Will there be a corporate tax repatriation holiday soon for the USA?

[repoman]

Seems like it is due and the anticipation of it may be part of the current stock prices of some companies.

I think that it is unfair to smaller companies that can't weather the long time until the holiday comes. Apple itself is taking out loans in the US while it still has profit overseas it could use instead. That should not be legal.

Anyway, I am probably the least knowledgeable about this topic here, so I thought it would be a good question to ask.

 

[funinspace]

Uh....what? Smaller US companies don't have gobs of money floating around in other countries, as a way to avoid it being hit with corporate taxes if it did return to US soil.

As the Congressional Critters have quite a bit of work that needs doing, like actually getting a budget passed by April 28th, dealing with that dastardly debt ceiling that re-birthed a month ago, I don't see a 'tax holiday' arriving anytime soon. Yeah, we could theoretically have a government shutdown as part of a celebration of Don the Con's 100th day. But the Repugs will probably patch some budget monstrosity together at the 11.999899th hour...

 

[Horatio Parker]

Tangentially relevant, i.e. tax reform:

Exotic schemes to game the system are constantly in the news.

Take, for example, the corporate inversion strategy, in which a U.S. company arranges to be taken over by a foreign company in order to eliminate its liability on overseas profits. These takeovers generate large fees for the accountants and lawyers who engineer the process without improving the broader economy.

“Dead peasant” insurance policies, made famous by the documentarian Michael Moore, are another example. In that scheme, huge companies like Walmart take out insurance policies on their frontline workers, such as checkout clerks, to smooth out their profit flows and reduce their tax liability. If a worker dies, the company gets the payout, not the individual’s family. Someone got very rich dreaming up dead peasant policies but, again, this financial innovation doesn’t contribute to economic growth.

Perhaps the greatest scheme of all is the private-equity industry, which loads firms with debt. Because the interest on that debt is tax-deductible, private-equity firms can make large profits even if they’ve done nothing to improve a company’s performance. Incidentally, many of the richest people in the U.S. made their fortune in private equity, including folks like Mitt Romney, Pete Peterson and many other prominent billionaires or near-billionaires.

If tax reformers are serious, and I hope they are, here’s one simple way to largely eliminate the gaming opportunities that have made these people rich.

Instead of traditional taxes, the government could require corporations to turn over a portion of their stock, say 25 percent, in the form of non-voting shares. The government would benefit from any dividends or share buybacks but have no voice in running the company.

This system would eliminate almost all opportunities for gaming, since a company wouldn’t be able to deny the government its share of profits unless it also withheld profits from other shareholders. And we wouldn’t call that “tax avoidance” but outright theft – the sort of thing that gets people sent to jail.

http://onlineathens.com/opinion/2017-04-11/baker-stock-shares-could-be-key-real-corporate-tax-reform

 

[SimpleDon]

Tangentially relevant, i.e. tax reform:

Exotic schemes to game the system are constantly in the news.

Take, for example, the corporate inversion strategy, in which a U.S. company arranges to be taken over by a foreign company in order to eliminate its liability on overseas profits. These takeovers generate large fees for the accountants and lawyers who engineer the process without improving the broader economy.

“Dead peasant” insurance policies, made famous by the documentarian Michael Moore, are another example. In that scheme, huge companies like Walmart take out insurance policies on their frontline workers, such as checkout clerks, to smooth out their profit flows and reduce their tax liability. If a worker dies, the company gets the payout, not the individual’s family. Someone got very rich dreaming up dead peasant policies but, again, this financial innovation doesn’t contribute to economic growth.

Perhaps the greatest scheme of all is the private-equity industry, which loads firms with debt. Because the interest on that debt is tax-deductible, private-equity firms can make large profits even if they’ve done nothing to improve a company’s performance. Incidentally, many of the richest people in the U.S. made their fortune in private equity, including folks like Mitt Romney, Pete Peterson and many other prominent billionaires or near-billionaires.

If tax reformers are serious, and I hope they are, here’s one simple way to largely eliminate the gaming opportunities that have made these people rich.

Instead of traditional taxes, the government could require corporations to turn over a portion of their stock, say 25 percent, in the form of non-voting shares. The government would benefit from any dividends or share buybacks but have no voice in running the company.

This system would eliminate almost all opportunities for gaming, since a company wouldn’t be able to deny the government its share of profits unless it also withheld profits from other shareholders. And we wouldn’t call that “tax avoidance” but outright theft – the sort of thing that gets people sent to jail.

http://onlineathens.com/opinion/2017-04-11/baker-stock-shares-could-be-key-real-corporate-tax-reform

This would never go. It is similar to "Islamic" lending where instead of interest, the bank gets a portion of the business, that is, stock in the business. This proposal of Baker's could be best described as "Islamic" taxation.

Nothing with the word "Islamic" in it would be acceptable to this administration.

 

[Horatio Parker]

Tangentially relevant, i.e. tax reform:



http://onlineathens.com/opinion/2017-04-11/baker-stock-shares-could-be-key-real-corporate-tax-reform

This would never go. It is similar to "Islamic" lending where instead of interest, the bank gets a portion of the business, that is, stock in the business. This proposal of Baker's could be best described as "Islamic" taxation.

Nothing with the word "Islamic" in it would be acceptable to this administration.

Well, the Germans did a lot of state equity financing. Is "German" an acceptable label?

 

[SimpleDon]

No one who hasn't experienced it can appreciate how much effort corporations go to to reduce their income taxes. They maintain two, sometimes three different sets of books. They pay Washington based lobbyists to get tax loopholes written into the tax code to benefit the corporation. They hire the best lawyers to try to find an interpretation of the existing tax code that will benefit the corporation. They devise schemes to hide their income, as touched on in the article. They spend a large part of their time and effort into try to convert corporate income into capital gains. An extraordinary amount of the time and the attention of the management of the corporation is dedicated to this task of avoiding taxes instead of to the business of the corporation.

I would be in favor of corporate eliminating the corporate income tax and making up the lost revenue with an increase in the personal income tax of the highest earners who receive almost all of the profits from corporations and eliminating the tax dodge of the special treatment of capital gains.

 

[SimpleDon]

This would never go. It is similar to "Islamic" lending where instead of interest, the bank gets a portion of the business, that is, stock in the business. This proposal of Baker's could be best described as "Islamic" taxation.

Nothing with the word "Islamic" in it would be acceptable to this administration.

Well, the Germans did a lot of state equity financing. Is "German" an acceptable label?

I was making a joke, nothing more. I actually agree with Baker.

And yes, I don't have any problem with doing something that the Germans do. I lived and worked in Germany and there are many things that the Germans do that is better than the American way. They still negotiate wages across all industries and occupations. In this way no one company has an advantage of paying lower wages. There can't be a race to the bottom concerning wages. They use a much better, more cost effective model for delivering health care. And they have used it for nearly 150 years.

 

[Loren Pechtel]

I would be in favor of corporate eliminating the corporate income tax and making up the lost revenue with an increase in the personal income tax of the highest earners who receive almost all of the profits from corporations and eliminating the tax dodge of the special treatment of capital gains.

I will agree that the corporate income tax should go--it's too susceptible to manipulation and it's in effect a regressive tax. (It shows up in the price of goods--and the lower classes spend about 100% of their income on such goods. The upper classes invest, reducing the % of their income subject to this tax.)

However, after that you're going off on the wrong track.

1) A fair amount of corporate profit ends up going to the middle class. It's call 401ks, IRAs and pensions.

2) The price of goods will fall by about the amount of the reduction in corporate tax. (Competition will drive prices down. Only the non-competitive companies such as Apple will be able to keep prices up.) Thus if the increase were applied across the board it would still result in an increase in the standard of living of the average person.

3) As it stands the effects of inflation make capital gains roughly the same as earned income. (On interest, however, you're screwed. It's quite possible to face a real tax rate of around 100% on interest.)