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Post by trappincoyotes39 on Aug 29, 2014 15:13:11 GMT -6
The Obama administration is highly exercised about “inversion,” the practice by which an American corporation acquires a foreign company and moves its headquarters out of the United States to benefit from lower tax rates abroad.
Not fair, says Barack Obama. It’s taking advantage of an “unpatriotic tax loophole” that hardworking American families have to make up for by the sweat of their brow. His treasury secretary calls such behavior a violation of “economic patriotism.”
Charles Krauthammer writes a weekly political column that runs on Fridays. View Archive RSS Nice touch. Democrats used to wax indignant about having one’s patriotism questioned. Now they throw around the charge with abandon, tossing it at corporations that refuse to do the economically patriotic thing of paying the highest corporate tax rate in the industrialized world.
Odder still because Democrats routinely ridicule the very notion of corporations as persons. When Mitt Romney suggested that corporations were people in 2011, Democrats mocked him right through Election Day. In the Hobby Lobby case, they challenged the very idea that corporations can have religious convictions. Now, however, Democrats are demanding that corporations exercise a patriotic conscience. Which is it?
Moreover, corporations have an indisputable fiduciary responsibility to protect their shareholders’ interest. Surely Walgreens betrayed this responsibility when it caved to administration pressure and canceled its plans to move its headquarters to Switzerland. The inversion would’ve saved it billions of dollars. Its cancellation caused an instant 14 percent drop in Walgreens shares.
But the Democrats’ problem is deeper. Everyone knows why inversions are happening. America’s 35 percent corporate tax rate is absurdly uncompetitive. Companies are doing what they always do: try to legally lower their tax liabilities.
What is maddening is that the problem is so easily solved: tax reform that lowers the accursed corporate rate. Democrats and Republicans agree on this. After the announcement of the latest inversion, Burger King buying Tim Hortons and then moving to Canada, the president himself issued a statement conceding that corporate tax reform — lower the rates, eliminate loopholes — is the best solution to the inversion problem.
It’s also politically doable. Tax reform has unique bipartisan appeal. Conservatives like it because lowering rates stimulates the economy and eliminating loopholes curbs tax-driven economic decisions that grossly misallocate capital.
The appeal to liberals is economic fairness. By eliminating loopholes, tax reform levels the playing field. Today, the more powerful companies can afford the expensive lobbyists who create the loopholes and the expensive lawyers who exploit them. Which is why the nominal corporate tax rate is 35 percent but the effective rate for some of the largest corporations is about 13 percent.
So why not attack the inversion problem with its obvious solution: tax reform? Time is short, says Obama. He can’t wait. Instead, he wants legislation to outlaw inversion.
No time? Where has he been? He does nothing about tax reform for six years (during two of which Democrats fully controlled Congress), then claims now to be too impatient to attempt the real solution. Instead he wants to hurry through a punitive anti-inversion law to counterbalance the effects of our already punitive tax rates.
This is nuts. But amusing, given that a major financier of the inversion-célèbre of the day, the Whopper-to-Canada deal, is none other than Warren Buffett, Obama’s favorite plutocrat.
Buffett’s demand that the rich be required to pay more taxes made him a hero to the president. In 2012, Obama repeatedly held up Buffett as a champion of economic justice. What does Obama say today about his 2012 class-war comrade in arms — now become, by Obama’s own lights, an economic traitor?
And more such Benedict Arnolds are being minted every week. One of the reasons for the recent acceleration of inversions is that corporations want to move before Obama outlaws it, locking them into America’s anti-competitive corporate tax rate.
The Wall Street Journal cited a Buffett confidant as saying he likely wouldn’t have backed a deal like Burger King if it were purely for tax reasons. Indeed, there are other considerations that can always be invoked. Which makes some of the contemplated anti-inversion proposals even more absurd: They would outlaw only those mergers done for tax reasons. How do you prove motivation? Lie detectors?
A real political leader would abandon this sideshow and actually address corporate tax reform with a serious revenue-neutral proposal to Congress. There would be hearings, debate, compromises. We might end up with something like the historic bipartisan tax reform of 1986 that helped launch two decades of nearly uninterrupted economic growth.
But for that you need a president.
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Post by PamIsMe on Aug 30, 2014 0:31:23 GMT -6
Sounds like just more Conservative BS to me.
Cheers, Pam
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Post by trappincoyotes39 on Aug 30, 2014 5:55:19 GMT -6
Pam do you think cooperate taxes are where they should be here in the US? Also do you think the tax rate has any bearing on this subject matter or not?
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Post by trappnman on Aug 30, 2014 6:42:26 GMT -6
Charles Krauthammer? perhaps the douchiest person on this world- give him $10 and he'd pontificate on how goats make good lovers- he is nothing but a carny shill for FOX.
taxes are no factor
I rmember when Sunbeam moved out of CA years ago, one of the first to move out of country....and were they suffering here? the years before they moved, they had 19-21% corporate profit........ but they could gain more by moving.
companies want to be offshore? then treat them as oversea companies!
as far as tax rates- and TC, pay particular attention to whats underlined in red-
USC Professor Kleinbard Destroys Myth of High US Corporate Taxes
Wednesday, 20 Aug 2014 01:18 PM
By Michael Kling
U.S. corporations continuously argue that their high corporate tax rates burden them a competitive disadvantage. That's why a growing number of American corporations are buying foreign companies and reincorporating overseas in a controversial process known as inversion.
But that argument "is largely fact-free," Edward Kleinbard, a professor at the Gould School of Law at the University of Southern California, reveals in a paper published on Social Science Research Network.
Contrary to pervasive arguments, the U.S. corporate tax system gives American corporations a competitive advantage, argues Kleinbard, a former chief of staff to the Congressional Joint Committee on Taxation.
"Whether one measures effective marginal or overall tax rates, sophisticated U.S. multinational firms are burdened by tax rates that are the envy of their international peers."
Competitiveness has nothing to do with the inversion deals, Kleinbard states.
"The recent surge in interest in inversion transactions," he argues, "is explained primarily by U.S. based multinational firms' increasingly desperate efforts to find a use for their stockpiles of offshore cash (now totaling around $1 trillion), and by a desire to "strip" income from the U.S. domestic tax base through intragroup interest payments to a new parent company located in a lower-taxed foreign jurisdiction."
Although the U.S. corporate tax rate is 35 percent, the highest in the developed world, companies paid an average tax rate of 12.6 in 2010 because of tax breaks.
By taking advantage of those number tax loopholes, or by "aggressive tax planning technologies," big American companies are actually more competitive than foreign corporations, the professor explains.
Walter Galvin, retired vice chairman and CFO of Emerson Electric Co., writes in The Wall Street Journal that the U.S. tax system blocked its acquisition of American Power Conversion (APC) and allowed French company Schneider Electric acquire it.
"A close reading of the public record surrounding the APC deal, however," the professor counters, "leads to the conclusion that this gripping tale represents a corporate false memory, like the adult recollection of a childhood trauma that never took place."
Schneider was widely criticized for paying a 30 percent premium over APC's stock price, but never mentioned taxes when defending its acquisition.
The paper is worth reading even if you disagree with its conclusions, according to The New York Times columnist Andrew Ross Sorkin. It helps explain why corporate tax reform will be difficult even though both political parties claim they support it. It also gives an idea why corporations may oppose some proposals, even if they might lower the tax rate.
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Post by trappincoyotes39 on Aug 30, 2014 7:00:35 GMT -6
So your saying some large business stay put even with higher taxation and will take less profits for stock holders?
How does that help people's investments?
Do you think if we had lower corporate taxes than some other countries we would then see less of this taking place or not? Meaning then would the cost of switching and bringing money back in be more of a cost and hassle than it is worth?
The problem with Burger King for example is its market share is shrinking and will continue to do so in future years, one guy that studies this says in the next 15 years many of what we knew as fast food will no longer be in business, due to people changing ways of fast food and how their taste buds reach out for other means of fast food in the same price point.
So Burger King saving 8.1 million per year could extend it self and do things that might keep them more solvent for a period of a few more years while adding diversity to its company by picking up Tim Hortons.........
If all that where true as the professor states then why do we keep losing jobs to foreign countries? Taxes and labor cost and material cost and rules and regs all factor into the bottom line be it here in the US or globally and to stay competitive one must turn over every rock to see where cost savings can be had. Especially if your a public traded company.
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Post by trappnman on Aug 30, 2014 7:30:16 GMT -6
what I am saying- is that the average corporation paid 12.6% the last year stats are up for
so the "high tax rate" for leaving, is bullshite
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Post by trappincoyotes39 on Aug 30, 2014 8:30:34 GMT -6
Is it really BS?
This comes from the UK :
Many politicians in Washington are angry that some American companies are redomiciling in the UK, Canada and elsewhere. These “inversions” generally occur as a result of mergers with foreign firms, with tax being a big reason why the non-US company winds up as the “parent” firm in the new union. This is what Pfizer was attempting with AstraZeneca, for example. So what is it about the American business tax regime that makes it so attractive for companies to give up their corporate citizenship? There are two factors driving the new wave of inversions.
First, the United States has the highest corporate tax rate in the developed world (and the highest in the entire world, according to KPMG, if you ignore the United Arab Emirates’ severance tax on oil companies). How high? The central government in Washington imposes a 35pc rate on corporate income, with most states then adding their own levies, with the net result being an average corporate rate of 39.1pc. This compares with 37pc in Japan, which has the dubious honour of being in second place, according to the tax database of the Organisation for Economic Co-operation and Development (OECD). Other G7 nations have even lower tax rates on businesses, with the United Kingdom being the most competitive of that group, with a rate of 21pc and falling.
And if you broaden the analysis, it becomes even more evident that the United States has fallen behind in the global shift to more competitive corporate tax systems. The average corporate tax for OECD nations has dropped to 24.8pc. For EU nations, the average corporate tax is even lower, with a rate of less than 22pc. And don’t forget the Asian Tiger economies, with Singapore, Taiwan and Hong Kong all clustered around 17pc, as well as the fiscal paradises that don’t impose any corporate income tax, such as Bermuda and the Cayman Islands. But America’s onerous corporate tax rate is only part of the reason why companies are seeking greener pastures. The second factor driving inversions is America’s “worldwide” tax system. Unlike the “territorial” systems in most other nations, the US tax code requires American-domiciled companies to pay tax on income earned (and already subject to tax) in other nations.
Consider what this means. Let’s imagine that an American company is competing for business in the United Kingdom against a local firm, a Canadian firm and a Dutch firm. All the companies have to pay a 21pc tax to HMRC on their UK-sourced income, but the American company then has to declare that same income on its US tax return and pay an additional layer of tax to the Internal Revenue Service (IRS). This might not be a major problem if the corporate income tax rate in America was reasonable but that’s obviously not the case, so worldwide taxation puts the American company at a significant competitive disadvantage, not only against the UK-based firm, but also against the other two companies, since Canada and the Netherlands maintain territorial tax systems for their businesses. The US company does get a credit for taxes paid to the UK government, so the combined tax paid to HMRC and the IRS theoretically doesn’t climb above the American tax rate, but this merely limits the additional tax penalty.
American companies also have the ability to postpone the extra layer of tax in some instances, but this policy of “deferral” requires them to keep money overseas (and with multinational firms sitting on nearly $2 trillion of unrepatriated earnings, this is not a trivial issue). But it gets worse. High tax rates and worldwide taxation may be the most noticeable warts on the American tax code, but the entire internal revenue code is a convoluted and punitive mess.
A study by German economists ranked the United States 94 out of 100 nations for overall “business tax attractiveness”, behind countries such as Pakistan, Greece, Russia and Nigeria.
Given these bad policies – a high tax rate and a worldwide tax system – imagine you are a major investor in, or senior manager of, an American-domiciled company that competes in global markets. If you can somehow take your corporate charter (and thus your legal HQ) out of a filing cabinet in the United States (most likely in Delaware) and shift it to a filing cabinet in a nation with better tax policy, that one step can substantially benefit shareholders, with secondary benefits for employees and customers. Hence that’s why US firms are buying foreign ones and then relocating themselves abroad. It’s important, however, to understand that there are limits to what an inversion can achieve. No matter where a company redomiciles, for instance, that doesn’t change the fact that it will still owe tax to the IRS on US-sourced income. But no longer having to pay tax on non-US-sourced income is more than enough reason to consider a new home. The motive to invert is especially strong since other nations are engaged in a tax competition-fuelled shift to better tax policy. With each passing year, more nations reduce their corporate tax rates and shift further in the direction of territorial taxation.
In the United States, however, there is no reasonable hope in the near future for pro-growth reform. Indeed, the Obama administration has actually proposed to make the system even less competitive by curtailing deferral. This would mean immediate application of worldwide tax on the foreign-sourced income of US-domiciled firms. Some on the left hold out hope that anti-tax competition campaigns from the European Commission and the Paris-based OECD will “solve” the problem. But the EU has been trying for decades to harmonise corporate tax rates with no success, while the OECD’s more limited “base erosion and profit shifting” initiative hasn’t gained much traction.
So it’s reasonable to assume that tax policy outside America will continue to improve, which means the incentive for inversions will grow. Unless, of course, American policymakers may impose protectionist policies to hinder the mobility of American companies. Could that happen? There are two options. President Obama is threatening to change the law unilaterally, something he’s already done several times with “Obamacare”. The affected companies almost certainly would challenge that kind of extra-legal step and it’s quite likely that the courts eventually would slap down the White House. In the interim, though, the number of inversions presumably would slow to a trickle.
It’s also possible that Congress and the President might agree on a legislative response. That seems improbable, since Republicans control the House of Representatives and support territorial taxation and a lower corporate tax rate, which makes any compromise with Obama seem unlikely. But this is where politics may play a role. Voters don’t like inversions because of misguided assumptions that companies are evading tax and moving jobs out of the country. So Republican politicians may decide to support bad policy for short-run political gain, which is what they did last decade in response to an earlier wave of inversions. Blocking inversions, though, is like breaking the thermometer because you don’t like the temperature. It simply masks the underlying problem. In the long run, the United States will lose jobs and investment because of bad corporate tax policy, regardless of whether companies have the right to invert.
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Post by trappincoyotes39 on Aug 30, 2014 8:35:13 GMT -6
More than one way to look at things for sure. other countries are lower and lowering taxes of such nature while we sit without some reform, yet with our debt where it is things are tough for sure. The double taxation on a global market place I do not think is helping Our economy.
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Post by trappnman on Aug 30, 2014 8:38:25 GMT -6
no one pays the rate of 39.1
like Romney complaining about taxes, and only paying 12%
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Post by trappincoyotes39 on Aug 30, 2014 17:06:34 GMT -6
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Post by trappincoyotes39 on Aug 30, 2014 17:09:32 GMT -6
If you don't want to read the entire 12 pages at least look at pages 7-8 to better explain
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Post by bblwi on Aug 30, 2014 18:01:58 GMT -6
Yes the rates are germane to the discussion but mostly because they are a political issue and not a real cost issue. Ever wonder why the US wants their headquarters in a low tax area but not as much production. Most developed nations have high value added taxes and that really costs industries a lot of money, so the USA can form LLC corporations that stay here and produce the product and with a 35% rate with our write-offs and loopholes most of the branches of the large corps don't pay much tax even if it is 35%. Also if you have a higher tax rate your expenses and investments get you huge tax deductions and not small deductions. It is good politics for the GOP to have a higher rate as it causes many to scream and yell and support their cause when in reality their total tax bills are not as high as many nations. Toyota likes to build cars here but have their headquarters in Japan. The Dutch locate production out of the Netherlands but keep their headquarters at home, so does Denmark, France etc. If we need to lower taxes then we should do so on a large scale. I don't feel it is morally correct to allow a business to locate headquarters out of the USA and use our public infrastructure heavily to make profits and expect middle class tax payers to pay for their excellent mobility opportunities as well as public subsidized, water, irrigation, utilities etc. They relocate because they have the wealth and assets to do so and most US Citizens don't have the wealth to relocate. If you notice the headquarters are not relocated in developed or developing nations that want to create more jobs or employment they are going to tax havens that just want to house their high profile employees and there does not need to be any or much increase in costs to the nation to have them there. Sort of like Face Book where you create wealth out of noting that produces nothing and therefore has no economic rollover impact.
Bryce
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Post by PamIsMe on Aug 31, 2014 0:15:38 GMT -6
"Pam do you think cooperate taxes are where they should be here in the US?"
I don't know. However, it does seem somewhat logical that since we live in a global economy maybe the US would actually gain more revenue if the corporate tax rate was competitive with some countries where corporations are going. China's is 25%.........Switzerland 13% to 25%. If equaling 25% that would more than double the 12% most are paying the US now. But, would that be enough to stop them moving? What would it take 20%, 15%............Zero like Cayman Islands?
The article states: "A real political leader would abandon this sideshow and actually address corporate tax reform with a serious revenue-neutral proposal to Congress." Maybe Congress should come up with a plan for a change.
The revenue neutral idea to me is bunk. How would revenue neutral help in any way? The US needs extra revenue.
"The Tax Reform Act of 1986 was given impetus by a detailed tax-simplification proposal from President Reagan's Treasury Department, and was designed to be tax-revenue neutral because Reagan stated that he would veto any bill that was not. Revenue neutrality was targeted by decreasing individual income tax rates (on the wealthy, raising it on the poor) , eliminating $30 billion annually in loopholes, while increasing corporate taxes, capital gains taxes, and miscellaneous excises."
How did Reagan's trickle down economics idea really work out? lol
Pam
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Post by trappincoyotes39 on Aug 31, 2014 5:04:12 GMT -6
Bryce Toyota build many vehicles in the US in fact 5 states they employ people, who I doubt many would have jobs if not for them. Theynbuild cards and trucks here in the US and it saves them on shipping cost and keeps their profits and price point where they need to be, or they wouldn't have invested so much into their production companies here in the US. But that is a good point as they are selling a global product so they build vehicles and parts in many countries. Toyota employs 100,000. 'S of Americans at their plants in the US and of their best selling car here in the US the Camry 80 percent of each one is made in the US. Pam yes the US. Needs more revenue but more will do no good without cutting spending , we can't keep taking it in and higher rates and not curb spending in this country, the debt is growing daily and at amounts Americans have never seen in their lives ever. We need job creation without that we will spiral down more and more, having a society that is more and more govt dependent is not the answer for a free country like the US. The money today paid out for assistance programs and the lack of work ethic by a few generations now can't keep going on or we will all pay big. The entitlement belief system has to go away and more people need to do more for themselves IMO. I see people daily in areas that sit on their porch smoke and talk on their cell,phones who have no job, no drive or ambition to do so this has got to stop or at least shrink back down, we get excited over corporate America making money for stock holders but the need to get people to focus on work and ambition slides on by? Ok that was my rant and opinion . I work with a few people who are 66-72 and they work harder than those sittin on the porch half their age doing nothing, the mind sets are totally different between the age groups.
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Post by bblwi on Aug 31, 2014 10:35:04 GMT -6
You did not even read the post. I stated that Toyota builds cars here but headquarters is in Japan. You can't have a debate on an issue with people who don't even recognize what you say or want to even digest what is said.
Bryce
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Post by trappincoyotes39 on Aug 31, 2014 19:23:47 GMT -6
Bryce we all know where their head quarters are, yet they employee a lot of Americans ........... They are a Japanese company growing in America .........
Why would they bring their head quarters here? More taxes for sure......
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Post by bblwi on Aug 31, 2014 21:24:35 GMT -6
You just don't get it do you. Never said that they were not creating jobs. I was stating why they were making cars here but choosing to run the company from their own nation. I guess that is a lot more than many American firms are willing to do and it sure is not cheaper to run your headquarters in Japan than in the USA. Japan is one of the highest cost nations to live. Taxes is not the only cost to a business or their employees. Some areas buy land by the square foot and for several thousand dollars per square foot.
Bryce
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Post by PamIsMe on Sept 1, 2014 2:31:27 GMT -6
"... Needs more revenue but more will do no good without cutting spending ...."
I do agree, we need to do both to some degree. But the question is where to cut spending. The Military is a big part of the budget, but when anyone wants to cut some funding from it, all h*ll breaks loose. Low income assistance is a very small part of the budget, must we always go after the poorest of the poor?
Pam
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Post by trappincoyotes39 on Sept 1, 2014 6:09:31 GMT -6
No we need to cut fat from every area, problem is many are pet projects and vote getters in states, so we will keep,watching our deficit balloon and add jobs at a very slow rate. Our economy has no guarantees tied too it, the deficit is a major concern and unless dealt with hard choices across the board we could be in some real big trouble again, sooner than later.
DC,is really broke and needs a major over haul .........
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Post by trappnman on Sept 1, 2014 7:53:46 GMT -6
once again, we see an issue that great shakes is made concerning the talking points- but closer examination shows its nonsense.
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