Tax guru: Only 1 way to keep businesses on U.S. soil. Reveals secret to lifting massive burden from companies

[rangerrebew]

Tax guru: Only 1 way to keep businesses on U.S. soil
Reveals secret to lifting massive burden from companies
Published: 9 hours ago


National Taxpayers Union President Pete Sepp says new rules designed to stop American companies from setting up shop on foreign soil may work to keep some firms in the U.S., but he says the only thing that is going to allow businesses to stay and thrive is a tax code overhaul featuring lower rates and a much simpler code.

On Tuesday, President Obama announced the Treasury Department is implementing new rules designed to make it more painful for American firms to purchase a smaller, foreign business and use it as an offshore hub to avoid American taxes. It’s a concept known as an inversion.

While watching American corporations avoid paying U.S. taxes is infuriating to many, Sepp said there are bigger problems.

“President Obama calls this practice ‘insidious,’ but what’s really insidious is our failure to keep up with the rest of the world in terms of reforming our business tax systems,” Sepp said. “We have not had major tax reform in this country for individuals or businesses since 1986.”

Among the new Treasury Department rules are a policy putting a three-year limit on companies outside the U.S. adding American assets so as not to dodge ownership requirements for future inversions. Treasury is also planning to put a stop to earnings stripping after inversions.

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Some experts believe the new policies had an instant impact as Pfizer and Irish drugmaker Allergan walked away from their $160 billion merger. Whether that’s the main reason or not, Sepp said a few new policies don’t solve the larger problems.

“Ultimately, it won’t effect the problem a great deal because the problem is rooted in other parts of our tax system: high rates, twice as high as many of our economic competitors. High effective rates, whereby even after deductions and credits, the tax burdens are too heavy for our companies to bear,” said Sepp, who then listed even more problems.

“Shareholders demand that companies limit their tax liabilities and maximize returns. Other countries are not standing in place. They are reforming their tax systems constantly,” said Sepp, noting that Canada and the United Kingdom have been aggressively cutting rates and rooting out tax code complexities.

The bottom line, Sepp said, is nothing can replace what needs to be done.

“Whatever minor rule makings that the United States Treasury issues, or even laws Congress might make to create new clampdowns on inversions, are no substitute for doing the heavy lifting of comprehensive tax reform,” Sepp said.

Listen to the WND/Radio America interview with Pete Sepp:

Read more at http://www.wnd.com/2016/04/tax-guru-only-1-way-to-keep-businesses-on-u-s-soil/#7GISmBmP6vPAwbmY.99

[MACVSOG68]

Lowering the highest corporate tax rates and getting rid of most exclusions and credits will actually increase the average effective tax rate paid.  US effective tax burdens are almost the lowest in the world.  Complexity of the federal tax code however is a problem no one seems to be realistically dealing with. 

[jmyrlefuller]

Lowering the highest corporate tax rates and getting rid of most exclusions and credits will actually increase the average effective tax rate paid.  US effective tax burdens are almost the lowest in the world.  Complexity of the federal tax code however is a problem no one seems to be realistically dealing with.

Indeed, yet our rates are pretty close to the highest and our rules for expats are among the strictest. It's just that the boondoggle that is our tax code has created an industry for tax-dodgers, lobbyists and other industries that specialize in carving out loopholes to avoid them.

[MACVSOG68]

Indeed, yet our rates are pretty close to the highest and our rules for expats are among the strictest. It's just that the boondoggle that is our tax code has created an industry for tax-dodgers, lobbyists and other industries that specialize in carving out loopholes to avoid them.

Couldn't agree more as to the complexity of our tax code.  70+ thousand pages brings smiles to every tax attorney in the land.  And we have one as a member! 

[truth_seeker]

So called "inversion" is to 1) avoid being taxed by the US, for foreign source income and profits, and to 2) operate in a lower tax location.

Not new. Been going on for decades. Firms hold profits offshore, since they are not taxed by the US until those profits are remitted to the US. From time to time you may hear proposals to offer reduced tax rates, if the firms do return the profits.

We used to have a tax attorney here. He should be explaining these things for the group's benefit.

https://en.wikipedia.org/wiki/Tax_inversion

https://www.google.com/search?site=&source=hp&q=unitary+tax+system&oq=UNITARY+TAX+&gs_l=hp.1.3.0l9.16737262.16746269.0.16750883.14.12.0.2.2.0.5972.7453.0j10j1j9-1.12.0....0...1c.1.64.hp..0.12.1343.0.YQ-PA_mLD7M

[Bigun]

How about we just get rid of the entire Marxist monster of a tax code we now endure and replace it with something much more in keeping with what our founders envisioned?

Http:// fairtax.org

[MACVSOG68]

How about we just get rid of the entire Marxist monster of a tax code we now endure and replace it with something much more in keeping with what our founders envisioned?

Http:// fairtax.org

Because it's the most power Congress has, the power to use the income tax to reward, punish and influence behavior.  Doubt they'll ever give that up. 

[Bigun]

Because it's the most power Congress has, the power to use the income tax to reward, punish and influence behavior.  Doubt they'll ever give that up.

They will but we will  have to force the issue!

[Bill Cipher]

Lowering the highest corporate tax rates and getting rid of most exclusions and credits will actually increase the average effective tax rate paid.  US effective tax burdens are almost the lowest in the world.  Complexity of the federal tax code however is a problem no one seems to be realistically dealing with. 

Then why do companies keep leaving the US in order to lower their tax burdens?  If the tax burden is the least in the US, then shouldn't they be coming into the US, not fleeing the US?

[truth_seeker]

First US corporate tax rates are among the higher of the developed world.

http://taxfoundation.org/article/corporate-income-tax-rates-around-world-2015

Second, the US tries to tax companies on their worldwide earnings. Say an American company has profits in a lower tax foreign country. the US allows a deduction for taxes paid to that country, but then wants the differential above the lower foreign tax rate.

Many countries do NOT tax income of corporations, beyond their own borders.

Everybody except Bernie agrees, the US rates should be lower.

Don't we have a tax attorney named Oceander, to provide expert explanations?

[MACVSOG68]

Then why do companies keep leaving the US in order to lower their tax burdens?  If the tax burden is the least in the US, then shouldn't they be coming into the US, not fleeing the US?

I know you know what the effective tax rates are here.  Companies paying effective rates in the single digits aren't moving to 3d world countries just to trade taxes for bribes.  Regulatory burden and labor costs play a big role.

[Bigun]

I know you know what the effective tax rates are here.  Companies paying effective rates in the single digits aren't moving to 3d world countries just to trade taxes for bribes.  Regulatory burden and labor costs play a big role.

It isn't the taxes alone but the costs of compliance that make it so onerous and those are always there whether or not you end up with an actual tax bill.

[MACVSOG68]

It isn't the taxes alone but the costs of compliance that make it so onerous and those are always there whether or not you end up with an actual tax bill.

Couldn't agree more.  I've said many times the onerous tax code is far more the problem than the taxes paid.  The best we can hope for is some simplification, perhaps in line with a plan Ryan drafted a couple of years ago similar to the one the Simpson/Bowles commission came up with.  Whether we like it or not, the federal government needs more revenues, not less until the budget can be balanced and the debt repaid. 

[MACVSOG68]

First US corporate tax rates are among the higher of the developed world.

http://taxfoundation.org/article/corporate-income-tax-rates-around-world-2015

Second, the US tries to tax companies on their worldwide earnings. Say an American company has profits in a lower tax foreign country. the US allows a deduction for taxes paid to that country, but then wants the differential above the lower foreign tax rate.

Many countries do NOT tax income of corporations, beyond their own borders.

Everybody except Bernie agrees, the US rates should be lower.

Don't we have a tax attorney named Oceander, to provide expert explanations?

Yes, corporate income tax rates are among the highest, but the effective rates are among the lowest.  Other countries don't rely on the income tax, but rather a series of value added and other types of taxes that are easier to bring in.  Regardless of the rules of calculation of worldwide income, the tax burden on corporations and individuals which accounts for taxes at all levels are among the lowest in the civilized world.

And Hillary would also raise taxes, though not as much as Bernie.

[Bigun]

Yes, corporate income tax rates are among the highest, but the effective rates are among the lowest.  Other countries don't rely on the income tax, but rather a series of value added and other types of taxes that are easier to bring in.  Regardless of the rules of calculation of worldwide income, the tax burden on corporations and individuals which accounts for taxes at all levels are among the lowest in the civilized world.

And Hillary would also raise taxes, though not as much as Bernie.

I'll just let someone who speaks far better than I respond to this one:

"the oppression arising from taxation, is not from the amount but, from the mode -- a thorough acquaintance with the condition of the people, is necessary to a just distribution of taxes. The whole wisdom of the science of Government, with respect to taxation, consists in selecting the mode of collection which will best accommodate to the convenience of the people."

Patrick Henry, Virginia Ratifying Convention June 12, 1788

I completely agree with him!

And then we have this:

"There is no art which one government sooner learns of another than that of draining money from the pockets of the people."

 Adam Smith, The Wealth of Nations, 1776

[Bill Cipher]

I know you know what the effective tax rates are here.  Companies paying effective rates in the single digits aren't moving to 3d world countries just to trade taxes for bribes.  Regulatory burden and labor costs play a big role.

Regulatory burdens and bribes are equally fungible.  Taxes play as much of a role. 

And the effective rate is only half the story.  The base that rate applies to is the other.  20% of $100 is still more than 30% of $50.

[MACVSOG68]

Regulatory burdens and bribes are equally fungible.  Taxes play as much of a role. 

And the effective rate is only half the story.  The base that rate applies to is the other.  20% of $100 is still more than 30% of $50.

My point was that many 3d world countries without an income tax operate on bribes.  So even if a company moves there, they're still paying.  The base for the top rate after the war was $200k for individuals with rates slowly dropping from 94% to 70%.  The Country went through a number of ups and downs economically.  Corporate rates have been far higher than today with much lower bases, even under the Reagan tax cuts of '86. 

The highest brackets and rates may have some bearing on whether a company decides to expand, but capital and labor costs together with governmental regulatory burden is IMHO far greater a decision factor than taxes.  Several of the largest corporations pay no taxes at all. 

Ultimately at least for the election, the question will be how much we should cut taxes and hope the loss of revenue can be made up through economic growth and cutting of federal expenditures.  So far I haven't seen a reasonable plan from those still in the race on either side.  And all that regulatory burden at every level of government as well as increasing labor costs will still be there.

[Bill Cipher]

My point was that many 3d world countries without an income tax operate on bribes.  So even if a company moves there, they're still paying.  The base for the top rate after the war was $200k for individuals with rates slowly dropping from 94% to 70%.  The Country went through a number of ups and downs economically.  Corporate rates have been far higher than today with much lower bases, even under the Reagan tax cuts of '86. 

The highest brackets and rates may have some bearing on whether a company decides to expand, but capital and labor costs together with governmental regulatory burden is IMHO far greater a decision factor than taxes.  Several of the largest corporations pay no taxes at all. 

Ultimately at least for the election, the question will be how much we should cut taxes and hope the loss of revenue can be made up through economic growth and cutting of federal expenditures.  So far I haven't seen a reasonable plan from those still in the race on either side.  And all that regulatory burden at every level of government as well as increasing labor costs will still be there.

I wouldn't call Ireland and the U.K. Third world countries operating on bribes.  Allergan was headquartered in Ireland.

[MACVSOG68]

I wouldn't call Ireland and the U.K. Third world countries operating on bribes.  Allergan was headquartered in Ireland.

No neither is a third world country.  But the total tax burden on both is higher than in the US.  Most European countries don't depend on the income tax as does the US, but taxes there are still higher than here.  I recall once that Ireland was a great place to retire if you were in the arts as retirement income wasn't taxed.  If the US cut its corporate income tax rates down but increased VATs or consumption taxes, the tax burden would still be there.

[Bill Cipher]

No neither is a third world country.  But the total tax burden on both is higher than in the US.  Most European countries don't depend on the income tax as does the US, but taxes there are still higher than here.  I recall once that Ireland was a great place to retire if you were in the arts as retirement income wasn't taxed.  If the US cut its corporate income tax rates down but increased VATs or consumption taxes, the tax burden would still be there.

Then why would Pfizer want to subject itself to Irish taxes?  That doesn't make any sense.

[MACVSOG68]

Then why would Pfizer want to subject itself to Irish taxes?  That doesn't make any sense.

Maybe they figure the VAT won't impact their profits; maybe the regulatory burden is less; maybe they can pay less for labor; maybe Ireland gave them a break for headquartering there.  Hell I don't know.  Mabye the CEO was a Bing Crosby fan...  

[Bill Cipher]

Maybe they figure the VAT won't impact their profits; maybe the regulatory burden is less; maybe they can pay less for labor; maybe Ireland gave them a break for headquartering there.  Hell I don't know.  Mabye the CEO was a Bing Crosby fan...  

Maybe, maybe, maybe.  But they did say the tax savings - the corporate income tax savings - made the deal worth the while, even with the previous anti-inversion rules.  With all due respect, you have maybes, they had tax savings.

[MACVSOG68]

Maybe, maybe, maybe.  But they did say the tax savings - the corporate income tax savings - made the deal worth the while, even with the previous anti-inversion rules.  With all due respect, you have maybes, they had tax savings.

You asked me, and I gave you other possibilities.  But there are a lot of issues that drive companies out, and a lot of corporations here that wind up paying no taxes.  I suspect if those companies were to move elsewhere it would likely be for other reasons.  Fact still remains, the tax burden here including social security and state taxes is lower than in either the UK or Ireland.  And if corporate taxes are cut here, revenues to the government are going to have to come from somewhere else, probably the individual taxpayer.  Or as one candidate wants to do, institute a VAT along with the income tax, costing individuals even more.

[Bill Cipher]

You asked me, and I gave you other possibilities.  But there are a lot of issues that drive companies out, and a lot of corporations here that wind up paying no taxes.  I suspect if those companies were to move elsewhere it would likely be for other reasons.  Fact still remains, the tax burden here including social security and state taxes is lower than in either the UK or Ireland.  And if corporate taxes are cut here, revenues to the government are going to have to come from somewhere else, probably the individual taxpayer.  Or as one candidate wants to do, institute a VAT along with the income tax, costing individuals even more.

I'm sorry if I came across as insulting; it wasn't intended.  The thing you seem to be missing is the size of the base on which the tax is imposed.  As I pointed out earlier, 30% of $50 is still less than 20% of $100.

[Bill Cipher]

Certainly Michael Hiltzik at the LA Times is of the view that taxes were a driver of the Pfizer/Allergan deal: http://www.latimes.com/business/hiltzik/la-fi-mh-pfizer-s-creative-merger-20151116-column.html

Certainly Americans for Tax Fairness are of the view that taxes were a driver of the Pfizer/Allergan deal:  https://welch.house.gov/sites/welch.house.gov/files/Pfizer%20Price%20Gouger%20Tax%20Dodger%20Report%20FINAL.pdf

Certainly Aswath Damodaran, writing at nasdaq.com, is of the view that taxes were a driver of the Pfizer/Allergan deal:  http://www.nasdaq.com/article/value-and-taxes-breaking-down-the-pfizer-allergan-deal-cm546410

Taxes may not have been the only driver, but they certainly seem to have been a substantial driver.