Let's start with the obvious. It is really really arrogant and unlawful to assume that laws written in the United State should apply in other countries that have their own sovereignty and laws. It would seem to be really arrogant and laughable (by the government and citizens of that country) to presume to do so. Can you imagine the Chinese saying "Ok. We will agree to accept your jurisdiction and enforcement of US pollution laws just because you say so?" Yeah. That doesn't happen.
Why am I bringing this up. Well, the US Government presumes to tax it's citizens and corporations on business activity performed outside of the United States! We are the only country to try this because most other countries actually acknowledge the rights of other countries to have their own laws within their own borders.
This has two very negative effects as it stands today. (Obama's plan to increase taxes on income earned outside of the US will cause these problems to get much worse.) First, This means that the US Company needs to pay both the local country taxes and the US taxes for business activity performed in that country. A Local company (Non-US company) only needs to pay the local taxes. This obviously is a major competitive disadvantage. Second, (and it ties to the first) this creates a major incentive for companies that will be doing business globally to not be US Companies. They could liquidate themselves and sell off the pieces to foreign companies, they could allow themselves to be bought out by foreign companies, or someone deciding to start a company could actively decide not to incorporate in the US or hire US workers at all (Acting proactively in their own self-interest.)
It would seem that this would create the opposite results that are intended by raising the taxes on these corporations. Instead you will end up having less and less revenue to tax because companies will not fall under the US Tax umbrella at all.
There are much better solutions. Make Corporate Taxes flat and very low or eliminate them altogether. Corporate taxes are a bad idea anyways and are useless as anyone who has had a company knows. Let me explain. A company earns revenue (Money comes into the company). Money also exits the company in a number of ways. One way the money exits the company is through salaries. We tax the salaries so that portion is taxed. Another way the money leaves the company is through distributions to owners (Could be shareholders or just owners in a private company.) Distributions to owners/shareholders are already taxed. The remainder is Retained Earnings. This money can be reinvested in the business. (Aha! This is tax free right? WRONG!) If the money is not spent it is pretty much useless. This money can be used to buy equipment (taxed) hire more workers to grow the business (taxed a lot) given out as bonuses (HOLY COW do they like to tax bonuses! They take about half!), etc. Are you getting the picture yet? Why do we need a corporate tax on profits when all the money gets taxed anyways anytime a person or business actually uses the money for something? Trust me. The IRS has got this one figured out.
Obvious answer: Eliminate the Corporate Tax. It's primary function appears to be to scare investment and anyone away from incorporating in the US. A secondary function is to make it more difficult for US companies to compete globally (Why would we want to continue to hurt our own companies?) Tax reform on everyone who receives money from these companies would be appropriate. My approach would be a 2 line 1040 using a flat tax structure (Multiply line 1 by line 2. Mail check to IRS. It doesn't get any easier or fair than that)
I'm afraid the obvious answer won't be implemented. This isn't about competitiveness or even about tax revenue. It's just politics as usual and vilifying big evil corporation's without thinking through the consequences. Just sounds great when he reads it off the teleprompter though, doesn't it?
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