
Trump Tax Plan Said to Call for Lowering Corporate Rate to 15% - neuralFatigue
https://www.bloomberg.com/politics/articles/2017-04-24/trump-advisers-said-set-to-discuss-tax-plan-with-top-republicans
======
maxerickson
Dupe of
[https://news.ycombinator.com/item?id=14186874](https://news.ycombinator.com/item?id=14186874)

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gjmacd
No corporation with a good tax team pays anything more than 20% of taxes. This
idea that 15% is going to really be THE thing that spurns business, well, it
might work initially, but the reality is, it will just create more federal
debt (think Bush tax cuts of 2003). Also, the current tax codes (loop holes)
are too favorable for corps. With the proposed lower corp. base tax rate it
will just make it easier for corporations to not pay ANYTHING. Wonderful, if
it wasn't hard enough to fund schools and roads, now we'll make it even
harder. How about simply closing OFF the tax loopholes, give corporations
"kickers" to earn tax credits on hiring in the US and other things that could
help. Giving them 15% right off the top -- that's so Trump, it's insulting.

~~~
humanrebar
> No corporation with a good tax team pays anything more than 20% of taxes

Seems like a good reason to level the playing field, no? We want businesses to
succeed by providing better products and services at better prices, not by
being extra good at bureaucratic arbitrage.

~~~
ncallaway
Okay, but _just_ lowering the top-line number doesn't do anything about that.
It just lowers the top-line number.

If he was proposing making the top-line number 15% and removing all deductions
and credits, then you'd have a more compelling point.

Myself, I'm going to wait until a full tax plan comes out before passing
judgement one way or another. One number devoid of context tells us nothing.

~~~
humanrebar
I mostly agree, but reducing the spread does decrease the handicap a bit.

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alkonaut
Just to make sure: for something to be "revenue neutral" means it can't
contain a real reduction in tax revenue offset by a hypothetical gain through
"dynamic effects" in the economy?

~~~
runako
That would seem to be table stakes for baseline discussion.

As a counterpoint, one could set the tax rate arbitrarily low and then
carefully craft a dynamic function that achieves revenue neutrality based on
that plan.

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cortesoft
I am pretty liberal, but I DO think corporate taxes should be lower. We should
tax the money that people pull OUT of a business for personal consumption, not
the money that is being used to drive the economy.

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jogjayr
I don't actually have an opinion either way because I don't understand the tax
system well enough. But I'm curious, why do you think:

a) money pulled out of business for personal consumption isn't driving the
economy? - that's how other businesses make money

b) personal consumption isn't already taxed? That's what sales tax does right?

c) money pulled out of businesses isn't used to finance other businesses? eg.
I live off dividends from my index funds while I bootstrap my startup.

~~~
cortesoft
First, I am not alone in thinking we should get rid of the corporate income
tax. Most economists of all stripes agree (there are some good explanations
here: [https://www.theatlantic.com/business/archive/2010/10/why-
we-...](https://www.theatlantic.com/business/archive/2010/10/why-we-should-
eliminate-the-corporate-income-tax/65351/))

To answer your points:

a) Yes, consumption drives the economy, but consumption does not 'multiply'
like investment spending does. It would be much better for the economy for
someone to buy a tractor than a speedboat, for example; the tractor is used to
create more wealth, while the speedboat does not produce anything. We want to
incentivize the investment type spending.

b) Yes personal consumption is already taxed. We would have to change the way
and rate we tax to offset lost income, and do it in a way that is not
regressive. If we get rid of corporate income tax, we can raise capital gains
and income taxes on wealthy people without overly penalizing them.

c) Yes, you can obviously use money earned from one company to invest in
another. A good tax structure would recognize that and encourage it.

I think all of this comes down to realizing that taxes do two things, raise
revenue and drive behavior. We want to make sure the behaviors we cause are
the ones we want as a society, while at the same time raising enough revenue
to do the things government needs to do.

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liquidise
A largely meaningless figure without the included context about targeted cuts
elsewhere.

That said, corporate taxes[1] currently make up around 10% of the total US tax
revenue, so major cuts (35% -> 15%) actually stand to result in a 4.2% drop in
total US tax income. This assumes no positive change in corporate growth as a
result of the reduced taxes.

1: [http://www.taxpolicycenter.org/statistics/amount-revenue-
sou...](http://www.taxpolicycenter.org/statistics/amount-revenue-source)

~~~
awa
You are missing that the reduction should cause some money sitting in coffers
outside to flow back in to US. Microsoft, Apple, Goog etc have billions of
dollars parked outside the country.

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hackuser
Is there evidence of this? Tax reduction proponents often claim some
offsetting benefit, but rarely does it seem to come true. Look up the Laffer
Curve from the 1980s, when the Reagan administration claimed that tax cuts
would spur economic activity and actually increase tax revenue.

Also, to a degree it's based on the premise that these companies are
overwhelmed with high taxes and that is determining their behavior. Perhaps
they have other motives or the rate isn't really too high for them.

~~~
WillPostForFood
The evidence is that US corporations are stashing ~$2 trillion dollars
offshore. I'm not saying cutting taxes will fix the problem, but it is very
apparent that the current tax rate is determining their behavior.
Unfortunately it can become a race to the bottom for countries trying to
capture the taxes on that income.

~~~
hackuser
> it is very apparent that the current tax rate is determining their behavior

That isn't necessarily true. It could be due to other laws, such as the one
that allows them to stash money overseas tax-free. Perhaps that's the law that
should change.

~~~
WillPostForFood
Yes, I should have said current tax law, not tax rate, but the getting a lower
rate abroad is clearly the main driver.

~~~
hackuser
> I should have said current tax law, not tax rate, but the getting a lower
> rate abroad is clearly the main driver.

I wasn't clear: I don't know that I accept that, though of course I've heard
it many times. It's a narrative that suits people who want to cut taxes for
corporations, but those people always have very convenient narratives. Has
anyone seen evidence?

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geff82
We don't know about the side effects yet, but a 15% corporate tax would be the
starting signal for some entrepreneurial friends of mine to found a company in
the USA the second the bill has passed. There is no other big market with such
a low corporate tax.

~~~
DaiPlusPlus
Corporate taxes are on profits - it's very easy for a company, especially a
startup, to not make a profit - ever - if they reinvest the earnings before
the end of the tax year or the shareholders make drawings. I don't see how low
corporate tax rates will spur new startups - but I do see it as incentivizing
the repatriation of foreign-earned income by large multinationals.

On the contrary, I think a higher and progressive corporate tax rate would
spur startups because it would serve as a governor to prevent large
corporations (of the faceless variety) becoming large conglomerates - which
generally have a depressive effect on the economy - thus giving smaller and
more nimble startups an opportunity to compete.

> There is no other big market with such a low corporate tax.

Ireland's corporate tax rate is 12.5% (
[https://en.wikipedia.org/wiki/Corporation_tax_in_the_Republi...](https://en.wikipedia.org/wiki/Corporation_tax_in_the_Republic_of_Ireland)
) and as Ireland is in the EU it has full access to the largest single market
in the world - but I'll concede the EU's market is fragmented by localization
issues and less demand for high-technology compared to North America.

~~~
geff82
I can tell you that I would not set foot in a country with high taxes. The US
has some special incentives which even nowadays make it attractive (honestly,
the US is so rich, big and special that the tax rate does not matter too much
in the grand total), but in general, as a European there is no need for me to
accept anything more than 25% when starting out. Everyone who starts out wants
to keep their money. Especially starters need low taxes so they can invest
more (and not only in the present year to get "deductions").

~~~
geff82
What I want to say: why bother with a 10% tax rate in Bulgaria (which has
access to the EU, but gives you some things to explain why you are there) at
100.000 profit when you can have 1.000.000 profit in the bigger market that
the US is at 35%.

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refresh99
It's amazing how many people simply don't understand how taxes work.

Taxes are paid on profits, not gross revenue. If my company makes $1M net but
I decide to expand my business by buying more equipment or staffing up I can
spend that $1M on that and have a net of $0 profit and owe $0 in taxes.

Explain how by lowering the tax rate from 35% to 15% gives me any more money
to expand my business when it is taxed on profit, which I could choose to
reinvest as much as I want when I want and write it down (current, past or
future years)?

All it does it does is it means when I have no where else to spend my profits
that it shows up on the balance sheets as profit. Do you know who benefits
from that? Shareholders, execs and board members.

All of that extra money will just get locked up in the bank accounts of the
people who already can't figure out how to spend the money they already have.
It does not create more revenue for the govt, it does not accelerate growth.

History has shown time and again supply side economics does not work. It's not
just a theory, the Laffer Curve has been proven to be nonsense as much as it
can outside of a vacuum.

The reason the wealthy love the idea is because there are only so many ways to
create the growth on the balance sheets that the market demands each year and
this would be an easy way to do it.

You think wealth inequality is bad now, wait until you see a 15% Corp tax
rate. The people who will pay for the missing trillions in revenue will be the
99% that are already struggling. At some point the system will be too stressed
and this could be the proverbial straw.

I would recommend those reflect on the origins of our tax system and how tax
was to be derived exclusively from business income and not wages before
feeling sympathy for the non-human entity called a corporation.

If you want to see a large influx of growth to the system you force that money
to reenter the system. Making it illegal to use shell companies and tax havens
purely to reduce tax liability would have injected trillions back into the
economy that would have created some great outcomes just based on tax revenues
and the need to reduce tax liability thru investment. Read healthcare,
education, wages, infrastructure, better jobs, etc.

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alkonaut
To me it's strange how federal law allows local governments to offer tax
breaks to individual companies in order to attract them. Conversely, large
corporations can play states against each other for the sweetest deal. As a
comparison this isn't allowed e.g in the EU and not between regions within
most countries.

Shouldn't a tax reform close that possibility, which should raise a lot of tax
revenue, which could then be used to cut corporate taxes, but now in a fair
way?

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crusso
The US Federal government's role isn't to manage all commerce within the
states. It's not a matter of what "federal law allows". Managing tax rates
within states is not a Federal power enumerated in the Constitution.

It's a good thing that States are forced to compete with each other on
offering suitable economic environments for the businesses that they wish to
attract. Big corporations can offer significant tax revenues and employment
opportunities for the states they call home. There's no reason why States
shouldn't use whatever means are at their disposal to attract good companies
for their citizens.

~~~
alkonaut
You misunderstood me: I'm not saying the states shouldn't be competing for
business.

I'm saying states shouldn't be allowed to give tax breaks to _individual_
companies and not to others. That's effectively having different tax codes for
different companies.

It's is analogous to having different laws for different people (which, I
assume would not be constitutional).

The point is to create good economic environments without allowing
corporations to play states against each other.

~~~
crusso
If a state wants to offer tax incentives to green energy companies, that
shouldn't be allowed?

~~~
alkonaut
That could be done without targeting individual companies so yes. Same as it
is legal to give incentives to buy green cas by subsidizing light or electric
cars taxing gas or heavy cars.

The kind of _targeted_ breaks I'm thinking of is e.g. this:
[http://app.leg.wa.gov/billsummary?BillNumber=2089&Year=2013#...](http://app.leg.wa.gov/billsummary?BillNumber=2089&Year=2013#history)

That's just basically Boeing saying "Give us a tax break of N billion or we
move from Washington". Legislators afraid to lose their jobs approve. The
state keeps the jobs, the legislators keep their jobs. Everyone is happy?
Well, except the people in the state that lost a ton of tax revenue.

To be clear: this isn't a tax cut for "the Washington aerospace industry".
There aren't going to be any competitors creating buildings for the
manufacturing of plane fuselages in Washington state - it's a tax cut directed
directly towards _Boeing_ alone. You wouldn't have to be a star lawyer to
prove that point.

The argument that "but they create jobs in the state so even with the tax
break, Washington state benefits from having them there" doesn't float either.
That's how blackmail works. I need my knee caps so even after paying the
mobster $10000 for keeping them I come out ahead!

If states weren't able to offer _company targeted_ tax breaks like that, then
Boeing couldn't have blackmailed Washington legislators like that. Which would
benefit everyone involved (Except of course - Boeing).

~~~
crusso
Hence my question. So now if you allow industry-specific taxation, then you
just craft a special bill that cuts taxes for large airplane manufacturers and
Boeing gets a tax cut.

Boeing has a lot to offer a state. They could put their production in lots of
places, including in other countries. If a state finds value in having Boeing
there, there's nothing wrong with incentivizing them to go there.

If smaller businesses find that the state is hostile to them for one reason or
another - maybe because they feel overtaxed because of big breaks for the big
companies, then smaller businesses will not do as well in that state and will
tend to migrate elsewhere. Then the state might need to rethink its tax policy
like New York has been doing with its reduced rates for new businesses.

At the end of the day, we don't need the Federal government micro-managing the
states. The USA wasn't formed that way and it would be yet another Federal
overreach that would create backlash and perverse incentives. You mentioned
the EU. The EU is dealing with that sort of backlash now with Brexit and other
referenda. Overreach by central governments is a proven route to tyranny.

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xster
If only we can get an equivalent tax increase on a progressive capital gain
tax system, it might even be a good thing.

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plandis
This seems bad to me. Without a border-adjustment tax (or some easy, intuitive
way to figure out what to tax) this just lowers the bar with the same number
of loopholes as before.

Companies will still use tax loopholes but now the government will lose even
more money.

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LinuxBender
Will Pres. Trump also consider removing AMT?

~~~
humanrebar
I have mixed feelings about this, I guess. I don't like the AMT, but if it
never gets adjusted, it turns into a simplified tax code at some point.

~~~
LinuxBender
Simplified to 15% across the board for businesses and individuals alike?

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twoodfin
I'm skeptical that tax reform has a better chance of making it through this
Congress than ACA reform, but:

Can anyone comment on how a lower corporate rate would likely affect S corps
and incentives to form them? Maybe a new 15% rate wouldn't apply to such
firms, but if it did, wouldn't it represent a pretty big new benefit/loophole
for incorporation?

~~~
unclebucknasty
Wouldn't apply to S-corps, as pass-through taxation from the company is
applied at the owners' personal tax rate(s).

But, indirectly, the biggest incentive that I can see would be with regard to
retained earnings and reinvestment. For an S-corp, shareholders pay tax on
profits according to their ownership percentage, irrespective of whether they
even receive a distribution from those profits.

And, if on Jan 1, the company invests all of its profit in a new project
(essentially wiping out the profit), it doesn't matter. Prior year taxes are
still due from shareholders at the full rate. This can generally lead to
forced distributions to shareholders just so they can cover taxes.

So, that's painful, especially for a business that's in growth/re-investment
mode. Problem is, moving to a C-corp and being doubly-taxed at a 35% corporate
rate, and again at a ~30% marginal personal rate is usually even more painful.

So, yeah, a much reduced corporate rate might allow for a different calculus
there that incentivizes me to organize as a C Corp vs. S Corp. Let the company
take the 15% corporate tax hit and keep the 20% balance vs the old rate. Plus
minimize dividends to keep the max amount of money in the company to re-
invest.

~~~
elsewhen
> Wouldn't apply to S-corps

see my post above - at times trump has stated that this _would_ apply to pass-
through entities (s-corps, sole proprietorships and LLCs). at the moment
however, this point remains unclear.

~~~
unclebucknasty
Yeah, not sure about that. Was responding to the hypothetical posed by my
parent.

Would be interesting if it applied to pass-throughs though. Actually, more
like completely nuts and ripe for abuse.

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hackuser
Two thoughts on stories on taxes:

1) I'd prefer stories on government finances tell the whole story: Slashing
taxes and government services by X. That may or may not be an acceptable
trade-off, but usually it's presented as something like Walmart is slashing
prices - there's a sale! - only looking at the cost side.

2) Present it as the zero-sum situation it is: If person A pays less, everyone
else has to pay more for the same result. Somehow, people have to pay for
things, and I think it's widely accepted that people should be making roughly
equivalent sacrifices.

(That's not a call for a flat tax rate; 10% of income is much more of a
sacrifice to someone making $10K than to someone making $1 million. FWIW,
another HN reader told me recently that research says there is roughly a
logarithmic relationship between utility and dollar amount.)

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CuriouslyC
Honestly, corporate taxes don't make much sense. It would be much better if we
reduced the corporate tax rate to 0% and made up the difference by increasing
capital gains tax.

~~~
refresh99
This is the most insane idea I've ever heard of. You do realize that capital
gains are only assessed at time of sale of said asset right? So where do we
make up the trillions in revenue? How does the govt operate when there is a
bear market? I just don't understand why when taxes and economic principles
are so simple on a macro level that people seem to get lost on how it all
works.

Something that sounds crazy, but way less crazy than what you are floating,
would be to have something like a 90% tax on corps with a 3 or 5 year
deferment to allow the profits to be invested back into the company. Then,
whatever the Corp couldn't figure out how to spend in useful ways would go
towards hiring instead of layoffs, raises instead of a race to bottom. The
shareholders like me who make money for doing nothing but placing my money
there wouldn't make such a killing, but I would rather see this country have a
booming middle class than continue the wealth inequality to the point where I
can't leave my house to use my toys and defend my big house against raids. I
know that sounds a bit hyperbolic but if we stay on the current trend lines at
some point in the distant future that day will come. Reducing Corp taxes and
eliminating the estate tax are the types of things to accelerate that as
opposed to putting us back to a good economic equilibrium.

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ebbv
Republicans talk a big game of fiscal responsibility but when given the chance
they do irresponsible things like this and Bush's extensive tax cuts for the
wealthy that cost the rest of us billions by running up debt.

~~~
DaiPlusPlus
Don't forget illegal wars, increased military funding, and raising taxes
anyway (
[https://en.wikipedia.org/wiki/Read_my_lips:_no_new_taxes](https://en.wikipedia.org/wiki/Read_my_lips:_no_new_taxes)
).

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randyrand
This would be much more in-line with the world average.

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hezbollah123
It will lead to a generalized and obnoxious "IR35" problem, which says that
"you are NOT a real company", because you just incorporated your activity as
an employee to pay a much lower corporate tax instead of the higher personal
income tax and other contributions that you should be paying. Paying the lower
corporate tax is reserved for TRUE capitalists and not for smaller entities
such as yourself, who are in fact meant to be treated as substantially higher-
taxed wage slaves.

