tdsrnest:
Thanks for starting this thread. I will look forward to your research and I will provide my own. I want to come at this discussion from a slightly different angle; I believe that we are dealing with multiple interrelated issues that fall under the category of the US Economy. Corporate Tax is but one component. A discussion that is laser focused on US Corporate Tax glosses over many of these issues and clouds the discovery of their solutions. Have you ever peeled an onion? To truly gain an understanding of our present state of operating, we need to remove one layer at the time and look at the problem and any proposed solutions.
I am not attempting to hijack your thread, but limiting our discussion to purely the US Corporate Tax leaves much on the table undiscussed. As you are aware, the US currently has a very high baseline Corporate Tax Rate; approximately 39.2%. This makes the US the 2nd highest Corporate Rate in the world, with Japans Corporate Tax rate of 39.5%. There are several caveats that separate the US from all other OECD members (including Japan):
1) The US Corporate Tax code levies taxes on US Corporate income (minus credits, exclusions, exemptions, depreciation, etc) whether generated inside the US or on foreign soil. No other OECD country follows this model. Foreign income for the other 33 members of the OECD countries is not taxed or at a reduced rate when compared to corporate tax rates for each country.
2) US Corporations also pay an additional 10 individual Federal taxes ranging from employer contribution to Social Security, Medicare, Medicaid, Unemployment, Excise Tax, Mineral ExtractionTax, shareholders of US corporations pay Self-Employment Tax (if not employees of the corporation), and an additional 13 taxes implemented or increased under the ACA.
3) Corporations also pay a laundry list of State / local taxes, in addition to State Corporate Income Tax: Property Tax, Collect and submit State Sales Tax (Unpaid tax collector), Franchise or Inventory Tax, Ad Valoreum Tax, Employer Contribution for State Payroll Tax, State Unemployment Tax, Local Option Taxes, and/or Gross Receipt Tax.
See attached Corporate Tax Rate Table:
http://www.kpmg.com/global/en/services/tax/tax-tools-and-resources/pages/corporate-tax-rates-table.aspx
NOTE: The corporate income tax rate is approximately 40%. The marginal federal corporate income tax rate on the highest income bracket of corporations (currently above USD 18,333,333) is 35%. State and local governments may also impose income taxes ranging from 0% to 12%, the top marginal rates averaging approximately 7.5%. A corporation may deduct its state and local income tax expense when computing its federal taxable income, generally resulting in a net effective rate of approximately 40%. The effective rate may vary significantly depending on the locality in which a corporation conducts business. The United States also has a parallel alternative minimum tax (AMT) system, which is generally characterized by a lower tax rate (20%) but a broader tax base.
Our current US Corporate Tax Code (CFR 26) consists of 9500 individual printed pages plus the addition of the newly implemented 210 page FATCA regulations in CFR 4. What I find very disproportional are the special exemptions, exclusions, credits, set asides, accelerated depreciations, industry specific tax loopholes, and credits. We are not dealing with a level playing field. Many of the exemptions and credits are industry specific.
Large Corporations have the financial wherewithal to hire lobbyists to influence Congress. Small business (corporations), which constitutes 85% of the Corporate Tax Roles do not have the financial wherewithal to hire lobbyists to obtain preferential treatment from Congress. This Corporate Tax structure needs to change. At the present time, several US Senators are working on a remedy that will totally eliminate US corporate taxes and substitute a flat tax arrangement. If passed into law, this structure would tax imports at the same rate as exports, create jobs in the US, would eliminate the 9500 pages of current corporate tax law, increase the corporate tax revenue as no exemptions, exclusions, credits, depreciation, or set asides would exist. The proposed corporate flat tax level would be in the 9% range. This flat tax rate would create an avalanche of new companies moving into the US, along with the associated jobs.
I have several links that share my point of view in better that I can express it.
http://www.nationalreview.com/corner/266791/yes-us-corporate-tax-rate-high-veronique-de-rugy
http://taxfoundation.org/blog/high-us-corporate-tax-rate-chases-away-companies-jobs-and-tax-revenue
http://www.wsj.com/articles/regulation-run-amokand-how-to-fight-back-1431099256
We can discuss Corporate Welfare vs Social Welfare spending and the other 17 disparity problems in our country, but the problems with the lowest common denominator are 1) the lack of JOBS 2) Run amuck Federal Corporate Tax regulations drive Citizens and Corporations to Re-Domicile (relocate offshore and give up US Citizenship / US corporate Status. 3) Punitive Federal Regulations that deter business and job creation.
Your thoughts?[/quot
My thoughts are in the details because you have just exposed facts and rates that seem to be all fact based but what I want to do is show examples as to what is actually being exploited in our corporate tax policy all to show in a lot of areas that prove your agenda and solutions as being a great idea. My findings will show if this country just lowers the corporate tax rate to 25% and maintain the corporate welfare, loopholes and subsidies , that every major corporation in this country will have a negative tax exposure and pay zero taxes. That's why I love your flat tax agenda but would rather call it a minimum tax that all corporations pay but using the loopholes to get to the minimum rate. Some of these loopholes I will mention are probably needed to help corporations to grow and prosper in this country. But like I have mentioned any corporate loophole should be incentive based to create American manufacturing and above poverty wages to eliminate the burden on our social programs.
[ninetogo- I agree with your thoughts on loopholes' being restructured or modified to produce an incentive to create American jobs. This would be the quickest means to help turn our economy around, instead of implementing the flat tax. I see the flat tax as a 5 year t***sition (see my notes attached below) period.]
Now my research has lead me to $58 billion a year on entitlements. This does not include cost overruns on our paid for social programs such as SS unemployment, and Medicare. Just tax payer dollars directly to these programs. Corporate welfare is causing a loss of funds to the Fed of $92 billion a year some is justified and some is just absurd and lacks any common sense.
[ ninetogo many of the cost overruns can be attributed to the influx of i******s into our country (Section 8 housing, free medical, SNAP, etc. ) plus the influx of refugees dictated by the US and high unemployment (01/15/15 figures show 92,386,000 unemployed in our country.]
I agree our social welfare programs reduce the incentive for recipients to become productive members of society and I don't know any liberal that's not for eliminating abuse of these programs.
[ninetogo- the best means of reducing permanent welfare recipients is to rethink the long term implications of our present welfare system. First, only US citizens are entitled to any type of welfare. I******s entering the country on their own should not be eligible for any benefits, period. Refugee immigrants selected by the UN to be resettled in the US should not be the responsibility of the US Taxpayer. Our congress should place a limit of the maximum number of refugees that can enter on an annual basis and not the UN. Second: Hinge all welfare, as we know it, to either participation in jobs training, or working 30 hours per week in community service. Day care could be provided as part of this requirement and use community service workers. No more free lunches. If you need help, fine. We will give it to you, but there are stipulations. Give people an incentive to be gainfully employed or working in a community service capacity. EBT cards would have chips implanted with a single pin code. Many EBT cards are traded for cash (50 Cents on the Dollar) or traded for drugs. The one time pin code would prevent the recipient from selling their card.
So let's get back to taxes. You mention state taxes on corporations. This would be very difficult to try to track because 50 states fifty different tax policies. Also local taxes where these corporation are located, but there are thousands of state and local incentives for corporations to move to certain States and towns so your quote of different taxes on the state and local level in some ways is not accurate because there's plenty of tax incentives to relocate there companies.
[ ninetogo: state tax is a tangled web and under the 10th amendment, each state can elect to enact state level income tax or not. State and local taxes are currently directly deductible from the Federal corporate, and Federal individual taxes. This is the one credit that should remain, even if a Corporate flat tax, national sales tax, individual flat tax, or Corporate VAT is implemented.]
Let's take a look at just a few bills that have been blocked or filibustered in congress that possibly could have lowered tax rates and created jobs. I hope you will take the time to read.
Bring the jobs home Act: would have eliminated deductions for moving expenses for businesses relocating overseas. But also it gives a 20% tax credit to companies who insource jobs
[ninetogo: I commit to you that I will research this proposed bill and share my findings]
American jobs act: this bill has been lost and never really understood by the right wing as to exactly what's in it. The bill is loaded with tax breaks for middle income, small business, tax incentives for corporations. It addresses every concern left and right and it was a great bill that got filibustered by the right and I have no idea why.
[ninetogo; Again, I will research this and share my findings.]
It is worth mentioning when we say that at 39% the US has the highest corporate tax rates. This does not take into account deductions, exclusions, subsidies which result in a lower effective tax rate between 7% and 11% depending on the year that you research. But if you look over the last 15 years the average effective corporate taxes paid was 11.5%. Which is actually the lowest. And depending on the year we had as many as 28 major corporations paying zero taxes and as high as 2/3 paying no taxes. It all depends on the economy as to effective corporate taxes paid. But to mention my past beliefs that every major corporation making a profit on selling goods, services should pay at least a minimum tax of 10%.
[ninetogo: My research is showing a very decided ine******y between tax breaks given to Large ($100 million/yr revenue corporations) and the small ($5 million or less) / medium ( $25 million or less) sized corporations. Again, the small and medium size corporations do not have the resources that the large corporations to hire tax lawyers, & lobbyists to obtain company specific or industry specific tax credits, exclusions, depreciation, etc.]
So let's look at a few loopholes which in some cases are a good thing but it's just a path used by corporations to avoid paying taxes.
Businesses with internal operations pay host countries tax on income earned. Now these corporations pay US taxes on profits they bring home. But these companies can avoid taxes on foreign earned income by investing the profits abroad instead Tax loophole of Deferral.
Tax loophole of inversions to give you an example of this loophole. Burger King merges with Canadian Chain Tim Horton's all it does is move it's official address for tax purposes to Canada but there headquarters remain in Miami.
Corporations with high profits, low tax bills. Despite millions in profits corporations including GE, Verizon, and Boeing all paid negative aggregate federal taxes between 2008 and 2012. Some of the lesser known corporation paying a negative tax aggregate is PEPCO, PG&E, Duke Power, Corning. Keep this in mind as we move along with the right agenda of lowering the corporate tax rate down to 25% and maintaining these loopholes.
[ ninetogo: In our enthusiasm to level the playing field, create jobs, and rebuild our economy, let us never forget that Capital is T***sient, fleeting and movable. If we create conditions where the owners of that capital feel there are better opportunities elsewhere, that capital will leave our country. GE recently moved their Corporate HQ from the US to China. Eduardo Saverin, co-founder of Facebook, renounced his US citizenship in 2013 prior to the IPO of Facebook His net worth is $35 Billion. He is now a citizen of Singapore. Saverin renounced his citizenship, rather than pay the US imposed tax burden of $10 Billion on this earnings from the Facebook Initial Public Offering. In the past year, the US has lost 1320 high net worth individuals as citizens. This trend MUST be reversed to where the US is attracting High Net worth individuals. High taxation of High Net Worth Individuals is rather stupid]
copro
Let's take a look at Bank Of America: has not paid a Nickel in federal Taxes for the last 2 years and racked in $1 billion in tax benefits. BOA took these profits after excepting $45 billion from taxpayers which BOA was able to count as a tax deduction when they paid it back. So corporate tax rate at 39% but these corporations play by a whole different set of rules.
We all have to understand we are in a golden age for corporate profits so why do we have corporations paying zero taxes.
Let's look at a few that do pay taxes
IBM paid less than 3%
Chevron paid 4.3% and also got there share of oil subsidies.
[ninetogo: We need to ask what is the dollar amount of oil leases that Chevron pays to the US Department of Interior without the current ability to drill wells on those leases??? I can tell you that Chevron is currently paying lease payments to the US Government on 31 offshore oil leases sites that the Obama Administration has not allowed them to drill on those lease sites. I would say that 4.3% is well justified. ]
FedEx paid 5% and nobody every mentions the fact that FedEx utilizes our USPS to t***sport mail
[ninetogo: The way I look at FedEx, they helped the USPS reduce their pension shortfall. At the end of 2010, the USPS had a pension shortfall obligation of $49 Billion. Through arranging mail contracts with companies such as FedEx, UPS, and DHL, this obligation will be reduced to $33 Billion by the end of the decade.
Honeywell paid 6%
I could go on and on but this was just a few I researched to give you an idea that your flat tax corporate policy is right on.
[ninetogo: I noticed that each reference made was one of the fortune 500 companies that are considered large Corporations, according to the IRS. These companies have Gross earnings of $100 million per year or greater. This proves my point about large corporations having the financial wherewithal to hire tax advisers, tax accountants, & lobbyists to greatly reduce their US Tax obligations. The small and medium size corporations do not have the same wherewithal, so their corporate tax obligations are greater.]
Although as you mentioned that our tax code has over 9000 pages of these loopholes I want to show ten loopholes commonly used and abused by the corporate elite. Now some maybe great policy but how do we monitor the corporations that abuse these loopholes. US corporations exploit every available rule in the tax code to minimize the taxes they pay. I want to say that I am not against any corporation from making these profits. But where do we stop and at what point should they be paying some kind of tax.
#1. Inventory Property Tax:
5 year cost to US $16.7 billion
Benefits multinationals with operations in high tax foreign countries
#2. Graduated Corporate Income
5 year cost to US $16.4 Billion
Benefits Individuals that own small corporations.
#3. Exclusions of interest on State anD Local Bonds
5 year cost to US $59.8 billion
Benefits High income investors and corporations
#4. Research and experimental Tax Credit
5 year cost to US $29.8 billion
Benefits Pharmaceutical companies, engineers, agriculture
conglomerates
#5. Deferred Taxes for Financial Firms
On certain Income Earned overseas
5 year cost to US $29.9 billion
Benefits financial forms with foreign interests.
#6. Alcohol fuel Credit
5 year cost to US $32 billion
Benefit is food and agriculture conglomerates
#7. Credit for low income housing Investments
5 year cost to US $34.5 billion
Benefits only large real estate developers
#8. Accelerated depreciation of machinery and equipment
5 year cost to US $51.7 billion
Benefits airlines and manufacturers using large equipment for years.
#9. Deductions for Domestic Manufacturing
5 year cost to US $58 Billion
Benefits any major company that produces a product within US
borders.
#10. Deferral of income from Controlled Foreign Corporations
5 year cost to the US $172.1 billion
Benefits multinational companies
This is just a few and yes the positives and negatives can be debated as cost and intent. I have read through a few of these and they are very difficult to understand but I am sure there are good sound reasoning for these loopholes but there are no math odes to investigate the abuse. Kind of just like our social welfare there is a lot of abuse on the corporate level.
[ ninetogo: I do not disagree. A flat Corporate rate would remove many of these tax breaks and make them unnecessary. See my attached response note.]
So I want to end in saying that our loopholes in the tax system needs to be incentive based to create jobs above the poverty wage to keep people off our social entitlement programs and opening up manufacturing in this country.
Example of foolishness Burger King buys merges with a Canadian chain Tim Horton's moves it's official address to avoid taxes, hires minimum wage employees (under the poverty rate) these employees are now on food stamps and fall under our social welfare programs. ?????????
So just wanted to show if the corporate tax rates dropped to 25% maintain loopholes there will be absolutely no corporations in this country paying taxes.but you did get me thinking about a flat tax of 10% but these loopholes can be used to get to that 10% level.
tdsrnest: br br Thanks for starting this thread. ... (
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