
Mark Cuban: If Your Company Is Moving For Tax Reasons, I'm Selling Your Stock - bane
https://ca.finance.yahoo.com/news/mark-cuban-youre-company-moving-130751365.html
======
nostromo
Perhaps we should drop the corporate tax rate to zero. It's simply too easy
for a global company to avoid them. In the end, small and mid-sized businesses
are the ones that get soaked.

It currently makes up about 10% of federal revenue.
[http://www.cbpp.org/cms/?fa=view&id=3822](http://www.cbpp.org/cms/?fa=view&id=3822)

~~~
tsuraan
So, I create a corporate entity that provides my housing, transportation,
other major needs. All my income is paid to this entity, which pays no taxes.
I, as a biological person, get some basic stipend to cover daily costs, and
live comfortably with all my necessities being paid by the corporate entity.
How does the state collect any taxes at that point?

EDIT: thinking a bit more, I guess sales taxes could still be collected. Could
a government function almost entirely off sales taxes?

~~~
drhodes
Your edit refers to something like the "Fair Tax",
[http://en.wikipedia.org/wiki/FairTax](http://en.wikipedia.org/wiki/FairTax).
It's been a while since I've read about it. From what I recall, some people
are against it because they think it will disproportionately burden low income
people.

~~~
snowwrestler
Fair Tax is the worst of all worlds.

On its face, a sales tax is highly regressive, so it disproportionately harms
poor and middle class citizens.

So the Fair Tax answer is for the government to refund to everyone a stipend
for the basic costs of living. This creates a collection of personal data the
same size as the IRS (they need to know where to send the check), AND a
government entitlement program larger than Medicare and Social Security put
together.

~~~
talmand
Why not a progressive sales tax based on the pricing of the individual item?

As for the data collection, for most people the government already has all
that info anyway.

The stipend would open the door for the possibility of the guaranteed basic
income some people have been going on about lately. People would already be
accustomed to the government sending them a monthly check for essentially
being alive.

~~~
nitrogen
If prices were taxed progressively (which AIUI they are in some cases, e.g.
expensive imported cars), you might see large items split into many small
parts sold separately, with an on-site assembly service that costs less than
the saved taxes.

~~~
talmand
Then you simply tax the service. But on the other hand, higher taxes don't
always result in higher revenues.

In fact, you might see an uptick in revenues. If people see they might save
money with that method then more people might be likely to buy the item they,
otherwise, may not have.

It all depends on how the taxes are structured.

Of course, we then slide into complicated tax code like we have now.

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Eliezer
Hi! This is the Market Economics Fairy! Just a quick reminder that if virtuous
people selling a stock would predictably lead its profits to be temporarily
priced lower relative to the rest of the stock market, even a small group of
profit maximizers can just swoop in and buy that stock! So this is a
completely ineffective strategy for virtuous people to drive a stock price
lower! And if Cuban sells the stock after the news of their move breaks, he's
already locked in all of the company's expected profit from that move, because
the stock will already be priced higher! Sincerely, the Market Economics
Fairy!

~~~
busterarm
He doesn't care about that. He's not looking at it from the trader's
perspective but from the value investors.

His actions follow through completely with his intentions here - he's
signaling that the equity has lost value. This can hurt the company's value if
he builds consensus, whether they lock in the short term profit or not. It's
even the subtext of his whole argument: they aren't looking at the long-term
consequences of their actions but are chasing short-term gains completely at
the expense of their future.

Edit: And as much as I align with the trader's perspective on markets, traders
tend to blow up and with great frequency...much more-so than value investors.

~~~
zak_mc_kracken
> he's signaling that the equity has lost value.

But it hasn't. If anything, such announcements are followed by a stock value
increase since the savings that will result from this move will add up to the
bottom line, and the market responds positively to this kind of news.

Lay offs are another of these things that tend to drive stocks up.

~~~
busterarm
Edit: Rephrasing because I worded it poorly.

His sell action _right now_ signals that he thinks it has lost value. What
happens after that with the stock is independent of his opinion there. Sure,
the stock may go up in the short-term because of all of this, but his action
now agrees with his sentiment that they're doing something harmful that has
effects _in the future_.

What happens with the stock price isn't just reading tea leaves, but totally
unimportant to the discussion. Whether you think a stock is going to go up or
down isn't the only (and at the institutional level not even the most
important) reason that you buy or sell a stock.

~~~
zak_mc_kracken
I think there is really no connection between moving your taxes abroad and how
well the stock will fare. Maybe it will go up, maybe it will go down, but that
tax optimization move will have very little impact on that in the long run.

What Cuban is doing isn't a financial move but a principle one. He's unhappy
with the company's decision and that's how he shows it.

It's emotional, not rational.

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jahabrewer
I find it difficult to balance my distaste for corporations that act
irresponsibly with my laziness in regard to my investment portfolio. I use a
slight variant on the three-fund portfolio
([http://www.bogleheads.org/wiki/Three-
fund_portfolio](http://www.bogleheads.org/wiki/Three-fund_portfolio)). I value
its simplicity because it saves me time and gives an acceptable expected
return. However, using large total market funds means that I'm invested in so
many companies that it would take a very long time to investigate each one for
responsibility.

Good on Mr. Cuban for standing up here.

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donatj
I don't understand the whole "If you behave logically as a business we hate
you" sentiment.

You enact business unfriendly practices business leave. It is the job of a
business to make money, the most money possible, at all costs. That is its
single purpose existing.

~~~
parfe
Just because you "behave logically" does not mean you behave morally or
ethically. Perhaps you should reflect on why immoral behavior would result in
people hating you.

~~~
JonFish85
Are you saying that a company moving money around in an advantageous way is
immoral? How so? Presumably you deduct the maximum amount you can from your
taxes. That's what the business is doing: shuffling it's money around in a way
that minimizes their costs.

Sure, I can see the argument of people who don't really like it, but to say
it's immoral seems a bridge too far for me.

~~~
ceejayoz
"Minimizes their costs" can also be read as "minimizes their contributions
back to the society they're benefiting greatly from", hence the ethical
concerns.

~~~
JonFish85
I think the companies would argue (not necessarily myself, for the record)
that they do contribute to society via high-paying jobs, collecting payroll &
sales taxes and income taxes. According to [1], Apple paid roughly $14.2b in
2012 income taxes, and according to [2], they paid $1 out of every $40
collected (using Apple numbers, although I'd imagine other companies are
similar).

[1]
[http://www.usatoday.com/story/money/personalfinance/2013/03/...](http://www.usatoday.com/story/money/personalfinance/2013/03/17/companies-
paying-highest-income-taxes/1991313/)

[2] [http://www.imore.com/apple-already-pays-1-out-
every-40-tax-d...](http://www.imore.com/apple-already-pays-1-out-every-40-tax-
dollars-us-collects-how-much-more-does-senate-want)

~~~
lliwta
> via high-paying jobs, collecting payroll & sales taxes and income taxes.

In other words, doing what's absolutely necessary and expedient in order to
make profit and not flagrantly disregarding certain portions of tax law?

And in the case of tech companies such as Apple, the "high paying jobs" bit
comes with an extra bit of irony since they were doing the _exact opposite_ to
a criminal extent.

Color me unimpressed.

~~~
JonFish85
Median Apple salary is ~$110k[1]. Sure, there was the lawsuit about colluding
to depress salaries, but according to [2], the median personal income of a
person with a bachelor's degree or more is $56k. That's essentially double.

[1] [http://www.salarylist.com/company/Apple-
Salary.htm](http://www.salarylist.com/company/Apple-Salary.htm) [2]
[http://en.wikipedia.org/wiki/Personal_income_in_the_United_S...](http://en.wikipedia.org/wiki/Personal_income_in_the_United_States)

~~~
lliwta
Wow. Are you really claiming Apple gets moral high ground for its salaries
even after _criminal collusion_ to keep them low?

As Apple's aptly demonstrated, it doesn't pay those salaries for any other
reason than that it _must_ , and even then it will break the law to pay less.

Finally, most US Apple employees are located in California, where cost of
living is substantially higher than most of the country. There's far less
disparity in your figure when taking cost of living & the common academic
pedigree of Apple's employees into account.

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x86_64Ubuntu
It's funny how people behave as if taxing companies is some sort of NP-Hard
problem. When in fact, we've done it before, and even during the greatest
market expansion in the 1950s-1970s. But no, we should go ahead and give up
taxing companies, and allow them to use our courts, our infrastructure, our
legal protections as American entities and American natural resources to their
hearts content.

~~~
walkon
The resources they are consuming are for the ultimate goal of satisfying
consumer demand in an efficient enough way to profit from it. Are you a
consumer? If so, you're an direct and indirect consumer of those resources.

------
wyager
Why? I don't understand how businesses are morally obligated not to select the
optimal tax environment for them.

After all, a very common defense for compulsory taxes is "if you don't like
them, you can leave." Is that not what's happening here?

~~~
jimbokun
I don't understand why Mark Cuban is morally obligated to invest in
corporations doing things he doesn't like.

~~~
wyager
>I don't understand why Mark Cuban is morally obligated to invest in
corporations doing things he doesn't like.

I never implied he was. I'm curious what his reasoning is.

~~~
seanflyon
You are curious why he thinks businesses are morally obligated not to select
the optimal tax environment for them. Only he never indicated that he thinks
that.

Your question should be: Why would Mark Cuban want to encourage companies to
stay and pay taxes? The answer to that question is somewhat obvious.

------
downandout
Let's remember that Mark Cuban didn't receive his fortune by making smart
investments. He received it by winning the dotcom lottery. When listening to
investment advice, perhaps we should listen to people that made their fortunes
through smart investing. Public companies have a responsibility to their
(rational) shareholders to minimize expenses that have no possible ROI. Taxes
are chief among those.

~~~
andyakb
Give me a break. Cuban is the first to admit that he got lucky in terms of his
valuation, but it wasnt his first exit and his extensive writing on business
should show that his success was not the result of luck.

Further, if it werent for his intelligent investing, he would have lost nearly
all of the proceeds from that sale, like so many others did(1). It was exactly
his smart investing that allowed him to _keep_ his "lucky" windfall

(1) [http://investmentxyz.blogspot.com/2006/05/cubans-collar-
anat...](http://investmentxyz.blogspot.com/2006/05/cubans-collar-anatomy-of-
famous-trade.html?m=1)

~~~
downandout
You're missing my point. He "made" his fortune by selling a company at a
spectacular overvaluation. That's fine, but don't pretend that he turned a few
million into a few billion through smart investing.

With regard to the moves he made after the ridiculous Broadcast.com sale, all
he did was lock in his profits. That turned out to be the correct move, but
that doesn't necessarily say anything about his investing skills. It just
shows that he realized that he had hit the lottery and wanted to insure his
win.

Warren Buffett made his money through smart investing. Mark Cuban did not, so
I'd rather listen to Warren Buffett and others like him than an opinionated
guy that got lucky.

------
JonFish85
So what about companies who incorporate in Delaware? Are these companies he
doesn't want to invest in?

~~~
ericd
That's to take advantage of Delaware's well fleshed out corporate law, not to
avoid paying any taxes. I pay more in taxes to do that, in fact.

~~~
JonFish85
That may be some, but a good chunk of companies save a lot of tax dollars by
doing this (according to [http://www.nytimes.com/2012/07/01/business/how-
delaware-thri...](http://www.nytimes.com/2012/07/01/business/how-delaware-
thrives-as-a-corporate-tax-haven.html?pagewanted=all) among others).

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mikepmalai
U.S. could probably address this issue if they moved to a territorial tax
regime. It would bring a lot of offshore cash back to the United States
(especially in tech) that can later be redistributed back to investors and the
economy via buybacks, dividends, and domestic M&A.

The United States currently has a "worldwide" tax system and taxes U.S.
companies on income earned both domestically and abroad in foreign countries.
The tax on foreign earnings usually isn't assessed until the company brings it
back to the United States (you'll hear companies talk about getting hit with a
repatriation tax if they bring their "trapped" offshore cash back onshore to
the U.S.). Most U.S. companies will try to avoid paying repatriation tax and
keep substantial portions of their foreign cash earnings overseas to
"reinvest" indefinitely.

At this point, the United States is one of the few advanced economies that
still taxes its companies on their active foreign earnings (I believe only 8
of the 34 OECD countries use worldwide tax system) and also has one of the
highest tax rates. Most OECD countries use a territorial tax systems that
largely exempts active foreign earnings from domestic taxation.

~~~
briandh
This point is not brought up enough. It is often buried or left out entirely
in these discussions.

Corporations that invert will not stop paying US taxes. They will stop paying
it on _foreign-earned income_.

~~~
busyant
Unfortunately, you can always game the system:

[http://www.bloomberg.com/news/2012-10-05/pfizer-s-u-s-
losses...](http://www.bloomberg.com/news/2012-10-05/pfizer-s-u-s-losses-
questioned-as-overseas-profit-soars.html)

------
manishsharan
I appreciate the sentiment but that will not mean much. Ethics rarely figures
in Investment decisions, which are made on the basis of excel spreadsheets and
quant algorithms. If on the other hand you were to find employment for people
who found their employers' tax avoidance to be distasteful and wanted to quit
to make a statement, then you might be able to make a difference by starving
such companies of talent.

~~~
drdeadringer
> Ethics rarely figures in Investment decisions

However, it seems to be a "coming thing". I began altering my investments a
handful of years ago to include what I found tasteful not just on return, but
on ethics//morals as well. I don't see how this is different from "voting with
your feet" or "voting with your dollar".

Starving companies of investment and sales are part of the same mixture as
starving companies of talent.

~~~
elsewhen
i'm sure you know this, but when you invest in a company, you are actually
just buying shares off of some other investor - the money doesn't go 'to' to
company (except in IPOs and secondary offerings). of course the stock price
can affect a company in some pretty important ways.

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nickjamespdx
Go Mark Cuban, I never liked you before today. Thanks.

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neekb
Let's put it a different way. Let's assume for a second that the taxes are
more or less "fixed" and need to be paid. SO - you can have companies
participate to a lesser or fuller extent. The rest falls on us as INDIVIDUALS.

The moral angle here is that companies shouldn't avoid the taxes of the very
environment that enabled them to succeed in the first place.

So I think what he's basically getting at is that paying your (corporate)
taxes is basically like "giving back" to that system/environment.

That's the way I think about it, anyways.

~~~
joelrunyon
What if you believe that the actual taxes are overinflated & used improperly?

~~~
jasonwocky
Move? Vote? Write your Congressman?

~~~
icebraining
_Move?_

Isn't that what they are doing?

~~~
MereInterest
Nope. Companies can put a small portion of themselves in a foreign country,
then say that that small portion is the most important part. I cannot cut off
my big toe, mail it to the Cayman Islands, then say that I should be taxed
under their laws instead as a result.

That analogous thing would be for a company to stop all business within a
country, which is not being done.

~~~
refurb
They can't put a "small" portion of themselves in another country, that's why
Pfizer was trying to buy Astra Zeneca. You need the merger of two relatively
sized (by value) companies.

You know what you need to do that? It's in the tax law.

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zak_mc_kracken
That's totally going to convince companies to stop doing that.

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Double_Cast
This sounds like a tragedy of the commons. Is it feasible to excise tax
corporations who move overseas like a tariff?

~~~
danielweber
Businesses are fungible. What's the difference between "I'm moving my business
overseas" vs "I'm closing down my American business and starting an overseas
business?"

Trying to catch this is nailing jelly to a tree.

------
vasilipupkin
I would say it slightly differently: if your company is willing to spend time
and resources on the move for tax reasons and if taxes is such a big part of
the future expected bottom line, that it's likely the company is not seeing
huge opportunities going forward - and that is a negative signal for the
stock.

------
josho
So, I guess this means Cuban has no stake in Apple & Google to name a few?

------
knodi
Corporations are people.....

