Tax Some, Spend More
To support president Biden’s $2.3 trillion infrastructure proposal, Yellen Pushes for Global Minimum Tax Rate on Multinational Corporations.
Treasury Secretary Janet Yellen argued for a global minimum corporate tax rate Monday, seeking international cooperation that is crucial to funding the administration’s $2.3 trillion infrastructure proposal.
President Biden’s proposal to raise the corporate tax rate to 28% from 21% would push the U.S. from the middle of the pack among major economies to near the top. The Biden plan would also impose a 21% minimum tax on U.S. companies’ foreign income, remove an export incentive and raise taxes on some foreign companies’ U.S. operations.
Under the Biden plan without a global minimum tax, a U.S. address becomes a potential disadvantage, meaning that foreign-owned businesses operating overseas could be significantly more profitable than competitors owned by U.S. companies.
Democrats’ changes would also decrease the benefits of having profits abroad as opposed to profits in the U.S., but they would make a U.S. corporate headquarters more of a liability.
Who Really Pays Corporate Taxes?
I side with economists who allege corporations don’t really pay taxes.
In response to corporate tax hikes, companies raise prices or reduce wages and benefits.
Ultimately, corporate tax hikes are a hidden tax on consumers.
America First or America Alone?
Janet Yellen says ‘America first must never mean America alone.’
In regards to taxation, there is a large group of countries that benefit from low taxes. Hopefully, they will politely (or better yet impolitely) tell Yellen where to stuff it.
Meanwhile, I 100% endorse the notion of not going things alone.
For starters, I suggest the immediate end to all sanctions that the US has unilaterally placed.
Sanctions, weapons sales, and our counterproductive drone killing maneuvers provide ample places for Yellen’s newly proposed policy.
Finally, minding our own business in general should be the ultimate goal.
Mish
Has voters’ remorse set in yet?
A great evil has been eliminated, and the country survived, albeit not with a lot of room to spare. Now the question is whether the Republicans can rise out of the Trump-hole and offer an alternative. At this point, it appears unlikely, so for now there the is no reason for Democrats not to move to the hard left.
A global corporate tax deal would make it harder for corporations to shift assets around the world in an effort to engage in tax avoidance. That’s one thing in favor
that does give foreign entities ability to affect profits of domestic corporations
A better solution would be to allow corporations to deduct dividends. It would equalize the treatment of debt and capital. Many of the dividends would be taxed at higher rates because they would be paid to the better off members of society. It would also protect jobs that are lost bankruptcy of thinly capitalized corporations.
I suggest raising capital gains tax for short term gains. The majority of the rich do not have incomes but have wealth assets. Encouraging longer term investments is beneficial to economy. Hedge funds and big corporations running hedge fund divisions are not helping the general economy. Beating up corporations while we have high costs is so detrimental. Biden needs to close loopholes, offshoring, shell corporations, insider trading and all the other malarkey that costs this country billions in lost revenue before bazooka of raising everyone’s taxes. Raise capital gains on higher income people which is a progressive tax
I challenge anyone to show that corporate tax cuts of the past 25 years have done anything to add to gdp growth. Economy has grown at far higher rates with both corporate and personal tax rates signficantly higher.
The best thing they could do is eliminate all loopholes/exemptions, go back to making stock buybacks either illegal or taxed same as dividends, and have a flat corporate tax of 25%.
Corporate tax cuts can’t add to GDP growth for the simple reason that $1 spent by a corporation counts the same as $1 spent by the government. So 0% or 100% tax and the GDP growth will be the same (this year).
The difference is how efficiently that money is spent. Private money is always spent more efficiently (most bang for the buck) than government money unless you believe the government spends your own money better than you can, in which case you should allow the government to spend 100% of it.
Corporations are funny, they are like a person for purposes of political speech, but should not be taxed like a person. They should be deferred to on issues such as pollution, but are to be excoriated for speaking out on voter rights.
Corporations are property. They are owned themselves even if in some circumstances they can be treated like physical people. In parallel physical people are being treated in some circumstance as property with for example contracts with clauses that prevent them from using their acquired skills if they leave the company for one. In that sense physical people become property of the company.
Why are corporations speaking in favor of election fraud?
When the tax rate is lowered corporate officers are rewarded with bonuses, shareholders (the rich, the top 10% of wealth owns 80% of equities) get stock buybacks. Some of the reasoning here seems to be from a bygone time.
It’s a logical thing to do if your company is doing so well that it generates excess cash, has limited investment opportunities and if dividends are taxed more than capital gains.
It looks like inflation protected bonds have rolled over starting in Feb 2021? No inflation LOL
“I side with economists who allege corporations don’t really pay taxes.
In response to corporate tax hikes, companies raise prices or reduce wages and benefits.
Ultimately, corporate tax hikes are a hidden tax on consumers. “
Really Mish, corporations have plenty of money for stock buybacks, lobbying, executive bonuses, but those poor corporations just can’t afford to pay any taxes. They will raise prices, they do that already, they will reduce wages, they do that already, they will lower benefits, they do that already. Why do I pay taxes, because I live in America, I drive on the roads, went to a public school for the first 12 years, do I like it, no, but I understand why I pay taxes. I’m not in favor of over taxation, but zero, what good is raising the tax rate from 21% to 28% on a corporation that pays zero, it’s still zero. The capital gains tax is another scam, not only do you get to pay a lower rate, you then get to write off the losses against the gains to lower your tax burden even more, yet it is still US dollars, there has been a war on labor for the last 40 year and the elites and corporations will not stop until there is nothing left or as Claus says, you will own nothing and be happy. America needs to stop the capitalism on the way up and socialism on the way down for corporation and the markets.
By the way those countries that have low taxes have no loopholes. The average company in America pays around 15% after loopholes. The net effect of a tax increase is never the actual rate. Corporate taxes are graduated just like personal income taxes. I’m in the 35% bracket but I only pay 21% on average over the last 10 years. What Yellen is calling for is an AMT. Which is what Biden ran on. This way a company like Amzazon always has to pay some tax. This is a fair solution for those that exploit loopholes to pay no or minimal taxes.
They’re not loopholes. The law was written intentionally and with purpose. It’s great virtue signaling for politicians who call them “loopholes” as it gives them cover in the media for not reading or writing the law in the first place.
Companies cant raise prices that much to compensate for taxes. Besides we all know companies screw their employees at every turn and reward shareholders first with things like stock buybacks that create nothing and reward executives and board members. The only employees that win are those with large stock options. Companies rarely lower prices on goods if ever and it is only temporary. Even Mish cant the see the err of it. The reason the middle class has struggled is because wages haven’t kept up with inflation and es executive compensation has exceeded inflation. Everytime and executive talks about shareholders he is mostly talking about himself.
the share buybacks mostly benefit the executives who plan to sell shares in response to their own manipulation of the share price. It does not benefit the long term holders who also will be on the hook for the debt in the case the share price falls with the debt on the books, reducing profitability of holding. Think state and municipal pension funds. the Dems already want a blue state bailout for their shaky pension funds for overpaid state employees.
“a global minimum tax would help prevent companies based in other countries from having a significant potential advantage”
Why would any country -not want- to have a significant potential advantage against a country that already takes a tax slice of their own tax base? Why should any country cooperate with the US to make good a fall in investment income?
You could read into this because more to the point, why are tax rises needed if the Fed isn’t doing anything likely to cause inflation. hmm Yellen?
“Ultimately, corporate tax hikes are a hidden tax on consumers. “
Yes, but the same old argument rehashed over and over to no avail.
The point is that our infrastructure continues to deteriorate and needs to be repaired/updated. Congress has been unable to put together a national plan to pay for this repair for at least 30 years. It’s always “too expensive” but there always seems to be unlimited money for the military-industrial complex or to cut taxes (mainly for the wealthy).
So what do we do? The job needs to get done and someone is going to have to pay the cost. How do we get to the goal with a plan that could be supported bipartisanly?
“Ultimately, corporate tax hikes are a hidden tax on consumers. “
Yes, they keep making the same nonsensical argument. What is demonstrably true is that corporate tax cuts are an overt tax increase on consumers:
In 1960, for every $1 that corporations paid in corporate income taxes, individuals like you and I paid $2 in income taxes.
In 1980, it became $1 : $4
In 2000, it became $1 : $5
In 2020, it became $1 : $7
“How do we get to the goal with a plan that could be supported bipartisanly?”
We don’t. One party has Lost It’s Freaking Mind, and the other one never was much good for anything.
Its all hissyfits from here to hell.
“Hopefully, they will politely (or better yet impolitely) tell Yellen where to stuff it. “
Hopefully (for them) they don’t say it! I don’t mind us using our awesome military power in such instances to make them toe the line.
Tax Revenue by source – link to taxpolicycenter.org…/amount-revenue-source
link to taxpolicycenter.org…/amount-revenue-source
In 1960, for every $1 that corporations paid in corporate income taxes, individuals like you and I paid $2 in income taxes.
In 1980, it became $1 : $4
In 2000, it became $1 : $5
In 2020, it became $1 : $7
“Ultimately, corporate tax hikes are a hidden tax on consumers.”
For accuracy, one should move corporate taxes into the individual tax column.
Corporate tax cuts have always been moved into the individual tax column as tax hikes.
His point is that Corporations are not taxpayers. They are tax collectors. They don’t consume, so any tax they pay does not reduce their consumption. Instead, if they are unable to pass it on to consumers/customers, they cease to exist. Corporations pay many taxes other than income taxes, including property taxes, personal property taxes, sales taxes, use taxes, excise taxes, and the big one, employment taxes, plus a variety of other taxes. All of those taxes end up rolled into the price of the product they sell.
For every product you buy, probably 20-30% of the price is a tax that was paid by various businesses involved in getting that product to you, and the taxes are passed on to you as a part of the price. Sure, you only see the 8% sales tax tacked on last, but you are paying far, far more tax than that every time you buy a product.
Is taxing corporations better than taxing individuals? Yes, if you want to grow government. Why? Because taxes included in the base price of products are invisible, and people don’t have any idea how much tax they are really paying, and thus, don’t care.
It doesn’t matter. I would still want to go from 1:7 corporate:individual to 1:2 corporate:individual tax ratio. I don’t care what “surprise outcome” that will bring – which I think is a lie anyway.
I think you misunderstand me. I’m not making a value judgement, nor saying there is a “surprise”. Nor am I saying that there is anything wrong with any particular choice about distribution of taxes between corporate taxes, personal taxes, etc. I’m simply saying that it is an inevitable truth that all taxes are paid by individuals. Since they are the only consumers, they are the only ones who can substitute tax payments for consumption. The advantage of using businesses as the tax collectors is that the collected taxes become invisible, and people don’t realize they are paying them.
Personally, I run a small business. Off the top of my head, I would say that about 20% of my revenues goes towards taxes, mostly payroll taxes, which is >100% of income. It’s just a cost of doing business, and included in the price we charge.
Money manager bigwigs are ironically complaining that government may need to rein in passive, low-fee or no-fee index funds. link to theatlantic.com
Of course when you earn your money through commissions and sales charges. Or using the old adage “when all you have is a hammer, everything looks like a nail”.
When Republicans lowered the corporate rate they were supposed to remove deductions. Funny how that worked. Might as well raise it back
Ridiculous. A floor amounts to managed trade