patrick.net

control point says

Higher taxes encourage investment. Historically this has been proven.

LOL

http://www.voxeu.org/article/france-s-weak-economic-performance-sick-taxation

http://reason.com/24-7/2013/07/11/high-taxes-red-tape-drive-plunge-in-fren

"Honestly, at the moment, I don't see any point in investing," said the 75-year-old Mr. Mizrahi, who founded small auto-part maker Klaxcar in the 1990s. "If I were 40 years younger, I'd move abroad."

Refuted. Btw. this has nothing to do with "left" or "right", but with basic math and common sense.

mell says

Refuted. Btw. this has nothing to do with "left" or "right", but with basic
math and common sense.

No, its an opinoin piece based upon cherry picking data. As if there are no other factors that contribute to Real GDP per capita growth.

I can cherry pick too. I choose....Norway. In figure 2 on your first link, Norway has the highest CIT as a percentage of total tax revenues. It also has higher GDP per capita growth than the US, figure 1.

Do you want to do a correlation analysis between GDP growth rates and tax rates in the US? I have done it in the past - there is a positive correlation between GDP growth and higher taxes, period.

In fact, when the top marginal tax rate is above 50%, GDP has grown, on average, 2% more per year than when the top marginal tax rate is below 50%.

Opinion pieces based upon cherry picked data are hardly factual.

Refute what I said. Explain why low tax rates would not encourage profit taking.

I think mell is on the Koch Brothers' payroll.

Problem with high taxes is that it causes capital to go overseas where tax rate is lower, or to just have special interests seek loopholes. If you can provide a service at $5 but have to pay $1 in taxes... you can't compete with some jackass overseas who can provide it for $3.50 unless you slap a $1 worldwide tariff on it.

Problem with low taxes is we can't afford to have infrastructure, army, law and order.

Golden seed is somewhere in the middle. I think for what I'm paying in taxes I'm not getting enough services from the state. We have crapy education system that caters more to illegals than it does to citizens, police department that is understaffed and underpaid, no border security, welfare state, and way too many jackasses from overseas constantly gunning for a piece of American pie.

I'm mad as hell and I won't take it anymore!

FortWayne says

Golden seed is somewhere in the middle. I think for what I'm paying in taxes
I'm not getting enough services from the state. We have crapy education system
that caters more to illegals than it does to citizens, police department that is
understaffed and underpaid, no border security, welfare state, and way too many
jackasses from overseas constantly gunning for a piece of American pie.

I'm mad as hell and I won't take it anymore

The problem is 50 cents plus out of every tax dollar goes to paying for our military/defense.

freak80 says

I think mell is on the Koch Brothers' payroll.

No, he's just a typical right-wing dim bulb who thinks a quote from some 75-year-old coot refutes actual data.

control point says

I can cherry pick too. I choose....Norway. In figure 2 on your first link, Norway has the highest CIT as a percentage of total tax revenues. It also has higher GDP per capita growth than the US, figure 1.

That has nothing to do with your thesis regarding investments and taxes. Norway is bathing in oil and therefore doing very well. Look, taxes are one of the tools for redistribution and financing, but they are certainly not encouraging investment, even if they happen during a periods of robust investment. It's just basic math and common sense. Are you more likely to make an investment with some of your saved money if you get to keep 75% or 25% of the gains? Come on now ;)
Oh, btw.

http://www.bloomberg.com/news/2013-10-07/norway-s-incoming-government-pledges-tax-cuts-and-asset-sales.html

FortWayne says

Golden seed is somewhere in the middle. I think for what I'm paying in taxes I'm not getting enough services from the state.

Agreed. You wouldn't believe what you get for your taxes in some of the northern European nations, and those services are available for everybody from rich to poor.

mell says

Are you more likely to make an investment with some of your saved money if you
get to keep 75% or 25% of the gains? Come on now ;)

Investments are made with pre-tax dollars. If a corporation hires employees, their income (and tax bill) is lower. If a corporation buys equipment, a portion of that investment lowers their income and tax bill.

If I hire someone and it costs me $100k, but I think I will make $200k more revenue by doing so, I will hire that person. Regardless of if tax rates are 99% or 0%. If they are 99%, It costs me $1k in after tax income for $2k after tax profit. If the tax rates are 0%, it costs me $100k in after tax profit for $200k in after tax income.

The higher tax rates subsidize the risk.

control point says

Investments are made with pre-tax dollars.

Maybe on wall street, not on main street. Anything I invest, is after tax.

control point says

I want someone from the right to refute this. If you run a business - in times of low tax rates you maximize profits. In times of high tax rates you invest in infrastructure and avoid taxes. In short, at 50% tax rates, any investment in the company is paid 50% by tax savings and 50% by the company.

$100k spent hiring someone with a 50% tax rate affects the bottom line by $50k. When taxes are 20%, $100k spent hiring someone is paid by $80k from shareholders and $20k by the government.

Does this mean that companies that make investments are allowed to write off the entire value of their investments as an expense in the year made? A company purchasing a piece of capital equipment or a new building can expense the whole thing in one year to avoid 50% taxes, as opposed to carrying the purchase as an asset on their balance sheet and depreciating it over a number of years? Yes? No?

How exactly is it that if taxes are 20% in your example, $20K of the salary comes from the government?

Take all the corporations, TBTFs, banks that have been bailed out and would have otherwise failed, incl. Buffet and BRK and take 50% of their market cap as a special tax and you will end up easily with 100s of billions to reduce the deficit and debt. It's a small price to pay in the crony capitalist system for being eternally backstopped, subsidized and informed before everybody else by the Fed/government so that it's impossible for them to go belly up. Remove all QE/MBS buying and reduce the deficit/debt instead, or send everybody of the tax-paying middle-class a monthly check if you must insist on spending. Don't punish the middle-class and stifle economic climate for the crimes of a few.

Paralithodes says

Does this mean that companies that make investments are allowed to write off
the entire value of their investments as an expense in the year made? A company
purchasing a piece of capital equipment or a new building can expense the whole
thing in one year to avoid 50% taxes, as opposed to carrying the purchase as an
asset on their balance sheet and depreciating it over a number of years? Yes?
No?

Depends on the type and size of the investment usually. A $2000 laptop is written off. A $200,000 server farm is capitalized typically. Real property is capitalized.

Paralithodes says

How exactly is it that if taxes are 20% in your example, $20K of the salary
comes from the government?

The salary is $100k. If the company does not hire that person, then their net income is $100k higher - but at a 20% tax rate, $20k goes to the government in taxes, and the loss of after tax income to shareholders in $80k.

If they hire at $100k, the after tax cost to shareholders is $80k and the cost to government is $20k.

mell says

Take all the corporations, TBTFs, banks that have been bailed out and would have
otherwise failed, incl. Buffet and BRK and take 50% of their market cap as a
special tax and you will end up easily with 100s of billions to reduce the
deficit and debt.

lol. How about we take the actual out of pocket COST of the bailout and then subtract out the taxes that those companies have paid in the last 5 years and the taxes that the employees of these companies have paid the last 5 years, then subtract out the unemployment that would have been paid out to the employees, etc.

tatupu70 says

mell says

Take all the corporations, TBTFs, banks that have been bailed out and would have

otherwise failed, incl. Buffet and BRK and take 50% of their market cap as a

special tax and you will end up easily with 100s of billions to reduce the

deficit and debt.

lol. How about we take the actual out of pocket COST of the bailout and then subtract out the taxes that those companies have paid in the last 5 years and the taxes that the employees of these companies have paid the last 5 years, then subtract out the unemployment that would have been paid out to the employees, etc.

Paid back some with debased dollars, great. Furthermore I hear all the time that pushing buttons and betting on contracts is not a "job" does not add anything productive to the economy. Yet they keep making record profits and loss-free trading months (impossible without being on the inside), so according to the ones debating for the "other" side there must be NET losers out there, no matter if they paxes and employ people or not. So which one is it? They are constantly getting subsidized and not punished for rigging the markets, what is that worth to you? But glad to see you suddenly defend the FIRE sector ;)

sbh says

Your time machine scenarios designed to stoke deflation

If you are so (unprovenly) worried about deflation, how about this:

Instead of the bailouts the government seized the Fed and printed its own money, created its own intermediate banks and distributed payments regularly to the people. No TBTfs needed for this, let em fail.

control point says

Depends on the type and size of the investment usually. A $2000 laptop is written off. A $200,000 server farm is capitalized typically. Real property is capitalized.

At least you're discussing your point without ad hominem attacks, that's already worth a lot to the debate. I have to extend that credit to tatupu mostly as well.

sbh says

I respectfully suggest you advance your talking points.....for everyone's sake. You haven't had anything new to say since you began.

Hey now, don't knock recycling. Recycling is good for the environment.

mell says

Paid back some with debased dollars, great. Furthermore I hear all the time
that pushing buttons and betting on contracts is not a "job" does not add
anything productive to the economy. Yet they keep making record profits and
loss-free trading months (impossible without being on the inside), so according
to the ones debating for the "other" side there must be NET losers out there, no
matter if they paxes and employ people or not. So which one is it? They are
constantly getting subsidized and not punished for rigging the markets, what is
that worth to you? But glad to see you suddenly defend the FIRE sector ;)

I'm certainly not defending the FIRE sector. But I want the criticism of it to be correct. That's all.

sbh says

trickle-downer conservative hiding in a Libertarian cowl

I always figured the self-described libertarians I knew were just ashamed to be voting the same way as Southern Baptists on issues like abortion, gay marriage, flag burning, what have you.

So they rationalized their voting behavior for the world to see as an unfortunate compromise: go with the party of low personal freedom but more economic freedom - let's assume that the Republics really stand for economic freedom, for the sake of this argument - and then, once economic freedom is achieved, then we would get more social freedoms, either by default - we'd all be rich - or by attacking those issues next.

If this sounds like Marx's "the state shall whither away," that isn't a coincidence. It's essentially inverted Marxism: If we have economic anarchy, total freedom in all things will follow, as opposed to Marx's idea of the rational, economically centralized state purging us of petty class motivations and prejudices, which would then remove the very underpinnings of the state.

Both sound like bullshit to me.

Problem is, many libertarians really, really hate the idea of gay marriage and are fine with an abortion ban.

More and more, I now feel some sympathy for libertarians. I don't see them so much as hypocrites but more as victims of a scam: trickle-down disguised as rational freedom.

HydroCabron says

let's assume that the Republics really stand for economic freedom, for the sake of this argument.

I don't think they do - there's a few amongst them who do but certainly not enough, That's why a second party is needed. I have also consistently been advocating civil/social liberties (so have a even a few Republicans).

sbh says

I respectfully suggest

A valid point does not become invalid just because it isn't addressed. I would suggest you look in the mirror and refrain from personal attacks. Look around, we are all diverse. I don't always see eye to eye with Tom Wong, but he apparently has valuable input and experience (esp. regarding CA/SV business). Same goes for Dan, or Fort Wayne who likely is socially far more conservative than I am. Try to embrace other people's viewpoints instead of labeling them as "foxbots, right-wing shills, tickle-downers etc.", esp. since you know nothing about them beyond the topics discussed on patnet.

SiO2 says

I agree that anarcho-libertarian paradise is going to lead to poverty for the majority.

Whatever your understanding of this nebulous term may be, it certainly isn't debating long-term vs short term capital gains taxes which most of the countries have different tax rates for. Neither is questioning capital flight and/or people with wealth moving out of the country due to higher tax rates. Nowadays where business mostly exist on a couple of servers, you can easily set up a corporation outside of the US where the business transactions will happen, and therefore skirt higher taxes (with some restrictions that a good lawyer can take care of). This is reality, not fiction, happening every day. Nobody is advocating an anarcho paradise.

SiO2 says

I agree that anarcho-libertarian paradise is going to lead to poverty for the majority.

Poverty really doesn't matter. Most people were happier under feudalism - look it up.

Also, they'll still have the right to own guns - even thought they won't be able to afford them - and visit war memorials as often as they can afford to fly to Washington, D.C. and book a hotel room.

SiO2 says

On the other hand, communism (ussr-style in the 60s,70s,80s) led to more poverty and misery

It was almost as bad in the United States. I hope you're sitting down when you read this: we... taxed... (are you ready?)... capital gains (gasp!) at a higher rate than we do today.

Life in the United States was a vast landscape of death and desperation back then.

Regarding capital gains, I would be for taxing them as ordinary income, but would increase write offs from 3K per year to unlimited, however the wash sale rule would have to be strictly enforced.

dublin hillz says

Regarding capital gains, I would be for taxing them as ordinary income, but
would increase write offs from 3K per year to unlimited, however the wash sale
rule would have to be strictly enforced.

This 3k point is a bit disingenuous. It is actually beneficial if you think about it.

You are taxed 20% on capital gains, and can write off up to 3k of capital losses per year against ordinary income. This is important. You are potentially lowering taxable wage income (taxed at higher rate) with losses that would have been taxed at only a 20% rate if they would have been gains.

Further, it is only $3k per year if you never have any other gains. If you lose $50k one year, you write off $3k at your highest marginal rate (lets say 25%) and carry over the $47k remaining. If you gain $50k the next year, you pay no taxes on $47k of that gain, and 20% on the $3k excess.

Net, you have essentially paid less taxes than if you wouldn't have done either trade, but have not gained or lost anything except the opportunity cost of your $50k.

control point says

Further, it is only $3k per year if you never have any other gains

If you never have other gains, perhaps investing is not the right thing to do.

I agree with the sentiment posted that cap gains should be taxed as regular income. Why favor investment over work? But, they should be inflation adjusted. If you buy stock in 1980 for $100, and it's worth $150 now, you are actually worse off. So there shouldn't be tax on that.

Lifting the 3k cap for offsetting losses is an interesting point.

mell says

Nowadays where business mostly exist on a couple of servers, you can easily set up a corporation outside of the US where the business transactions will happen, and therefore skirt higher taxes (with some restrictions that a good lawyer can take care of). This is reality, not fiction, happening every day. Nobody is advocating an anarcho paradise.

your not skirting any taxes... how could you ? Your gonna get taxed by the home countries taxing authority and any foreign nations you do business with.

for USA companies, they pay domestic and foreign tax. there is a foreign tax credit used by corporations are there is one for individual tax payers.

there are no lawyers or accountants that can fix anything to hid transactions or skirt taxes..unless your completely working for a criminal organization.

control point says

Further, it is only $3k per year if you never have any other gains. If you lose $50k one year, you write off $3k at your highest marginal rate (lets say 25%) and carry over the $47k remaining. If you gain $50k the next year, you pay no taxes on $47k of that gain, and 20% on the $3k excess.

Net, you have essentially paid less taxes than if you wouldn't have done either trade, but have not gained or lost anything except the opportunity cost of your $50k.

the carry over provision is there for a purpose.. as was the case with carry over deductions from medical and charitable deductions... yes that too lowers individual
taxes..

thomaswong.1986 says

mell says

Nowadays where business mostly exist on a couple of servers, you can easily set up a corporation outside of the US where the business transactions will happen, and therefore skirt higher taxes (with some restrictions that a good lawyer can take care of). This is reality, not fiction, happening every day. Nobody is advocating an anarcho paradise.

your not skirting any taxes... how could you ? Your gonna get taxed by the home countries taxing authority and any foreign nations you do business with.

for USA companies, they pay domestic and foreign tax. there is a foreign tax credit used by corporations are there is one for individual tax payers.

there are no lawyers or accountants that can fix anything to hid transactions or skirt taxes..unless your completely working for a criminal organization.

Apparently Apple was able to do it and it wasn't illegal:

http://online.wsj.com/news/articles/SB10001424127887324787004578495250424727708

thomaswong.1986 says

You know of any regulations which would have stopped irrational exuberance /
speculation over the public infatuation over internet stock..or home prices ?

You want to regulate peoples actions.. but you dont know what actions they
will take which
creates speculations.. Beenie Babies anyone ?

Enforcing lending standards would have stopped the housing bubble.

mell says

Apparently Apple was able to do it and it wasn't illegal:

http://online.wsj.com/news/articles/SB10001424127887324787004578495250424727708

Alot of companies bugged out of continent due to litigation and high severance costs.. moved their HQ to UK or Ireland. Thats a question France, Italy, Germany and others have to deal with. And yes The Irish are very happy to get the tax dollars and require international companies to hire their citizens, the Irish are not complaining at all. What the Irish dont tax, gets taxed and is due to the US IRS.

For US IRS purposes its all Global income is taxable ....but we dont double tax the same international pre tax income. If less than statutory foreign tax is paid, the more US IRS collects.

http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Tax-Credit

Foreign Tax Credit
If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. Taken as a deduction, foreign income taxes reduce your U.S. taxable income. Taken as a credit, foreign income taxes reduce your U.S. tax liability. In most cases, it is to your advantage to take foreign income taxes as a tax credit.

The Journalist need to start asking the big 4 Accounting Firms how all this works.

page 61

http://investor.apple.com/secfiling.cfm?filingID=1193125-12-444068&CIK=320193

thomaswong.1986 says

You know of any regulations which would have stopped irrational exuberance / speculation over the public infatuation over internet stock..or home prices ?

Yes. Banking regulations forbidding banks from playing in the derivatives markets.

But they were repealed in the late 1990s, by Phil Gramm, Jim Leach, and Thomas Bliley, with the help of a compliant House and Senate, and a whore President with no guts to veto.

It once was the case that members of both parties believed in sensible regulation. A minority of Democrats now do, and nearly none in the Republican Party do, since it has now become a religious cult.

A flashback:

During debate in the House of Representatives, Rep. John Dingell (Democrat of Michigan) argued that the bill would result in banks becoming "too big to fail." Dingell further argued that this would necessarily result in a bailout by the Federal Government.

Hahaha! What a socialist asshole! Can you believe that Marxist, Stalinist, Castro-loving crap!

HydroCabron says

Hahaha! What a socialist asshole! Can you believe that Marxist, Stalinist, Castro-loving crap!

doesnt Dingell represent Detroit.. where is the beacon ?

thomaswong.1986 says

The Journalist need to start asking the big 4 Accounting Firms how all this works.

Why? It's not magic to read a 10-k, the journalists numbers look about right. Take Apples 10-k. Go to the line that says income, 55.7 billion. Then go to the statement of cash flows taxes paid, 7.7 billion giving a rate of 13.8%. Back out state taxes and foreign taxes (footnote #5) of 2.2 billion you come up with 5.3 billion for a tax rate of 9.5% which much higher than 2011 at 5.3%. Just a touch short of the 35% federal rate they are supposed to be paying to have their operations in the good old USA.

bob2356 says

Why? It's not magic to read a 10-k, the journalists numbers look about right. Take Apples 10-k. Go to the line that says income, 55.7 billion. Then go to the statement of cash flows taxes paid, 7.7 billion giving a rate of 13.8%

Journalist know shit!

Pg 61...A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2012, 2011 and 2010) to income before provision for income taxes for 2012, 2011, and 2010, is as follows (in millions):

$ 19,517 / 55,763 = 35%

Again there is a difference between Gaap Pre-tax vs IRS reported taxable income..

Paid vs accrued (Liable) due to temp differences plus credits. what isnt paid is still taken to the P/L and will be paid once the temp differences expire Therefore the taxable income will be much less than 55B per GAAP. You really need the Tax return for that. A typical investor doesnt need such information.

http://en.wikipedia.org/wiki/Deferred_tax

http://www.youtube.com/embed/45PARid_erY

thomaswong.1986 says

Again there is a difference between Gaap Pre-tax vs IRS reported taxable income..

Paid vs accrued (Liable) due to temp differences plus credits. what isnt paid is still taken to the P/L and will be paid once the temp differences expire Therefore the taxable income will be much less than 55B per GAAP. You really need the Tax return for that. A typical investor doesnt need such information.

So you are saying apple is lying on the 10-k, the tax return will have a significant difference in numbers? I'm sure the investors would be very interested in that. Pretty amazing how those temp differences keep happening year after year after year after year. What decade do you project they will actually expire and apple will send a really huge check to the IRS?

Very interesting you get your tax accounting information from youtube and wiki. I guess journalists don't have access to those types of research resources. Anyway thank you for confirming what I suspected all along was the basis of your alleged tax knowledge.

bob2356 says

Very interesting you get your tax accounting information from youtube and wiki. I guess journalists don't have access to those types of research resources. Anyway thank you for confirming what I suspected all along was the basis of your alleged tax knowledge.

You don't know who your dealing with.

I'd back off, if I were you: thomaswong.1986 says he reads The National Review. You can't win against that kind of intellectual firepower!

thomaswong.1986 says

For US IRS purposes its all Global income is taxable ....but we dont double tax the same international pre tax income. If less than statutory foreign tax is paid, the more US IRS collects.

http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Tax-Credit

Thomas, your comment is true for individuals. But the recent discussion is about companies. Apple USA Inc can do something that an individual cannot do; they can set up Apple Ireland Inc, assign the value of the patents to Ireland, say that the sales in EU are out of the Irish subsidiary. Apple USA Inc would only pay USA taxes on whatever Apple Ireland Inc pays to Apple USA Inc.

A person can't do this with W-2 income, as stated in your link. But that's not really relevant to this question of companies setting up subsidiaries in other places.