1691

To be clear, I’m generally in favor of cutting the corporate tax rate. I really do not oppose that part of this bill at all.

But I’m also not going to be a mindless drone and think that it’s resulting in any kind of change in capital expenditures… certainly not ones announced already. Like, for instance, the plans for a new Apple campus? That shit has been in the planning stages for years. You’d have to be an imbecile to think that they all of a sudden made some dramatic shift in their corporate plans.

Likewise, you need to be an idiot to think that the tax cut is going to result in companies suddenly paying their employees a bunch more. Why would they? That’s not how business fucking works. The amount of taxes you pay puts some potential limit on what you can afford to pay in wages, but it’s not like big corporations were anywhere near hitting that limit, as made obvious by their cash holdings and recent profits.

The reason you see some wage increases from some companies, is the same reason that was there before… competition for workers. You may see some minor, temporary gestures like one time bonuses, but these are (obviously) meant as PR moves to try and win favor for a tax plan that benefits the corporations (and their owners) in a huge way. And as we’ve seen, most of these bonuses aren’t actually what they were originally reported. They were either bonuses which were going to be given regardless of the tax law change, or they are dramatically smaller than first indicated.

1692

Apple has been hoarding that money overseas for a decade, refusing to bring it back until/unless the tax rate was lowered. It had grown to a stupefying 250 billion, the anticipated tax bill indicates that virtually all of that money is coming back to the states. That would not have happened without the bill, and it is an unqualified good for the economy.

1693

What you probably mean to say is “without a lowering of corporate tax rates” rather than “the bill”

It would not have been hard for the Republicans to pass a much better tax bill with a similar corporate tax rate reduction. Instead they chose to pass this bill, because what they really wanted was to give huge tax breaks to their donors above all other concerns.

1694

The question is, why did Apple keep $250 billion overseas for so long? Because they knew that if they waited long enough, they’d get a tax break or repatriation holiday just like they did in 2004. The problem, of course, is that by promising repatriation breaks to corporations while out of power, republicans encourage corporations to keep their profits out of the country until they regain power, which hurts the country.

Or maybe it doesn’t, since when Apple and other corporations repatriated their money in the 2004 tax holiday, they cut 20,000 jobs and cost the treasury $3.3 billion.

What we should really be doing is just forcing companies to pay American taxes on their foreign profits (since much if not most of those profits are actually made in America, but recorded overseas using accounting tricks) so that repatriation is a non-issue. That would free up corporations to invest as much as they like in America without having to wait 14 years for another tax holiday, and give them some of that ‘certainty’ they claim to like so much.

1695

This doesn’t make any sense though. The result of this line of thinking is that every corporation pays taxes on all profits to every country in the world.

1696

There is precedent: Americans have to pay individual income tax to the US on money earned outside the US. However, they are allowed to deduct any income tax paid to another country from the US bill. This means they have no incentive to work in a low tax country, but won’t be double taxed if they work in a high tax country. We should do something similar for corporations.

1697

But corporations don’t have residency like people. It doesn’t “live” anywhere. How do you decide what corporations pay income taxes to the US?

1698

Yes, they do. They have (or don’t) a permanent establishment, and that’s the basis for taxation most places. It’s a very flawed concept in the internet world, but it still exists.

1699

How do corporate taxes work anyway for major companies that have multiple subsidiaries?

If my (US based) company does development on a contract basis for a company in the UK, and the UK company sells the product our company doesn’t get taxed based on the revenue, we just get taxed on how much we received for performing said development.

So what happens if a holding or parent company owns both of us that’s based in yet another country. Where do taxes get accrued?

1700

Also Apple isn’t just bringing the money to the US because the tax rate was lowered. The tax bill is forcing them to pay a 15.5% tax on that money anyways (regardless of what country it is held in) so they might as well bring it to the US anyway. There is a very real difference and most likely future revenue will still be kept out of the country.

https://www.ft.com/content/789e69f6-e1ea-11e7-a8a4-0a1e63a52f9c

Senate and House leaders unveiled the final version of their tax reform legislation on Friday, putting the Republicans on the cusp of delivering tax cuts of close to $1.5tn. As part of the package they will impose a 15.5 per cent one-off tax on offshore cash, coupled with an 8 per cent levy on less liquid assets, a Republican aide said.

Again, nothing more than PR fodder for idiots not wanting to look into details.

1701

I honestly don’t know how this makes sense with multinational corporations. And if you just taxed based on the location of such a thing, it seems like you would just incentivize then to move to some other country with a lower tax rate.

Didn’t Google win some case against France for someone like this recently?

1702

I find the whole concept that there is such a thing as an American company to be pretty laughable. The idea that we should be tax their profits not only is bad economics, it is flat out immoral.

Let’s take a classic "American " company like General Motors. Last year GM sold million cars.
4 Million cars in China
3 Million car in the US
3 Million cars in the Rest of the world

There #3 country is Brazll where they sold 343,000 cars.

First of all, explain how most of their profits are made in America when 70% of the cars they sold (and manufactured) are overseas? The reality is the vast majority of Fortune 500 companies have the majority of their sales overseas. Generally speaking profit margins are higher on overseas operations, because of the combination of the higher corporate tax rate in the US and the US market is typically the most competitive.

In the case of GM in a good year they make $.05 per dollar of revenue, so there isn’t a ton of profit to tax.
So if we tax their profits in Brazil which has ~30% corporate tax rate, one of the direct consequences is that there is less money for the Brazilian government to tax. The means less money for the poor of Brazil, where poverty is whole new level compared to US poverty. Wealth inequality within the US is nothing compared to wealth inequality in the world.

The problem with old US corporate rate is that difference between 38% and Ireland 18% absolutely encourages creative accounting. While it is facile to say “well should just crack down on the abuser”, in order to do that you have to write laws. The corporations are always going to be hiring smarter accountant and lawyers than the government. So if you have a team of SW engineers in Ireland and the US working on a project, who is to say that right allocation for the Irish portion is 25%, 50% or 75%. We live in a world where a handful of guys at Snapchat can get acquired for $4 billion.

I’ve been ambivalent about economic of lowering the corporate tax rate. On one hand, the Democrats argument that corporation already had a ton of cash so the likely impact of lowering the tax was simply going to be an increase share buybacks and raising of the dividend was very strong. On the other hand, the classic economic argument that lowering the US corporate tax rates, increases the profitability of US venture, which will encourage new investment.

One thing is for sure is that a 21% rate is going eliminate a lot jobs in the tax department for big corporations. These are smart people so I’m sure they can find more productive jobs.

It is still early, and there is a lot of posturing. But certainly, the Apple announcement is good news. I just hate that Trump will take credit for it. This is mostly Paul Ryan’s tax plan if anybody deserves credit or blame it is Paul.

1703

The US parent and the UK subsidiary agree on transfer price. There are a bunch of rules, but what they are I don’t know. Needless to say the price is largely determined by what will lower the tax most.

1704

Is anyone arguing that lowering the corporate tax rate was a bad idea? Far as I can tell, almost everyone is on board with that part, though some folks may think it should have been a few percentage points higher. But the real issue in my opinion is that the tax law lowers the rate without closing the vast majority of corporate tax loopholes, which isn’t the “broaden the base” approach that would make it fiscally responsible.

1705

Exactly. Please, anyone who knows better, chime in, but AFAICT they didn’t do jack on that “elimination of loopholes” score.

1707

Using Republican logic, Trump lost us over 25k jobs in a week.

Also

Money well spent. Whats another trillion or two when you get… basically nothing for it?
I mean we literally could just make a million random people millionaires and still lose less money.

1708

That’s not true.
The arguments against lower corporate taxes was that it would benefit rich people. As I said that is a plausible argument and we will see what percentage goes to higher wages for workers, how much goes to enrich existing shareholders, and how much goes to spurring new investments.

We have had almost no discussion about
A. what people mean by corporate loopholes.
B. Which loopholes are closed and which remain open

However the biggest loopholes pretty much all revolved around exploiting the difference between the low tax country like Ireland or Singapore with 17-18% rate and the US rate that was twice as much. With the US rate at 21% it makes no economic sense to arbitrage the small difference. Meaning there is no incentive to go through hassles of opening an R&D facility in Ireland just save 3% on taxes, might as well hire the engineers in the US.

As for other loopholes, cutting the top rate from 38% to 21% basically, decrease the value of all other deductions by 45%. The $5 million benefit package for the CEO, jet, country club due, security team, and executive chef, use to only cost shareholders $3.1 in after tax money, now it is almost $4 million.

1709

Wow talk about a misleading summary. It would be equally true (and equally misleading) to say 100% of Fortune 100 company, that had a response to a CNBC, had plans to boost worker pay, make investment or increase charitable giving.

It would be even more accurate to say that CNBC reporters suck at getting information from companies. Seriously 5 reporters and only 9 answers.

However, the real story is much simpler, larger corporations still evaluating effect of tax cut on future plans.

1710

That’s fair, it did come up, but I at least am much more concerned with the personal tax changes when it comes to the difference in who benefits.

What I mean is damn near anything where a company gets a break from paying that corporate tax rate. Call it loopholes, breaks, incentives. There’s a gazillion articles out there talking about what those are, here’s a couple from a quick search:



I’m not a tax lawyer, so I’m not going to argue with you point by point. But you’re going to have a really hard time convincing me that this tax law - slipshod and confusing as it is - makes any kind of significant dent in corporate deductions and credits.

As for the argument that the difference between US and low-rate countries matters, there is some truth to that. But I don’t think it’s as much as you seem to think. Give it a year or two, and we’ll see if rates are lowered in those countries as well. Not to mention that they could cut special deals with particular companies or industries just like we do, at which point the overall rates don’t matter nearly as much.

Now, I know that there are some corporate deductions and credits that are used as incentives to good behavior - research credits and the like. My gut reaction is that those tend to have unintended consequences that outweigh the benefits, and we’d be better off using that money as grants to folks doing the good things rather than creating more opportunities for tax lawyers to find ways to misuse the provisions. There are probably specific cases where the tax incentive really is the best option, but I’d like to see a very high bar to prove that.

1711

Also, turns out, Apple never said they were repatriating any of the money, just that they were going to pay US taxes on it, as the law requires. They might repatriate some of it!