Here's a pattern I see play out every few years:
> Media rightly call out super rich for continuing to grow richer while people are struggling and SMBs fail
> Politicians rightly call out super rich and say they're going to do something about it
> Super rich come out in support of raising taxes, additional regulation, etc because who cares about laws and taxes if you're rich. Proceeds to lobby politicians for policies that help them.
> Media praise super rich for supporting policies and politicians that will help the super rich while either not understanding motivation or out right lying about who the beneficiary of these policies will be.
> Politicians implement policies that benefit the super rich while selling it to the public as something that's good for small business / those less fortunate.
> Media praises politicians implementing policies that were push for by the super rich while claiming it will help small business / middle class.
The CTO said they lobby for high regulation in privacy specifically to stifle startups so they can get them cheaper.
Generally politions work with the biggest industry players to craft regulation and it ends up like you described.
As Chomsky points out, propaganda is still useful information, since the angles being portrayed in a debate tells us what a societal elite wants us to see (and conversely, not see)
Is this about the Georgia law forbidding giving water to people waiting in line to vote?
I remember Ron Paul saying we could do away with personal income tax - and providing facts to back up his argument - and people thought he might be crazy.
He also wanted to get rid of the Department of Education (which most people don't understand)
> The United States Department of Education (ED or DoEd), also referred to as the ED for (the) Education Department, is a Cabinet-level department of the United States government. It began operating on May 4, 1980, having been created after the Department of Health, Education, and Welfare was split into the Department of Education and the Department of Health and Human Services by the Department of Education Organization Act, which President Jimmy Carter signed into law on October 17, 1979.
> The Department of Health, Education, and Welfare (HEW) was created on April 11, 1953, when Reorganization Plan No. 1 of 1953 became effective.
From Eisenhower's speech creating HEW:
> The purpose of this plan is to improve the administration of the vital health, education, and social-security functions now being carried on in the Federal Security Agency by giving them departmental rank.
Back to wikipedia:
> The Federal Security Agency (FSA) was an independent agency of the United States government established in 1939 pursuant to the Reorganization Act of 1939. ... The new agency originally consisted of the following major components: (1) Office of the Administrator, (2) Public Health Service (PHS), (3) Office of Education, (4) Civilian Conservation Corps, and (5) Social Security Board.
> Even though the first steps toward public education were taken in 1647 by the Massachusetts Bay Colony and land was set aside for public schools by the Congress of the Confederation in 1785, the idea of universal, free public schools did not become firmly established until the Civil War era. Even then, only half of the States had an efficient public school system.
> In 1867, Congress established the Department of Education to promote the cause of education and collect and disseminate facts and statistics about education. Until it was transferred to the FSA, the Office of Education and its predecessor organization had been part of the Department of the Interior.
So while the DoEd in name wasn't created till 1980, its forebears existed at the Federal level as long as we've had public education in the United States.
Taken from various wikipedia pages, but an overall summary is here:
Like what specific functions do you think the Dept. shouldn't be doing or could be scaled back? Because, like the Dept. of Energy (which is really the Dept. of Nuclear Material Management), I think a lot of people don't understand the purpose of the Dept.
Income tax is a word that disguises the more accurate but insidious term: protection money.
If the govt wanted to to collect money 'legitimately' then should charge for their services. (so for example a big truck can pay more tax than say a car for use of the road).
Of course we know that since governments will generally do a worse job than private entities, so they will stick to income tax.
businesses know how to give profit to shareholders and owners, and they do not know how to do simple things like keeping different departments each from doing work which invalidates the work of the other department.
I mean have you ever worked for a business? they are all giant messes masquerading as organized entities.
it is laughable to think that a business could be better at most things that the government now does.
I can't imagine what experience you've had to believe this. I've been in the work force for 20 years and for the most part, the shittiest businesses I've seen have been magnitudes more competent than what I've seen of government.
Lol, have you ever worked for the government? Nothing will ever clean up their mess. With businesses ( which are not aided by the govt in someway) latest one day they will perish if they are not profitable.
(Yep, I have worked for 3 decades with businesses, and probably know about 10 people who work for the government)
there is a very large swath of reality that you are choosing to ignore.
Large companies ($1B+) that have a negative impact on the environment and society, should pay more taxes to disincentivize the harmful behaviour. On the other hand companies that have a positive impact on the environment and the society should pay less.
Also, any billionaire person who labels themselves as a philanthropist should pay double digit % taxes. After all, through taxes we contribute to public good, infrastructure, social support and public institutions. Privately controlled investment funds labeled as charities don't count. Everyone knows.
As far paying taxes: All these billionaires aren't really making that much money, they're mostly owning stuff that may or may not appreciate. The fact that it does appreciate is now mostly a function of monetary policy. If you want to tax that, you really need a wealth tax, which is essentially confiscatory. Good luck keeping that capital ashore.
Lastly, even if you did somehow manage to keep billionaires around and tax them, it's not really that much revenue. You might as well not bother with it. It sounds unfair, and it is, but "worse is better" in this case.
Okay but how is that actually bad?
The barely profitable parts of Amazon, ie the retail operation, are already pretty comprehensively lousy. Making it unprofitable to more or less monopolize retail, the way Amazon does now, seems like it would open competition back up among ecommerce business on a smaller scale. As I've discovered since quitting Amazon myself, with platforms like Stripe and Shopify, human-scale
ecommerce no longer needs to be - or is! - the patchwork headache we all remember unfondly from 2005. The experience at point of sale is consistent, reliable, quick, and pleasant. The money goes to support small businesses, rather than being shoveled directly into the flaming mouth of Mammon. And while it does take a little longer for shipments to arrive, that's actually also a net good because almost nothing actually needs the kind of unsustainable next-day Prime treatment that Amazon's retail operation insists on by default. Without Amazon's perverse incentives toward counterfeit garbage, the rate at which I've had what I get match what I order has so far been 100%. And without Amazon Logistics involved, I can be fairly confident besides that whoever did the work of delivering that order probably was not denied the basic human dignity of access to toilet facilities because of rampant Taylorism or for any other reason.
You've really made a remarkably strong case for the thing you're arguing against! I doubt that's what you wanted, but I appreciate it all the same.
I don't really have much to disagree with you about, but maybe you want to check the "monopoly" claim.
Look how the small ecommerce companies have all become FBA companies
While I suspect you're right in that many have, I don't believe it's anywhere near a majority.
Or in the alternative, Fellow of the British Academy.
(And don't they? How much of b2c ecommerce are they? - how has the pandemic affected their share? You seem to have readier access to that data than I do!)
Maybe they do want to monopolize, but I'm pretty sure that they couldn't, what with Walmart, Target, eBay, Ali Express, and other major global players in the space. Amazon's want is largely irrelevant to a conversation like this.
I feel like seeing that Amazon owned a third of US ecommerce, before the pandemic stomped brick-and-mortar flat, goes more to my point than to yours.
My point was simply that "monopoly" is not an accurate term here.
You can't say "oligopoly may be more accurate, so I've been correct."
Within the context of a policy discussion, a monopoly versus oligopoly is a pretty material difference. Every growing business at some level “wants” to monopolise their niche.
I'll quote myself:
> I don't really have much to disagree with you about, but maybe you want to check the "monopoly" claim.
If you want to have a debate, we can. Name something you want to disagree on.
> All these billionaires aren't really making that much money
I'm sorry, I can't tell if what you are saying is sarcastic, naive or perhaps you work as an Amazon Ambassador (throwaway account, 3 mo. old?).
What's the alternative? Don't tax corporations, allow them to form monopolies and starve SMBs? Don't tax billionaires, allow them to hoard power and give them a free pass on everything? Trust that somehow power cannot corrupt them?
This sounds nice in theory, but in practice there is always the option to just not do business. You can get away with high taxes if you have something to offer in return, but at some point you just damage or destroy the economy.
> Breaking monopolies and monopoly-like structures will create many opportunities for SMEs / SMBs to flourish.
Fair enough, but as a consumer, perhaps I would prefer not to shop at the SMB equivalent of Amazon? Perhaps I like the fact that AWS is cross-subsidizing my deliveries?
Amazon isn't really much of a monopoly if you consider that it really competes on price and there isn't much of a barrier of entry to their market. They have little competition because it's not profitable, not because they're so powerful. Of course Amazon knows this, which is why they attempt to build a moat with regulation and taxation.
> I'm sorry, I can't tell if what you are saying is sarcastic, naive or perhaps...
Perhaps you did not quite understand what I am saying: These people are not earning money, they own assets. Owning assets can earn you money, such as dividends or rent. Those are already taxed. However, the reason why people find themselves on top of the "richest people" lists is usually not because they earned income from assets, but because the assets they own appreciated in value.
In general, you don't tax that appreciation because the asset price could drop just as well - if the Fed didn't bail out the market every time. You tax the profits gained from selling those assets. If you never sell your assets because you are already a billionaire and don't need cash, you don't get taxed. This is not really much of a tax revenue loss, because if you taxed, say, unrealized stock gains, you would massively suppress the value of stocks. Such hypothetical tax revenue just doesn't exist, at least not in the amount that you may imagine.
> What's the alternative? Don't tax corporations...
Yes. Corporate tax does nothing but make the country less interesting from a business perspective, for what little revenue it creates.
> ...allow them to form monopolies and starve SMBs?
That is orthogonal, in fact SMBs would profit the most from reductions in corporate tax.
> That is orthogonal, in fact SMBs would profit the most from reductions in corporate tax.
Is it possible that this is the root of the issue? Filing corporate taxes is 10x as complicated (and expensive) as even the more complicated end of personal returns. I've got 1099 income, sole-prop and LLC, schedule C, home office deductions, business car lease, backdoor Roth, business and personal itemized deductions, etc. I pay maybe $200/yr to my CPA for all the paperwork and filing, sometimes as much as $300.
In the past I was a partner in an S corp. We paid $5k+ every year for all the paperwork.
Reductions in corporate taxes would be beneficial to smaller shops for sure, but simplification might be the best thing for everyone. Corporate income is going to get taxed twice most of the time anyway (once at the corp, and again when it passes to someone as income) so there seems to be little need to incentivize anything other than reinvestment which already happens by it not getting taxed as income. A simple progressive tax structure based on profit with little that can be deducted outside of actual reinvestment would simplify things greatly.
Indeed. Watch Amazon lobbying for a tax that you don't have to pay, but you have to pay for proving that you don't have to pay it.
If nothing else, I'd expect the tax increase to take the form of "same tax, but we take bigger numbers", so the cost of paperwork for small businesses would remain exactly the same.
I'm not who you responded to but surely you can discuss without resorting to accusations of shilling or insults.
In general, the super-rich don't need to sell, which is why they don't need to pay taxes. If you want to change that, you need a wealth tax, with all its problems. That's my point.
Then he also paid income taxes on that.
Would that not benefit the competition? And isn't that a good thing?
I think people would be made worse off if Amazon's retail operations were to be made worse (or shut down in the limit case).
Maybe short term but the in the long term I think everybody would be better off with more smaller competitors instead of a few dominant ones. Same for Apple. I don't think their size is good for the economy or technology in the long run.
There's nothing wrong or anti-competitive about undercutting another retailer. At some point, you can get into anti-competitive predatory pricing or "dumping", but I don't think anyone is credibly arguing that Amazon is dumping product below their cost.
In fact is has been recommended by most economists
In 2010 Congress passed FATCA , which forced financial institutions in foreign countries to give up information on assets held by US nationals in their borders. This was extraordinarily unpopular with other countries: I'm in Canada, and the amount of negative press was astounding. In addition to privacy concerns (the law applied to dual-citizens, including "accidental Americans" who didn't know they held US citizenship), implentation proved to be very expensive for foreign banks.
However, the US played hardball: if a financial institution was non-compliant with the provisions of FATCA, the US government took 30% of any payments made to them as tax. There was tons of grumbling, but foreign financial institutions went ahead and implemented it.
To add insult to injury, the US is itself not compliant with FATCA, as the information sharing is supposed to be reciprocal if a foreign country signs a reciprocal treaty. That has not happened.
Access to the US financial system is an extraordinarly big stick when the US government chooses to wield it. It's often said that preventing offshoring or creating a wealth tax is impossible without global buy in. Really, the US could do it if it wanted to. It would not be popular, but FATCA shows there's precedent.
With the unintended side effect that it can make it incredibly hard, if not impossible, for an American citizen to open a bank account in another country. Even if she's a resident in that country.
In most places (e.g. Luxembourg, Basel, Lichtenstein, ...) the "pick your favorite tax scheme" game is tolerated (in Basel you can have your pick of 3 tax schemes. Anything agricultural goes for the French scheme, most of the rest, especially medical technology, for the Swiss one, Car companies like their German tax (I'm guessing to avoid import tax)). And while not quite as impactful, it's still tolerated at e.g. the French-German border.
And of course there is the "European exception". EU countries each have their tax policy set so "their" company doesn't get taxed. Even the EU proper has such a company (Airbus). But individual countries do as well: the Netherlands has Shell, France has Total, Belgium has lots of government non-government companies (e.g. Sita, Eurocontrol, BICS, who are "Belgian" but multinationals ...). The incumbent telecom is usually beneficiary of such schemes as well, as well as large medical concerns.
And I would like to point out: one thing FATCA (+the preexisting international income tax the US has) has done is make it much more difficult, much less worth it, for US citizens to work abroad. Do we really want that ?
Being a tax haven is arguably how small nations achieve this. The US has a large unfair advantage in terms of economy - has done since at least WW2.
America skews heavily in favour of freedom - for Americans in America, not so much outside that system.
Let's tax the economy of scale and force companies who are not able to utilize economy of scale well to split into multiple smaller companies.
For example, I sometimes thing large corporations can beat out smaller competition purely because they have/can afford a large legal/patent dept, that smaller single-industry players do not.
There should also probably be more rules wrt competition - allowing private interests to control TLD/DNS, protocols, Operating systems/ecosystems, hardware specs/compliance, the EM spectrum and other common utilities/services has allowed an extreme bent towards monolithic companies - force theses large corps to spin off internal services!
> On the other hand companies that have a positive impact on the environment and the society should pay less.
Just have a carbon tax. Setup a general scheme for SMBs, and allow larger corps to setup their own if they can do it more efficiently (regulate that, of course).
Large corporations and billionaires also have an outsize influence on politics at the expense of small business and regular people. They shape the world to their advantage.
Mattel lobbied for and helped write legislation that regulated themselves... and everyone else.
The laws ended up disproportionately hurting small toy makers while rewarding Mattel for their bad behavior.
When you realize Bezos also owns a newspaper, and journalists get paid to write articles praising this or that. Honestly, it’s enough to jade anyone at this point.
In the same way that the new "Stimulus package" now requires that payment processors report any transaction over $600 on a 1099-K Tax Form, it's always the little guy that is mostly affected by the changes in tax law because little guys have no lobbyists and don't have an easy access to lawyers to fight the IRS.
Something that people from middle class are not able to afford.
The other reason is that making difficult for members of middle class to accumulate wealth secures their own business, they are effectively killing the growth of potential competitors.
In the longer perspective this is very dangerous, it creates oligarchy, which, in turn, has all the incentives to restrict free market, free speech and democracy.
Middle class is important for the society since those are people who have time to engage themselves into public affairs, they don't have to spend all their time trying to earn money. In addition middle class is much more numerous than 1% of the wealthiest. As a result they give work to a lot of people who are down the social ladder. Both Mark Zuckerberg and some Mr. Jones, who owns a grocery shop employ a single babysitter, need a single plumber to fix their pipes, are able to eat the same amount of food, etc. So thousands of Jones are given job to much more people than single Mark Zuckerberg (obviously I am talking about Zuckerberg as a person, not his company).
That's why from the social perspective it is important to have as many Mr. Jones as possible. They give work to a lot of people, they drag them up. That's why taxing heavily middle class is a terrible idea and all the "tax the rich" regulations in the end mean "tax those who cannot escape taxation".
But then you say:
> all the "tax the rich" regulations in the end mean "tax those who cannot escape taxation"
Why is avoiding taxes different than any other moral problem? Why cannot you say, "putting conmen in prison" in the end means "smart conmen will avoid prison". It's this moral defeatism that gets me.
Sure, there will be people who do immoral deeds and avoid being caught, but how are we better off by not trying to catch anyone?
It's even in the open, that the large corporations pay little taxes, everybody is a witness to that. You (as a society) can change that system if you want.
"Tax the rich" sounds kind of like a good idea at first but then you take into account the point about how the rich have lawyers, lobbyists, and accountants. Rich people and companies already figure out how to subvert tax laws. Why wouldn't they figure out how to subvert the new laws they are clamoring for too?
Put another way, is Bezos supporting this law because he wants to be worth less?
I'd prefer we solve things more directly. Break up big business via anti-trust. Stop businesses from buying one another. Rather than raising taxes let's just simplify the tax code so it's automatic and there is minimal ambiguity or flexibility for creative tax accounting. Let's bring legal cases on all the questionable tax strategies big companies are engaging in. Raising taxes to hope we catch the big guys doesn't seem like a smart plan to me. It seems more likely they'll dodge the increase and smaller companies will get hit with it.
Well, I don't see how it's feasible or desirable to do things more directly. You're saying BigCos are a problem, and you want to disincentivize their formation, then picking them on one-by-one basis will actually require more expertise and more effort, compared to having laws (e.g. tax laws) that apply broadly, and then enforce these laws.
We have laws precisely so that we wouldn't have to decide every case individually, and that the rules are clear to everyone, so they can avoid possible (and arbitrary) punishment.
I also think that as long as you want to tax all corporations the same, there will always be an inherent advantage in being big. That's why many people suggest progressive taxation in various forms to disincentivize such empire-building.
> Raising taxes to hope we catch the big guys doesn't seem like a smart plan to me.
This is a straw man - nobody is arguing just for raising taxes and then not enforcing those laws, we would love to enforce these laws of course. But having them is the first step to enforcement, I don't think your approach (enforce something without support from laws) is more viable, even legally. It requires more regulatory expertise, which you argue we are lacking compared to corporations.
Also nobody is really arguing against tax code simplification, but it only can get you so far.
Big governments love a couple big businesses because it’s much easier to infiltrate, influence, control and ultimately procur wealth with that small group of businesses rather than attempting to influence 100’s or even 1000’s of smaller and independent companies.
So the next time you see 3 domestic car companies, and 3 airplane makers, and 4 toilet paper makers, 3 oil companies, etc. Understand they want it that way because of control and $$$$.
In theory I am all for it but on the other hand what would be the allowed size? I can hardly imagine mom and pop shop producing Lithium Ion cells, starting foundry etc, etc. This measure could put country to severe disadvantage against any other that does not implement same measures.
To be more practical and keep competitive edge internationally I'd just milk big companies by way of taxes and make sure there are no loopholes and perks like foreign earning exceptions etc. And outlaw political corporate lobbying.
I think they are usually talking about avoidance (legal), not evasion (illegal). while some avoidance schemes do toe the line of outright evasion, I (perhaps naively) don't believe ultra-rich people routinely employ illegal tax strategies.
personally, I'm okay with the fact that some people will inevitably break the law and not get caught, as long as it's not pervasive. if nothing else, they will have to live with the anxiety that the music might stop for them at any moment.
what I'm not okay with are the "tax the rich" initiatives that look good when condensed to a set of talking points, but in reality are just a tax hike for the upper-middle that will be easily (and fully legally) avoided by the wealthiest people. convince me you have a solution for that before you come for even more of the wages I actually work for.
Isn't a complex tax code a moral problem for the same reason? The other way to attack the problem would be to simplify tax codes more.
Notice that there isn't an argument that Zuckerberg should have less money. There is an argument that Mr Jones should have more. As far as anyone on the left is concerned that would decrease equality (the obvious way to achieve it is less transfer payments from the middle class to the poor).
This is an oft-touted talking point, but not actually correct. If you add up all the numbers, most social welfare in the West proportionally goes to pensions and healthcare. Poverty relief is usually a smaller budget than corporate welfare. This article (0) shows the distribution for the US.
Additionally, part of US social welfare specifically enables companies like Walmart to get away with not paying their employees a living wage, so is de facto corporate - not social - welfare. In short: thinking of it in terms of "the poor are the problem" only helps hide the wealth transfer from the middle class to the upper class.
There is no way for the middle class to have more money while keeping the wealth for the upper class constant, because the system already trickles up middle class wealth. At some point, we should be expecting companies to pay their dues and change rules to make them: corporation tax, liveable wages, overtime compensation, emissions, pollution, workplace safety and perhaps even off time caused by burnout.
UBI solves all these issues nicely. People get to spend the money in the way that works best for them. Because they aren't 100% tied to the corporations, the worst, lowest paying jobs gain leverage when negotiating.
While not the best solution, it is far better than current welfare. Even Milton Friedman supported UBI in this context.
They're just shackled to a government handout making them totally dependent on the government of the day's generosity or lack thereof.
This seems to relate to marginal income tax rates, not corporate taxes.
>and all the "tax the rich" regulations in the end mean "tax those who cannot escape taxation".
They don’t have to. Simply eliminate deductions and credits and exemptions.
There’s nothing at all simple about switching from one to the other. (Grocery stores in particular would be extremely hard-hit and a lot of us rely on them to survive. The wheels would come off quickly if not carefully thought though.)
If the issue is it affecting poorer people adversely, then that should be addressed by making them less poor, e.g. the government giving them money.
Whole Foods could conceivably become the equivalent of a discount grocery by virtue of such integration, after Amazon bought up farms and distribution channels.
Simply? In a global world economy? There is nothing simple about it.
One could argue that the US is already an Oligarchy or more accurately an 'Oligarchic Plutocracy' which has accomplished all of the above.
Even I would refer to USA as democratic, but there is lot of evidence that the democratic component is pretty weak.
This seems like a false narrative to me.
For example, the policies Biden is putting forward tax household income at those above $400,000 annually and above, which is firmly in the 1%. This isn't your plumber or single babysitter.
In addition, they are discussing a minimum corporate tax rate and closing loopholes so that corporations and individuals can't pay 0% in income taxes, which is what many are paying now.
If the numbers at https://dqydj.com/average-median-top-household-income-percen... are correct, the "top 1%" household income threshold in the US in 2020 is $53lk. $400k is closer to the "top 2%" level.
More importantly, these numbers like "400k" tend to not be inflation adjusted (e.g. the cutoffs for the net investment tax and the additional medicare tax are not, cutoffs for phaseouts of the child tax credit are not, etc). And income percentiles grow faster than inflation. Looking at that same data table, it looks like the percentile boundaries grew 6%+ year over year from 2019 to 2020. If that's not a fluke caused by the pandemic in some way, then in 10 years you expect something like 1.79x growth in the cutoff numbers, which would put $400k at about the "top 8%" level at that point.
Is it possible that your idea of what level is "firmly in the 1%" is just a few years out of date?
Take the raw numbers. Yearly household income of $400,000 is not gong to affect the baby sitter or local contract plumber. I stand by my assertion that the OPs comment was attempting to distort the narrative.
Yes this may need to be adjusted for inflation down the road, like anything else.
I suspect that both of those claims are dubious, by the way. Someone with more wealth is in fact likely to employ more plumbers (due to having more toilets) and babysitters-per-child (full-time nannies, tutors, etc). And given how low-margin grocery stores are, I don't know that I'd expect a grocery shop owner to end up with $400k+ taxable income....
> Yes this may need to be adjusted for inflation down the road, like anything else.
My main point about the inflation bit is that it's disingenuous to introduce a new tax with a claim that it "does not affect the middle class" when you know with near-certainty that in 10 years or less it absolutely will. In fact you are banking on that to make the numbers you depend on actually work out.
Almost all proposals to "tax the rich" that do not come with automatic inflation adjustments built in are just proposals to tax the middle class in disguise.
Many EU states seem to get this very wrong.
I agree in principle, but reducing immigration and restricting free trade aren't policies that make the poor rich; they're policies that benefit those in possession of scarce resources at a cost to the rest of society.
Take steel tariffs for instance. They benefit the steelworkers, at the cost of every domestic industry that consumes steel. The entire economy pays to support an otherwise unprofitable industry.
Reducing immigration won't magically increase the supply of skilled workers. There aren't masses of unskilled poor who aren't going to college due to immigration putting downwards pressure on skilled wages. They aren't going to college because they lack the resources and opportunity.
Here's some ideas:
1. Tax stock buybacks similar to dividends. Or eliminate them entirely. This leads to...
2. Let unearned income tax brackets go up to the same % levels as earned income, only for different income levels. For example, if $400k in earned income is 38%, then maybe $2m in unearned income should also be 38%. Right now long term cap gains tops out at 15%, which is bullshit.
3. Since wealthy people borrow against their assets to spend, instead of selling assets and incurring taxes, place limits on interest deductions when doing this. There are already similar limits in place for mortgage interest deductions.
By using a tax ladder  (tax rate increases in steps).
He probably views it as an investment. Amazon has a keener interest than most in ensuring road maintenance is done properly and if that means a small increase to his tax bill he's probably ok with it.
He also desperately needs to score some progressive points. His reputation is getting trashed rn. I'm sure that factored in to his decision.
I'm skeptical of the notion that he wants this to keep competitors down.
Why wouldn’t he just advocate for road maintenance?
Edit: whoops, I didn’t read his actual statement. Tricked by CNN! Still, I’m a little skeptical of ascribing motivations to people like Bezos that aren’t in line with his past actions, but instead are in line with my personal politics, which is why I’m skeptical.
If taxing the big companies is the aim, how does one gauge the policy suggestion?
(I am not Americans just watching this curiously from outside)
Besides, paying tax should be a much easier process for the small fish.
The solution would be to have absolute minimalist tax rules which are so simple that there wont be loopholes. Then also make judges apply common sense and smash every attempted loophole until everyone stops wasting money to find one.
Never going to happen obviously but we can dream.
I think we'd be better off fixing the deduction of such problems, but just pointing out that part of the reason taxes are so complicated are to enable this. Another reason is to create corporate tax loopholes...
Yes the loopholes are intentional but it only helps very few individuals and a whole industry of layer, while corporations aren't actually in the business of finding tax loopholes they are indirectly forced to participate anyway because their competitor does. People blame the companies for evading taxes but they are not the problem they have to play along because everything else would be hard to explain to the shareholders.
Imagine if you are a business owner and your company slowly grows to amazon size. At what point would a sane person like to pay people to evade taxes? You would never want to do that instead of building a team of tax specialist or outsource that you could expand in real business. Your local small business owner and Jeff Bezos both have no interest in that.
Some big companies retain multiple law firms and ask the same advice a couple of times. If an overworked attorney who barely gets any sleep ever misses a point or drafts his/her advice vaguely in a way that would enable their evil plans, they rely on that single opinion. If there are any problems they don't assume any liability, because hey they got a legal opinion from a respectable law firm. Nobody needs to know/can prove they obtained multiple opinions on the same matter because of legal privilege.
In return, big law gets paid a lot of $$$, because of the risk of providing such opinions under considerable pressure and trickstery.
In a big corp, I think most employees are concerned with saving the day. If the management pressures them to cut corners most will. What better way is there to pass the blame?
Both declarations are available to the IRS; if you force corporations to declare how they "bridge the gap", while it would let them practice tax evasion, it would make it easier to assess what form that evasion takes; and it would make fraud much harder.
I don't remember if it went through.
Large corporations have an effective tax rate below the nominal one due to antics with exceptions — while smaller businesses get hit harder. What’s called “progressive” often ends up regressive due to the imbalance in ability to do finance trickery. Rich people will always find or create exploits in the law, so those “high taxes on mega corps and billionaires!” hit the middle class and medium sized businesses: they’re who bear the brunt of taxes, in the US.
You get out of doing that unnecessary damage by removing the game: no whatever exceptions, just a flat rate everyone pays.
What’s called “regressive” is actually progressive in that it lightens the tax burden on the middle class and medium businesses, while making the richest pay a fair share. (Also, simpler codes are harder to cheat.)
Discussing the tax burden of the poorest is a misdirection used by politicians: the poorest in the US receive more benefits than they pay, so it’s a question of how that burden is split between the middle class and the upper class.
The big issue is with "just a flat rate that everyone pays". What do you pay that rate over? Big corporations manage to pay that rate over nothing. Generally those corporate taxes are paid over profits, so corporations avoid taking profits in countries that tax them. They sit on their money, pay it out as bonuses to executives, and take their profits in tax havens.
The issue isn't the tax rate, it's the loop holes. It's that the amount that's taxed is easily manipulated. Instead of easily manipulatable profits, the tax should be levied on something less easily manipulatable. Like revenue. Of course that already happens: VAT taxes, only because you pay them on all products, they are effectively paid by consumers, not corporations.
But how about allowing corporations to deduct their local external costs from their revenue? Not easily manipulatable foreign external costs, but simply the costs made in the same market as where the revenues come from? Then you're effectively still taxing profit, but tied to the local market, cutting tax havens and internal trickery out of the picture. A company on the other side of the world selling in your country but not making any costs there; no labour, manufacturing, rent, etc; would pay tax over their entire revenue, whereas a local shop that has does have all those costs, and therefore cannot help but invest in the local economy, gets to deduct those costs and pay less taxes.
I think that could do a lot to even out the imbalance and make the playing field a lot fairer.
If a country doesn’t make automobiles or refrigerators, are those taxed as if they were pure profit for the retailer? It’s not like a local retailer is going to manufacture even refrigerators, let alone cars or phones.
I think we need to address this somehow. Perhaps by counting size by which actual people control and/or own the companies rather than the current arbitrary legal structure.
Did you even read my post?
It’s entirely about this fact: you wrote a long rant concurring, but phrased as violent agreement.
You just pulled a single phrase out of a multiparagraph post, then strawmanned my argument.
That’s not up to the standards expected of HN posts.
You had one more paragraph with some random technical considerations agreeing with me.
Then you concluded.
You literally just repeated my point, but started with “it’s more complicated than that” — which is phrased as a disagreement with my point.
That’s a straw man (misrepresenting my suggestion as being a flat rate, even though my entire comment was about loopholes — like yours) and violent agreement (phrased as disagreement when repeating the same thing).
Your reply here is just wrong. (:
You could make that argument against absolutely any policy. So what is your solution then? Don't do anything?
Could you explain why this is the case?
> So just tax wealth of individuals
Individuals can play the same games. Jeff Bezos could move most of his wealth into funds, foundations or companies and be poor on paper while still keeping the de-facto control of all assets. Or they could shift their wealth overseas, into tax havens or into less transparent areas like crypto.
> Could you explain why this is the case?
Just to comment on this real quick, this has multiple reasons. Basically, the larger your company is, the more funds you have to spend on lawyers and experts, as well as offshoring. Also, depending on the country you're in and the specific tax laws, it might be easier to fulfill incentives for nullifying the corporate tax (IIRC reinvesting and creating jobs is how Amazon nullifies a good chunk of their taxes, right?). That is not to say, we should completely axe corporate tax imo, because some of those incentives are really good. You want corporations in your country to reinvest and create jobs, because that's overall a really good thing for the job market.
The thing about Bezos' wealth is that a huge chunk (maybe even the majority) of it is already in the form of assets. That's not as easily moved overseas (though to my limited understanding it isn't impossible) without hurting his own company, and at that point it might be profitable to just pay a wealth or asset tax or something like that. Obviously that would need to be designed REALLY well, but there's a good chance that that's how we can tax exactly what we want to tax, without hurting small businesses and without hurting the lower class.
I’m talking all loopholes, even giving money to a 501c3. Billy’s nonprofit gives back less than 1% to the country that coddled him. Plus—I feel a lot of nonprofits are just tax dodges.
Want to manufacture overseas? Fine, but move to that country, and don’t come back.
I got carried away again. I would like to basically see tax loopholes closed, or only allowed the first few years of a business life.
The problem is real-estate as this is what people need. If people could buy property they would not be interested in stocks or crypto and they would not care for rich people getting richer. They would be busy in their pools or backyards.
And fixing real-estate is not done by having more taxes, penalizing vacant homes, or grabbing your inheritance. It's simple: Build more housing.
I am almost in my 40s now and one thing I've recently learned is that sometimes it is better not to do anything at all.
You can set a fee of 3% for restaurants let's say, and 10% for some other business (example)
This makes sense for small business
Even if it does mean less restaurants and less eating out, there is nothing inherently more unfair about it.
You can also see for example the digital services tax introduced by France because VAT was not proving effective.
Unless your thought is that businesses would charge more if there was no sales tax. I don't really buy that, though; businesses list pre-tax prices specifically to avoid sticker shock.
How about a policy of mandatory 10% profit for companies over 1B in revenue? That would produce some nice antimonopoly effects too.
Generally the answer is: they "spent" the money on "intellectual property" licensed to them by a subsidiary in Ireland (patents, brand name, software license) where that subsidiary pays zero takes through some accounting trickery and moves that money offshore to Bermuda or Caymans. So the main company makes zero profit in markets outside Ireland because coincidentally licensing expenses exactly equal the gross profits of the company - and thus pays zero taxes anywhere ever.
 formerly the "double Irish" international tax loophole, nowadays there's a different "Irish patent box"
Funny. China had a profitability requirement for any IPO until the beginning of 2020.
This is the desired outcome and we should not touch this.
Say I run a company out of the US called 'Paraná' (Seeing as the other big river is already taken), turning $1B/year profit.
I promptly spend the profit buying consulting services from 'Paraná Consulting and Tax Shenanigans LLC' based out of a Panama mailbox for $1.05B, for instance - then I even run my US business at a loss.
(I don't know anything about US or international tax codes, but the above basically sums up the methods described in X stories I've read about tax planning over the years.)
UK, Netherlands and others countries have their own tax havens like Cayman Island, Curacao Island. Are you really going to ban trade with such big financial powerhouses?
Pay the damn wages and dividends, I'd say. The former will go into consumption, the latter will go probably into other companies, especially if we discourage less productive uses of capital (like real estate). And also getting taxes from these is more straightforward. Maybe they don't even have to be that high percentage-wise, if there is less possibility of avoidance.
If the goal is to increase wages, then government should lower the supply of labor and increase the demand for labor. Provide minimum x weeks of vacation, parental leave, maximum 8 hours per day until overtime rates kick in, free higher education, etc.
As for forcing companies to pay dividends, I’d rather the government not be able to tell me what to do with my company’s funds. If the government wants control of the funds, they should raise the tax rates.
> As for forcing companies to pay dividends, I’d rather the government not be able to tell me what to do with my company’s funds
I don't want to digress too much, but limited liability corporation and more complex structures with shareholders are creations of the government. You used to have to obtain a specific charter from the sovereign for each one of them. So unless you're an individual doing business with unlimited liability, it's debatable whether government (or the lawgiver, to be more specific) shouldn't get to make the rules for you.
Of course, the idea that states are created for the benefit of humans is bullshit, but it's nice to dream of something better...
I agree with this. Which is why I wrote the state can choose to increase taxes. I have yet to be shown how requiring a company to pay dividends accomplishes the goal of improving the lives of humans.
Of course, that's too tame. We'd be better off eliminating the most common forms of incorporation, or severely curtailing them e.g. maximum revenue limits. All the things that corporations can do, individuals, partnerships, mutual-benefit firms, etc. can also do, except often more carefully.
> doesn't let you entirely evade taxes
It's not about evading taxes to 100%, but maybe 90% (not sure about the numbers).
Also, the taxes get paid in a different country, doesn't benefit the people in, say, the US.
In that example they found that the 'licensing fee' was a royalty meaning there is a 30% withholding depending on double tax treaties and rates between the two locations. Which for a zero tax foreign licensor would mean a 30% local tax on however much you send overseas.
I wonder how much the company saved on avoiding taxes in that way, until it didn't work any more. (Didn't see any numbers, having had a look at the linked page)
I wonder if there's any table of all different methods companies use, to avoid taxes, and how much they typically save, and what could be ways to stop it
Maybe could be helpful for lawmakers
> required to pay 30% withholding tax
That's quite a lot is it? Compared to company taxes. Seems like a strong incentive to stop cheating
Agreed. To add perspective, I don't believe corporations will give a crap about the people (extreme example, Amazon) like we believe our respective governments should. I'd rather have bad spending on keeping people alive than no spending at all.
Instead of actually promoting innovation, they tend to become a subsidy for the tech industry.
Meanwhile Joe Schmoe bought yet another iPad (which wouldn't exist without the government inventing much of computer tech) to go in a landfill in two years. But at least he funded Apple's ability to make a brand new, basically identical model, next year.
How do we measure who has a "good" track record on spending money?
To avoid pure anecdotes, the Government Accountability Office actually studies this every year: https://www.gao.gov/products/gao-20-440sp ...
That's not to say I don't believe in government spending. I don't know that there is a much better solution, and any conglomeration of humans is going to have roughly equal capacity for doing the right thing and doing the wrong thing, hopefully weighted more towards the "right" thing with solid leadership...
R&D would get us fastest nice things like space colonization, longevity, megastructures, the next step on the Kardashev scale.
NASA doled out public money to prime contractors for various pieces of the program (North American, Grumman, Rocketdyne, Douglas, IBM...) and the primes subcontracted various pieces as they always do.
This is not to understate the tremendous engineering effort of organizing such a huge program, but it’s not like this achievement was done by a bunch of government workers alone.
Thank you, loopholes!
What you mention is less true if corporate tax is progressive on profits.
On the other hand, Amazon wouldn't care about corporate taxes on profits because it reinvests all its revenue.
This is arguably a more efficient transfer capital rather than raising taxes and then dealing with bipartisan political entities in the most efficient use.
Id also point out that the new tax policy also raises wealth tax by a significant amount. Also, its probably better to deal with wealth tax on a state by state basis, since this in turn forces the development of generally low tax areas since its favorable for people to move there (like all the companies setting up shop in Austin right now, which in turn raised the wealth of anyone there who owns a house by close to 100k at this point)
So, in practice, that's just lobbying to kill his competition off?
On the other hand: Wait wasn't it Amazon who cheated on taxes like no other company (compared in size)?
After the union shenanigans, his biasedness in the elections or well deserved PR desasters such as the contest for a new headquarter (what a surprise it went where it can influence policy most), I'm a bit allergic to being nudged to see his moves as all too altruistic.
Increasing corporate taxes raises the burden across the board, for competitors and possible future ones. Meanwhile Amazon can afford to have its accounting adjusted to mitigate the impact more efficiently than any competitor could.
It cements his position.
The politicians we vote in deliberately create laws that allow large companies to pay little to no tax. It is not an accident or a sneaky corporation that outwitted a dumb politician, it is by design.
> it is by design
It certainly wasn't "designed" for geographically flexible entities such as Amazon that didn't even exist 30 years ago.
When ever a new kind of entity fits in loop holes that weren't open one technological advance earlier it has any interest to lobby politicians to keep that niche/grey-area open. That can and should be called cheating.
We do not consider that bribery, yet when a group we dislike does the same thing, we’re supposed to see all lobbying as bribery or just that of opposing groups?
<Edited to add brevity.>
Lobbying is at least transparent in its intentions.
My point is that it would be more productive to focus on fixing the system than just getting angry at companies for "cheating".
Its not like the corporations haven't been using their financial influence, particularly after Citizen's United, to influence the rules.
We need to start approaching more taxation rules at a trading/travel block level. E.g. G12 say minimum 25% corporate tax or any product/service that involves non-complainant countries has a X% duty type thing.... or something down that concept route.
I think the real rich person law they politicians have supported and can influence is capital gains tax. Capital gains at a certain point is income. There's a reason CEO's take a $1 salary, they are clearly not living on that.
The Section 482-7 regs were written by the IRS to control how intellectual property is shifted offshore. The valuation methods outlined in the article were questionable. I read the regs multiple times to understand them and made an Excel valuation model to follow their rules.
Don't think the IRS realized they created terrible, ridiculous theoretical models. Don't think it was intentional either. Just a few people that didn't understand the implications and congress that signed the code into law without being able to understand it. Tax code for valuing IP is highly complex.
The US government writes terrible tax code in my opinion, mainly because they're just not very good. They're not as good as top private sector tax lawyers.
I empathize with the "You make the tax laws @SenWarren; we just follow them. If you don't like the laws you've created, by all means, change them" sentiment. Multinational corporations have to comply with tax laws from multiple countries that are arbitrary and complex.
I don't think any of us here could come up with a tax code that cannot be exploited. And of course large companies will exploit any loophole, all of us do when filing our taxes.
Maybe the problem is the existence of such powerful companies. Once you have them, it's very hard for politicians to stay on top of them.
To be clear, I'm not saying that there's no corruption or politicians favoring large companies. But most loopholes used by companies tend to stem from good intentions. It's like in IT security, there are backdoors but most bugs still have a benign origin.
Good governance is hard. And megacorps are an advanced persistent threat that goes to great lengths to claim exceptions for itself.
Usually those are in there to be found and used. Your energy would be better spent being upset with the politicians for putting it in there than the lawyers for finding it.
i really don't think this is true, many big companies are hopelessly bureaucratic
It's also largely a question of what change is required? I've seen a parent company move itself to become a subsidiary of a holding company which is now landed in another nation. It had almost no effect on the day to day. It was paper work.
Megacorps are filled with paperwork. But that doesn't necessarily mean they are bad at it, slow at it.
It's because Amazon has low profit margins compared to other companies its size - AWS is profitable but the retail business isn't very much, and investors don't want them to make more money because they like free shipping too much. The remainder is lost to R&D credits.
If people want Amazon to pay more taxes, then Washington state should have an income tax. Pretty straightforward.
He was ruthless and inhuman to his workers and we should never forget that.
For Bezos that could very well be true. Interestingly enough Amazon used to have a really positive public image until about 1-2 years ago. If he had quit any earlier, maybe his image would be much better now.
Unfortunately not only that, but ruthlessness is a main characteristic of most of his business practice. This peace is obviously yet another attempt at further increasing the size of his moat around his corporations. On top of that never forget he also has a substantial stake in mass news media itself.
The problem is they aren't cheating. They are hiring a lot of lawyers to find every single LEGAL mechanism in the book to allow them to pay no taxes.
I'm not saying I agree with it. But the problem here isn't with Amazon it's with the US tax code, which has been molded over decades of politicians and lobbyists to allow for this.
To fix the system you need to fix the tax code.
Even if you fix taxes on national level, you aren't going to catch multinationals. They keep moving just behind that inevitable race to the bottom.
Because in my country basically the governments hire law firms to write out legislation, and then those same law firms sell these types of services to circumvent the laws they draft.
So the feeling I get it's not much a taxes problem, but the public institutions are managed by lawyers, and are optimized by lawyers that leave enough margin so they can thrive.
And why should they ?? To quote Steve Eisman "incentives trump ethics every single time".
Here's a tax strategy that will greatly simplify all government efforts: any corporation with a market cap of 100bn+ is obliged to sign a privately negotiated deal with the gov to agree on a annual tax rate for the next X years. The minimum is set at 20% with no exceptions and can go up to 50% depending on the estimated negative social impact of the corporation. There are no write offs, no loopholes. Every year the tax bottomline is checked and enforced.
There is also a tax distribution enforced so that only a few can get the 20% one at any time. The goal of this to force a "bidding war" between them to get the lowest tax and the only way to do that is to reduce their negative impact to a bear minimum or stop existing altogether. Incentives.
Once that is set in place work on reducing the tax code complexity for everyone and everything below 100bn. Currently most if not all tax regimes try to shoehorn all entities under the sun under similar rules and then provide various kinds of tax write offs that create incentives to dodge tax and provides the biggest players with a massive advantage as they can hire specialists to focus on every single possible loophole to avoid paying anything.
I know I shouldn’t mix the individual with the public company he founded and I don’t want to be that person that says he only does it because the tax incentives. He is a person after all and I’m sure he deals with more social pressure as a result of his status and like all people has issues that strike a cord internally. Still there is something deeply troubling about people acquiring so much wealth that put them in that situation in the first place when he wouldn’t be there without his workers and yet significant numbers of them are on food stamps paid for by taxpayers...when his company paid $0 taxes.
Be it Billy Gates, Bezos, or one of the many Midwestern Financial Gurus—-their use of 901c3‘s are basically tax dodges.
Gates foundation gives back less than 1% of the wife’s fund to the nation that birthed him, and provided a comfy launching pad for that privileged life. (I get you need to help developing nations, but America is dying. I have never seen so many homeless.)
I don’t know Bezos charities, but if it’s related to his companies commercials in media, those are carefully selected to brainwash the masses. How much money did they spend so we knew their employees had soap to wash their hands this past year? And I guess Amazon warehouse workers chuckle fund was receiving hand sanitizer that looked like vodka bottles.
I see how Amazon is now worried about climate change now with his promise of electric vehicles, so he must be worried about something? Maybe he’s running short of tax write offs, and heavily federally subsided electric vehicles make sense fiscally? Not even taking into account the millions he will save on a depreciating asset? In a way, we are buying his gift to carbon neutrality? (I would bet in five years—he will take the Uber approach to deliveries more than he does now, even requiring workers to furnish their own electric vans). I could see the boys laughing over this at the catered hootenanny. It feels good to be a gangster bllly—huh?
I only know of a few charities that truly give back. Most of the big ones we all know through media are overfunded. I once heard there is a very popular children’s hospital who could operate for the next twenty years without another cent, even when taking into account inflation/tech costs.
I used to look up nonprofits on WayStar. They have now made looking at the free 1040’s complicated.
(Does anyone know of a truly selfless charity? I’ve always given Salvation Army a long rope. They have been feeding America’s hungry forever, and I know people who eat there.)
Do you mean 501c3? How are these a tax dodge? How does someone end up financially better off than just keeping and investing their wealth if they choose to donate it or deploy it in a donor advised fund?
> Gates foundation gives back less than 1% of the wife’s fund to the nation that birthed him, and provided a comfy launching pad for that privileged life. (I get you need to help developing nations, but America is dying. I have never seen so many homeless.)
If you think America is dying, boy do I have news for you about the state of most of the world. I also deploy most of my personal donations outside America, through GiveWell and Watsi (and more targeted donations independently).
America has a lot of problems. I live in NYC and can empathize with the dissonance of seeing the homeless sleeping in the cold on Madison Ave. I don't want to diminutize that, and this is something I also care about.
But the blunt fact of the matter is that America is far better off than the countries Gates focuses on. It's not even a fair comparison in terms of poverty and healthcare. Gates deploys his wealth primarily in regions that have never or only rarely "birthed" billionaires like Gates, in your words.
It is uniquely selfish to criticize billionaires for hoarding their wealth while also insisting they focus their charity on one of the richest countries in the world by median.
But the whole life of Bill and Melinda is about their work in the foundation. It's not a side gig for good press, they don't do anything else. I can understand criticism where billionaires have a charity next to their business. But there's no other business left for Bill.
But to be fair, Bill Gates is probably the only prominent example of a billionaire who quit the industry completely and dedicated his whole life towards charity.
James Simons has more or less done this for the past 15 years.
Alternatively, why should Gates spend charity money on America if that money would go have a greater impact on helping people and improving lives elsewhere?
My mom grew up in a village where some had to resort to cannibalism to survive. My grandfather was eaten after being beheaded by communists. I am blessed to be an American.
In 1997, as part of the Tobacco Master Settlement Agreement, the 4 major tobacco companies agreed to sweeping restrictions on cigarette advertising. This ensured that it was almost impossible for a new player to enter the market, because they had no way to create brand awareness.
This is a desired behavior which we want - it fosters innovation and job creation.
It seems to me that money can be used for two things: productive uses and unproductive uses. Unproductive uses can be taxed as much as we want - as a society we don't really care that much if people can't do unproductive things with their money like pay for foot massages and things like that. (Well, people who want to pay for unproductive things like foot massages and videogames care, but I think it's okay to take away some potential foot massages via taxation to pay for important public goods.) But we should take care when taxing productive things, because we're taking away opportunities from our future. If a masseuse wants to invest in some kind of robo-massager that will let them give twice as good foot massages for half the price, that's just a better use of everyone's time and money than continuing to do it the old way and not something we probably want to discourage.
Seen through that lens, a wealth tax (or better, a consumption tax like a VAT) makes more sense than a corporate tax to me. Imagine a chash-rich opportunity-poor corporation that has only one thing to do with its excess cash: invest it building new widget factories for 3% return on investment. And let's say there's a cash-strapped opportunity-rich second company that can build new factories for a 10% return on investment. What we would want to happen is for the owners of the first company to withdraw the excess cash, so they can invest it in the second company which has much better things to do with it.
With a corporate tax, that process is interrupted, because the first company can invest in itself tax-free but must pay taxes to return money to investors so they can put it to better use.
My thinking is that a wealth tax taxes nearly the same thing as a corporate tax, without this flaw. You can't really tax a "corporation", fundamentally everything is owned by someone so if you tax a corporation you really tax the owners of the corporation. Here's how that plays out: The price of a share of a company is usually modelled as the expected future earnings from posession of that share, discounted for time. So if you expect a company to pay dividends of $0.1/share/year forever and have a discount rate of 5%, you should be willing to pay $2.00/share. If a corporate tax of 50% reduces that to $0.05/share/year (since half the profits have been taxed so the dividends are half as large), the price will drop to $1/share. A wealth tax taxes the value of the shares directly, instead of messily taxing the profits and affecting the share price indirectly. But a wealth tax doesn't have the weird switching-over issue I mentioned earlier, so money would no longer be trapped in unproductive areas (or worse, trapped overseas waiting for a change in US corporate tax policy).
A VAT would be even better because it would incentivize people to keep their money in productive uses by taxing only unproductive uses (VAT doesn't apply to stocks or business expeneses or things of that nature). But that's kind of tangential.
Maybe a professional economist can correct me on this but that's my thinking.
there is no process interruption here. a tax on profit doesn't prevent corporations from investing in the highest npv projects available to it because capital expenditures and r&d investments occur before that taxation, and moreover the interest expense is deducted as well.
despite all the hand-wringing over corporate taxation, this maxim holds true in most cases. taxation has little effect on the investments a company chooses (or alternatively, the variance of choices gets lost in the error bars). they will still tend to choose the highest npv projects, even if that's negative.
In that case, it has to take that money as profits instead of reinvesting, and so is taxed.