Reduce Corporate Tax Rate To 15% ?

[TD Ryan2 314]

Will this really create jobs?

I'm being honest - I don't know if it will or won't - but based on what I've seen / experienced, I'm skeptical.

 

See - the companies I've worked for over the last 20 years don't just hand out bigger raises or add more employees simply because revenue and/or profits rise.

Even today, companies are more profitable than ever, but there's no big spike in hiring and wages.

 

Why should I believe that making corporations even MORE profitable will help to increase wages and hiring?

 

And I don't think corporations are "evil" or "greedy" for behaving this way - corporations exist to make money and profit, not just give it away because it's "nice" or 'the right thing to do" or "patriotic".

 

 

[edjr 5,554]

Not a focking chance.

 

Greed, Greed, Greed, Greed, Greed

[NorthernVike 2,080]

I don't think they would hand out bigger raises, but it may keep some companies from going oversees or bring some back to the US.

[TD Ryan2 314]

I don't think they would hand out bigger raises, but it may keep some companies from going oversees or bring some back to the US.

OK - fair point.

 

But to me, this is more of the same that I already see with corporate america... lemme' 'splain:

 

most companies right now are really benefiting from the recession's after-effects in the sense that they "learned to do more with less" and "productivity" is up... companies learned to run lean, hold on to their better employees, and simply get more out of them... so... in the same way the Govm't isn't ever gonna reduce taxes or give any back once they get it... Corps. aren't ever gonna' dial back the "lean and productive" approach either... in fact, BOTH will push for more.... get them to 15% today... they'll need 14% tomorrow and if you don't, more wage cuts and job losses because they need to meet their growth schedules and increase profitability year-over-year for ownership and shareholders.

 

[parrot 789]

Will this really create jobs?

I'm being honest - I don't know if it will or won't - but based on what I've seen / experienced, I'm skeptical.

 

See - the companies I've worked for over the last 20 years don't just hand out bigger raises or add more employees simply because revenue and/or profits rise.

Even today, companies are more profitable than ever, but there's no big spike in hiring and wages.

 

Why should I believe that making corporations even MORE profitable will help to increase wages and hiring?

 

And I don't think corporations are "evil" or "greedy" for behaving this way - corporations exist to make money and profit, not just give it away because it's "nice" or 'the right thing to do" or "patriotic".

 

 

 

I work for a small, closely held corporation. We actually do tend to pay larger bonuses in more profitable years, but part of the reason for that is to beat the taxes. So in some ways we might be less inclined to pay that money out if tax rates were lower.

[Gladiators 1,904]

I think it's just a big circle jerk.

 

With that said, I think the goal of reducing corporate tax rates is to keep manufacturing here and help increase company profits. Increased profits, hopefully, results in companies growing their companies. They bring in new machinery, build new plants, expand corporate offices (all of this also helps the construction industry), which adds more jobs. More jobs means more consumer spending and increases in the housing market, as well as less unemployment and people living off the government...Like I said, big circle jerk.

 

I haven't dug into whether the theory holds much merit. I could also see companies saying, "hey, we just saved $50M in taxes since our rate dropped to 15%, we should probably divide that up between the 20 execs and pay out slightly higher dividends, no?" Lots of companies already pay low rates though...There are so many loopholes.

 

Ultimately, we need to keep manufacturing in the US and export. We can't continue growing and adding jobs to the US economy by selling to ourselves. The only way that works is if the government essentially funds everything through adding to our growing national debt.

 

I try not to get caught up in this ...Just increases my stress/anger levels.

[edjr 5,554]

it's time abolish the IRS and institute a flat tax and a fat tax

[NorthernVike 2,080]

More companies than ever are abandoning the U.S. for nations with lower taxes.

A new analysis found 47 companies have relocated to home bases overseas to take advantage of lower rates in the past 10 years through a merger process known as inversion.

To qualify for the lower taxes, a company must do more than simply set up shop overseas and change its address. It must first merge with a company in the lower-tax country and then either do at least a quarter of its business overseas or give the owners of the foreign company at least one-fifth ownership of the newly merged company.

Only 29 companies used the inversion process during the previous two decades, according to the Congressional Research Service analysis.

 

Lawmakers and regulators have tightened the requirements over the years after high-profile companies like Fruit of the Loom, Seagate and Tyco shifted some or all of their business to places like the Cayman Islands and Bermuda.

But with the trend seemingly on the rise, some say it is time for yet more stringent requirements. Among them is Rep. Sander Levin, a senior Democrat whose office distributed the CMS report.

 

 

Inversion can yield significant tax savings. One of the most recent deals, for example, shifts medical device giant Medtronic (MDT) from Minneapolis to Ireland, where it acquired rival Covidien. Ireland's corporate tax rate of 12.5% is significantly lower than the top U.S. rate of 35%. Pfizer (PFE) recently pursued a similar deal with its British pharmaceutical rival AstraZeneca (AZN).

 

 

http://money.cnn.com/2014/07/07/news/economy/tax-advantage-inversion/

 

 

 

Now the article is two years old but the point stands. Not only do we lose great paying jobs, we lose out on a shitton of taxes. So instead of lowering taxes the Government wants to force them to stay...

 

that doesn't work so well so why not try lowering taxes?

[TD Ryan2 314]

thanks NV - that's interesting stuff.

 

I don't blame corps. for moving if it helps them be more profitable... that's what they're supposed to do.

 

It just seems like that leaves the USA chasing and begging the Corps. to stay without any real leverage or commitment the next time the Corps. want a tax break.

 

How about Import fees? In the end, the US is the great consumer /spending country... our citizens are the ones buying everything... wouldn't a hefty import tax then give the US leverage and keep companies HOPING they could stay here because if they can't HQ in the USA, they'l likely lose access to the US market b/c high import taxes reduce their competetivness?

 

and again... I don't know the answer, just asking questions.

[Baker Boy 1,484]

We have the highest corporate tax rate in the world.

Many corporations pay no corporate tax today.

Who do you think actually pay the corporate tax? The consumer.

[NorthernVike 2,080]

thanks NV - that's interesting stuff.

 

I don't blame corps. for moving if it helps them be more profitable... that's what they're supposed to do.

 

It just seems like that leaves the USA chasing and begging the Corps. to stay without any real leverage or commitment the next time the Corps. want a tax break.

 

How about Import fees? In the end, the US is the great consumer /spending country... our citizens are the ones buying everything... wouldn't a hefty import tax then give the US leverage and keep companies HOPING they could stay here because if they can't HQ in the USA, they'l likely lose access to the US market b/c high import taxes reduce their competetivness?

 

and again... I don't know the answer, just asking questions.

 

Import fees are a great idea according to Trump. They are also a great way to start trade wars according to Clinton. I jest.

 

Open trade has been a key part of Obamas economic plan, so lowering taxes may be the only incentive left.

 

 

Personally, I'd love to see a 15% corporate tax. I own 50% of an S-Corp business, I'd change to a C-corp in a heart beat if they did. We are an S-corp so we pay ordinary income tax on the profits of our business as I am not in the 35% tax bracket. Take what they give you I guess.

[IGotWorms 3,309]

No that's silly.

[Gladiators 1,904]

 

Import fees are a great idea according to Trump. They are also a great way to start trade wars according to Clinton. I jest.

 

Open trade has been a key part of Obamas economic plan, so lowering taxes may be the only incentive left.

 

 

Personally, I'd love to see a 15% corporate tax. I own 50% of an S-Corp business, I'd change to a C-corp in a heart beat if they did. We are an S-corp so we pay ordinary income tax on the profits of our business as I am not in the 35% tax bracket. Take what they give you I guess.

 

Have you done an analysis on this? Wouldn't you pay the 15% corporate tax and then 15-20% on dividends? I don't think I'd be quick to switch to a C-Corp if the rate was dropped. Probably means more legal/accounting fees to switch and who knows how long the reduced tax rate would last.

[parrot 789]

Personally, I'd love to see a 15% corporate tax. I own 50% of an S-Corp business, I'd change to a C-corp in a heart beat if they did. We are an S-corp so we pay ordinary income tax on the profits of our business as I am not in the 35% tax bracket. Take what they give you I guess.

 

This may not work to your benefit. You pay your normal tax rates on your pro-rata share of the S-corp profits now. As a C-corp, even with a 15% tax rate, you're going to pay that rate on your profits, then you will have pay at least the dividend rate of 15% on top of it. And those aren't graduated rates like individual rates, that will be 30% on the whole nut.

[NorthernVike 2,080]

 

Have you done an analysis on this? Wouldn't you pay the 15% corporate tax and then 15-20% on dividends? I don't think I'd be quick to switch to a C-Corp if the rate was dropped. Probably means more legal/accounting fees to switch and who knows how long the reduced tax rate would last.

 

 

This may not work to your benefit. You pay your normal tax rates on your pro-rata share of the S-corp profits now. As a C-corp, even with a 15% tax rate, you're going to pay that rate on your profits, then you will have pay at least the dividend rate of 15% on top of it. And those aren't graduated rates like individual rates, that will be 30% on the whole nut.

 

 

Thanks for the heads up.

[NorthernVike 2,080]

No that's silly.

 

 

Great insight.

[IGotWorms 3,309]

OK - fair point.

 

But to me, this is more of the same that I already see with corporate america... lemme' 'splain:

 

most companies right now are really benefiting from the recession's after-effects in the sense that they "learned to do more with less" and "productivity" is up... companies learned to run lean, hold on to their better employees, and simply get more out of them... so... in the same way the Govm't isn't ever gonna reduce taxes or give any back once they get it... Corps. aren't ever gonna' dial back the "lean and productive" approach either... in fact, BOTH will push for more.... get them to 15% today... they'll need 14% tomorrow and if you don't, more wage cuts and job losses because they need to meet their growth schedules and increase profitability year-over-year for ownership and shareholders.

 

Yes this is 100% correct.

 

Trickle down folks act like if you just hand these huge corporations a wad of cash they'll say "gee we don't know what to do with this, so let's hire more people!!"

 

Could not be further from the truth. They will hoard it for their officers and share holders. And if they do invest it probably won't be in human capital and it probably won't be in the United States.

 

To believe otherwise is just naive.

[Strike 3,956]

I always find it odd when people rail on large corporations. I've worked for several small companies and two fortune 500 companies in my career, including my current gig. I've been treated much better financially from the large companies I've worked for than the small ones. Of course, part of that is having a desirable skill set. Being a good fry cook isn't going to cut it. So, who here works for a large company and is being bent over financially? In my experience, if you have a desirable skill set large companies will pay you accordingly. I will say that the company I work for has moved some of our jobs to India. Definitely a cost saving move. So anything to lower the cost of keeping employees here would undoubtedly help keep more jobs in the U.S. at my company.

[IGotWorms 3,309]

I always find it odd when people rail on large corporations. I've worked for several small companies and two fortune 500 companies in my career, including my current gig. I've been treated much better financially from the large companies I've worked for than the small ones. Of course, part of that is having a desirable skill set. Being a good fry cook isn't going to cut it. So, who here works for a large company and is being bent over financially? In my experience, if you have a desirable skill set large companies will pay you accordingly. I will say that the company I work for has moved some of our jobs to India. Definitely a cost saving move. So anything to lower the cost of keeping employees here would undoubtedly help keep more jobs in the U.S. at my company.

I don't think anyone's railing on them.

 

Simple fact is their sole and only obligation is to their shareholders. Legally they owe a duty to run the business in the best way possible and these days that almost exclusively means maximizing profit in the near term.

 

So if you give them more $$ in the form of a huge tax break they will almost certainly use that cash to pad their bottom line.

 

That's not hating on large corporations, it's just acknowledging reality.

[Strike 3,956]

I don't think anyone's railing on them.

 

Simple fact is their sole and only obligation is to their shareholders. Legally they owe a duty to run the business in the best way possible and these days that almost exclusively means maximizing profit in the near term.

 

So if you give them more $$ in the form of a huge tax break they will almost certainly use that cash to pad their bottom line.

 

That's not hating on large corporations, it's just acknowledging reality.

 

 

Actually, it's an overly simplistic view of how corporations work. And, even using your model, with a lower tax rate it very well may be in a corporation's best interest to hire more people.

[IGotWorms 3,309]

 

 

Actually, it's an overly simplistic view of how corporations work. And, even using your model, with a lower tax rate it very well may be in a corporation's best interest to hire more people.

Might be in their best interests to hire some additional workers in the US or elsewhere. That's about as much as you're going to get. Doesn't seem like it's worth trillions in lost tax revenue to me

[Strike 3,956]

Might be in their best interests to hire some additional workers in the US or elsewhere. That's about as much as you're going to get. Doesn't seem like it's worth trillions in lost tax revenue to me

Do you think they pay 35% now?

[TD Ryan2 314]

the whole idea of taxing Corps to begin with was based on the notion the the Corps needed the USA... for roads, infrastructure, security, etc... all of those things that facilitate doing business.

 

and it simply isn't the case anymore... the USA doesn't have a monopoly on those things as much as it once did AND business relies less on those things than ever before.

 

So, what's the USA's leverage now? Seems to me that they lost a ton of leverage but the ONE thing the USA still has is it's spending... the USA is the #1 market... we are the world's #1 customer.... lose the US market and your Revenue/Profits will take a HUGE hit.

So why doesn't the USA leverage that?

 

[IGotWorms 3,309]

the whole idea of taxing Corps to begin with was based on the notion the the Corps needed the USA... for roads, infrastructure, security, etc... all of those things that facilitate doing business.

 

and it simply isn't the case anymore... the USA doesn't have a monopoly on those things as much as it once did AND business relies less on those things than ever before.

 

So, what's the USA's leverage now? Seems to me that they lost a ton of leverage but the ONE thing the USA still has is it's spending... the USA is the #1 market... we are the world's #1 customer.... lose the US market and your Revenue/Profits will take a HUGE hit.

So why doesn't the USA leverage that?

 

Our leverage is our financial system and our culture. Both are slowly eroding and/or being replaced internationally.

 

Which makes sense if you think about it. Our domination wasn't going to last forever.

[Bert 1,087]

it's time abolish the IRS and institute a flat tax and a fat tax

Democrats will never allow a flat tax. The middle class pays a hell of a lot more tax under a flat tax then they do under the current system.

[edjr 5,554]

Democrats will never allow a flat tax. The middle class pays a hell of a lot more tax under a flat tax then they do under the current system.

 

They do?

 

 

 

For example, let the flat rate be 20%, and let the deductions be $20,000 per adult and $7,000 per dependent. Under such a system, a family of four making $54,000 a year would owe no tax. A family of four making $74,000 a year would owe tax amounting to 0.20 × (74,000 − 54,000) = $4,000, as would be the case under a flat tax system with deductions.

 

 

[Bert 1,087]

 

They do?

 

 

A family of four with gross pay of $74,000 is most likely paying zero federal income tax.

[GobbleDog 816]

NPR had a show last year where they polled "liberal" and "conservative" economists to see which policies they differed on and where they agreed.

 

The one policy they ALL agreed on was reducing corporate taxes to 0%. But they conceded that it's be political scuicide for any politician to propose it and thus never happen. But good for the economy.

 

Who knows if it'd really work, but it was interesting to hear them all agree on it.

[IGotWorms 3,309]

NPR had a show last year where they polled "liberal" and "conservative" economists to see which policies they differed on and where they agreed.

 

The one policy they ALL agreed on was reducing corporate taxes to 0%. But they conceded that it's be political scuicide for any politician to propose it and thus never happen. But good for the economy.

 

Who knows if it'd really work, but it was interesting to hear them all agree on it.

No taxes at all? What was the rationale?

[Bert 1,087]

No taxes at all? What was the rationale?

I think he is only talking about corporate federal Income Tax

[IGotWorms 3,309]

I think he is only talking about corporate federal Income Tax

Yes I'm aware of that. Why 0%?

[wiffleball 4,635]

I haven't read the whole thread, so hopefully somebody has learned from my past postings and said this already:

 

 

For most mid-mega-large corporations, statutory tax rates means next to diick in the real world. It's all about effective tax rate. I've lost track of how many times I've posted the quote about the huge % of America's biggest companies paying little or no income tax whatsoever - or even getting massive refunds. Most people in the past have been absolutely incredulous when I post articles on that subject, but it doesn't make it any less true.

 

If the IRC (tax code) wasn't filled with 84 million different ways to mitigate corporate tax burden and we were just talking about straight gross revenue x %, a conversation about tax rate reduction would have meaning. But as it stands right now, the best you can hope for is that it helps small-mid size businesses.

[Baker Boy 1,484]

Yes this is 100% correct.

Trickle down folks act like if you just hand these huge corporations a wad of cash they'll say "gee we don't know what to do with this, so let's hire more people!!"

Could not be further from the truth. They will hoard it for their officers and share holders. And if they do invest it probably won't be in human capital and it probably won't be in the United States.

To believe otherwise is just naive.

BS! You know nothing about the business world and your answer proves that if you were in the business world you would fail miserably.

A business that does not reinvest and expand is a dying business.

 

 

When Apple's Tim Cook appeared before the Senate, many observers were expecting the CEO to be grilled by outraged senators about how his company has avoided paying billions in U.S. taxes by moving parts of his business to Ireland. That's not how it went down.

 

A day after a congressional panel released a scathing report, accusing Apple of a massive tax-dodging scheme, the Apple CEO vigorously defended Apple's tax structure, testifying that he not only followed tax laws, he also followed "the spirit" of tax laws. Cook then managed to turn the discussion on its head by scolding the U.S. government for its outdated tax system with an outrageously high corporate tax rate. Cook also pointed out that the U.S. government could learn a thing or two from Apple's philosophy:

[wiffleball 4,635]

The truth is, I've never been in a project meeting where anyone ever has even alljuded to the idea of "gee, we can't do that - it would be profitable and we don't want to pay income tax!"

 

 

What is far more likely - and the reason why abatements and incentives are handed out like candy is that a project is scrapped or moved due to property and/or sales/use taxes.

[IGotWorms 3,309]

Nice cut and post Phurfur. You're right you must know so much more than me

[Bert 1,087]

The truth is, I've never been in a project meeting where anyone ever has even alljuded to the idea of "gee, we can't do that - it would be profitable and we don't want to pay income tax!"

 

 

What is far more likely - and the reason why abatements and incentives are handed out like candy is that a project is scrapped or moved due to property and/or sales/use taxes.

That sucking sound was every corporate Tax VP in America gasping.

 

All they care about is can they take accelerated depreciation and can they carry the losses back and forward.

 

Preach on brother man!!!

[IGotWorms 3,309]

I could see a case for a drastically reduced or completely eliminated corporate tax rate.

 

Businesses leave because of taxes so if you cut it then they stay. Staying here means they hire more Americans. Those people are paid a salary and you'd probably have to raise their income tax to make up for lost revenue with no corporate taxes. Seems like the workers get the shaft but maybe corporations pay them more since they aren't shouldering any tax burden??

 

Couple leaps in there I'm not willing to make though

[TD Ryan2 314]

but maybe corporations pay them more since they aren't shouldering any tax burden??

 

 

all good up until that point.

NOPE.

 

nobody's getting paid more just because a corporation has more money - and you know that worms.

[parrot 789]

NPR had a show last year where they polled "liberal" and "conservative" economists to see which policies they differed on and where they agreed.

 

The one policy they ALL agreed on was reducing corporate taxes to 0%. But they conceded that it's be political scuicide for any politician to propose it and thus never happen. But good for the economy.

 

Who knows if it'd really work, but it was interesting to hear them all agree on it.

 

Looking it at purely through economist glasses,I can see where it would make tons of sense. It would almost undoubtedly be good for the economy to allow companies to retain more money to reinvest, even if only a portion gets directly reinvested. The question would be whether they are considering the impact to government coffers when making this determination, or purely looking at its impact on public commerce.

[Strike 3,956]

I could see a case for a drastically reduced or completely eliminated corporate tax rate.

 

Businesses leave because of taxes so if you cut it then they stay. Staying here means they hire more Americans. Those people are paid a salary and you'd probably have to raise their income tax to make up for lost revenue with no corporate taxes. Seems like the workers get the shaft but maybe corporations pay them more since they aren't shouldering any tax burden??

 

Couple leaps in there I'm not willing to make though

 

It is a tip that salaries aren't determined by how much taxes a corporation pays or how much they think their employees will pay. Salaries are determined by what it will cost to get a qualified person for the job in question. Workers don't get "the shaft". Nothing is stopping them from moving on to the next company that will treat them as they believe they deserve to be treated.