/ownership/management purposes is extremely common.

These tax shenanigans would stop if laws were enforced.

Again, the laws are enforced. Tax avoidance schemes operate within the bounds of the law. It sounds like you’re confusing with “tax evasion”, which is illegal and is enforced.

srtjstjsj15• 6 years ago

Tax evasion is rarely enforced, because the IRS was defunded.

lucideer• 6 years ago

These tax shenanigans would stop if laws were enforced.

At the end of it all, laws are enforced by the judiciary. The judiciary (similarly to politicians) are human people, and each individual's interpretation of what is law will vary.

Probably the biggest example of the difficulty of enforcement is the Irish Apple case[0]. The European Commission carried out a two-year investigation that found Apple avoided paying €13 billion in taxes to the Irish state. The Irish state rejected the Commission's findings and appealed the findings to the European General Court (EGC). And the EGC found in favour of the Irish state (and Apple).

Does this count as laws being enforced?

[0] https://en.wikipedia.org/wiki/EU_illegal_state_aid_case_agai...

nicolas_t• 6 years ago

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes.

This used to be a typical loophole but is being closed by the OECD, a lot of tax havens are now taxing royalties differently. 10 years ago after reading up on this, I've decided that it was only fair for me to read up and try the same methods. I didn't see why I should pay high taxes when the richest in my country didn't.

It's not overly difficult to do this completely legally (that's the difference between tax avoidance and tax evasion), it's not an issue of the laws being enforced, it's mostly that there are many countries in the world and some have an incentive to compete on tax law. So, you can do a lot while still being completely legal (it's easier though if you are willing to move and live in different countries and if you're not american but still possible otherwise).

In the last 5 years, the OECD has been fighting against this and forced a lot of tax havens to change their laws. From my read of the texts and has someone who has been impacted by this, it doesn't really make avoiding tax impossible just more expensive, meaning it's increasingly difficult and costly for a single person who is middle class like me to do it but still relatively easy for big corporations with an army of accountants to do it. I'm not sure that's really an improvement.

srtjstjsj15• 6 years ago

It's insane that a nation delegates its sovereignty to others. There's no reason to allow subjects to shop around for better tax rates, except corruption.

a_imho• 6 years ago

When people do it, it is tax avoidance. At scale it is tax optimization. Call it disruption if you will.

These tax shenanigans would stop if laws were enforced.

Those who could enforce them have no interest to do so.

pibechorro• 6 years ago

The laws have always and will always favor those with capital. Its naive to think otherwise. There will always be loopholes, resources to fight it, go lobby a d bribe.

The "corruption" is a feature, not a bug. If you truly want go get rid of the assymetry, then the answer is not more regulations and extractions, but less across the board. Fund the services without relying on taxes to income, not only will it be fair for you and mc.corp, it will also create efficient market incentives and eliminate the vectors for corruption when there is nothing to gain.

IG_Semmelweiss2• 6 years ago

Only if power is concentrated as it is today.

Concentration of power in congress is a feature, not a bug.

You can remove concentration of power and simply aee corruption/bribe/lobbying dissappear overnight

See my post above for how to do this with 3 simple laws

indymike• 6 years ago

Seems like this is a bit on the difficult to enforce side. Incidentally, profit is what is taxed, so the easy way to avoid tax is to simply not be profitable. Individuals pay tax on all of our income from interest and employment so this difference always feels somewhat unfair. The very laws that allow companies to avoid paying income tax are usually created as incentives: do this (HQ in Ireland), and in trade, you get to pay less in tax. The C suite and lawyers are usually guilty of meticulously obeying the law, which really makes the whole thing feel even more unfair. Reality is that the system is working as coded, but there are bugs in the code.

amelius• 6 years ago

Yes, and then there are countries with secret tax discounts for large multinationals.

These tax discounts should really be subsidies, and open to the public to view.

Proper accounting is where fairness starts.

pa7x13• 6 years ago

This tax shenanigans happen because we have built an absurdly complex tax framework which can be gamed/abused with economies of scale. The solution is to streamline the tax framework as to make its implementation almost unavoidable.

Long-story short, my bet is:

- Sales tax (VAT)

- Inflation

- UBI

Sales tax is far less gameable as it's linked to concrete economic activity. It also has the benefit of tracking the added value produced by an economy (it has the right properties as a tax). It has a problem though, it's regressive, see last point. Every economic activity should be included (e.g. stocks should have a VAT; you sell stock you collect VAT, you buy stocks, you pay VAT). Some progressiveness may be included by using different VAT rates for different products, to be done judiciously.

Inflation is a fantastic tax, very hard to game as it's quite pervasive and taxes the accumulation of capital so it tends to be distributive, anti-regressive. Cash sitting idle does nothing for the economy so disincentivizing it makes sense. This doesn't mean that inflation has to be high (the usual moderately low and positive that economists aim for may be reasonable), just that inflation should be seen as the taxation mechanism for the accumulation of capital. And we shouldn't reduce it to a single number for the entire economy but understand how inflation is evolving in the different parts of the economy to make sure monetary and fiscal policy are hitting the targets.

UBI, fixes the regressiveness of VAT. UBI is not too different from having a lowest tax-free income bracket or even negative-tax income bracket if you prefer to look at it that way. UBI can also help hit the right inflation rates in consumer products which we have been having great trouble achieving through conventional central bank policies.

I think this mix is far less gameable, tracks better the size of the economy, places the right incentives and disincentives and will survive better the ongoing economic transformations (good luck taxing income when most of the economic output is produced by computers).

srtjstjsj15• 6 years ago

Sales tax is extreme regressive, more than UBI can handle. Unless you are proposing a 50% sales tax and a progressive UBI?

sokoloff9• 6 years ago

Inflation is a tax on capital held in monetary form. It is not a tax on capital held as the earning power of an ongoing business. If I hold $1M of cash, I care about inflation eroding that over decades. If I hold $1M worth of DCF of Coca-Cola's future profit streams, inflation does not concern me for that portion of my capital.

tappio2• 6 years ago

This is my personal opinion, but even if we had perfect global tax laws, people would still find a way to abuse the system. I see the issue being too much power concentrating into too few hands. If you have too much power humans naturally use it. Rich get richer and poor become poorer. How do you see better tax code and UBI will fix this? How do you prevent abusing power?

Mumps2• 6 years ago

Inflation is a fantastic tax, ..., anti-regressive.

_Thomas Picketty has entered the chat_. History has shown that the rich are able to (easily) outpace inflation, while the poor (read: effectively ~95% of the planet) do not.

So I'm not too sure that is a desirable claim to make here.

njs12345• 6 years ago

Land value taxes also seem like they would work very well, have some nice incentive effects and are hard to game: https://en.wikipedia.org/wiki/Land_value_tax

0goel02• 6 years ago

You should read https://www.huffpost.com/highline/article/white-collar-crime...

Some excerpts (it's a great, long piece. Read it all):

"In 2017, researchers estimated that fraud by America’s largest corporations cost Americans up to $360 billion annually between 1996 and 2004. That’s roughly two decades’ worth of street crime every single year."

"Even though auditing millionaires and billionaires is one of the most cost-effective government activities imaginable—an independent report estimated in 2014 that it yielded up to $4,545 in recovered revenue per hour of staff time—the IRS investigated the returns of just 3 percent of American millionaires in 2017."

"It is, as one of those high-priced lawyers might say, improbable that these demographic and economic facts exert no influence whatsoever on judges' rulings. In a 2012 review of sentencing data in Florida, researchers found that “high-status” white collar criminals, such as doctors scamming Medicaid, were 98.7 percent less likely to receive prison terms than welfare fraudsters. A 2015 study found that judges showed increasing mercy as fraud offenders moved up the income scale: Criminals who stole more than $400 million got sentences that were less than half of the minimum recommended by federal guidelines. Criminals who stole $5,000 or less served sentences well over the minimum."

"The only thing that consistently worked was to combine them— warnings from government agencies, surveillance of the worst actors, harsher punishments for repeat offenders and, yes, at the top of the ladder, criminal prosecutions for corporations that refused to shape up.

This is hardly some exotic, untested concept. When it comes to every other form of crime, law enforcement agencies are perfectly comfortable cracking down on offenses at every level. This is the country that invented three-strikes laws and “broken windows” policing. When it comes to street gangs and drug distribution networks, the criminal justice system has no problem simplifying complex criminal liability questions into four simple words: You should have known. "

Nasrudith4• 6 years ago

First off tax avoidance isn't fraud even given such shenanigans. They really do have offshore corporate offices in those countries. If they tried faking paperwork and really kept it in a corporate bank account? Actual fraud.

There is a reason for that - said strict criminal liability is broken it just breaks single lives and horrifyingly can be ignored. But break an entire systems and that leads to instability.

Take a complex economy with byzatine rules - either you have selective enforcement and effectively a dictatorship with extra steps or it is applied mercilessly across the board. Given the added risk to investments unsurprisingly many would choose to get the hell out of there.

Really the answer should be to do away with strict liability bullcrap.

ipython• 6 years ago

It gets very complicated at the high levels of tax compliance. I am part of a company who had paid a specialized company to set up a tax advantaged structure in a foreign country several years ago in order to avoid capital gains tax.

The tax treaty document between the US and this country was over 100 pages long. When it came time to actually take the tax advantages on a return, we decided to figure out what the risks were of being audited and potential penalties. We engaged several tax experts to give their opinion.

What ensued was eye opening. We received wildly different opinions depending on the expert. The entire case hinged upon how one line in that 100+ page document could be interpreted. At the end of the day you are subject to the mercy of the IRS. For a large corporation, you may be able to afford the litigation (or avoid it all together as you could proactively play to the court of public opinion).

For us, we decided to fire the tax consultant and pay the tax. It was - for us - a very large sum, several million dollars.

Ultimately the “laws” are less like a set of rules and more a set of malleable guidelines. People who say, “oh I can just take whatever loopholes I’ve been given” don’t understand the sheer complexity and ambiguity of the tax code.

While I’m disappointed that we “lost” that money (one could argue it wasn’t ours to begin with), and disappointed that others are morally flexible enough or big enough to get away with it, I am left with the feeling that we did the right thing for the country as a whole. I am sad that more companies and individuals don’t consider that in their moral calculation.

908B64B1972• 6 years ago

Ultimately the “laws” are less like a set of rules and more a set of malleable guidelines. People who say, “oh I can just take whatever loopholes I’ve been given” don’t understand the sheer complexity and ambiguity of the tax code.

I wonder if it's laziness or by design.

While I’m disappointed that we “lost” that money (one could argue it wasn’t ours to begin with), and disappointed that others are morally flexible enough or big enough to get away with it, I am left with the feeling that we did the right thing for the country as a whole. I am sad that more companies and individuals don’t consider that in their moral calculation.

That's the thing: Moral should never come into play. If it does, that means the law wasn't written properly.

P_I_Staker• 6 years ago

It's funny how that works as companies scale up. A relative owns a small business and needed to get rid of an employee. She wound up laying her off, and taking the insurance hit. She wasn't the best employee and there probably could have been an argument for causal firing, "I'm not going to just lie" is what she said.

Many larger orgs would just try to go for a causal firing, so they can block the employee from receiving unemployment. It doesn't even matter if they're an otherwise decent employee. We'll save money so lets just lie, basically. It's pretty crushing to the individual, and IMO this practice should be abolished.

This is totally anecdotal and plenty of small to medium businesses act shady, but it's interesting that things tend to get even shadier (lawful evil) as things scale up. Yet there's less at stake for the individual employees and more ability to "not be evil", without closing up shop.

lr4444lr• 6 years ago

Not that I defend it, but largely because non business entities don't have the concept of losses against which to deduct revenue, unless you actively trade equities. But I don't mean to just be pedantic about it: this really is the main reason. Summers' plea here strikes me as futile. He really thinks if the complex accounting were all laid out that it would lead to some mass awakening? I doubt it...

x87678r• 6 years ago

My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some loophole, I would go to prison.

Your intuition is wrong. There are lots of small business people that expense everything and pay negligible tax if any.

Nasrudith4• 6 years ago

The laws /are/ being enforced. Business taxation is based upon profit and has deductible expenses essentially to help avoid what happened with US Steel and not investing in their infastructure and then the world passed them by. If they actually spent or redistributed the parked money domestically without going through the proper channels they would be in deep shit.

Similarly limits on capital travel hampers both foreign investment and international business expansion as it gets "routed around".

IP expense transfers are the third piece and whatever was tried to do away with would result in giving up what the US already wins big on.

It isn't a problem of enforcement. Every last piece is policy of the loophole is policy working by design.

tdullien• 6 years ago

For what it is worth: The OECD has made a lot of changes to their transfer pricing guidelines, and starting in 2018, individual countries have a lot of leeway in re-assigning profits to other jurisdictions. The effect is not fully felt yet because the new guidelines are not evenly applied, but a friend of mine (who spent most of the 2000s building aggressive tax structures for multinational pharma companies) has spent the last few years mostly unwinding the aggressive structures again, in reaction to the OECD changes.

If you are interested in the details of this, Google "OECD BEPS transfer pricing"; it is quite a fascinating topic.

On a side note: The same updated guidelines, when misapplied by an aggressive tax authority, can cause all sorts of headaches for fully-distributed, fully remote companies, and the extent how this can cause trouble is underappreciated by the startup scene.

rayiner2• 6 years ago

Your intuition is incorrect. Almost nobody goes to jail for tax related crimes. The ones that do are folks like Wesley Snipes who just refuse to pay taxes period.

currymj• 6 years ago

they'd let you get away with it, you wouldn't go to prison. i'm pretty sure individuals used to take way more weird writeoffs. but mostly these have been closed over the years for individuals.

the laws are generally enforced the problem is various companies and nations working very hard to make sure that loopholes in the tax code are preserved.

908B64B1972• 6 years ago

My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some loophole, I would go to prison. Why isn't the same standard applied to rich companies?

Because the tax code is relatively simple for W2 employees. Not so much for corporations.

"You're technically owned by an Irish company you invented to avoid taxes? Cool. The c-suite plus your accountants are going to prison for the next five years and we're seizing the X billion you actually owe plus a punitive fine."

It gets doubly complicated once you cross borders, because transferring assets like that might be legal under some treaty between country A and B.

Truth is, if society doesn't want these practices to be legal it has to write a tax code that doesn't make them legal.

greendestiny_re• 6 years ago

International companies are allowed to avoid taxes because governments wage war through infiltrating the supply chains of other countries and conquering them economically, with citizens shouldering the financial burden of the effort.

b20000• 6 years ago

Anyone can learn how accounting and taxes work and anyone can set up a company wherever they want in the world. IMHO a lot of these "they don't pay any taxes" statements come from not understanding how accounting and taxes work. There is nothing illegal about setting up a company to manage your IP and license it to your other companies and I don't see what's wrong with that, sorry.

cblconfederate2• 6 years ago

The public has a right to know how companies that pay no taxes pull it off

Not just that, they need cheap access to the same infrastructure.

chii4• 6 years ago

unfortunately, it doesn't exist. Otherwise, if it does, then there's a way to arbitrage the extra money savings into a service that you can pay for (in lieu of tax).

The fact that such a service doesn't exist for the pleb individual means that this can't be done.

cblconfederate2• 6 years ago

at least in europe , there is a market for "tax optimization" for middle-to-upper middle class people that is not prohibitively expensive, involving the many tax havens of the EU for certain kinds of businesses, for those willing to go through the hassle.

stjohnswarts11• 6 years ago

That doesn't exist and won't as long as corporations can spend unlimited amounts on politicians and said politicians have no term limits.

ghskskdbbdmdldk• 6 years ago

I just want healthcare. We pay more than enough taxes to get healthcare. Why do I not get healthcare for the taxes I pay? The government is busy trying to use my wealth to mine asteroids or shoot brown people or some stupid shit. I appear to get approximately zero benefit from the taxes I pay. Unlike, apparently, many americans, I am far more worried about blood pressure than I am about aggressive brown people and our failure to colonize mars.

juskrey2• 6 years ago

Why no one ever mentions how much companies effectively contribute to various salary and employees income taxes? Corporate tax is practically nothing.

pcurve• 6 years ago

Companies that pay billions in taxes also contribute. Why let a handful get away with it?

juskrey2• 6 years ago

Wrong incentives. When basing on salary/personal income taxes, government is interested to raise everyone's income less inflation if it wants more taxes (let's skip 20th century aberrations like > 90% income taxes for now). Corporate tax is an opaque mechanism with unknown corrupt incentives, effectively turns into blackmailing of business and IMO should be dropped whatsoever. Many countries are adopting zero corporate tax (having dividend and salary taxes instead).

arielm• 6 years ago

Solid point, though those on here that don’t run businesses probably don’t get the scope of what companies pay that those big ones aren’t able to avoid.

chii4• 6 years ago

employees income taxes?

that's the employee's contribution, not the company's.

refurb4• 6 years ago

Right, but if the company didn't create the job, the income tax collected would be zero.

I'm not saying the income tax collected is purely coming from the company, but take Amazon for example - their economic activity creates jobs which pay salaries that are taxed.

gostsamo• 6 years ago

Well, if my employer is a small company, they pay my additional taxes plus their own. So, why big companies should have an edge in front of the small ones?

fierarul2• 6 years ago

This will not end until people will all "incorporate" and apply the same tax tricks as major corporations. In other words we need the revolution of the "personal corporation". The startup that offers this will be the next Apple. Or, will be shut down when the law is changed. Either way, it's a win for society.

Stripe Atlas is a step in the right direction, but it does only the low hanging fruit. Accounting, handling audits and winding down is where the pros are required.

gnicholas15• 6 years ago

Unfortunately, sophisticated tax advice simply does not scale down to the level that would make it applicable to most companies/people. This type of advice is heavily fact-specific, and if you create a complicated legal structure, you can't take your eye off the ball for a minute. Otherwise you can end up blowing the whole thing up, or worse.

I would note that the world you describe (where people have tax tricks just like corporations) used to exist. Before the tax reform bill of 1986, doctors/lawyers/dentists/etc. were able to take advantage of tax shelters that greatly reduced their wage income, without actually incurring any real losses. These passive loss tax shelters were heavily marketed by accounting firms because of their general applicability. But in 1986 they were eliminated by a tax reform bill that outlawed perceived abuses and lowered tax rates.

fierarul2• 6 years ago

I have to say I like your replies on this topic here and elsewhere. Almost sounds like these tax avoiding entities are software and there's a big maintenance cost as laws change all the time. I've always thought that a big part of law should be "programable" and I think we are slowly getting there.

Next up, imagine a machine learning trained entity just roaming the international law landscape, just trying to survive.

supernova87a2• 6 years ago

I'm not sure I understand (or agree with) his assumption that the full tax returns of corporations are private matters and always must be. That's a choice that Congress can make.

If corporations are the way for entities to achieve individual profits without individual liabilities, then surely privacy is not the same concern as for individuals' tax returns. Why are corporations (whose structure is granted by law to reap certain benefits with incorporated protections) then further shielded from their tax returns being public to show how they did it?

We can (if our leaders were incentivized to do it) choose to have it be true.

shadowmore• 6 years ago

But our leaders aren't incentivized to do it, because our leaders are incentivized only by the very corporations in question.

As in, the corporations, through lobbying, quite literally write the legislation, not the people we actually elect to office.

So uprooting corporate tax info transparency rules is something that will never come to pass until other existing systems are demolished, but how do you get the legislators to legislate against their own self-interest?

cies2• 6 years ago

uprooting corporate tax info transparency rules

Also the Big Four are not going to like that, they make a lot of money off this.

supernova87a2• 6 years ago

I just read a story about how in the 1950s some citizens in Appalachia couldn't get their representatives to give a damn about fixing the run-down single bridge to their small isolated town far away from the big cities of importance.

So what they did was to ask the Soviet Union's representative office in the United States to sponsor their bridge repair, and they let all the newspapers know about it.

Sooner than you could blink, the state politicians reversed course and ponied up the $ for the bridge.

Maybe sometimes what you need is your enemies to be shown to be exploiting your weaknesses so that someone cares enough to fix it.

knowingpark• 6 years ago

As if Larry Summers doesn't know how they do it. Is he trolling? Why doesn't he just write the article "This is how corporations pay no tax"? Maybe it has something to do with un-elected officials, who generally represent the not-public, being Treasury Secretary.

rootsudo• 6 years ago

It's not really a secret, the laws are public, the methods exactly aren't hidden as they must abide that and people in the profession understand liability mitigation.

The challenge here is education the public what assets, tax liability and general liability are for a corporation and what a corporation actually is (basically, almost, kinda a person.)

So it isn't shenanigans, it's the general public inability to learn a specific niche field and people whoa are knowledgeable, exploiting a legal loophole, on purpose whether or not the spirit/letter of the law was for that.

known2• 6 years ago

Not possible since TRUTH is suppressed in the name of trust/loyalty/compliance/privacy/conspiracy/discipline/patriotism/sedition/job/national security/intellectual property https://yts.mx/movies/citizenfour-2014

blargmaster42_8• 6 years ago

Taxation is theft, avoiding it is heroic.

29athrowaway2• 6 years ago

The wealthy tax the rest of us. Think about it.

Tax avoidance, subsidies, bailouts, stimuli, etc.

Want to tax the rich? No. They tax you.

robertlagrant9• 6 years ago

That's not taxing us, that's just them (or businesses they, or non-rich people, run) getting some tax relief. They will still be either paying more tax or employing more people or investing in more companies that employ people than I do, that's for sure.

29athrowaway2• 6 years ago

They make us pay for their convenience.

For example, Walmart pays minimum wage and asks employees to use Medicaid while their leadership gets enormously rich.

lifeisstillgood• 6 years ago

This is a US specific comment but I was reading the David Shor article yesterday and he pointed out that the (vast) majority of funding (for democrats?) comes from individual (wealthy) donors - ie not the corporations who tend not to own the politicians so much anymore.

simonh2• 6 years ago

As usual The Economist has a lot that’s very sensible to say about tax reform. In particular putting more emphasis on taxing investors (you can shift your profits between jurisdictions but not your investors), property and inheritances. The main target should be rents.

https://www.economist.com/leaders/2018/08/09/overhaul-tax-fo...

andromeduck4• 6 years ago

Or we could just focus on taxing the unearned value arising out of land control instead of property.

Land tax + VAT would be ideal and difficult to avoid.

cies2• 6 years ago

Or just tax pollution and resource (land et al) usage. That will rearrange the economy to overcome one of the biggest challenges of our time.

Tax on labour and housing are dis-incentivizing "good behavior".

andromeduck4• 6 years ago

I don't think pollution taxes ought to be treated as general revenue. It should be distributed back as UBi for transparency purposes.

stjohnswarts11• 6 years ago

I think this is the only way to get corporation onboard for pricing in climate change. I don't see it happening though as they have a boot on the necks of almost every member of Congress because the corps essentially fund their careers as politicians.

afrojack123• 6 years ago

I see so many posts that have the wrong idea. So many of our politicians and lobbyists are former lawyers. Even the accountants are in on it. The laws are written to be purposely complicated so mega corporations keep smaller entrepreneurs down and lawyers/accountants big fees for knowing the rules inside out(they wrote them).

Why do you think large companies give stock options as compensation instead of straight cash. It is to avoid taxes.

The average American has one source of income a W2. A simple tax filing. Next time you do your tax filing, look at the questions TurboTax or FreeTaxUSA asks you and then look at the offical government tax doc(this is what gets filled out with your answers).

sokoloff9• 6 years ago

Most large companies have transitioned to giving shares (RSUs) rather than stock options (NQSOs in the case of large companies) for non-executives. Compliance risks/costs are lower and payouts to employees are more predictable (and therefore valued more highly by employees).

harry84• 6 years ago

Vague idea:

The government can compulsorily acquire the domestic domiciled assets of any company for 50? 100? times that company's declared taxable income with some appropriate average over the previous 5 years.

You earn nothing taxable here? Great for your tax bill but now you can worry about the capital loss and loss of control of trademarks & patents domestically. Better to declare the profit and pay the tax like an honest person...

mhaymo2• 6 years ago

There are legitimate reasons for a valuable company to make little to no profits. Namely re-investment in growth. Your proposal would make it impossible for businesses to spend todays profits on growth for tomorrow, and would thereby dramatically slow economic growth.

iguy4• 6 years ago

Yes. The whole idea of describing the tax on profits as an involving "declared taxable income" is misleading.

Few workers work without a salary, but plenty of companies run without profit... because they are re-investing and growing, or because they are slowly shrinking and dying. Lots of tax can still be collected (on money going out as salaries, and through VAT on money coming in) and their existence can still be useful (making stuff we need, and employing people) even if the books exactly balance at the end of the year.

harry84• 6 years ago

This is actually incorrect. Investment is not tax deductable. Invest all your salary in an S&P500 index fund as a tax deduction?

Business expenses are tax deductable. Investment is not.

Yes I'm completely aware that this is one of Amazon's stated defences for tax dodging. Tax dodging is their core competency. I hate that.

whiddershins2• 6 years ago

I don’t fully understand why corporations are taxed in the first place.

All the money the corporation takes in ultimately gets spent on operating expenses, or is profit that is then distributed to shareholders who then owe taxes on that income.

If it’s annoying and counter intuitive that corporations are in some legal senses considered people, it is even more confusing that they pay taxes.

This sets up a crazy situation where employees of the corporations start lobbying and messing with policy and regulations so it favors the organization.

Seems like bad piled on top of bad. Increasing the tax rate on investment income is basically the same thing as taxing corporations, but would remove all these perverse incentives.

Schiendelman2• 6 years ago

This makes a lot of sense. There’s no way for the money to get out of the corporation without being taxed, we have all these R&D deductions to make many companies able to pay nothing, why not be direct about it?

On the other hand, is the status quo ok? Are we getting something out of companies having to do these specific activities to deduct?

tim333• 6 years ago

There’s no way for the money to get out of the corporation without being taxed

Not totally true. Interest free loan to the owner or his mother in law. Company buys a house / car / jet owner can use. Company buys consultancy services from the owners other company based in the Bahamas etc

etripe• 6 years ago

They are taxed because they are beneficiaries of society's investment in infrastructure and people. They benefit directly from a healthy, educated population, enforcement of construction codes, the operation of the legal system, roads and waterways, etc. Companies aren't entirely benign, either, so part of those taxes goes to environmental impact assessment and handling they don't pay for, such as pollution, health hazards, etc.

If you were to make the case the healthy, educated employees could be compensated through their wages, then that still leaves infrastructure, externalities and the legal system.

While you could privatise infrastructure, I think it would be a bad idea. It could lead to shady schemes where a corporation "taxes" its employees on the toll road leading up to the building. Considering historical examples like company stores, I'm not sure we could rule that scenario out. Also, where does infrastructure stop and what does it include? The last miles of telecoms, power, water and other utilities or more?

As to the legal system, it seems self-evident we don't want that privatised. Do you disagree?

On the topic of externalities: I suppose it's feasible to create new taxes specifically for what are now considered externalities, so corporations pay for them: pollution, carbon footprint, burnouts/boreouts, etc. Would you be in favour of those?

sneak4• 6 years ago

A corporation is an abstraction that does not exist, so it cannot benefit from those things you listed.

The human shareholders and human staff benefit (and profit) from those things, and there are already mechanisms in place to tax those human beings, either as shareholders or as staff with ordinary income.

alexmingoia• 6 years ago

I believe an income tax should be the only tax, since it covers any and all economic transactions, and it's the only progressive tax.

- There's only a single loophole: People who use their business to pay for personal expenses. They are easy to catch, and the simplicity of the tax scheme allows collectors to focus on this one loophole.

- It's simple to collect: Ask all the banks for everyone's statement, and apply a percentage to their calendar year's income. You could even deduct tax when people deposit money.

- It's simple to forecast and calculate: Everyone knows how much tax they owe, and knows how much tax they will owe.

- It's progressive: The more people make the more they pay. Property tax, sales tax, gas tax, etc. all disproportionately affect people with less money.

sneak4• 6 years ago

Don’t forget inflation: an uncontrolled, regressive back door tax that primarily affects the poor and poor-adjacent that don’t hold securities.

srtjstjsj15• 6 years ago

Property tax can easily be made progressive. The only barrier is that some state Constitutions ban progressive property tax due to "originalist constructionist" misinterpretations.

andromeduck4• 6 years ago

Sale of labor should be treated as exactly that, a sale. There should be no special income tax rate.

DebtDeflation• 6 years ago

I don’t fully understand why corporations are taxed in the first place.

Because as economically inefficient as a corporate income tax is, without it you would create an enormous incentive for individuals to incorporate, filter all their income through the corporation, have the corporation pay all their expenses as business expenses, purchase their assets for them as business assets, and compensate them in the form of loans which never get paid back. Yes, you could write the law in such a way as to prohibit this and spend a fortune on enforcement, but ultimately it would fail against such incentives.

cwhiz2• 6 years ago

You can do all that today no problem.

srtjstjsj15• 6 years ago

That can be easily fixed by making loans taxable and payback creditable. Want a $100K loan? Get a $140K loan, pay $40K tax. Pay back the loan? Deduct from taxes.

whiddershins2• 6 years ago

But I can already do that using an LLC, which also doesn’t pay any tax.

CaptainMarvel• 6 years ago

The UK has laws that prevent all of these things AND still has corporation tax.

Expensing anything is difficult as it must be solely for the business purposes and not personal use.

For example, you cannot generally expense food, clothes, housing, education etc. (You can probably expense an insignificant part of that though under some circumstances.) It’s not possible to take loans for extended periods of time without them actually counting as income for individuals (and being subject to income tax).

gohbgl• 6 years ago

A while ago I listened to a podcast [1] where the guest Stephan Kinsella argued that the state justifies taxing and regulating corporations by granting them special rights like limited liability. The guest then continued to explain that this justification is flawed since the these supposed special rights are actually not special at all. The argument made a lot of sense but it only explains the justification and not the reason for corporate taxation. In my opinion the reason is obviously to increase the state's control over us.

[1] http://www.stephankinsella.com/paf-podcast/kol-026-freedomai...

Nasrudith4• 6 years ago

This sets up a crazy situation where employees of the corporations start lobbying and messing with policy and regulations so it favors the organization.

How is that part crazy? It isn't ideal certainly but the same thing held for farmers, fishermen, and tradesmen back when it was cottage industry. That is fundamentally a result of representative government and them being able to vote. Everybody has interests of some sort.

known2• 6 years ago

Let us make Companies comply with https://en.wikipedia.org/wiki/Freedom_of_Information_Act_(Un...

bwilli123• 6 years ago

I would argue that given all the privileges that Society gives to Limited Liability Companies, that there should be one basic demand in return (regardless of profitability, or lack of it) That is, that all company communications be released to the public after a 10 year delay. Governments worldwide manage to do this after 10, 25 or 50 years. I don't see why corporations would rate the same privilege. Transparency is the best defence against corruption.

LatteLazy• 6 years ago

The behaviour is legal because it was made legal. We choose to do this. Pretending its some magic trick with complex steps is simply a nice excuse to avoid the difficult truth: it's legal and easy for publically traded companies to pay no corp tax and we like it that way.

thysultan• 6 years ago

Create a "church of the people" non-profit org, where anyone that "believes" can join and give it charity, and the church in its infinite benevolence gives credit cards to the needy(the donors) that they can use as they like or as the gods allows(how much you donated + interest).

To avoid taxes you mealy have to find a way to appear poor. In the above scenario both the "church" org and the donors are poor if the church uses all its donations on its donors and vice-versa.

BlueTemplar2• 6 years ago

Sadly, "Our Lady of Perpetual Exemption" was shut down...

https://www.youtube.com/watch?v=JcPeBAYYuhc

https://en.wikipedia.org/wiki/Our_Lady_of_Perpetual_Exemptio...

(Too many people contributed their seeds…)

habosa• 6 years ago

The lawyers who work at all of these firms who make large-scale international corporate tax avoidance possible should be ashamed of themselves. They are stealing from their fellow citizens.

When big fraud scandals occur (Enron, Wirecard) the accountants and auditors are rightfully shamed by their industry. When we find out who paid $0 in corporate income tax the lawyers who made it happen and defended it seem to escape scrutiny. The legal industry will protect its own every time, no matter who they enable or defend.

“In every big transaction [...] there is a magic moment during which a man has surrendered a treasure, and during which the man who is due to receive it has not yet done so. An alert lawyer will make that moment his own, possessing the treasure for a magic microsecond, taking a little of it, passing it on. If the man who is to receive the treasure is unused to wealth, has an inferiority complex and shapeless feelings of guilt, as most people do, the lawyer can often take as much as half the bundle, and still receive the recipient’s blubbering thanks.” ― Kurt Vonnegut, God Bless You, Mr. Rosewater

piyush_soni• 6 years ago

I used to think like that as well, but honestly, people will exploit loopholes in the law as long as they're there. The whole morality or ethics part of it is really subjective. The only correct fix is to fix those loopholes.

sneak4• 6 years ago

If the law can make something not stealing when it fits the common definition (that is, taking money from people nonconsensually and calling it “taxation”), then someone minimizing taxes while complying with the tax law as it is written is not stealing, as the law is thus the authority on what is or is not “stealing”.

However, if you think that complying with the tax law is stealing (and thus believe that the law is not the basis for what is or is not “stealing”), then it’s also legitimate to call what the tax enforcers do “stealing”, even though it is permitted by law, because it fits the common definition of “taking without consent via threat of force”.

You can’t have it both ways and be consistent. Either the law defines what is “stealing” or it does not.

jlokier10• 6 years ago

They are stealing from their fellow citizens.

Yeah, but stealing how much?

Almost everyone I know or read about who runs a small business or is self-employed talks with their accountant about how run things in a "tax efficient" way, to pay the minimum tax within the rules while keeping reasonable about it.

It would be foolish not to. You have to keep competitive.

And the rules are, for the most part, based on fair and sensible principles. Things like if you paid for something to use in your trade, it's fair to subtract that from what someone paid you, so the different is your profit on which tax is based.

Scale that up to large international corporations, and it turns out "minimum tax within the rules" is often $0 in a particular country, often because your profit there is also $0.

Just because you can structure a complex business of many parts in such a way that those initially fair and sensible tax principles work out that way.

The tax rules don't specify a larger, correct amount of tax.

So the lawyers, should they be ashamed for advising their clients how to run a large company tax efficiently?

Assuming yes, because that's the premise being replied to here, what should they be advising their clients to do instead? A voluntary tax overpayment? Structure the business another way? Guess? Copy other companies?

Is "shame" really the right way to control what advice lawyers and accountants give to large companies?

It seems to me that "shaming" by itself quickly leads to a lot of uncertainty and unfairness, because nobody can tell what the correct advice or correct tax payments "ought" to be on shame alone.

You'll end up with different companies who do exactly the same thing paying wildly different amounts based, essentially, on what they voluntary decide to do for PR or emotional reasons. That has the potential to be quite unfair.

It would be highly unprofessional for a lawyer or accountant to give advice based on their personal emotional state, and nebulous targets which nobody has agreed on and different people reach very different views on. So the right thing to do for an ethical professional lawyer or accountant is to resist that pressure, and try to give the most unbiased, knowledgable and reliable advice instead, based on the rules as they are set out, which everyone is supposed to adhere to.

That's why I'm inclined more towards ideas like the "General Anti-Avoidance Rule" https://en.wikipedia.org/wiki/Tax_avoidance#General_anti-avo... which gives companies and their advisors a framework for deciding the correct amounts to pay, with a stick if they don't.

Public shaming and campaigning is useful, but the end goal of that is ideally to apply political pressure to improve the rules in a "level playing field" way, so that proper application of them results in proper taxation. Many attempts at closing tax loopholes tend to make the tax code more complex, which requires yet more rules to close yet more new loopholes. Those rules are very "gameable".

But general anti-avoidance rules don't have to have this problem, if they are constructed with suitable generality and defer hair-splitting details to fair justice principles rather than ever-finer rules. Getting this right is still difficult, and still a work in progress. It's very contextual too, as the difference between structuring a business to avoid tax and structuring a business because that's how you conduct business is as much about culture and common practice as anything, and these change over time even while the general rule stays the same. But it seems like a better general approach to me.

throwaway22453• 6 years ago

It would be foolish not to.

Hard disagree.

At typical self-employed scale, fiddling around with avoiding taxes is a waste of time (and money) which is a net loser against putting that energy into finding income. Are self-employed people really busy setting up as a business in Estonia or lobbying their national representatives?

If you're taxed on your profits, it's always better to double your profits than to avoid tax on your current profits.

This tax avoidance strategy only becomes important where there are no other efficiencies remaining to find: or, when you don't have other competitors to worry about.

It's a monopolist strategy. A tax reform that benefits you is also going to benefit your competitors - so it's not being done for competitive reasons.

pge• 6 years ago

Maybe in the era of multinational corporations, the idea of corporate taxation is outdated. What if corporate taxes were eliminated entirely and replaced with higher taxes on personal wages? It’s far more difficult for a person to game the tax system than a corporation. People can’t move their income to another country, or any of the other games corporations play (or at least, it is much more difficult for them to do so).

jokoon• 6 years ago

"Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws." - Plato

"Life is nothing but a competition to be the criminal rather than the victim." - Bertrand Russell

Honestly those are the only nuggets of wisdom I can think about when I look at all the tax havens. The movie The Laundromat was also quite instructive.

The end of the cold war moved the ideological cursor "organized economy versus libertarian economy".

Governments are struggling hard to save their model so they can function properly. I really have a hard time seeing how this won't create problems, this is globalization at work. Not sure if states/borders will disappear.

bdcravens• 6 years ago

"But corporations should be required to publicly account for the gap between the income they report to the IRS and the income that they report to their shareholders."

I suspect this is a far greater issue than companies who pay $0; his proposal would apply to ALL with shareholders, and I (as a layperson) believe most companies have some gap there.

cwhiz2• 6 years ago

Just get rid of corporate taxes, and get rid of capital gains taxes. Treat all income the same.

Kills the double taxation issue, and removes the incentives for corporations to avoid taxes.

saalweachter• 6 years ago

Double taxation is a talking point, not a philosophical problem. It's like rebranding the inheritance tax as the death tax to make it sound unfair or absurd ("they tax dying in this country!!!").

Double taxation happens constantly in all sorts of contexts, for instance, most of us pay income tax, and then pay sales tax using those already-taxed dollars, and then the seller pays income tax on the money received less sales tax.

The reason we tax in so many ways is mostly some combination of "hysterical raisins" and politics (it can be politically easier at different times to raise revenues in different ways, and restructuring the tax code will create winners and losers so maintaining the patchwork status quo is easier), but it's not necessarily a bad thing to tax with a variety of methods. There is a certain amount of administrative overhead in having a corporate and personal income tax, a payroll tax, a sales tax, a property tax, etc etc etc, but doing so also makes it harder for someone to dodge taxes entirely -- restructuring to avoid personal income taxes can put you in line for corporate income taxes and vice versa, for instance. Holding lots of land subjects you to property taxes instead of corporate taxes on the companies you own stock in. Meanwhile all of these separate taxes create paper trails that can be used in the mutual enforcement of all taxes. If you run a business and your sales tax receipts, corporate taxes, and personal income taxes don't roughly line up, it signals that an audit may be called for. The tax system becomes a checksum for itself.

Now, this may all just be status quo rationalization, but my point is, "double taxation" is just a shibboleth and not itself a reason to radically reform the tax code.

JoeAltmaier3• 6 years ago

Agreed. Its infinite taxation, as the money goes around and around in a circle. It's all green, and all been taxed many times.

As the philosopher said, taxation is the art of plucking a goose so as to get the most feathers with the least squawking.

easytiger• 6 years ago

The public also needs to learn about taxation escalation as a heist pulled off in the fog of the world wars that is ever increasing in burden. This as a counter to the increasingly corrupt assertion that tax is a moral obligation.

adeptus• 6 years ago

I am still confused as to why companies have to pay tax at all? If every single employee including owners already pay income tax, and IVA/GST/purchase taxes, property taxes, xyz additional personal taxes levied by respective governments, why then on top of all that make companies pay tax, doesn't that just detract from people wanting to start companies and/or seek countries with the least taxes/best loopholes?

Disclaimer: I own no companies. I don't even own stocks at the moment.

Icedcool• 6 years ago

Because they act as a stand alone entity, and they may make and keep profit that doesn’t get dispersed to the employees.

emteycz4• 6 years ago

They don't make use of it in a way a person does. They use it to make more income, not for food, housing, fun, etc.

anonunivgrad3• 6 years ago

A company doesn’t “keep” anything. It eventually uses all of its money to either pay dividends (or stock buybacks, their financial equivalent), salaries, business expenses.

We tax corporate profits, not income. That takes out of the dividend stream, so we tax capital gains (the tax the investors pay on dividends/stock appreciation) correspondingly lower.

You could in theory get rid of the corporate tax and just tax capital gains at the same rate as income. It would fix a lot of problems. But you would upset a lot of people who don’t understand finance and taxation, like the people seeing red in this thread, who have some moral gripe with these corporations (who are mostly just doing what the law incentivized them to).

It would have one small effect though. Since the US taxes the worldwide income of its citizens and permanent residents, it would probably overtax them, making them pay the higher capital gains rate for profits made in countries that do retain the corporate tax. The most obvious ways to fix that would just reintroduce the problem of sorting out where the profit was “made”, which is where we are now. Ideally, you’d get all of the western countries to sign up to end this stupid corporate tax at the same time. That’s difficult because a few important countries have used low corporate tax rates as a way to attract business that would otherwise have no reason to be there.

0goel02• 6 years ago

Empirically, no it does not.

It causes companies to seek loopholes, yes. They'll incorporate in Ireland for example, but they'll continue to operate wherever they need to.

realityking• 6 years ago

Take the case of me, a German citizen living in Germany, owning Apple stock. The German government taxes me on the capital gains - fair enough.

But with your model the US government and the government of California would receive no taxes beyond those owed by the employees.

emteycz4• 6 years ago

And why is it wrong? Either they sell and/or operate in the US - so US sales tax is paid and their US employees/owners pay their tax - or they do not, no reason to pay tax there.

newhacker2719• 6 years ago

US taxes us on capital gains. OP is asking why the same money is taxed twice. You have simply restated the scenario what OP is asking about. The question is why are corporations taxed , not, what would happen if corporations are not taxed.

andromeduck4• 6 years ago

I don't see a problem with that if the value is taxed where it is created, eg via VAT.

JoeAltmaier3• 6 years ago

Because we'd all become companies, and nobody would pay taxes.

raxxorrax• 6 years ago

Theoretically, if salaries were proportional to profit and therefore the overall tax burden, it would make less sense on a domestic level, I agree.

Similar to VAT you could argue that you pay with money that got already taxed.

But if companies have rights, you can argue that they also have burdens.

linuxftw• 6 years ago

In the US, some companies do not pay tax, the shareholders pay the tax on any income (S Corporations). Sole proprietors and partnerships are the same. C Corporations are like a legally distinct 'person', and what they pay in salaries, etc, are deductions.

It is 100% possible for a C corporation to pay no tax because it pays out all profits (income minus deductions) or operates at a loss.

Many large firms are hiring contractors to perform 'capex' work that qualifies for R&D Tax credits: https://www.cpajournal.com/2017/10/30/u-s-research-developme...

Tax laws drive some crazy incentives.

lm28469• 6 years ago

I am still confused as to why companies have to pay tax at all?

Because that's how we decided to build our societies. Money flows up very easily but doesn't flow down anywhere as fast, that's why we tax companies and people.

The sole purpose of a company is to make as much money as possible. Laws are there to make sure they do it safely (ie. don't send 12 years old kids to the mine, don't make employees work 7 days a week), make sure the system isn't abused (Amazon trucks use public infrastructures to deliver goods, why shouldn't they participate to the maintenance of said infrastructures ? &c.), and make sure the country benefits of having such companies operating within their borders.

Not sure about other countries but in France taxes are used to finance schools, universities, hospitals, justice courts, reduce the cost of doctor visits, train tickets, housing assistance, allowance for disabled people, active solidarity income, public education and a lot of other things.

I could find endless arguments to support why companies _should_ pay taxes but none to support the opposite, besides "I own a company and want to accumulate more money"

asdfadsfgfdda• 6 years ago

How's this for an argument against corporate taxation: Corporations receive money from customers, and distribute to employees (salaries) and investors. It's just simple arithmetic. How does a tax on corporations impact these three stakeholders? It seems unlikely the burden falls entirely on investors. So should we burden these customers and employees with taxes? If the real goal is to tax the rich, why not tax investors? Also, corporations have shown they are most capable of avoiding taxation. How efficient is a tax on corporations when they can easily hire an army of tax lawyers and accountants? Would the world be a better place if those tax lawyers were doing something more productive?

crazypython• 6 years ago

Because a company is allowed to go in debt or bankrupt independently of its shareholders. If your LLC is in debt and defaults on that debt, the owners (you) won't go in debt.

There are better explanations, including that a corporation is a beast of the state etc.

stjohnswarts11• 6 years ago

Why in the world do you think a company shouldn't pay for taxes on profit? If that were true everyone would just incorporate and no one would have to pay taxes.

caffeine• 6 years ago

Not true. Whenever those companies want to somehow give those profits to a human, that is taxed (income tax, dividend tax, etc.). So requiring no corporate tax would not mean that no taxes are paid.

thehappypm• 6 years ago

It’s just a weird way to tax. People don’t pay taxes on “profit” (their savings) they pay taxes on “revenue” (income). Corporations and people are different and it’s fair to ask the question why a non-person entity has to pay that sort of tax.

exabrial2• 6 years ago

The problem isn't "who's not paying taxes", the problem is "taxes". In the USA we pay extraordinary taxes for extraordinarily small returns. If the US government was on charity navigator, it would have a no-star rating.

This money is best left to the distributed wisdom of thousands of companies in millions of individuals who will look after every dollar and see to it's use rather than waste.

When I see headlines like this I'm not upset by them I'm sort of thankful they are not fueling reckless spending.

exabrial2• 6 years ago

Oh the internet is not without irony. On second page of HN today:

https://tunnelingonline.com/why-tunnels-in-the-us-cost-much-...

sigzero• 6 years ago

I hate to break it to the author but no, you do not have that "right".

CWuestefeld• 6 years ago

Although avoiding taxes may be a sort of business "code smell" that makes us suspicious, there's no inherent reason to regard such behavior as evil.

The tax code, in all its thousands of pages, is designed (or at least it's supposed to be) to give incentive to certain behaviors that we'd like our businesses (and citizens) to follow. And the more they do this, the less taxes they'll be paying.

Thus, to a first approximation, paying very low taxes ought to be indicative of a payer who's doing all the things that our politicians and bureaucrats think they should be doing.

A few years ago I replaced all the windows in my house, along with a door and a garage door, with new, energy-efficient ones. This entitled me to a tax credit for that year, allowing me to pay a few thousand dollars less in taxes. I don't think that people should accuse me of being a bad citizen because my tax bill that year was unusually low. If anything, I'd think that the same environmental groups who lobbied for such measures in the tax code would all be shaking my hand for taking advantage of that in order to achieve the goal of lowered energy usage.

So yeah, maybe be suspicious of such businesses, but let's not just assume they're evil. That said, the idea that the public has a right to know what corporations are doing this is fully compatible with my claim, so we'd also know who's being a good corporate citizen.

walto2• 6 years ago

Sadly though, capitalism has a way of turning everything into a perverse incentive.

stjohnswarts11• 6 years ago

So does basically every other human effort where one can extract a benefit for an individual. Since communism on a large scale has always resulted in failure of its implementation can you suggest a 3rd path?

nolroz• 6 years ago

I think this point outlines how important it is for the public to know how the taxes were reduced. If the methods create positive outcomes to society then it would seem a lot less shady.

parenthesis• 6 years ago

Governments should pay the necessary salaries to hire some top tax-avoidance experts to help them close loopholes.

EPiXNiCROS• 6 years ago

good for them. you have absolutely no right to the labor of another and fuck you for thinking you do.

beagle32• 6 years ago

They should have AMT for companies like they do for people. After all, corporations are people too!

The mechanics would be different, of course, as e.g. the whole point of AMT is to disallow some deductions, and many businesses would be bankrupt without (totally reasonable) deductions.

The problem in collecting these taxes is not the ability to do so, it is rather the will to do so.

moneytalks• 6 years ago

Can't wait to see how http://n-gate.com summarizes this one.

Attained• 6 years ago

Isn't that profit for shareholders taxed as cap gains?

Edit: I mean, if I own a share I pay taxes when I sell it and make money

clausewitz• 6 years ago

but...job creators...and trickle down...and bootstraps

stevenalowe• 6 years ago

https://en.wikipedia.org/wiki/Gregory_v._Helvering - no obligation to maximize taxes - reinvest profits in company growth is the simplest way to avoid taxes, and arguably better for the economy

neycoda3• 6 years ago

Most of the ways companies avoid taxes now used to be illegal.

The public has a right to know how companies that pay no taxes pull it off

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