The US government doesn't, as a general rule, care if the money has ever been here. If you as a private US citizen choose to live and work abroad, you are required to file US income taxes and declare all foreign income. And depending on the precise details of the foreign government's treaty situation and tax rates, you may be required to pay the normal US tax rate on some or all of that income.
I don't know that it counts as a "loophole" exactly that the system for corporations works the way it does. "Loophole" sort of implies an unintended consequence, when the reality is that the laws are written with the express purpose of making this type of tax avoidance possible.
> If you as a private US citizen choose to live and work abroad, you are required to file US income taxes and declare all foreign income.
Do you support this practice though? Does any other country try to tax people for income earned entirely abroad? This puts US citizens at a disadvantage compared to citizens of say, the EU.
In practice, the US has tax treaties with most other nations that permit foreign taxes paid (on income that would be taxable federally, so not on wealth taxes) to be taken as a dollar-for-dollar credit. That means that any country with a lower tax rate than the US will generally not increase your overall income tax bill. If you owed $X to a foreign country and $Y to the US for work done in the foreign country, you pay $X to the foreign country (regardless) and if Y is greater than X, you pay $(Y-X) to the US.
It's a pretty weird practice, and I can't come up with a good reason why I think it should be done, but it is. Just not for corporations. That's my point -- not that it's desirable, just that corporations get special treatment here.
At some point you tax people too much and they leave your country for one with better taxes. Never forget that the top 20% of citizens are responsible for like 87% of all the tax revenue the US and state governments rely on.
If the new cut cut cut tax plan passes and Californian's can no longer write off state income tax on their federal returns, you will see even more people leave California.
Never forget that the top 20% of citizens are responsible for like 87% of all the tax revenue the US and state governments rely on.
Never forget that you implicitly assumed this is because taxes on that segment are too high, rather than because various aspects of our economy were rigged to give those people a disproportionately high share of the total taxable income.
In other words: there are two ways to reduce your tax bill, and only one of them requires Congress to pass a law that puts you in a lower bracket.
This is an entirely handwavy and unsupported assertion, whereas stating the percentage of tax paid by the top 20% is a statement of fact with no implicit assumptions.
The people of a country get the tax system written by the representatives they voted for, and are complicit in any "rigging" of the economy.
What we have is a tax code that is layer upon layer of exceptions that came about when Group A supported a tax on Group B to pay for a benefit for Group A. Sometimes group A is in the top 20% (e.g. taxes used to subsidize an industry) and sometimes group A is in the bottom 20% (e.g. taxes used for food stamps). The former arises from things such as regulatory capture and the latter arises from uninhibited populism.
No politically active bloc of voters is innocent. Everyone from the rich to the poor are special interests and all are equally as guilty of "rigging our economy". Only a flat tax that treats no group as special is fair.
In it, absent any tax code distortions, Wilt Chamberlain would end up with most of the taxable income through entirely voluntary transactions. If thousands of people voluntarily pay Wilt Chamberlain to be entertained and Wilt ends up with most of the income, is that a rigged system? Power law distributions in income are a naturally occurring phenomena. No rigging is required.
If the system is indeed rigged, it's rigged in favor of the 45% of Americans that don't pay any federal income tax. They get all of the benefits at none of the cost.
I don't know that it counts as a "loophole" exactly that the system for corporations works the way it does. "Loophole" sort of implies an unintended consequence, when the reality is that the laws are written with the express purpose of making this type of tax avoidance possible.