The arguement for the holiday the last time was "job creation" which didnt really bear fruit. Dont think it will happen again unless it is part of a larger tax reform bill.
The politically viable argument is that it will create jobs, and is indeed false.
The serious, economic argument is that companies shouldn't have to keep profits abroad simply because of a screwy, distortive tax system at the international level. And it is a valid concern.
(Before anyone says it, yes, I'm aware that some taxes, by design, distort behavior in a socially desirable direction. Differential corporate taxes at the international level ain't one of them.)
It's not so much about the level of taxes as it is about taxing foreign income, which is not something that other countries do, giving a competitive disadvantage to the US.
Even if Apple brings back the cash and dividends it out, that's more money in the pockets of shareholders, which are pretty much everybody with an index fund, pension funds, mutual funds, etc. That can't hurt the US compared to leaving the cash abroad.
Many other countries tax overseas profits, and many of the ones who don't, have very strict rules about foreign ownership to assure they aren't being gamed. The G20 is fairly united on this front.
The best argument for the holiday, is the fact that we're one of the only major nations doing something so foolish as double taxing foreign profits.
The idea of eg paying China's corporate income tax, and then paying America's on the way home, is absurd to say the least. A lot of companies will be stuck with 45% to 60% income tax bills on foreign profit. I can think of few things to make America less competitive overseas.
That's patently wrong. Corporation-level double taxation only applies in the extremely rare instances where the US does not have an income tax treaty with the other country.
We have tax treaties with all nations worth doing business with. Nobody is going to pay China's corporate income tax then U.S. income tax again at the corporate level for a 45-60% bill before it even gets to the shareholders.
My spider sense is tingling - from an ignorant observer on the subject of corporate taxes, this seems wrong.
As someone who isn't 100% ignorant about taxes in general, I've noticed that there's a shitload of completely wrong information about taxes out there. It's amazing how many smart people are incredibly ignorant, and then spread that ignorance, about how taxes actually work. So I have to ask:
Is this how it really works? At least for personal investments, IIRC you get some sort of foreign tax credit. From my initial searching, it seems like there's something similar for corporations.
The whole idea of 'double-taxation' is a canard. That's another topic though.
> Is this how it really works? At least for personal investments, IIRC you get some sort of foreign tax credit.
Any money Apple pays to foreign governments as income tax on profits is included in the calculation of their domestic tax liability. So if Apple had $1B in overseas profits, paid 5% in Ireland as income tax, then wanted to repatriate the remainder to the US, the government would seek $300M in tax -- not the $350M that would be indicated by our 35% corporate income tax rate.
People trotting out the 'double-taxation' nonsense are promoting the idea that Apple should be able to venue-shop for an ultra-low-tax locale to claim their profits, then be free-and-clear of their US obligations.
Two more things worth mentioning:
1. The 'overseas' money typically isn't physically overseas. The money is in US banks, circulating as loans in the US economy, but is only overseas on an accounting ledger for tax purposes. This greatly blunts the potential impact of tax holidays.
2. If Apple takes out debt to fund operations purely to avoid repatriating money, the US taxpayer would then be subsidizing Apple even further. Interest on debt is a deductible expense, so that 2.5% per year Apple is paying, would be deducted from their income in the next tax year.
> So if Apple had $1B in overseas profits, paid 5% in Ireland as income tax, then wanted to repatriate the remainder to the US, the government would seek $30B in tax -- not the $35B that would be indicated by our 35% corporate income tax rate.
That's not what double taxation is. Double taxation is that both corporate income and corporate dividends are taxed. Suppose a corporation makes $10/share in profit and wants to issue it as a dividend. First they would pay corporate 35% income tax on the profit and be left with $6.50/share, then if they issued a $6.50/share dividend, the shareholders would have to pay income tax on it again and be left with only $4.225 of the original $10.
If a foreign government also extracted a cut then the money would be taxed thrice.
This is an even sillier definition of double taxation than I was giving you credit for.
Dollars don't pay taxes, taxable entities do.
A corporation is a separate legal entity that serves as the tax base. If it makes an income, it will pay a tax on that income.
An individual is also a separate legal entity that serves as a tax base. If a corporation pays an individual dividends, then the individual will pay tax on the capital gains from their investment.
How is this any different than when a company pays you an income. First, the Federal government taxes you, then the State government does, then come Payroll taxes, then any local taxes, then you have to pay property tax, then you have to pay sales tax. Each dollar is quintuple-taxed! Or more!
> "Would you rather pay 10% income tax twice a year, or 50% income tax once a year?"
But that obviously misses the point. The problem with double taxation is that it makes the rate misleading. If you've lost 35% to corporate income tax and then 15% to qualified dividends or capital gains tax, you're paying ~45% in total, but people point to the 15% rate and trot out the "pays lower tax rate than secretary" trope.
> How is this any different than when a company pays you an income. First, the Federal government taxes you, then the State government does, then come Payroll taxes, then any local taxes, then you have to pay property tax, then you have to pay sales tax. Each dollar is quintuple-taxed! Or more!
Those are all different taxes. Income tax is the same tax paid on the same money, twice. It's recursive. Compare how corporate income tax works to how sales tax works. If you're a business you don't pay sales tax on your raw materials, you only collect it once on the finished product. The total amount of sales tax paid on a car doesn't increase just because you increase the number of intermediary entities between the iron mine and the car dealership. With corporate income tax, it does.
That's not the crux of his argument whatsoever, it's just a random statement being held up as a straw man.
> Income tax is the same tax paid on the same money, twice.
Except it's capital gains, intentionally taxed at a lower rate than income. The first tax is levied on corporate income, the second tax is capital gains which is taxed on the individual level. Different tax bases necessitate different tax treatment.
> Compare how corporate income tax works to how sales tax works. If you're a business you don't pay sales tax on your raw materials, you only collect it once on the finished product.
That's only true in the US. The majority of G20 countries that don't have capital gains + corporate income tax use a VAT to achieve the same ends.
Look at effective tax rates for individuals and corporations based in the US. We're one if the lowest taxed countries in the 1st world.
> That's not the crux of his argument whatsoever, it's just a random statement being held up as a straw man.
Let me rephrase: The quoted statement is the closest thing he comes to as an argument on point. The rest of it is falsities and random talking points with no relation to the question.
> Except it's capital gains, intentionally taxed at a lower rate than income.
It's taxed at a lower rate because it's double taxation. It's the political middle ground between not having double taxation and having it at the full ordinary income rate.
> The first tax is levied on corporate income, the second tax is capital gains which is taxed on the individual level.
They're the same tax. It's all income tax.
Consider what happens when both entities are corporations. When Ford makes income, they pay income tax on it. If the income was from selling cars they would have paid the ordinary income rate. If it was because Ford owns shares of Exxon and Exxon issued a dividend, it would be the dividend rate. In either case, when Ford issues what's left over after paying its income taxes as a dividend, its shareholders have to pay income taxes on it again. And it's the same tax (again) whether the shares in Ford are owned by Henry Ford or Apple, Inc.
> That's only true in the US. The majority of G20 countries that don't have capital gains + corporate income tax use a VAT to achieve the same ends.
VAT and sales tax are economically equivalent, VAT is just collected at different points in the supply chain (which makes tax evasion more difficult). VAT is only collected on the increase in value over the cost of the raw materials (the "value added"), i.e. the portion of the sale price that hasn't already been taxed.
> Look at effective tax rates for individuals and corporations based in the US. We're one if the lowest taxed countries in the 1st world.
What does that have anything to do with double taxation?
Note also that the reason effective tax rates in the US are so low is the massive amount of tax avoidance that occurs. The nominal rates that US corporations would pay if they didn't all hold their profits in foreign subsidiaries are some of the highest in the world -- which is highly discriminatory against smaller non-international US corporations that can't play the same tricks.
The corporate dividend tax paid by individuals tops out at 20% today, so the example total should be $5.20. States usually tax both corporate profits and dividends at 5-10% also, so that's another 10-20% but that's usually deductible against the other taxes. Expect to keep about $4.30 from the $10 profit, if it's distributed as dividends.
The 20% rate only applies to qualified dividends. If you don't meet the qualifications (e.g. you don't satisfy the holding period requirements) the dividends are taxed at the higher ordinary income rate.
The corporate foreign tax credit is even more generous than the FTC available to individuals. They get credit for taxes paid on the dividends (i.e., withholding taxes) and in some cases for the foreign taxes the dividend-paying company paid on its income.
A lot of this money have been funelled through tax havens and have never been taxed at all. There is no need to feel sorry for Apple and Google. They are abusing the tax system far more than they are hindered by it.
"As is often the case in Washington, the scandal isn’t what’s illegal -- it’s what’s legal, in this instance tax- avoidance systems with names like the Double Irish and the Dutch Sandwich. As detailed in a Bloomberg Businessweek investigative story last May, Forest Laboratories Inc. (FRX), which makes the antidepressant Lexapro, sells almost 100 percent of its drugs in the U.S. and cuts its U.S. taxes dramatically by attributing the bulk of profits to a law office in Bermuda.
Similarly, Google reduced its income taxes by $3.1 billion over three years by shifting income to Ireland, then the Netherlands, and ultimately to Bermuda. Microsoft has used a similar arrangement. Records in the Cayman Islands and Ireland show that Facebook is setting up such a structure too. "
> I can think of few things to make America less competitive overseas.
How about double taxing American salaries overseas? E.g. if I visit the states on business, I have to pay US taxes AND Chinese taxes for any time I spend there (neither recognizes the other's jurisdiction in that case). That is about a 60% tax rate, and you can't even deduct the taxes you paid to either country from the other.
A cynic would say that if politicians want the tax holiday to appease their campaign donors, it doesn't have to /actually/ create jobs, voters just have to /believe/ it creates jobs.
tl;dr: Microsoft had beaucoup bucks stashed in the EU that they didn't want to bring back to the US due to our corporate taxes, so they put it to use by buying Skype.
Also, keep in mind that not every corporation is in such an enviable position as is Apple.
I might be off base here but I think this idea "what we would we do if money wasn't an issue” is subconsciously the reason why shows like the walking dead and to a lesser degree falling skies have become so popular with our generation. The theme of a post apocalyptic world where zombies and aliens are trying to kill off the human race are the obvious draw at its core these shows illustrate what a moneyless world would look like in the sense that survival and relationships with those in close proximity to you would be the only thing that mattered. I also think a moneyless world would be complete chaos but that just me.
I totally agree. It is the main reason I like the post apocalyptic genre. It's fun to think about not having to go to a job for money, building a fort, and attempting to just live. :)
I understand your point and agree that it would be hard to lose the expected longer lifespan. Right now I live in such a way that I expect to reach a certain age and have modern conveniences available to me. When safety, freedom from pain, fresh water, food, sewers, transportation, access to information, and so on, are denied, I get grumpy. But that's my expectation because I wake up to that reality every day.
But what if I lived without that expectation? Maybe I would be happier? Maybe take better care of myself, my communities, my surroundings, the things I currently have instead of pining for the things I want? I don't know. Maybe not. Maybe live more in the present instead of fretting about the distant future and things I have no control over? Maybe not.
There are an awful lot of people on the Earth who live without the resources I have and, I could argue, are happier than me, have less overall stress, have more leisure time, are in better physical shape, and so on. And I'm not trying to romanticize it. I also understand that many people in that condition are miserable.
But overall life satisfaction is relative, isn't it, and largely a state of mind?
> There are an awful lot of people on the Earth who live without the resources I have and, I could argue, are happier than me...
Again, the myth of the extremely happy have-nots. This is coming up regularly on HN, and it's based largely on ignorance. People who have much less than you are not more happy. Access to resources, energy, improves quality of life in every way, and increases relative happiness as well. If that were not the case, then nobody in the lesser developed world would want to have a car, to eat more stuff, to have more money to spend and send their kids to school. But actually, they do, because they strive for more stuff that will make them more happy.
i live in a small village in rural india where I'd guess the average monthly income is less than $150. So, its a poor area, but not a destitute area. People generally have water, enough to eat, and the kids all go to school. They want cars and big houses like people in the west want faster cars and bigger houses. As a whole even for people doing labor the lifestyle isn't obviously bad. They work fewer hours, are in a more natural less poluted environment and are generally less stressed by life and work than their urban counter parts. There's a perceived lack of opportunity driving people into the cities. But its a similar drive that motivates people in the states to leave relatively nice styles in the midwest to move to Los Angeles or San Francisco to chase a dream even if it means working long hours in a restaurant and living in a crowded apartment.
One reason I think this theme resonates here is that software people are ___location independent in a way few other industries are. If you can work from anywhere being somewhere where your core living expenses are $200 makes sense. Siver's questions becomes real - what then ?
It's probably got to do with publicity given to those who voluntarily give up wealth and chose the path of poverty.
Poverty affects humans at a very basic level; their cognition is impaired, their day-to-day life to a very minute detail is controlled by lack of money. And some of the things that we take for granted (for instance potable water) is struggle for them. Those with money can't even imagine what it is like to be poor, day in day out and for years on end with very little hope in sight.
I was not aware of all these until I read a terrific book, "The Poor Economics". It was really an eye opener for me and because of which I'm more empathetic towards poor today instead of just saying they are happier or blaming them for their poverty.
I think he was. I also enjoy that fantasy, truthfully I think I'd do quite well in a post-apocalyptic society. For one thing; I have a friend who worked in a medieval troupe, and he taught me some of the basic routines they use with swords. Also I participated in http://irlshooter.com/ which was amazing, a similar level of thrill that I got from skydiving.
So forgetting all the messy business of day-to-day life, just running around with pointy weapons and fighting zombies seems appealing.
It's nothing really new, though. Some hippies in the 70s (check out Easy Rider if you have never watched it) tried to live away from civilization in small communities, living off farming and trying to do without money. Not sure how most of them ended up, though. Probably not well.
You hit it on the nail, at least for me. I love the post-apocalyptic film genre because it throws the current system of society under the bus and makes the characters focus just on survival and then a possible rebuilding of society in a whole new way.
Interesting theory! I like the idea of relationships mattering than the next shiny in life. In the case of your scenario I wonder what would happen if humanity survived the zombies and aliens and fully recovered. Would we just naturally end up worshiping money (a proxy for resources) again?
I stand corrected, you weren't being pedantic at all. I guess all those people lined up outside the bank, ready to riot, were waiting for the government to give them their money back.
To quote the Wikipedia[1] article on the riots:
"The uprising was a predominantly middle-class uprising against the government of President Fernando de la Rúa, who had failed to contain the economic crisis that was going through its third year of recession".
"The unrest started when Economy Minister Domingo Cavallo introduced restrictions to the withdrawal of cash from bank deposits, intending to stop the draining of deposits that had been taking place throughout 2001 and had reached the point where 25% of all the money in the banks had been withdrawn." People had were previously gradually withdrawing money over time.; no 'bank run' had occurred. The Corralito occurred, which among other political factors lead sections of the populace to riot. Read the article.
Moreover, the panic unleashed a wave of riots and other forms of domestic unrest. The ultimate result was an increase in the state's police powers, including more professional police forces.[17][18]
The Baltimore bank riot of 1835 was a violent reaction to the failure of the Bank of Maryland in 1834. The riot, which lasted from 6-9 August, was aimed at the homes and property of a number of former directors of the bank, who had been accused of financial misconduct and fraud
The Cyprus riots were not due to a bank run; they were due to the government's decisions to prevent citizens from withdrawing their money. From the article you linked: "Riots are now being reported in Cyprus as citizens are furious at the Troika’s decision to rob the citizens to pay for the bad debts of banks."
I'll give you the others, however. The fact that two are from over a century and a half ago however seems to support my implication that bank runs don't necessarily lead to riots (and more specifically, that not bailing out banks won't necessarily lead to riots).
The riot was because the government froze deposits so people weren't allowed to withdraw money from the banks. My original (implied) point was that bank runs themselves don't necessarily cause the chaos they're made out to, so if anything this supports my case: if the government had allowed the bank to collapse, there may not have been riots.
I don't see how whether they cannot withdraw because the government blocked withdrawals or because the bank has no money to give away matters. The riots are caused by inability to withdraw money in any case.
No, they weren't. To quote the Wikipedia[1] article on the riots: "The uprising was a predominantly middle-class uprising against the government of President Fernando de la Rúa, who had failed to contain the economic crisis that was going through its third year of recession".
If you owe your bank 10000 dollars and cant pay you have a problem if you owe your bank 1 million (or in our case 17 trillion)and cant pay they have a problem.
My point is debt isn’t a problem unless there are significant consequences attached to it. You talk of economic understanding but your theory is flawed.
I don’t want to sound like I am excusing this behavior but this type of thing happens all the time in various other industries all over the country. This is not an isolated sv disease. And as much as it is about money in regards to salaries it’s also about employee retention which is also about money haha.
