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American businesses adopt the Euro-model !!

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  • American businesses adopt the Euro-model !!

    I'm surprised none of you nitwits is in here ranting about European exceptionalism on this issue.

    I'll be waiting for Baahb to chime in on how tax planning doesn't drive business decisions.


    Inverted Thinking on Corporate Taxes

    Instead of trying to bar U.S. companies from going overseas, why not make America more hospitable?

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    By MICHAEL J. GRAETZ


    July 16, 2014 7:46 p.m. ET
    Treasury Secretary Jack Lew must have loved the children's classic " Hans Brinker, or the Silver Skates"—and perhaps even believed it, especially the story of a Dutch boy who saves his nation by putting his finger in a leaking dike. That appears to be the Obama administration's approach to tax policy.
    In a letter to Congress on Tuesday, Mr. Lew called on lawmakers to stop U.S. corporations from merging with foreign corporations and locating the parent company abroad to reduce their taxes. He also asked Congress to make the new law to combat such "inversions" retroactive to May. That was the month when Pfizer's PFE +0.42%attempt to merge with AstraZeneca AZN.LN -0.66% in the U.K. produced front-page headlines. Mr. Lew's letter was apparently provoked by the similarly high-profile news in recent days that AbbVie, ABBV -0.68% a U.S. biopharmaceutical company, is seeking to buy the Irish drug manufacturer Shire—and to make Ireland the parent company's tax home. Financial analysts have estimated that the move might save AbbVie $1.3 billion in taxes over the next several years.
    The AbbVie news came almost in tandem with reports that the U.S.-based generic drug maker Mylan is buying the generic-drugs business of Abbot Laboratories in a $5.3 billion deal, with a plan to organize in the Netherlands and cut its tax bill.
    In real life, the finger-in-the-dike approach doesn't work. With corporate inversions, there are simply too many companies that have very large incentives for poking more holes. Many more inversions are on the way. Investment bankers have warmed to the potential for this kind of merger business and are competing to be matchmakers for a flood of such deals.
    Inversions by U.S. companies to take advantage of more favorable corporate tax laws abroad are nothing new. Of the more than 25 U.S. companies that inverted between 1982 and 2002, more than 20 made Bermuda or the Cayman Islands their home. Others chose Panama. One moved to the Netherlands, another to Canada.
    Enlarge Image


    Treasury Secretary Jack Lew in Washington, D.C., June 26. Win McNamee/Getty Images




    The first effort to stop this tide was a 1996 Treasury regulation in response to the cosmetic company Helen of Troy'sHELE -1.55% move to Bermuda. That regulation didn't work. So, in 2004, Congress enacted new anti-inversion legislation. That obviously hasn't worked either. Estimates by congressional staff show that inversions will cost the U.S. Treasury $20 billion in the next decade. Now, despite two decades of failed efforts in this realm, Mr. Lew and many senators and representatives want to tighten the 2004 law. The Treasury secretary calls also for companies to demonstrate "a new sense of economic patriotism."
    Make no mistake: Such proposals would do nothing to make the U.S. a more favorable place to locate multinational headquarters or investments. If they succeed—which is unlikely, given the creativity of tax planners and the potential large tax savings at stake—the most likely outcome will be more foreign takeovers of U.S. companies. No anti-inversion legislation will block this route for garnering the large tax savings that U.S. companies are now seeking.
    To ask, "How do we stop American companies from leaving for more favorable tax jurisdictions?" is asking the wrong question. The right question is "How do we make the United States a more favorable location for investments, jobs, headquarters, and research and development activities?" That will require genuine tax reform.
    Ireland, Canada and the U.K. now have emerged as favored places to locate corporate headquarters. Their treasury officials are thrilled that U.S. companies want to relocate there. These countries have more in common than the English language and well-educated, motivated workers. They have all recently reformed their business income taxes to lower rates. At 35%, we now have the highest statutory corporate rate in the Organization for Economic Cooperation and Development, which has 34 developed countries as members. And, unlike the U.S., the vast majority of OECD countries do not impose taxes when their companies reinvest their foreign earnings at home. When U.K. or Irish treasury officials talk about their low-rate business-tax systems, they don't speak about patriotism; they talk about being "open for business."
    The U.S. is the only OECD country that doesn't have a national tax on consumption. Relying, as we do, so heavily on individual and corporate income taxes to pay for federal expenditures hobbles us in today's global economy. Political leaders from both parties should demonstrate their own "economic patriotism." They need to stop just talking about tax reform. The time has come for them to sit down together and enact a tax system that is fair, simple for the vast majority of Americans, and much more conducive to economic growth.
    Mr. Graetz, a professor at Columbia Law School, was a tax-policy official in the George H.W. Bush administration and is the author of "100 Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States" (Yale University Press, 2008).


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    "I'm totally talking out my ass"………….riser3

  • #2
    Race to the bottom.
    "Nobody ever got my name right." - Me

    Comment


    • #3
      We cannot lower our taxes to compete with European countries because their governments all balance their budget by providing nationalized health care.
      Last edited by Baaahb; 17 July 2014, 10:46 AM.

      Comment


      • #4
        Originally posted by Baaahb View Post
        We cannot lower our taxes to compete with European countries because they all have the cost savings of nationalized health care.
        Call it what it is. I proudly say socialized medicine. It is a good thing.
        "Nobody ever got my name right." - Me

        Comment


        • #5
          Originally posted by riser3 View Post
          Race to the bottom.
          It's not, necessarily. What loafer wants is for the US to give up the conceit that it's exceptional as far as tax policy goes. The rate doesn't matter as much as what profit's being taxed, and where it was earned.

          Comment


          • #6
            Originally posted by stevesliva View Post
            It's not, necessarily. What loafer wants is for the US to give up the conceit that it's exceptional as far as tax policy goes. The rate doesn't matter as much as what profit's being taxed, and where it was earned.
            I can't argue that the tax code does not need tweaking. A lot of it is truly bizarre. And there are exemptions that should be removed that will decrease my net. So I do have skin in the game. However when I wade through the article what I see is a call to shift the tax burden to the working poor in the form of consumption taxes to replace [especially corporate] income taxes. Given that the author calls for "a tax system that is fair, simple for the vast majority of Americans" how is that fair? And are corporations people or not? Mixing individual and corporate in the tax discussion muddies the waters.
            "Nobody ever got my name right." - Me

            Comment


            • #7
              Originally posted by Baaahb View Post
              We cannot lower our taxes to compete with European countries because their governments all balance their budget by providing nationalized health care.
              Sadly, I know you posted this with a straight face.
              "I'm totally talking out my ass"………….riser3

              Comment


              • #8
                Originally posted by stevesliva View Post
                It's not, necessarily. What loafer wants is for the US to give up the conceit that it's exceptional as far as tax policy goes. The rate doesn't matter as much as what profit's being taxed, and where it was earned.
                Of course the rate matters. Ours is obviously too high.
                "I'm totally talking out my ass"………….riser3

                Comment


                • #9
                  Originally posted by Sugarloafer View Post
                  Of course the rate matters. Ours is obviously too high.
                  Others feel it is obviously too low. Seeking some middle ground that equates to "agreement" is not worth the bother, but working hard to hammer out something we can all thrive with would be okay by me.

                  Thriving in the USA below 100K family income is problematic, given the prices and all.

                  Professor Graetz has his pov:
                  Graetz states that it would generate enough revenue so that families with $100,000 of annual income or less — almost 90% of all current filers — would not have to pay income taxes or file tax returns.[1] Graetz would provide a new payroll tax offset to replace the Earned Income Tax Credit and to protect low and moderate income workers from any tax increase under the new system. Households with an annual income of more than $100,000 would be taxed at a flat 25% rate and the corporate income tax rate would be reduced to 25%.
                  A 10% VAT would amount to a tax increase for the very poorest, so I have to take sides against it in its straight up form. Trying to rig exemptions from the VAT could make low-income zone shopkeepers crazy and poorer themselves, so I'm worried about VAT exemptions too.

                  We got into this tax mess over many decades, let's mind the babies when we go chucking out the bathwater.
                  Go for adventure, take pix, but make certain to bring'em back alive!

                  Comment


                  • #10
                    Originally posted by RobRoyMeans View Post
                    Others feel it is obviously too low. Seeking some middle ground that equates to "agreement" is not worth the bother, but working hard to hammer out something we can all thrive with would be okay by me.

                    Thriving in the USA below 100K family income is problematic, given the prices and all.

                    Professor Graetz has his pov:


                    A 10% VAT would amount to a tax increase for the very poorest, so I have to take sides against it in its straight up form. Trying to rig exemptions from the VAT could make low-income zone shopkeepers crazy and poorer themselves, so I'm worried about VAT exemptions too.

                    We got into this tax mess over many decades, let's mind the babies when we go chucking out the bathwater.
                    Rob....follow a little closer instead of just auto-posting some far left opinion. The discussion is about corporate tax rates. I've never heard anyone say that our corporate tax rate is too low. In fact it may be the highest among first world countries.
                    "I'm totally talking out my ass"………….riser3

                    Comment


                    • #11
                      Originally posted by riser3 View Post
                      I can't argue that the tax code does not need tweaking. A lot of it is truly bizarre. And there are exemptions that should be removed that will decrease my net. So I do have skin in the game. However when I wade through the article what I see is a call to shift the tax burden to the working poor in the form of consumption taxes to replace [especially corporate] income taxes. Given that the author calls for "a tax system that is fair, simple for the vast majority of Americans" how is that fair? And are corporations people or not? Mixing individual and corporate in the tax discussion muddies the waters.
                      Really ? Then why are you doing it ???
                      "I'm totally talking out my ass"………….riser3

                      Comment


                      • #12
                        SL you have missed that I am sticking right onto the point of the push to reduce taxes on the one hand and institute a VAT to pay for it.

                        Indeed, no matter what your ears are hearing, there are many who legitimately hold the opposite opinion from you. Holding opposite opinions is not a problem. Each camp has points to support their opinions. Rather than get dragged into details of opinion and the supporting points, I concede there is work to do on the point about corporate taxation and address just the VAT part that is intended to pay for it.

                        It's not really politics for me, just economics, as I stated about the effects of the VAT as outlined by the Professor who authored the comments you quoted. I mentioned a concern about trying to make the VAT fairer for the "poor".

                        As for my politics on this, you and I had better not discuss it. Let's stick to matters we can discuss in the actual economics effects.
                        Go for adventure, take pix, but make certain to bring'em back alive!

                        Comment


                        • #13
                          Originally posted by Sugarloafer View Post
                          Really ? Then why are you doing it ???
                          Um, I wasn't the one who did. The author did.
                          "Nobody ever got my name right." - Me

                          Comment


                          • #14
                            Originally posted by Baaahb View Post
                            ...European countries because their governments all balance their budget by providing nationalized health care.
                            Huhh? I read past this a few times thinking it was sarcastic - but maybe not. They balance their budgets by providing nationalized health care? By taking maybe 10% of GDP off the backs of businesses and individuals, and paying it themselves, nations balance their budgets? I just don't get it.

                            Happy to discuss how screwed up US health system is, why entrepreneurs should not have to carry that burden and how Barry fumbled the opportunity to fix it. But I gotta think you meant something else in your post??

                            Comment


                            • #15
                              Originally posted by Chugach001 View Post
                              Huhh? I read past this a few times thinking it was sarcastic - but maybe not. They balance their budgets by providing nationalized health care? By taking maybe 10% of GDP off the backs of businesses and individuals, and paying it themselves, nations balance their budgets? I just don't get it.

                              Happy to discuss how screwed up US health system is, why entrepreneurs should not have to carry that burden and how Barry fumbled the opportunity to fix it. But I gotta think you meant something else in your post??
                              What other possible fumble other than not going for single-payer, i.e. socialized medicine? How else would you have fixed it? Expanded public option?
                              "Nobody ever got my name right." - Me

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