It's a good letter, but I would have appreciated a mention of lowering corporate taxes. With a 35% corporate tax rate, that does encourage innovation -- innovation in tax avoidance. Think of the innovation that could happen if companies had a 15% corporate tax rate.. that would mean 20% available capital to companies. If I suddenly had access to 20% more capital, I would hire more people and build more things. A 35% corporate tax rate is the highest in the industrialized world and it's as big a detriment to company growth as any IP battle.
I'm not an accountant, but aren't the salaries paid to people you hire expenses thus not subject to corporate tax? In other words, if you make $1M a year and spend $1M a year on salaries, you pay $0 in taxes. If you instead spend $800K on salaries and have no other expenses, you pay tax on the $200K in profit.
Besides which, the point of the letter was to argue a single point: innovation over enforcement. Why stuff it up with topics like taxes, healthcare, or any other unrelated topic that would only serve to dilute the core message?
You're right. Taxes are in income net of salaries and expenses. If the tax rate was 15% versus 35%, the correct statement is not that it'd free up 20% of revenue for expansion, but rather that it would increase profits, presumably creating greater incentives for expansion.
The way taxes are structured, lower taxes is a second-order incentives issue, not a first-order availability of funds for expansion issue.
By that logic, isn't there already huge incentive for 'expansion' because anything not plowed in to expansion will be taxed, but anything rolled in to expansion won't be taxed?
EDIT: What we see now is the exact opposite of that - some companies sitting on huge hoards of cash, just waiting. Waiting for what, I'm not quite sure, but there's nothing stopping them from 'expansion' right now.
Sorry, but no. America's level of effective corporate taxation is at a historical low. Corporations used to shoulder more of the tax burden than individuals, now it's the other way around.
We need to keep the rate the same, but close a whole bunch of loopholes. Your expenses are already counted out before you pay the corporate tax.
If you want proof, I suggest you read the 1939 Tax Code, then the 1984 Tax Code, then the 1986 Tax Code. What do they all have in common? Corporate rates went down, and deductions and credits went up. 99% of the complexity of the federal income tax code relates to corporate taxes.
Companies are not paying taxes because they are reporting losses. Tax losses are not the same thing as economic losses. Tax losses are good and desirable; economic losses are not. GE, for example makes billions in profits each yet, yet is able to pay a negative tax rate. Apple and Google make billions each quarter, but avoid taxes on it by parking it overseas.
A thriving startup will be reinvesting in R&D and marketing expense, thus bringing profits back down to $0 (or lower if you've got investor funds).
It's absolutely dishonest to pretend that corp income taxes matter to startups in any meaningful way. If you're on track to make $1.2m next year, aim to increase your average monthly spend by $100k, and you'll make no profit (and thus pay no corp income tax), while retaining ownership of an asset whose value is increasing at a multiple of the revenues.
Innovation and IP laws matter to entrepreneurs. Corporate income tax rates are close to irrelevant for entrepreneurs.
Taxes do not matter to young startups, and I get frustrated hearing politicians (mainly from the right) argue that we need to cut corporate tax rates on behalf of entrepreneurs - when the primary beneficiaries are clearly large, established corporations.
That said, even after moving the goalposts (and pretending you didn't make your initial claims), your argument is still false just slightly less obviously so. Corporate income tax always costs rentiers more than innovators.
A business that can acquire customers with an LTV of $1,000 for a cost of $500 (read: a good, sustainable business) isn't going to just sit on $1,000,000 of profit. They're going to buy 2,000 customers.
And then next year they're going to buy even more. And then even more.
The company is only reinvesting $1M profit this year in the hopes of making $2M profit next year. The ultimate goal of building a company is for it to generate profit which will accrue to the shareholders.
Your hypothetical process of continually reinvesting all the profit can't continue forever. Even if it could, the company would have no investors. Why throw your money away?
Yes, taxes are eventually paid. But they aren't harmful to the innovation process, rather they provide an incentive to innovate for as long as you can. The corp tax actually provides a net advantage to innovators over rent-collectors.
It's exactly backwards of what briandear was claiming.
As for the rest of your nonsense, you're arguing against things that weren't said or implied.
If you (like briandear) believe that including anti-tax arguments in a response would increase the efficacy of the response, I'd strongly suggest that you avoid a career in marketing or sales. Not trying to be snarky, but I can't think of a polite way of expressing how ineffective the inclusion of general anti-tax sentiment would be when attempting to persuade the target audience.
I never suggested the anti-tax arguments should be contained in the petition, I just said you were wrong in your claim that corporate taxes are irrelevant for entrepreneurs.
The corporate tax rate is progressive, barely. Making it more progressive is also and option. 75.000 - 10.000.000 is taxed at 34%, adding some granularity would help.
