Thursday, August 28, 2014

The Muddle Of Corporate Taxes (Or Lack Of Same)

McARDLE: Burger King and the tax whopper. "Most Americans...seem to be under the misimpression that companies that invert, or people who renounce their citizenship, are doing so to get a lower tax rate on income they earn here. And in a few intellectual-property-based businesses...these complaints have some basis. In most cases, however, including Burger King, they’re doing it because the U.S. inexplicably insists on taking a big chunk off the top of all their foreign income, and making their lives miserable in the process. If we’re worried about inversion, then the U.S. government should follow the lead of other developed countries, and move to territorial taxation. Otherwise, we should stop complaining." Megan McArdle in Bloomberg View.

WEISSMANN: Is Burger King really not trying to dodge taxes? "But the idea that Burger King won’t really get any tax advantages out of relocating to Canada, where the corporate rate is about 15 percent compared with 35 percent in the U.S., seems transparently untrue. Yes, it will continue paying American corporate rates on its U.S. profits, just like any other foreign company. But Canadian citizenship will likely give it more opportunities to use various accounting and business tricks to shift profits north of the border and out of the reach of the IRS (multinationals with foreign subsidiaries excel at that sort of thing). Inverting will also leave Burger King more flexibility to move its international profits freely." Jordan Weissmann in Slate.

DICKINSON: The biggest tax scam ever. "The crisis of corporate tax avoidance is far more pervasive — and destructive — than either Obama or Lew is letting on. At a moment when Congress appears impossibly divided, a strong, bipartisan consensus has, in fact, emerged in Washington: The world's richest corporations will get away with fleecing hundreds of billions of tax dollars from the rest of us. In public, Democratic politicians blast corporate tax dodgers. But the party's most viable comprehensive 'reform' proposals would reward the crooked accounting of U.S.-based multinationals. Republican ­backed legislation — no surprise — would only make the crisis worse." Tim Dickinson in Rolling Stone.

FOX: Guess who pays corporate taxes — possibly you. "Most public discussions of corporate taxes in the U.S., however, still ignore the possibility that workers might actually be the ones bearing the burden. Perhaps this is because other public figures really want to avoid sounding like Mitt Romney. Perhaps tax incidence is just too difficult a concept for non-economists to get their heads around....Perhaps it’s that the evidence is still so mixed....Perhaps it’s that the corporate executives who lobby for lower tax rates don’t quite have the chutzpah to argue that this could result in higher wages. Or perhaps it’s just that, if corporations pay lower taxes, individuals have to pick up the slack. And...a direct tax is still more noticeable than an indirect one." Justin Fox in Harvard Business Review.

Lower corporate tax revenue, sparked by uncertainty over tax provisions, helped grow deficit. "Revenues to the government from company tax payments are expected to total $315 billion, down from an estimated $351 billion in April. The bigger budget deficit comes because companies are deferring tax payments while they wait for Congress to decide whether to revive expired tax breaks, CBO officials said. Lawmakers are expected to take up legislation after the November elections to renew through 2015 a mix of 50 temporary tax breaks, known in Congress as 'tax extenders,' that expired at the end of 2013....Businesses see the extension of the tax breaks as necessary while Congress dithers on a broader tax overhaul." Mark Felsenthal in Reuters.

COLLENDER: How to repeal the corporate income tax without increasing the deficit. "Repeal it and at the same time eliminate all federal support for corporations on the spending side of the budget. There is clearly $300 billion of subsides and other kinds of support for corporations in the federal budget in fiscal 2014. In fact, if you define federal corporate support broadly and include direct support, insurance, indirect subsidies and other types of payments to all industries, the amount of spending is at at least that level. It could be substantially higher. This would create a serious debate within the corporate community that hasn’t existed so far." Stan Collender in Forbes.

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