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Mercnbeth -> Does this surprise anyone? (8/12/2008 7:42:38 AM)

Awhile back I posted a thread about the difficulty of accomplishing a "tax the corporations!" agenda. This article seems to back that up.

quote:

Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.
The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.

More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.


Smart accountants and lawyers do not work for the government - they work for corporations. By the time the government puts together any new corporate tax structure, the corporations have determined a way to negate the impact. This would occur without help. Having PAC's lining the pockets of Congress insures that the ultimate payee is the general public, not the intended corporate target.

Global economics in the modern era of technology contributes, but the US is unique due to the influence of local and State tax implications. Tax credits and local backroom deals also give corporations major benefits. When that fails, profits (the basis of most tax) can be offset by subsidiary relationships and acquisitions. Why would a company acquire another company losing money? The answer is - to offset income and write off the acquisition expense against income.
quote:

...companies abusing transfer prices - amounts charged on transactions between companies in a group, such as a parent and subsidiary. In some cases, multinational companies can manipulate transfer prices to shift income from higher to lower tax jurisdictions, cutting their tax liabilities.


To me, this was one of the most interesting aspect of the report:
quote:

The GAO study did not investigate why corporations weren't paying federal income taxes or corporate taxes
Do you think that PAC influence had something to do with that? Why? Well the answer is obvious-because they can! Wouldn't you? Don't you? Isn't the goal every tax season to take every legal deduction possible?
But the punchline was even better: "
quote:

It's time for the big corporations to pay their fair share," Dorgan said.
What a joke! How Mr. Dorgan? Isn't that your job?

A simple replacement of the income tax with an 'acquisition tax' (aka - sales tax) would impact corporations and individuals. Buy something, whether a paper clip or a company, and pay a tax. If at the end of the year, your family income is below 'X' you get a refund.

This will never happen. Primarily because the Attorney and Accounting lobby won't let it. Standing behind them are the 'special interest' groups. Before you raise your nose, remember if you own real estates you are a big part of that 'special interest'. You want to see a 50% reduction from the current deflated home prices; eliminate the real estate property tax and mortgage interest deduction. Much of the home value is a consequence of being able to deduct the interest from your tax obligation.

Before you subscribe to supporting any candidates 'tax the corporation!' platform plank remember a few things. One is that the large corporations will simply move their corporate domicile to another country. Locally, the small - mid size companies will just compress. Look around; in our SoCal neighborhood I've never seen so many shops and stores, big and small, empty, boarded up, or having a going out of business sale. Unless your ideal society is one where the government is the major employer corporations must generate commerce, hire employees, and thrive. Trying to tax them won't make that happen. Besides, as this report indicates, you can't do it anyway.

All quotes from this source: http://apnews.myway.com/article/20080812/D92GMEPG0.html



pahunkboy -> RE: Does this surprise anyone? (8/12/2008 7:52:39 AM)

then why are they fighting to lower from 35% to 25%????

to dump the pricey accountants??

BTW - check out a proposed law- it takes the rate from 35% to 30%. the Dem in my districts newsletter featured this and how good it will be "for America".

2/3 pay none, wow.

I did not realize a sales tax would apply to buying a whole company.   They sure like to merge and dismantle.



pahunkboy -> RE: Does this surprise anyone? (8/12/2008 7:58:55 AM)

Great post BTW!


I really ought to tak emy brother in laws advice- --not to waste my time writing congress- but to improve my own life.



candystripper -> RE: Does this surprise anyone? (8/12/2008 9:06:20 AM)

Okay...here is *my* short version.  However, I have a Ll.M in Tax Law and spent two years recently studying this matter, so I do feel qualified to opine.
 
First, it is really beyond belief that the article is accurate...I'd like to see the actual GAO Report and read what it says. 
 
One reason I say this with some confidence is the Alternative Minimum Tax...any corporation, individual or other taxpayer showng profits 'on the books' and simultaneously showing a loss or significantly less income on their return is subject to a 20% flat tax on the book profits, and this tax is not easily evaded.
 
Second, the problem is not the income tax.  It matters little whether you choose to tax assets, income, transactions or monkeys flying out of your ass....the problem is and always will be 'loopholes' in the Revenue Code which can be manipulated for the benefit of a subset of taxpayers or sometimes even a single taxpayer (e.g., any historicially black university formed before 1800 in the state of Georgia...not that this is an actual loophole, just saying, that is how it is done).
 
Canada uses a sales tax...known as 'the value added tax' or VAT, which imposes tax on every single 'transaction' as a commodity moves from origin to point of sale.  Is Canada's tax base more stable, fairer, or less subject to criticism?  To a degree....but that is only my perception, and it is slanted, in large part because I've never addressed my full attention to the state of Canadian affairs.
 
Another pancea oft-totted is the flat tax, with most pundits placing the required rate at 14%.  Fill out a postcard-sized return irrespective of your simplicity or complexity as a taxpayer of any stripe; list all income without exception (this would include gifts received by individuals, for example) and multiple by 14%...the result is what you owe. 
 
The problem with this apparently attractive notion is two-fold.  First, no one seriously believes that ALL taxpayers would be included, at least not at the full rate....impoverished people would be given an exception or a lower rate and -- viola' -- it is no longer a flat tax. 
 
Second, everyone admits it is a regressive tax, shifting the weight of the burden to generate revenues at present levels away from high income taxpayers down onto middle class and low income taxpayers.  Such a shift -- and it would be very significant -- is generally considered unwise economic policy and, oddly enough, morally wrong. 
 
The flat tax and the VAT will never replace the income tax in the United States, and just as important, it would matter very little if they did so.  The loopholes will never really close.  The efforts of tax planners will be ceaseless.
 
It is uavoidable.  However, if it consoles anyone, bear in mind a corporation is an artifice, and passes losses and profits to shareholders, who ultimately are individuals. 
 
When a corproartion is taxed more heavily and cannot pass the costs onto consumers, the shareholders receive less income and the tax revenues that income would have generated are depressed accordingly.
 
In other words, there is a degree of 'gotcha -- nope, missed -- gotcha!' built into the Revenue Code that cannot be planned completely away.

candystripper



Mercnbeth -> RE: Does this surprise anyone? (8/12/2008 9:37:50 AM)

First, it is really beyond belief that the article is accurate...I'd like to see the actual GAO Report and read what it says. 
Never understood why a person would question the validity of something containing a reference. Why bother? Quoted from the like provided:
quote:

The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.
A current review of the Congressional record or the website of the Senators quoted directly is also be a simple matter.
quote:

 
The flat tax and the VAT will never replace the income tax in the United States, and just as important, it would matter very little if they did so.  The loopholes will never really close.  The efforts of tax planners will be ceaseless.
How do you substantiate this position? 'Tax planners' would be among the first in the unemployment lines. Being taxed when you spend money versus when you earn it doesn't require any "planning". If there were a tax on every transaction without exception, there are no loopholes. Now, if it is your position that the lawyers and lobbyists wouldn't allow that to occur, as I said in my OP, we are in complete agreement.

The problem with any of the flat tax proposals to date isn't the percentage but the target. It has always been pointed to retail purchases. It doesn't need to be.

A 1% tax on every transaction at every level would replace the current Federal income stream. Eliminating the bureaucracy of the IRS and there's a budget surplus. You want to stimulate US manufacturing; with the 1% tax in place for US goods, put a 10% acquisition tax on any product not manufactured and assembled in the US.

Another thing to keep in mind regarding the Corporate entity as a tax target. Al Capone was put in prison for tax evasion; Enron, and their executives weren't, it was for fraud. There has never been a corporation brought to trial for tax evasion. There will be no prosecutions as a result of this GAO report targeting the corporations paying zero tax. Why? Because there has been no law broken. They don't pay taxes because the lawyers and PACs special interests insure that they don't. It won't change regardless of the front man put in place, or the corporate lackeys in congress, after the next election.



Thadius -> RE: Does this surprise anyone? (8/12/2008 10:16:33 AM)

The report is accurate.  It was requested by a couple of Congressmen to discover what the ramifications of increasing corporate taxes would be.

While the title of the article written is very damning, some of the things overlooked by her are interesting.

She mentions companies that have receipts of $50 million not paying corporate taxes, this does not take into account what the outlays of that company were, or the fact that they still have to pay other taxes related to running a business.  Why should anybody have to pay taxes on gross receipts if they net a loss?  So to answer the question you posed in the title, no it does not surprise me.

I am not arguing that the tax system is perfect, on the contrary I believe it needs a major overhaul.



candystripper -> RE: Does this surprise anyone? (8/12/2008 10:17:41 AM)

Well, let's assume for arguments sake that you are correct, factually.
 
Foreign taxation is an arcane area of the law and I admit to having only a rudimentary knowledge of it...but in general, in the area, you begin by researching tax treaties...not American tax law as it would normally apply.  You would find many instances of treaties in which we have agreed with another nation to reduce or eliminate certain taxes on their businesses and individuals doing business or residing here, in exchange for similar consideration for our taxpayers doing business in or residing there.  It is really beyond my skill set to estimate whether there is a net gain or net loss as a result of such agreements....and there are myriad forms of them.
 
Next, let's assume that a national sales tax is used in place of the income tax to generate revenue.  The first problem you will encounter is that this is the most regressive of all the taxes.  Overnight, a huge shift to lower and middle income people will occur because 1% of a purchase is a much more important cost to the impoverished than it is to the high income taxpayer...do you follow me?
 
Then you have transitional problems.  When will you conclude the last tax year on income?  What will you do with taxpayers who have legally-permissible taxable year ends which do not coincide with this date?  What will you do about such things as the statute of limitations on  various collections actions under the out-going income tax?  The one thing you can count on -- tax planners will see the transition period as a boon and evade the income tax at record levels...so you will have at least one year, maybe more, of revenue shortfall.
 
What do you expect to happen to capital markets, housing markets and other economic sectors when the tax advantages of such behaviors disappear suddenly?  History suggests that capital will be withdrawn....which may be a good thing to a point...but at some level will fuel first inflation, and then if left unchecked, depression.  To be fair though, economists do not agree on the point....so we'd have to wait and see.  Are you prepared to deal with even the insecurty and perhaps panic this will spark in some?
 
Then there are the enforcement issues associated with the new tax.  Lets assume it is imposed at point of sale.  Now every single retail transaction creates a tax collector under a duty to the government, multiplying the number of payors to be monitored by an unknown but undoubtedly huge factor.  What becomes of barters?  Of gifts?  Of scholarships?  Of resale transactions?  Very quickly, the simplicity of the tax begins to slip away and the tax bar marches through, the government responds with new legislation, and before too long, the Reveue Code is just as byzantine as ever.
 
Merc...no one is saying it couldn't be done better, simplier, fairer, or on a different basis than income.  Of course it could....but being what they are, people with a little something will always seek to evade government efforts to 'take' by taxation.
 
candystripper
 



pahunkboy -> RE: Does this surprise anyone? (8/12/2008 10:32:58 AM)

Ild support a stock transfer tax of 1%

real estate transfers have it- so stocks should too.   BTW- wall street has figured this out and check the fees- 1%=2% are in more places then you would guess.

as to tax simplification it wont happen.  I worked for HR block and they and other will fight it.

a GOA report is not secret- Im sure you can get ahold of it.

BTW- states also assess an income tax.   Im seeing that often where the feds fail- the state steps in. So then it depends on which state you are in.

Oddly- the 2005 bankruptsy law allow one to have a multi-million $ home is one state,   ..Texas.   hmmm





Mercnbeth -> RE: Does this surprise anyone? (8/12/2008 10:39:34 AM)

quote:

Then there are the enforcement issues associated with the new tax.  Lets assume it is imposed at point of sale.  Now every single retail transaction creates a tax collector under a duty to the government, multiplying the number of payors to be monitored by an unknown but undoubtedly huge factor.  What becomes of barters?  Of gifts?  Of scholarships? 

Here's what would happen - NOTHING with zero impact. I'd ask you what is happening now regarding those transactions? You've taken nothing from the table because you didn't put anything on it.

I've already sited as a negative the impact of a flat tax or consumption tax on capital investment markets, the RE market in particular. I have it as the primary reason, after accountants and lawyer lobbying, that it won't happen. I haven't stated it previously but the next biggest impact would be to the religious and charity industries. Removing their current exempt status, and the tax benefit of contributers would put many of them out of business. I guess then we'd find out just how charitable, and religious people are.

As far as the low income side I think there would be less an impact if there were no tax placed on food, even fast food and junk food at the consumer level. As I stated I'd also have a minimum income threshold where a family could get back 100% of their acquisition tax. It wouldn't require 1% of the current IRS bureaucracy. It would be a two line form. I made this much, here are our receipts showing I paid this much in acquisition tax - send it back. MUCH preferable then the current zero interest loans many people give the government while having more deducted from their pay than they owe. Of course they'd miss out on the 'celebration' when they get their own money back from the government. Lincoln was wrong - you CAN fool all of the people ALL of the time; or at least most.

Your tax collector argument forgets that currently everyone of those goods/services providers ARE government tax collectors. They currently collect the local sales tax. Even the marijuana dispensaries, federally illegal, collect the local city and state sales tax. I'd guess those not set up as 'Non-Profit' or 'Not For Profit' also pay Federal tax. Although not germane to this discussion, do you think the street dealer adds anything to the local tax coffers.

But the entire point is a distraction from the point. The purpose of the GAO study was CORPORATE taxes. Isn't that the battle cry used by those to answer how all these social programs are to be paid? This points to the current condition, one you seem to agree with, that the tax structure doesn't let this happen. It isn't happening now and won't happen after the election.

Corporations can not be impacted and taxed. Any attempt is counter productive for the economy. Any move will result in fewer jobs, an exodus from the US of corporate entities, and lower production. 



MercTech -> RE: Does this surprise anyone? (8/12/2008 11:40:43 AM)

Remember.. the Income Tax is a temporary measure to pay off the war debt from the Spanish American War in the 1800s.

And people wonder why I don't trust anything the government says. <grin>

Stefan



meatcleaver -> RE: Does this surprise anyone? (8/12/2008 11:46:48 AM)

Why would politicians penalize their paymasters?



Daddystouch -> RE: Does this surprise anyone? (8/12/2008 11:55:13 AM)

You do have to remember that a lot of the corporations on the books don't really exist in the sense that Microsoft or McDonalds do. They're just entries on a government database linked to a bank account with no employees, no premesis... just a legal convenience.



Termyn8or -> RE: Does this surprise anyone? (8/12/2008 11:05:35 PM)

Big corporations pay taxes, they just pay them directly to the politicians.

T



kinkbound -> RE: Does this surprise anyone? (8/12/2008 11:38:47 PM)





quote:


Does this surprise anyone?

No.



Vendaval -> RE: Does this surprise anyone? (8/13/2008 1:48:51 AM)

*cough* Off-shore bank accounts?  Liechtenstein and Switzerland? Never heard of 'em *cough*

 
"Offshore Bank Account Holders, Here’s Some Advice"
 
Posted by Dan Slater
May 21, 2008, 11:32 am 
"Thanks to Tom Herman, the WSJ’s tax guru, there’s a guide available for those looking to make amends, or, as the case may be, stick their heads in the proverbial sand. In his Tax Report, Herman writes that lawyers are advising tax-dodger clients on a few alternatives: “They can confess and plead for mercy. They can quietly file amended tax returns, pay up, make other required disclosures and hope overworked government prosecutors won’t follow up. Or they could choose to do nothing and pray their names won’t turn up.”

Cono Namorato, a tax lawyer at Caplin & Drysdale and a former official at IRS and DOJ, told Herman: “Nothing is secret anymore. No individual should take any comfort in relying on any country’s so-called bank-secrecy laws.”

Part of the reason: Herman reports that, according to Senator Carl Levin, the chairman of the U.S. Senate Permanent Subcommittee on Investigations, offshore tax evasion costs an estimated $100 billion in lost revenue each year. Levin has introduced legislation designed to combat offshore secrecy and end the use of havens by Americans dodging taxes. "
 
http://blogs.wsj.com/law/2008/05/21/if-the-tax-man-cometh-heres-some-advice/



NeedToUseYou -> RE: Does this surprise anyone? (8/13/2008 2:14:11 AM)

quote:

As I stated I'd also have a minimum income threshold where a family could get back 100% of their acquisition tax. It wouldn't require 1% of the current IRS bureaucracy. It would be a two line form. I made this much, here are our receipts showing I paid this much in acquisition tax - send it back.


This is unnecessary, what you do is simply charge a slightly hirer tax rate, but send everyone a check every month. The check amount would be based around what the computed taxes would be for those at the poverty line. So, zero government reporting is required.

Example. instead of (made up number), 10% you charge 11% on everything. However, the 11% will be more in theory for the wealthy, but since everyone will get the same computed poverty level check every month. Then those living at the poverty level, are in reality not paying any taxes.

This is a better solution as it ends all government involvement barring disability cases, in income reporting. And it's simple to administer. Every man woman and child receives a direct deposit for the generic computed taxes paid up to the poverty level every month.

It's not blatant welfare, as the number would be based on upper level poverty line, thus everyone would simply be able to spend up to that much a month tax free, effectively, if you select to spend more then you are selecting to pay taxes.

Simple really.

Edited to clarify... The monthly check is just a check for taxes, and everyone regardless of income would receive the same check amount based on the upper level limit of taxes one would pay at the poverty line. So, a 100.00 - 200.00 bucks a month. You couldnt live it on it. But it effectively eliminates all federal taxes on the desperately poor, which I even don't have a problem with in theory anyway.



OrionTheWolf -> RE: Does this surprise anyone? (8/13/2008 5:52:34 AM)

The solution ------ http://www.fairtax.org



MrRodgers -> RE: Does this surprise anyone? (8/13/2008 7:57:20 AM)

quote:

ORIGINAL: Mercnbeth

Awhile back I posted a thread about the difficulty of accomplishing a "tax the corporations!" agenda. This article seems to back that up.

quote:

Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.
The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.

More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.


Before you subscribe to supporting any candidates 'tax the corporation!' platform plank remember a few things. One is that the large corporations will simply move their corporate domicile to another country. Locally, the small - mid size companies will just compress. Look around; in our SoCal neighborhood I've never seen so many shops and stores, big and small, empty, boarded up, or having a going out of business sale. Unless your ideal society is one where the government is the major employer corporations must generate commerce, hire employees, and thrive. Trying to tax them won't make that happen. Besides, as this report indicates, you can't do it anyway.

All quotes from this source: http://apnews.myway.com/article/20080812/D92GMEPG0.html


Here is a very viable and dare I say... 'free market' solution. Remove the income tax on labor and profits. Just what are profits ? We create these terms and then redefine them for tax purposes the balance of which is modified and adjusted according to who has the most influential (richest) lobby. So the corporate tax code is in fact...for sale.

We keep only 2 top income tax rates of 10 and 15% for above say $200 to $250K. NO DEDUCTIONS AT ALL. The same for corporations ELIMINATE THE TAX ON 'PROFITS' and create a 15% GROSS RECEIPTS TAX, right off the top. LET THE CORPS. MOVE OFF SHORE. It does us no good that they are now ON shore and in fact with this GR tax we become a corporate magnet and many 1000's would move here.

We create a 10 or 15% NATIONAL SALES TAX and use the IRS to collect it. Sales taxes are easy as we a have long term experience with them.

We tax capital gains (the buying and selling of anything) SHORT TERM OF TWO (2) YEARS AT 50% and please don't begin to suggest that would affect job creation...it would not. Longer cap gains at say 4 or 5 years would go down to 35%, then everthing after 5 years...down to 15% that it is immorally taxed now.

We tax dividends at the same as labor..10 or 15%.

The above is worth a try and might only get you killed...by the capitalist because of course he does NOT want a 'free' market...whatever that is...or pay taxes either.

NO...nobody with a normal brain should be surprised because the corporate tax code is the highest selling item on the congressional retail shelf.



MrRodgers -> RE: Does this surprise anyone? (8/13/2008 8:07:50 AM)

quote:

ORIGINAL: OrionTheWolf

The solution ------ http://www.fairtax.org

I agree but it doesn't go nearly far enough. These kind of suggestions forget...we have what will soon be $10 trillion in federal debt. Also, we have a tremendous entitlement bill coming up and that HAS to be reformed and still payed out.




Thadius -> RE: Does this surprise anyone? (8/13/2008 8:20:02 AM)

quote:

ORIGINAL: MrRodgers


Here is a very viable and dare I say... 'free market' solution. Remove the income tax on labor and profits. Just what are profits ? We create these terms and then redefine them for tax purposes the balance of which is modified and adjusted according to who has the most influential (richest) lobby. So the corporate tax code is in fact...for sale.


We create a 10 or 15% NATIONAL SALES TAX and use the IRS to collect it. Sales taxes are easy as we a have long term experience with them.


The above is worth a try and might only get you killed...by the capitalist because of course he does NOT want a 'free' market...whatever that is...or pay taxes either.

NO...nobody with a normal brain should be surprised because the corporate tax code is the highest selling item on the congressional retail shelf.


All I can say is holy shit.  Let's take these one at a time...

quote:

We keep only 2 top income tax rates of 10 and 15% for above say $200 to $250K. NO DEDUCTIONS AT ALL. The same for corporations ELIMINATE THE TAX ON 'PROFITS' and create a 15% GROSS RECEIPTS TAX, right off the top. LET THE CORPS. MOVE OFF SHORE. It does us no good that they are now ON shore and in fact with this GR tax we become a corporate magnet and many 1000's would move here.



So anybody that makes over using your higher figure of $250k would get any deductions?  So basicly shove it further up the ass of small business owners that aren't incorporated.  Good strategy.  If we eliminate the "tax on profits' and make it a 15% tax on "gross receipts" a company that only brought in 8% over costs would essentially be making a 7% loss (the ammount they would have to pay out above profits), I am sure that will keep the economy afloat.  Please explain to me how this would bring companies here wanting to pay such a tax?

quote:

We tax capital gains (the buying and selling of anything) SHORT TERM OF TWO (2) YEARS AT 50% and please don't begin to suggest that would affect job creation...it would not. Longer cap gains at say 4 or 5 years would go down to 35%, then everthing after 5 years...down to 15% that it is immorally taxed now.



I do hope you are talking about redefining some limit on what is considered a capital gain.  Any inheritance that one would gain would be taxed at which rate?  Such as if I inherit a house in a market that is still fairly high, and I decide to sell it, are you suggesting that I would pay half of the money to the government?

quote:

We tax dividends at the same as labor..10 or 15%.


Would this tax also apply to divident reinvestment plans, that some folks use in their retirement portfolios?

How is that for not talking about the effects that this would have on job creation?

In a state of awe,
Thadius



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