Drop corp tax to 25% from 35%, exempt 95% of companies' overseas profit...

[The Straight Story]

WASHINGTON (Reuters) - At least one Republican member of the congressional debt reduction panel is promising to forge ahead with tax reform after the panel failed to reach a deal to reduce the U.S. deficit.

Senator Rob Portman said on Monday he would soon introduce legislation to lower the corporate tax rate to 25 percent from 35 percent and giving a break on offshore profits.

Portman's bill, expected to be introduced next year, could add momentum to Republican Representative Dave Camp's bid to revamp the tax code.

Camp, the chairman of the tax-writing panel and former member of the debt reduction panel, has proposed slashing the top tax rates for individuals and corporations. He also proposed adopting a territorial system that would exempt 95 percent of companies' overseas profits from the U.S. corporate income tax.

"We are in the process of reaching out to other (lawmakers') offices," Portman told reporters one week after the 12-member congressional "super committee" abandoned efforts to reduce the country's growing public debt.

http://news.yahoo.com/tax-reform-mulled-debt-committee-failure-220518176.html

[Huey P. Long]

1. This WILL happen. Fuck us, we're on our own. More pain ahead.

[Turbineguy]

2. Dropping or raising rates is meaningless

when loopholes permit an effective rate of zero percent.

[ParkieDem]

3. Go ahead and flame, but I don't have a problem with this

In principle. If you drop the rate AND close all the damn loopholes, we'd come out way ahead.

As far as overseas profits are concerned, we're the only major country in the world that taxes overseas profits. Let's tax what ALL companies earn here in the US at whatever rate, and let foreign countries tax them abroad. The administrative headache of the foreign tax credit isn't worth the cost.

[Huey P. Long]

5. Ha, once passed, the loopholes will be reinstituted. Ignore the pattern at our peril.

[The Straight Story]

6. Not the only major country - UK and Japan as well, and we know they won't close loopholes

And if they do, they will open new ones.

[Ilsa]

7. Wouldn't that encourage businesses to operate outside the US?

Wouldn't that cause greater job losses?

[ParkieDem]

8. No.

The US is too big of a market for them to ignore. They couldn't limit their operations to tax havens such as the Cayman Islands. There's nothing there for them to do. There's no way their shareholders would allow them to abandon the US market.

[TheKentuckian]

15. Today? Plausibly. Down the road, you are holding on to the dream of privileged perspective

They are willfully and with purpose winding this economy down and have already used the seed corn to seed newer and larger markets which will result in a much more diffuse consumer class with far greater numbers.

Any long range strategy that is even partially based on the need for our market is doomed.

Soon China and India will have consumer classes larger than our entire population. We are being strip mined to make it happen.
Stockholders have already allowed the market to be broken, it can be safely abandoned as those with resources will continue to consume.

[Yo_Mama]

11. We would - also we need to look at what the "socialist" European countries have done

First, on a bipartisan basis US companies have received huge tax breaks over the last few years, which has led to companies such as GE not paying any taxes. This was just dumb.

Second, most of the developed world over the last decade has been cutting corporate tax rates and raising sales/consumption taxes, and this places the US in a less competitive position.

DUers don't want to deal with this, but the US is just one player in a very large world, and when the world changes we have to change with it. In the US, we tax individuals much less than most states and theoretically tax corporations more, but in practice the tax code is so larded up with exceptions and giveaways that we aren't collecting nearly as much corporate tax as we would if we just went to say, a Danish scheme (very business friendly):
http://www.taxrates.cc/html/denmark-tax-rates.html

Or Norway:
http://www.taxrates.cc/html/norway-tax-rates.html

Look at the high sales (VAT) taxes. Look at the relatively low capital gains taxes.

[hfojvt]

12. maybe with corporate taxes, but I don't buy it with individual taxes

First, even the big loophole of Schedule A is enjoyed by some making between $10,000 and $40,000 and they get $141 billion in deductions. http://journals.democraticunderground.com/hfojvt/151

Further, I do not know why we, as progressives would not want to close the loopholes and RAISE the tax rates for the rich at the same time.

I see a higher tax rate as a disincentive to steal. Suppose, for example, you are a CEO who steals (er earns?) $10 million a year. At that point, you are already taking advantage of every loophole and deduction you can. So if you get all ambitious and steal (earn? yeah, right) another $10 million that extra money will be taxed at the highest marginal tax rate. If that rate is high, like, say the 70% it was before the accursed Reagan slashed it to 28%, that is a huge disincentive to steal. Why steal another $10 million if the government is just going to take back $7 million of it?

I do not believe it is a coincidence that after Reagan slashed income tax rates that CEO salaries exploded.

Finally, Republicans always talk about closing loopholes and lowering rates in a way that is revenue neutral. Except that my bet is that there will be winners and losers, like this.

top .1% = gain $10 billion from the lower tax rates
next .9% = gain $10 billion from the lower tax rates
next 4% = gain $10 billion from the lower tax rates
next 5% = break even with the loss of deductions and the lower tax rates
next 15% = lose $15 billion from the loss of deductions
next 25% = lose $15 billion from the loss of deductions

and voila, there you have a plan that is revenue neutral and shifts the tax burden even more away from the rich and super rich and onto the upper middle class.

Mission accomplished.

And it will only get worse over time and the rich rake in the benefits the gap between what they pay and what they would have paid under the old system will get bigger and bigger as time goes on. Bigger in their favor that is.

[baldguy]

4. Why not make it easy and allow corporations to own slaves?

[hifiguy]

9. Somewhere in a Repuke/Libertarian "think tank" that idea

is being tooled up as we type.

[shraby]

10. They can introduce all those types of legislation they want,

but they still have to be voted on by the Senate and pass a president's veto.

[alc]

13. it's in the details

25% could be an improvement if loopholes are removed.

Overseas profit is tricky. If there's big money you can count on accountants and lawyers who are very good with international law. The foreign profits are normally made by a foreign corporation (for a lot of reasons including taxes). The country where that company is incorporated does not want it taxed by the US so they will help with the legal/tax details. More often than not (with big corps) the "foreign company" is just as much a foreign company as a corporation which started in that country (e.g. no US roads, courts, laws, police, electricity, etc. are used to make it work). From that country's point-of-view, it's not fair for the US to tax profits on any of it's "domestic corporations".

There is usually some ownership of the foreign corporation by the US corporation, but they can go as far as making it a completely independent company. In either case it licenses names/logos/patents from the US corp (the US corp pays taxes on those license fees and the US government requires the fees to be "fair market value"). The US government can't touch the independent foreign company except where US-based suppliers, customers, or employees are involved or when profit is brought back to the US.

You can argue that this is wrong all day, but it makes business sense and it is encouraged by foreign countries (so they get jobs and keep profit in their country). The 95% exemption MAY result in more money brought home and more US jobs. The details matter very much - simply writing off the idea because you don't think it sounds fair from a US-centric view is not the right thing to do.

[aint_no_life_nowhere]

14. Republicans hate immigration amnesties but not tax amnesties

When it comes to immigration, they say that giving another amnesty like Raygun will only encourage more people to come across the border, hoping for further amnesties down the line. Why not take same view of offshore profits? Removing taxes from these foreign profits will encourage more offshoring of commercial activities by U.S. companies, more shipments of jobs overseas by employers hoping to have further tax amnesties down the line. And even if you give an exemption to foreign profits to encourage their repatriation, you have to require their investment in jobs-producing endeavors. A tax amnesty was tried in 2004 and those profits were used to pay CEO bonuses and stock dividends, not invested in cpmpany growth.