
Don't Lower Corporate Taxes, Abolish Them - aburan28
https://www.bloomberg.com/view/articles/2016-11-25/don-t-just-lower-corporate-taxes-abolish-them?cmpid=socialflow-facebook-view&utm_campaign=socialflow-organic&utm_content=view&utm_medium=social&utm_source=facebook
======
nightcracker
This rhetoric is ridiculous. If I were to stash trillions of income overseas
to evade taxes, I'd go to jail, not have the law changed.

> It may look unfair to tax consumers to compensate for a major business tax
> holiday -- but then such a move would give businesses a strong incentive to
> keep prices lower to avoid a drop in demand.

A drop in demand? People are going to eat less food because taxes are now
lower? Need less healthcare? Will move to a cheaper home? Just not use
internet? Drive the car less to work and sit more at home?

Supply/demand is crooked. It doesn't work for the majority of the goods the
majority of the people purchase. Demand is fairly fixed and based on
population, and supply is provided by the only bidder in your area.

> Besides, liberated from corporate taxes, they'd have more freedom to
> increase wages.

Does anyone still believe this 'trickle-down' hogwash?

I really wonder when America will have its wake up call during its third part-
time job to pay the rent that maybe change is needed, and that your government
has no intention of making it.

~~~
wdr1
> This rhetoric is ridiculous

Here's what I honestly don't understand about HN:

Climate change has near unanimous support from climatologists. Most (rightly,
imho) point that as a reason why it should be accepted by the general public.
And those _doubting_ the experts are considered ridiculous.

Here, however, we have an issue to drop corporate taxes which has near
unanimous support from economists (across the political spectrum). Yet we call
the _experts_ ridiculous.

Why the flip? Why should the general public accept the expert advice in one
field, but then turn around & call it ridiculous in another?

~~~
Robin_Message
Scientists are often correct in their predictions, whereas economists sort of
aren't. It's an epistemology question; these experts are not the same as those
experts.

------
avar
NPR has a recent podcast called "The No-Brainer Economic Platform" which
includes changes to the tax codes that have a unanimous approval of economists
across the political spectrum (e.g. abolishing corporate tax), but which they
show via focus groups would be impossible to present to the public:

[http://www.npr.org/sections/money/2016/10/26/499490275/episo...](http://www.npr.org/sections/money/2016/10/26/499490275/episode-387-the-
no-brainer-economic-platform)

Their other plans include things like abolishing housing and medical
subsidies, which they claim just leads to price inflation in the longer term,
but which are obvious political suicides to propose.

A text summary of the podcast is available at:
[http://www.npr.org/sections/money/2012/07/19/157047211/six-p...](http://www.npr.org/sections/money/2012/07/19/157047211/six-
policies-economists-love-and-politicians-hate)

They did a follow-up episode where they hired an actor to play a politician
advocating these policies, and tried to convince focus groups of voters:

[http://www.npr.org/sections/money/2016/11/02/500413695/episo...](http://www.npr.org/sections/money/2016/11/02/500413695/episode-413-our-
fake-candidate-meets-the-people)

The point of these episodes was not to try to present some absolute truth
about economic policies, but rather to demonstrate that while there are
certain things experts universally or near-universally agree on, convincing
voters of these policies can be a hard sell.

E.g. they argue that eliminating mortgage tax deduction would have the
counter-intuitive long-term benefit of making houses more affordable. But when
you try to explain that to people you've lost most of them once they realize
that in the shorter term their existing mortgage would go up.

~~~
tomp
Can you summarize why economists support abolishing corporate tax?

AFAIK, corporate tax is optional anyhow. Any company could organize as
unlimited partnership and not pay corporate taxes. But most companies chose
not to, and I think that extra tax is a perfectly reasonable way of paying for
extra protection (that of a limited company).

~~~
Dove
From the linked transcript:

BLUMBERG: But fortunately, as you know, plank three I think is something that
people can get around - a massive tax cut.

SMITH: OK.

BLUMBERG: Are you ready?

SMITH: Yeah.

BLUMBERG: A tax cut that's an insidious tax. It's felt everywhere in the
American economy. It destroys jobs, stops innovation.

SMITH: I am all for it. OK. Who gets this tax cut?

BLUMBERG: Not who - what.

BAKER: If I'm being blue sky here, I would say the corporate tax is totally a
waste.

FRANK: The corporate income tax makes no sense whatsoever.

SMITH: You are killing the voters here. So far we've got raised taxes on the
middle class and eliminate taxes on corporations?

BLUMBERG: Yeah. And those were the two most liberal members of our panel, Dean
Baker and Robert Frank. And here's the reason that they and pretty much all
our panelists hate the corporate income tax, which by the way is one of the
highest in the world here in the United States at 35 percent.

BAKER: It doesn't make sense really to tax the corporation as such. What we
want to do is - I'm going to sound like a Mitt Romney here. What we care about
is if the corporation is reinvesting the money. What's wrong with that? Why do
we want them to prevent - why do we want to prevent the corporation from
reinvesting the money?

What we might want to prevent is giving the money to wealthy shareholders or
them buying a second, a third, fourth home, getting a new Mercedes every six
months, whatever it might be. That's where we want to have the taxes. We don't
want to prevent Microsoft or General Motors or whoever it might be from
investing more in improving their product line. That's a good thing in my
view.

BLUMBERG: So a lot of people, you know, when they think the corporate tax,
they want to keep the corporate tax in place because they want rich people to
pay more taxes.

SMITH: And rich people own corporations.

BLUMBERG: Right. But our panel agreed. If you want to tax rich people - and
not all of our panelists agreed, by the way, that you should tax rich people
more than others - but if you did, if that's what you wanted to do, just tax
rich people - do that. Don't tax the corporation.

tldr: Taxing corporations prevents them from reinvesting the money and doing
such things as advancing technology and hiring workers. It is a terribly
destructive tax, discouraging exactly the sort of activity that drives the
economy. It's the people who own the corporation that you're trying to tax, so
tax them when they get the money.

~~~
extra88
So, eliminate corporate tax but at the same time increase capital gains tax,
i.e. stop taxing it differently (less) than earned income? My concern with
that is people shifting their wealth to be held by a private corporation
instead of personally held; "it's not my yacht, it belongs to Extra88 Inc." I
think additional changes would need to be made to the nature of corporations
to avoid abuse.

~~~
grinnbearit
You tax capital gains differently than earned income to incentivise investment
over consumption.

This is because consumption today is always more valuable than consumption in
the future (the discount rate).

~~~
tomp
No, capital gains taxed less than wages incentivises investment over working.
Which IMO is the wrong thing, because it's fundamentally regressive - young,
poor but intelligent and educated people can only work, not invest, so we
should encourage them by taxing them fairly.

~~~
Godel_unicode
And you think if you remove the incentive to invest, thus reducing the capital
available to corporations, the same number of jobs will exist for those young
poor people to work in?

------
darpa_escapee
> It may look unfair to tax consumers to compensate for a major business tax
> holiday -- but then such a move would give businesses a strong incentive to
> keep prices lower to avoid a drop in demand. Besides, liberated from
> corporate taxes, they'd have more freedom to increase wages.

We tried this with Reagan and everyone is still waiting for their increased
wages.

~~~
Amezarak
Indeed, I've heard the _reverse_ argument, that with extremely high corporate
taxes, companies find paying their employees more money a better use of their
money than giving it away to the government, since at least they get something
out of it, however marginal they think the gains might be.

~~~
deelowe
Extremely high taxes don't work because it forces companies to move operations
over seas.

~~~
candiodari
What I don't get about the US is that when a US employee works overseas, the
government taxes them -under US rules- anyway. Even if they don't work in the
US at all. The same arrangement, as I understand it, goes for people who work
part of the year in the US. You work 1 day in the US under a US work visa, you
pay US taxes. On everything.

Why not do the same for companies ?

If you want to do business in the US, you pay US taxes. Not on what you sell
in the US, but everything, all your earnings worldwide. You get to deduct
local taxes as a cost, but other than that, there is no accomodation. If the
rule is good enough for people, it is good enough for business.

And if your criticism is that businesses will go overseas, that's the exact
same argument for people. People drop their US citizenship just to avoid US
taxes for crying out loud.

~~~
seanmcdirmid
If you are a non-resident you don't get taxed on worldwide income. If you are
a foreign company with US income you don't get taxed in worldwide income. And
why should SAP pay less taxes than IBM...could IBM compete with SAP if they
weren't held to the same standards?

You do have to report worldwide income to figure out your rate. Also, many
countries have different tax systems, so does a fee count as tax paid or as a
deduction to operating income? If a country organizes its burden purely as
fees, then are you getting screwed on income?

For countries with tax rates less than the US, an expat can still get screwed
by higher fees and cost of living to go with that. So much so that the usa
introduced an overseas housing deduction just for people who work in
Singapore, Hong Kong, Switzerland. Complicated, because most tax systems are
not very comparable.

~~~
coredog64
Not entirely true (expat from 2011 to 2013, please seek qualified tax
professional advice).

The US grants an exemption of something like $60K/year for income earned
entirely outside the US. It has to be paid by a non US entity in local
currency. And, IIRC, there were a few other requirements.

They will also credit you with any income tax you may have paid in your
country of residence.

You are correct that you're pretty well screwed in a high cost-of-living
country as the base exemption won't go far. But then, you're pretty well
screwed by the IRS sticking its nose into the bank accounts of US citizens
looking for transactions of $10,001.

~~~
seanmcdirmid
The foreign earned income tax exclusion is much more than $60k, it is almost
$100k now. I don't take it because the tax credit is much easier to work with
once you make more than that. But that applies to high tax countries where the
tax credit will negate USA taxes completely.

------
beat
It's only half the picture.

A major source - maybe _the_ major source - of massive unfairness in the US
tax code is the capital gains tax. Tax on capital gains is about half the tax
on wage income. This is justified by the "double taxation" of corporate income
tax. So abolish the corporate income tax, with its myriad loopholes and
ineffectiveness, _but treat capital gains as ordinary income_.

Wealthy individuals who make most of their income on capital gains rather than
wages would then pay the same as the rest of us. I remember during the 2012
presidential election, when Mitt Romney finally released his tax returns, he
paid less than 50% of my family's tax rate, on 100 times our income. How does
that make any sense? If capital gains were taxed as ordinary income, his taxes
would have been roughly the same as ours.

~~~
lazyjones
> _Wealthy individuals who make most of their income on capital gains rather
> than wages would then pay the same as the rest of us. I remember during the
> 2012 presidential election, when Mitt Romney finally released his tax
> returns, he paid less than 50% of my family 's tax rate, on 100 times our
> income. How does that make any sense?_

It's not an entirely accurate/honest picture. Romney's tax rate is lower
because the income from his capital gains has already been taxed as corporate
profits (well, assuming no tax evasion). I.e. the double taxation you
mentioned affects him too, but it's not contained in his tax rate.

~~~
clairity
"double taxation" is not an entirely accurate/honest term. corporations are
"persons" and we tax money flowing to people. it's taxed just like everyone
else. what's odd is that it has a different, and largely preferential, tax
treatment relative to other persons.

~~~
kemiller
It's perfectly accurate and honest from any normal practical point of view. If
I run my freelancing business through a C corp I have to pay corp taxes and
dividend taxes or capital gains. It's taxed twice, and at a higher level in
aggregate (assuming I'm making more than 75k) than if I'm just a sole
proprietor. That's exactly why LLCs and S Corps exist, of course, and there
are other ways around it, but it's still the case that the exact same amount
of underlying economic activity happens, but one case is taxed more than the
other.

------
matt4077
There are literally two arguments in this waste of ink:

1\. Enforcement is undermined by international competition and tax
optimization

...which is like calling for the abolishment of the criminal code in the face
of a rise in crime.

There have actually been major advances in corporate taxation in the last
decade or so. Switzerland is basically gone, so are Panama, Luxembourg,
possibly Ireland and the Caymans as well. If the EU and US managed to
cooperate, they could easily make the rules watertight.

2\. liberated from corporate taxes, they'd have more freedom to increase wages

...which is complete BS because (a) it's never happened, and (b) only earnings
(after costs such as wages) are taxed. If anything, the money could be better
spend to lower associated costs of employment, such as health insurance. Or,
you know, basically anything else: education, infrastructure, a decent life
even for the less fortunate.

His best argument is actually the counterargument he cites: you don't want
corporations (...are people...) to sit on endless amounts of cash. It creates
a power imbalance equal to that of billonaire dynasties.

The "author" reaches new hights of asininity with his proposal to increase VAT
instead, fully knowing that it is the most regressive possible taxation. You'd
need VAT increases to 30%, which means a 30% tax on the lower third to half of
society that lives paycheck-to-paycheck, but results in a 5% tax rate for the
guy earning so much he can invest 3/4th of his income – no VAT on financial
transactions etc.

------
pg314
The top five tech companies Apple, Microsoft, Alphabet, Cisco and Oracle had a
total of $504bn of cash by the end of 2015. They have more money than they
know what to do with. Lowering their tax rates will create exactly zero jobs
and have no effect on wages.

~~~
tonyedgecombe
They would probably return that money to shareholders which they don't feel
they can do at the moment because it is mostly held outside the US.

~~~
jbuzbee
And returning that money to shareholders (dividends) would incur income tax to
the recipient, thus the tax-man gets his due. A much better outcome than just
holding cash overseas

~~~
pg314
If they return money to shareholders via buybacks, there is no tax. Only when
the shareholder sells will potential capital gains be taxed.

~~~
ryanworl
Someone has to sell shares for Apple to buy them. Those sellers pay tax.

~~~
pg314
If they realise capital gains and they live in the US. E.g. Belgian
stockholders of Apple don't pay any taxes (not in Belgium, not in the US) on
capital gains.

~~~
spoonie
They probably would pay withholding taxes if their assets are US-domiciled.
I.e. of they bought US-listed shares from a US exchange.

~~~
pg314
No. Only dividends are subject to withholding taxes (and are taxed twice, once
in the US at 15%, the remainder taxed at 27%). It's a crazy system.

Before you think of moving to Belgium: US citizens can't escape the IRS, no
matter where they live, and so do pay capital gains tax.

------
crazygringo
I think the main argument for abolishing corporate taxes is that they're
inherently regressive, if we assume that the taxes get passed on to either
consumers (who may be poor) in the form of higher prices, or investors (like
grandma holding retirement shares) in the form of lower stock prices.

There's certainly an argument to made that corporate taxes should be
abolished, and personal taxes increased instead (income and capital gains),
where we can ensure that the equivalent amount of taxation is applied
progressively, through higher tax rates on the rich.

Because the key thing to remember is, corporations don't exist on their own --
they have human owners. So if you tax the rich owners directly, instead of
taxing the corporation, you can get the same money but with finer-grained
control -- you can progressively tax the rich owners more, and grandma's
pension less.

(Of course, if you don't believe in progressive taxation, then corporate tax,
sales tax, property tax, etc. are all just fine.)

~~~
slv77
Not all corporations are domestically owned and the owners that you propose to
tax may reside outside US tax jurisdiction. Lowering corporate tax rates and
raising domestic taxes would effectively mean that foreign owners of US
corporations would effectively have a profit advantage over domestic owners.

Also corporations have a lot of discretion in when they distribute profits. A
zero tax rate would effectively create the equivalent of an unlimited
401K/IRA. The corporate tax rates the US has today are in many ways the result
of the high personal tax rates in the 70's that resulted in a lot of people
creating what the IRS called "personal holding corporations" to defer taxes.

Does it make sense that a guy working for a $150K wage would be limited to
deferring $16K in income while a consultant working for the same amount could
defer taxes on any amount over what he chose to spend?

~~~
crazygringo
There’s nothing to prevent taxing foreign owners of domestic corporations
separately to make up for that -- taxation across borders is a separate issue.

As for deferrals, it's the same as with capital gains -- if you have a $1
stock that grows to $1,000, your taxes are deferred until you sell it. A
greater harmonization of tax deferral _period_ is a good idea. Either
everybody should get to do it, or nobody. But this is a separate issue, that
should be totally divorced from corporate tax.

~~~
slv77
The ability to defer income through capital gains is an extremely limited
vehicle to defer income when compared to being able to accumulate profits in a
corporation tax free.

Assume that you have a business that generates $500,000 dollars in profits and
you'd like to defer taxes. In the US under section 179 you can defer those
taxes by investing in depreciating capital equipment such as computers, trucks
or medical equipment. Obviously investing in depreciating capital equipment
only allows you to defer taxes if it in the future allows you to expand your
business and generate at least the same amount of income. In addition to being
capped, and phasing out, the rules are very specific to prevent the system
from being gamed. For example, you can't use those deductions to invest in
real-estate.

To effectively defer taxes for 10-20 years would require that over that time
you were able to find profitable ways to invest those profits to expand your
business.

Trust me that finding profitable investments over a 10-20 year horizon is an
extremely difficult thing to do and requires significant talent that is in
limited supply. Allowing those people to defer taxes and re-invest profits is
a win-win-win for the owner, the government and citizens.

Compare that to corporations that could accumulate profits tax free.
Essentially unlimited amounts of funds could be accumulated in the corporation
tax free with no personal obligation to find effective ways to deploy those
funds. Those funds can be held and grow tax free until needed in retirement
where they can be meted out at favorable tax rates or left for heirs.

They would even more favorable than traditional IRA and 401Ks because they
wouldn't have required distributions.

While its true that corporate taxes in the US are out-of-line with other
developed economies which has distorted the economy in some ways dramatically
lowering corporate tax rates without implementing rules requiring distribution
of corporate profits and implementing taxes on a foreign holders creates a tax
loophole so large that you could drive a truck through it.

Of course you'll hear the Wall Street Journal talk about how this is 'good'
for the US economy because it will allow corporation to 'reinvest' which will
lead to all sorts of good things for everybody but the corporate owners. Oddly
enough there is never talk about expanding limits on 401K's and IRAs and
allowing the middle class to defer taxes.

------
vinceguidry
Fuck. That.

Why do you think the planet's largest companies are still the planet's largest
companies? Because they've gotten in bed with government. That's why there's
no income tax, because of regulatory capture. Of _course_ Bloomberg wants to
just give up the fight. Sure, corporate tax right now doesn't contribute much,
but there's no reason why it can't. Yes, it's hard to enforce laws on entities
with ginormous amounts of resources, but that doesn't mean we shouldn't at
least _try_.

The audacity of these people...

~~~
131012
Bloomberg L.P. would definitely love having to pay no taxes. So do I.

~~~
kuschku
I wouldn’t. I’d gladly pay even more taxes, tbh. Because taxes are the best
RoI I can get.

Every Eurocent of my taxes goes back to better education of society, better
infrastructure, more investment in innovative technologies.

Sure, I don’t get more money directly from it, but a very educated, modern
society, with perfectly maintained infrastructure can save a lot of costs in
many places, and increase your income even more.

~~~
prkua
So why don't you pay more? Is there a law in your country that prevents you
from paying more than your are forced to? Aren't you allowed to donate money
to your government? Sounds like this is the best investment a person can make.

~~~
kuschku
Actually, yes. You can’t just transfer money to the government, they’ll just
send it back.

But you can buy government bonds, which currently have a negative interest
rate (you lose money).

------
yabatopia
Why stop at corporate taxes? Why not personal income taxes?

Maybe it's time to transform myself into a corporation. No more taxes, limited
liabilities, easy bankruptcy (student loans), can't go to jail even if I make
a real mess (financial crisis of 2007, Wells Fargo, BP), welcome at exotic tax
havens, tax breaks to move to another region... The ultimate lifehack: forget
cloning yourself, just corporize!

~~~
mypalmike
Lots of people do exactly this, as least for some portion of their finances.
Buying houses through an llc and renting to oneself is not uncommon. You lose
the tax benefits of interest deduction, but if you're paying cash that doesn't
matter anyhow. Other large purchases like cars and boats are owned in similar
arrangements. When you are financially independent (not working a W2 job),
many of your financials are easily categorized as business-related, with all
the tax benefits that incurs.

~~~
coredog64
Ask Wesley Snipes how well this works out. He only spent 3 years in federal
prison, a crap load of attorney's fees, and had to pay fines and back taxes.

~~~
mypalmike
There's a huge difference between using IRS-allowed expenses to reduce your
tax bill and claiming (as Snipes' accountants did) that all domestic income is
not taxable.

One is legal and the other is not.

------
figjamjam
How about abolishing income tax in general and just have a consumption and
land taxes.

I live and run my company in a tax haven. I had to move here in order to be
competitive internationally with other low tax jurisdictions. My only other
option was to go out of business.

In addition to not having to pay any income taxes I also don't have to report
anything to the government or worry about the government, bank, isp, phone
company etc spying on me. No need to worry about going to jail over a
misinterpretation of the tax code. I don't have to worry about immigration
issues. Healthcare is completely private and very affordable.

Politics is a lot more boring when the parties are not fighting over who's in
control over massive amounts of spending. Helps keep corruption down.

Leaving SF and moving to a tax haven was the best decision I've ever made in
my life.

I'm culturally American, but I'm not a citizen. If the US were to adopt
similar policies I'd love to move back. I'd bring money and jobs with me. But
unless Texas succeeds I'm unlikely to see a western (anglosphere) country
doing this in my lifetime.

~~~
ridgeguy
Genuinely curious - what's your tax haven?

~~~
figjamjam
They're all rounghly the same. Some more expensive than others. I'm carribian
based, I can't afford to be Switzerland based.

------
redler
_> Besides, liberated from corporate taxes, they'd have more freedom to
increase wages._

Are corporations desperately brainstorming to find ways to pay their employees
more, only to be foiled by freedom-impinging corporate taxes?

 _> The populist governments...need to deliver economic growth and benefits to
the disenchanted workers who have brought them to power. One way to do it in a
way everyone would understand would be to abolish the corporate tax_

The article posits replacing corporate tax with a 25% VAT. These disenchanted
lower-income workers would see their cost of living increase substantially,
but presumably they could dip into their newfound corporate tax savings to
cover the difference.

------
eganist
> Besides, liberated from corporate taxes, they'd have more freedom to
> increase wages.

We've already played the trickle-down economics game. I don't recall it being
all that successful.

~~~
witty_username
The article fails to point out that if corporate tax rates are reduced wages
and/or shareholder profits have to increase—the money must go somewhere.

So, if wages are not increased, company will make more profit after taxes and
thus shareholders will make more money.

~~~
nicky0
Or they just keep it in a cash pile like Apple.

~~~
bhickey
Apple's cash pile includes a lot of overseas holdings. There simply aren't
enough things for them to spend $60bn on. They don't want to repatriate the
money because they'd get hit with (wait for it) taxes. If we eliminated
corporate taxes while raising capital gains taxes, Apple would have an
incentive to repatriate the cash and the piper would still get paid.

------
pfraze
TL;DR: corporate taxes can not be collected effectively due to off-shoring,
and so should be replaced with taxes on private income or on consumption.

It doesn't make a very compelling case. Consumption taxes slow spending, and
private wealth can also evade taxation.

EDIT: corrected, thanks rectang

~~~
pfraze
What the article doesn't do, is make the economic case that less corporate
taxation will increase investment. Credit for that, I guess.

~~~
1_2__3
Almost certainly because they assume the reader takes that as fait accompli.

------
raverbashing
"liberated from corporate taxes, they'd have more freedom to increase wages"

Really? Wages are a business expense, taxes are paid on profit. Hence wages
have nothing to do with corporate tax.

------
BillFranklin
Their argument for abolishing the tax seems to be (a) it's not a big
contibutor to GDP, (b) businesses might raise employee wages, and (c) we can
control corps with other regulations.

Reasons a and b seem to conflict. If corps already aren't paying tax, they
have the cash ready to raise wages.

Reason c ignores that there are similar loopholes to safety and environmental
regulations too.

Taxing corps is an answer to the problem that companies cost the government
money (i.e. trucking companies use roads) while benefitting the state
(employing people who consume and pay income tax). Maybe it's a good idea for
the government to directly recoup the benefit of a company using state
resources.

------
a3n
I'd be on board with this if one thing resulted: corporations would be
prohibited from making political donations, or any sort of political activity.
Not being a tax paying entity, they should have no "voice" in politics as a
corporation.

~~~
whatthesmack
I've never understood the logic of silencing companies (banning political
donations, participation, etc). Companies are groups of people. People are
free to speak (legally enshrined in many locales). Restricting how a company
speaks seems to be restricting the decisions of a group of people to speak,
and thus an individual's right to speak.

With regards to the statement about being a "tax paying entity" or not to have
a voice, that is an extremely dangerous road to go down. See "poll taxes".

~~~
bhickey
Companies aren't _just_ groups of people. They're groups of people that are
specially organized and granted limited liability and other privileges. I
don't mean to claim that companies should or shouldn't have political voice,
but let's not pretend that there's something sacrosanct about incorporation.

------
1_2__3
It's extremely challenging not to read this article as satire.

------
rectang
What a repulsively regressive proposal.

The article would be more interesting it explored replacing corporate taxes
with a wealth tax rather than an income tax.

~~~
vixen99
'repulsively regressive' is an uninteresting cliched opinion. How about
explaining why you take this view taking into account that the tax means that
someone has less money to play with - could be employees, shareholders,
consumers who pay higher prices for the goods produced or all three groups who
might otherwise gain from business expansion. The money could go into a pot of
course but it's used in the same ways ultimately.

~~~
banach
> 'repulsively regressive' is an uninteresting cliched opinion.

Note that "regressive" is technically an accurate description of the suggested
policy.

> The money could go into a pot of course but it's used in the same ways
> ultimately.

It is not necessarily used in the same way. One reason why progressive
taxation is both socially and economically beneficial is that poor people
spend a larger proportion of their income, and thus generate demand. The same
money, given to the rich, will largely end up as savings.

------
brownbat
Eliminating corporate taxes ranked fairly well when Planet Money asked
economists for policy proposals.[0] (All the proposals were things that have
fairly broad agreement by left and right wing economists but are deeply
unpopular to most people, like eliminating the mortgage interest deduction.)

It wouldn't have been something I even considered before that episode, but one
economist argued that people really find corporate taxes appealing because
they're suspicious of concentrated wealth. But if we're trying to transfer
wealth from the rich to the poor, we could just transfer wealth from the rich
to the poor through more progressive income taxes.

While I think they made a good prima facie case, there's one counterargument
that I haven't seen explored. Cheating is positively correlated with tax
rates. So if you have a variety of kinds of taxes, you can have lower rates
than if you just have one source of revenue. You can reduce the incentive to
cheat while collecting the same revenue.

The "sweetheart deals" mentioned here are definitely aggravating though, they
seem deeply unfair, and zero sum when states compete for the business.[2]

I'd like more countries and states to adopt a "most favored company" rule,
where any company can claim the same terms as the most favored company in that
territory. Similar to how the WTO ensures fairness. If a state wants to
eliminate corporate taxes, fine, whatever, but you can't just do it for one
company whose execs took you out to a few ball games.

[0]
[http://www.npr.org/sections/money/2012/10/18/163106924/a-tax...](http://www.npr.org/sections/money/2012/10/18/163106924/a-tax-
plan-that-economists-love-and-politicians-hate)

[1] Planet Money had another episode on that a few years back, on the state
level.

~~~
brownbat
Sorry, meant to attach this link for [1]/[2]. Also! My numbering is all wonky.
:)

[http://www.npr.org/sections/money/2016/05/04/476799218/episo...](http://www.npr.org/sections/money/2016/05/04/476799218/episode-699-why-
did-the-job-cross-the-road)

------
jSully24
Is the real question not about taxes but what to do about all this cash?

Taxes are necessary. But in the case of corporations I think the problem is
not about what the right corporate tax rate should be but instead what does a
company do when they effectively have so much cash they can not find good
options to invest that money in.

If one of these companies suddenly reports a significant drop in cash due to
aggressive investments in something that is failing (say, perhaps building an
autonomous car) their stock will be punished, a very negative incentive.

The real question: is a company investing this cash the right thing to do? IMO
it is, we want that money at work, building something. I don’t believe taxes
can solve this. Instead can we need to find a way for companies to be able to
invest this money in new ideas but not be so punitive via the markets when
they try things that fail.

------
coldcode
The problem will come when you collide a corporate tax rate of 0% with tax
cuts for the wealthy. The end result will be higher taxes for the rest of the
population and no more services of any kind. Or even higher national debt. I
suppose you could always raise duties on foreign imports to insane levels
which would no doubt be popular politically. No idea what type of country that
would result in.

------
zaroth
The tax change I would like to see is a better way to support bootstrapped
small companies whose working capital requirements are increasing as they
grow.

You start on Day 1 with $100 and sweat equity and grow your business. Year one
you have $100k of revenue and $90k of expenses. You need that $10k in the bank
as its now your monthly burn.

Year 2 you grow to $400k and have $40k of net income. You need that $40k in
the bank because it's now your monthly burn.

Year 3 you grow to $1.2m and have $200k of net income. You need that $200k in
the bank because... Ok, you get it.

If you're funded you can burn those funds in the beginning and carry forward
the losses as your capital requirements are growing.

Otherwise you are stuck paying at least 40%, but can be much more depending on
the states you do business in, not to mention the CPA cost is substantial just
to make all the filings.

It's _really_ hard to bootstrap from $0 when every dollar you need to keep in
the bank just to have 3 months expenses on hand, actually costs you $2.

It's also really hard to get a line of credit that early in the business
lifecycle, so it's quite a trap for bootstrapping companies.

It would be really great if there was a way to defer the taxes on that early
profit that is staying as working capital.

Almost like the money shouldn't be taxed at the corporate level as long as the
company is not holding more than X months of expenses.

I've read there are taxes for holding "too much" money at the corporate level
and not paying dividends, but apparently it's not really applied in practice?
Or, again, only targeting smaller businesses who can't afford to play the
necessary games.

------
matthew1471
Okay I haven't spent very long thinking this through but if we think lower
corporation taxes wouldn't lead to an increase in staff earnings (which I
completely agree would be the case and for the article to suggest that is
offensive) then why not change the corporation tax laws so that it'd be
banded? The average salary across the whole organisation that people earn
(with different bands for different sizes of businesses to prevent small
groups of people making up shell businesses) are then factored into different
corporation tax rates.

You could financially incentivise companies to reward their workers, a big
business giving its staff generous salaries could then pay almost no tax..
Then you go after the individual's tax instead.

I'm sure there's flaws in this but I think the premise of financially
incentivising companies to pay better wages could make the lower corporation
tax idea more credible than just expecting it'll magically happen.

------
cmrdporcupine
The USA has some of the highest corporate taxes in the developed world while
simultaneously being the state that is arguably the most controlled and
dominated by capitalist interests. It seems like a paradox until you put it
under a different lens...

As a Marxist I'm actually _for_ the abolition of corporate taxes. I think
they're an ineffective and counter-producitve means of raising revenue and
simply make the state _more_ dependent on corporate profits and power.

But in return for the lowering of corporate taxes, I'm for socialization
(which is not necessarily nationalization) of a whole bunch of key assets,
legal and state support for worker-owned business and cooperatives, and
broadly the transfer of power of much of what is now in corporate hands into
the hands of the population as a whole.

~~~
dragonwriter
> The USA has some of the highest corporate taxes in the developed world

The US has low (substantially below average within the OECD) actual corporate
taxes, though it has a high nominal rate of corporate taxation. (Various tax
deductions, credits, etc. make the actual ultimate tax rate low.)

------
nathan_f77
My knee-jerk reaction was that this sounds like a terrible idea. It sounds
like something that very wealthy people would lobby for, in order to make
themselves even wealthier and increase inequality.

I had no idea that economists are almost unanimously in favor of this idea. (I
listened to the NPR podcast mentioned here:
[https://news.ycombinator.com/item?id=13043744](https://news.ycombinator.com/item?id=13043744)).

So now I'm not sure why the majority of these comments are so opposed. Do
people here not trust experts in the field of economics, in the same way that
many people don't trust the scientists who warn about climate change?

------
aplomb
Increased wages (for the average worker) is the last thing companies will do
with more cash - it's the gift that keeps taking if incentives are considered.

We Americans manufactured and believe in a host of fables to explain the
prosperity of the last 70 years...

------
soVeryTired
I'd like to propose a rule for politicos to follow when discussing fiscal
policy. I don't expect them to follow it, but I suppose everyone can dream.

The rule is this: all proposals for changes to government spending must be
revenue-neutral. That is, if you propose a tax cut somewhere, you must propose
a tax hike somewhere else to explain how the cut would be paid for. Or if you
don't want to propose another tax hike, you must specify what service will get
cut as a consequence. Conversely, if you wish to propose a service, you must
specify how you will raise the funds to pay for it.

Anything else is wishful thinking, and is storing up trouble for the future.

~~~
bhickey
This presumes that deficit spending is necessarily bad. When your borrowing
rate is sub-inflationary, you'd have to be a dope to spend today dollars.

The UK is still servicing debt on perpetual bonds from the 17th or 18th
century. They carry a low interest rate, so it's cheaper to make payments
rather than paying off the debt.

~~~
soVeryTired
I agree that deficit spending can be useful in some circumstances, but I think
it should be more like a last resort rather than a first port of call.
Otherwise, how can you argue against the reductio-ad-absurdum that all
spending should be deficit spending?

~~~
bhickey
> [I]t should be more like a last resort rather than a first port of call.

The obvious retort is that if all spending were deficit spending, people would
stop lending us money. Rather than attaching unnecessary ideological baggage
to tax policy, we should do the math. When deficit spending is cheap, we
should exercise it. When it's expensive, taxes are wiser.

------
barnacs
Better yet, abolish for-profit corporations. Cap individual salaries at 1.5x
median or something. Create a global or national direct crowdfunding platform.
Have the population propose, vote on and fund causes with the excess money.

------
spraak
This post, also on the front page right now argues to increase corporate tax

[https://news.ycombinator.com/item?id=13037810](https://news.ycombinator.com/item?id=13037810)

------
strict9
a few points made in original article, paraphrased:

1\. lowering taxes will benefit consumers because corporations will lower
prices (and definitely not maximize shareholder value)

2\. taxes have loopholes and sweetheart deals, so we should level the playing
field by rewarding their talents (or deep pockets) by eliminating everything

3\. _Only_ 10% of Federal tax revenue, despite the whales' best efforts at tax
avoidance

I think #1 is the most offensive. The idea of companies putting excess profit
from tax removal into hands of consumers is the most laughable argument for
removing corporate taxes I've ever heard.

------
ew
I used to think this was the right move. Tax everyone personally and let
corporations do what they do best.

These days I have trouble reconciling the notion that in the near future we're
going to need guaranteed minimum incomes for everyone as more and more jobs
are automated. With fewer people working traditional jobs there will be even
more incentive to shift the tax base toward the corporation and away from the
individual.

tldr: how does abolishing corporate tax jive with universal basic income?

------
mathattack
I actually do get the core premise. Tax the owners via dividends and capital
gains. An added tax in the middle is inefficient. Of course let's see this
done in a revenue neutral way!

------
kapauldo
Two problems: 1) someone has to pay for the common roads, OSHA, FCC, etc., the
things that enforce common consumer-business fairness, and 2) virtually no
company pays this rate. Exxon, Facebook and verizon have paid 0% or close for
years, so this is mostly a fake problem to disguise the real problem of tax
loopholes.

------
adhambadr
"Besides, liberated from corporate taxes, they'd have more freedom to increase
wages"

yeah right .. we all know thats exactly what's going to happen!

------
lazyjones
Corporate taxes will be abolished soon by smart governments and replaced by
(higher) personal income/wealth taxes. It's the only realistic solution to
global tax competition because corporate entities are much more mobile and
flexible than individuals (including shareholders). It's either higher taxes
on dividends and lower/none on corporate profits, or diminishing tax income
overall.

------
wav-part
Or have vote share = tax paid - service/goods provided. The democracy is weird
corporation structure, the more share you have the less power you wield.

------
cm2187
Flat tax, no tax deductibility of debt. Let's make the system simpler, easier
to enforce and comply with and eliminate all loopholes.

~~~
Tomte
Flat tax ignores that people's ability to contribute differs vastly. Also, it
ignores the decreasing marginal utility of money.

That statement basically means "fuck the poor".

------
known
No taxes; Just go and print currency;

~~~
wav-part
Only if they let
[https://en.wikipedia.org/wiki/Liberty_dollar_(private_curren...](https://en.wikipedia.org/wiki/Liberty_dollar_\(private_currency\))

------
heisenbit
It is scary to what extent corporate taxes can be avoided. Something is there
is seriously broken and radical ideas are worth contemplating when the there
is such a discrepancy between plan and outcome.

Should profit be accruing unchecked in corporations? Certainly there should be
some pay back to society as society bears some external costs. Not only that
but there may be better places capital could be deployed. These can be
different at different times - management doing reinvestment, shareholders
moving capital elsewhere, employees spending and taxman spending. A robust
scheme would employ a balanced approach. At any time one may be preferable and
some will argue for extremes. But things are changing - always - until this
time it will be different - only to return shortly later violently to mean.

Discussion of corporate profits requires to also be looking at income tax and
the treatment of dividends and capital gains is always being simplistic. But
the essay is not trying to propose a solution. It is simply pointing out that
there is a systemic escalating credibility problem:

> It could be argued that the existence of a tax that countries cannot
> properly enforce is one of the factors undermining trust in governments and
> feeding populist movements.

Bloomberg is not known for its social attitude and one may argue that they are
advancing here a very liberalist agenda by talking up a fake problem. I give
some leeway this time due the next paragraph:

> There are other ways governments can keep corporations in check -- for
> example, through environmental, safety and labor regulations, which U.S.
> Republicans and Brexiters dislike but which ultimately benefit consumers in
> a way the corporate tax doesn't. There are also other ways governments can
> get the revenue -- for example, by paying more attention to private income
> from corporate dividends and pass-through entities, or the European way --
> by placing an additional burden on consumption through a value-added tax. In
> the U.K., VAT contributes 10.7 percent of GDP to the budget. To compensate
> for the absence of a corporate tax, it would need to go up from 20 percent
> to 25 percent -- the level that currently exists in Sweden and Croatia, for
> example.

Finding ways to tax that can not be escaped is critical. Also important is to
find ways to tax that don't burden labor too much. However this approach needs
to take into account that shifting (or acknowledging the fiat-accompli) of
collecting tax from less sophisticated and mobile citizens and workers is
putting pressure on well paid full time employment. Tariff free zones may not
be so compatible with that approach.

Last but not least - hoarding profits (most extreme in case of Apple) as it
going on at the moment is a recent phenomena. There used to be a tax on that
called inflation. Any balancing would need to look at where and with volume
new money is entering the system and going nowhere.

------
adamnemecek
Bloomberg being Bloomberg.

------
speeder
The only problem I see with abolition of corporate taxes, is that it allow
certain people to store their wealth "by proxy".

advantages of zero corporate taxes:

* lots of advantages for small business, too much to list.

* big business don't need to shuttle cash offshore.

* big business have more cash to worth with, if that is their intention...

* less government money wasted on trying to collect those taxes.

And probably several other advantages... but at least US have a major problem:

stock ownership is counted as part of someone assets, but the value of those
are only taxes if the person sells it or get dividends, with zero corporate
taxes, it would be an incentive for CEOs, founders, etc... to just accumulate
stock, never pay dividends, don't pay high salaries to themselves, but still
throw their weigth around using their total assets as a hammer, for example by
having their corporation buy stuff they want, or by taking loans to use the
cash with the stock as collateral.

This would effectively allow the richest to accumulate untold wealth while
paying no taxes at all.

The only way I can see zero corporate taxes working, is if you patch up some
other areas first.

Now, something I think is quite brilliant in US that already exists, is that
US tends to tax only profits, for example lots of people upset with Trump not
paying taxes when he had losses (at least when he said he had losses...)

In Brazil you pay tax over your income, doesn't matter if you had profits with
it, this leads to extreme price inflation, specially when production chains
get longer, as people will charge for their stuff more and more to get over
the taxes.

For example, once I talked with a guy that made YoYos (the round toys on a
string). The toys are simple, and cheap to make, but on the store where I met
the guy, they wanted about 5 USD for a simple YoYo, and a better YoYo suitable
for amateur competition was about 30 USD.

The factory owner, told me that the 5 USD YoYo manufacturing cost was about 80
cents, but all the taxes summed when the factory sold to the distributor were
in total about 40% of the INCOME, not the PROFIT, thus the factory sold to the
distributor the YoYo for 3 USD, with 1.2 USD being paid in taxes, 80 cents
covering the manufacturing costs, and 40 cents being their raw profits (ie:
before paying employees, transport, dividends, marketing, whatnot).

The storeowner, also aimed to have about 50 cents in profit, but his taxes
were about 30% of the income (not profit). If it was in US, he could charge
3.5 USD, get 50 cents in profit, and tell the buyer he had to pay an extra 1
USD in taxes, but instead he had to charge 5 USD, he would pay 3 USD to the
factory, earn 50 cents in profit, and pay 1.5 USD in taxes.

