Trump's tax tease will be a massive payday for Valley tech giants and their shareholders US President Donald Trump has vowed to cut corporations some slack in the form of a tax break that may give Silicon Valley something to celebrate. America taxes businesses' overseas money at 35 per cent when funds are repatriated to the States, so most technology firms don't bother to transfer their mountains of dosh and leave …
@keef
My own handle has very few previous posts so isn't really worth anything to anyone. My first post was 16/11/11 (I've been reading this site a lot longer than that though) and I have 19560 up and 3394 down, I am not fussed about these things. As I have stated before I post AC because I sometimes value others opinions above my own, it's all about checks and balances. In regard of this I'm getting annoyed that big john is supporting Trump but will not give explanation, maybe I'm wrong and Trump is a good leader so I'm asking him to explain why and I'm going to keep asking why until he realises that unless he gives a valid answer then others will hold the same view as me that he is a nut job (Trump that is but it could also be big john)
Make America Great Again, huh?
Standing up for the little guy, huh?
Economic nationalism, anyone?
How 'bout them thar' jobs coming back right here at home? IBM now has more employees in India than in the US.
Still down with El Cheeto's promises?
Cutting taxes for the top 1% while eliminating the state tax deduction for the bottom 90%. Is this what you voted for?
Tax repatriation amnesty for - you guessed it - tax-evading mega-corporations. Paid for by the state tax deduction elimination from your federal taxes. Is this what you voted for?
How about that Infrastructure mega-investment bill that would create jobs here in the U-S-A!! U-S-A!! Where's that at? Is Congress debating it? Oooh, no they're not. They've been busy all year trying to take away your health insurance. Or at least making it three times more expensive.
You voted for El Cheeto. You should have voted for Bernie.
Next time, in 2018 or 2020, just don't vote. Stay home. You'll inflict less damage on yourselves, and everyone else.
"Cutting taxes for the top 1% while eliminating the state tax deduction for the bottom 90%. Is this what you voted for?"
fake news if you think THAT is happening. Still, I _WISH_ that top rates REALLY WERE were being cut! Sadly, I think the current political situation won't support it. Dumb-feels "feel" instead of think, "the rich" is an oppressed minority, and [believe it or not] the high marginal tax rates aren't ON "the rich", they're REALLY on people trying to _BECOME_ "the rich" !!! [high marginal tax rates on upper income earners help to keep the 'haves' and 'have nots' separated, in other words, and history confirms my premise]
If a 'rich' person is heavily taxed, that money goes to gummint. The money is then used to keep politicians in power, keep people doing busywork, and (effectively) pay people to STAY POOR (you know, welfare, food stamps, the social welfare tit, yotta yotta).
If a rich person is taxed LESS, the extra money goes to BUYING THINGS and HIRING PEOPLE for service work. In turn, more people are hired to MAKE things, etc..
You get what you pay for. In the case of sending money to gummint, you get more gummint, more social safety net for people who don't have jobs, and so on. In the case of KEEPING your earned cash, and spending it on things that have to be MADE or DONE, you get people WORKING to get the money.
I prefer the 2nd scenario. So, CUT TAXES ACROSS THE BOARD!
That's right. Let's get some WORK done for the money being spent. And it seems that only RICH people have money to SPEND these days. Taxing them MORE will only make things WORSE. Taxing them LESS will _MAKE_! _A_! _HUGE_! _DIFFERENCE_! in boosting the economy, WORLD WIDE.
It worked back in the 80's. and don't lie about the 80's, either. I was THERE. I was there in the 70's, too, and I know the difference. You can't convince me otherwise. The truth is the truth.
The 25% pass through income for "small businesses" is a massive giveaway to the rich, many of whom like Trump own private companies that are organized as S corps or partnerships and thus income passes through to personal income taxes (where it is taxed at 39.6%, or at 35% if the rate in the new plan went through, which almost few would end up paying)
If you tax pass thru income at 25% you can bet every entertainer, sports star, Wall Street banker and so forth will ask their employer to please treat them as a contractor, and pay their salary to their shiny new S corp, thus dropping their tax rate from 39.6% to 25%. That would massively increase the already too large budget deficit, unless you're dim enough to believe that tax cuts from current rates will increase tax revenue. It certainly didn't when Bush did it from rates almost identical to the current ones: he turned a large and growing surplus into a massive deficit in record time. It might also starve SS & Medicare, if the pass through rate doesn't also incur these taxes like regular income does (for only the first $130K for SS)
I suspect that won't stop republicans from continuing to make false claims that the rate cuts will pay for themselves because of all the economic growth they'll supposedly generate. The economy has been expanding (albeit rather tepidly) for a near record breaking length of time, so we're probably overdue for a recession. Of course economists will tell you the best time to do tax cuts is during a recession, but that requires the discipline to raise them during growth to contain inflation.
Kansas tried the same tax cut for "owner-operated businesses" 5 years ago, as well as other tax cuts, and it was an epic failure (nationally reported) that needed the taxes to be put back up this summer to pay the bills.
None of the claimed better growth materialized (performance was actually worse, if anything), except that many rich people avoided tax because of the same "small business" giveaway mentioned by Doug.
Hopefully the non-rich people whose taxes would rise with this week's republican proposal will sink this plan.
regarding S corporations...
if you owned one, you'd know that what you said was COMPLETE BOVINE SEWAGE.
Most people who own S corporations are independent contractors and small business owners. It's a way to avoid 'C' corporation regulations and nonsense, while simplifying the liability problems. LLC's are similar, as well as sole proprieterships, as far as 'income' goes. It costs me a flat $800/year for cali-fornicate-you state taxes, regardless of whether or not I earn money. I'm also required to PAY MYSELF A WAGE rather than taking all of the income as 'shareholder draft'. That wage has to be 'fair market value' or (as I understand it) you could get audited and have to pay penalties. Most of the tax difference is 'social security and medicaire' taxes, things I'll probably NEVER see [I'll just work until I'm dead, and never retire, and to hell with gummint programs, I don't want them and they'll be bankrupt before I'm eligible anyway]. So by paying myself a reasonable salary [which is taxed like everyone else], AND taking shareholder drafts on whatever profit I'm lucky enough to EARN, then I probably end up paying MORE taxes than the average person in the process [plus all of the extra costs associated with the additional tax filings and so on].
It's a _LOT_ different when you have to sign the FRONT of the checks...
And consider this: if you can get a *SLIGHT* tax break for owning a business where you are NOW taxed at a lower rate when you FINALLY get far enough ahead that you can ENJOY the fruits of your labors, then the difference between 40% and 25% could be...
A _ N E W _ E M P L O Y E E !!!
That's right, you HIRE SOMEONE with the extra money, to grow the business, relieve yourself from having to do ALL of the work yourself, yotta yotta.
Or you buy new equipment. Or you purchase more inventory. Or you open another store front or grow the business in another kind of way. Whichever.
LET PEOPLE KEEP WHAT THEY EARN! It's "fair".
@Bombastic Bob
"LET PEOPLE KEEP WHAT THEY EARN! It's "fair"."
I'm curious Bob. If one lets the people keep what they earn, as you put it, who do you think is going to pay for the U.S. infrastructure, not to mention the military.
How will the arms industry make a living if all that is cut back.
Interestingly, when I worked in the U.S. I seem to remember that one was expected to declare their world-wide income on which they were(are?) taxed. Has that changed?
Bearing in mind that in the U.S of A, corporations are regarded (apparently) as people, why aren't they being taxed on their world-wide income - whether it is repatriated or not!!!
Just asking.
Not sure if a 20% corporate tax rate is good enough to get companies like Apple holding trillions overseas to bring it home. They got a 5.25% rate when Bush had a repatriation holiday, they might be happy about a lower rate at home but still hold out for a lower rate for overseas cash.
If they don't need it now - and especially if they can borrow against it at historically low rates - why pay 20%? All they'd have to do is whisper "give us a repatriation holiday and we'll create jobs in the US" in Trump's ear and he'll start tweeting at congress demanding they pass a repatriation holiday immediately, and falsely claim it was a big success for job creation under Bush and needs to be repeated.
I don't know why it would hurt Europe if the cash was brought home. Most companies are like Apple and invest their cash very conservatively. The financial services industry doesn't make much on money market accounts or rolling over short term bonds.
It would hurt Europe because those trillions are currently propping up the European banking sector by being a positive amount on the banks balance sheets. Remove the money and you remove the liquidity of the banks, the banks then tighten up on lending, put interest rates up, call in loans to improve their liquidity etc etc
Its a feedback loop, money is not 'created' (well not unless it is 'quantitative easing' but that is not really making money, that is watering down the strength of money...) remove the money from Europe to the US and it will impact upon the European banks. Trillions is not a trifling amount.
"Not sure if a 20% corporate tax rate is good enough to get companies like Apple holding trillions overseas to bring it home."
I agree. corporate tax rate should be ZERO. Individuals (stock holders, employees) pay MORE THAN ENOUGH taxes already, so in effect corporate income is DOUBLE TAXED. That's hardly "fair".
Yes unfortunately the repatriation holiday was a disaster from that perspective. Previously companies kept some money overseas, but it was mainly intended to facilitate acquisitions or construction they might undertake there. The latter (building overseas manufacturing facilities) is what gave Bush's administration the "brilliant" idea of the repatriation holiday. The logic was if they bring the money home, they'd build manufacturing facilities here. Of course that wasn't true, but it gave them a taste of very low taxes and they were kicking themselves for all the money they'd brought back and paid 35% on that they could have left overseas.
If they weren't able to finesse the tax laws in other countries (all the double Irish, double Dutch and so forth strategies the various companies are using) to pay very low tax rates it wouldn't matter. That is, any money they'd already paid 20% or more on they might as well bring back, because they wouldn't owe any US taxes on it, since foreign taxes paid are a credit against US taxes for money earned overseas. But when most are paying well under 10%, a 20% rate just isn't enough to for them to risk upsetting shareholders by bringing money home only to miss out on far lower rates if Trump makes the same mistake Bush did.
Interesting issue. Will it create more jobs, etc. Or merely line the pockets of the stockholders who will hang onto it? The ones who would spend (locally and otherwise) are middle and lower class. They'd buy (probably Chinese made) goods but also services. The uppers... maybe a new Ferrari or another house. The rest of the money into the stocks, etc. Might get a bit of trickle down from that via startups but who knows.
but instead of investing the money, the vast majority was simply given to shareholders, [...]
The vast majority of which reinvested it into other businesses within the US (since many of those shareholders were resident or tax-resident in the US). 9.9% of 2.5 trillion dollars is not something to simply dismiss...
Although, I completely agree that it would be lovely if these corporations all simply did pay their 35% on their overseas profits. ;-)
"We will impose a one-time low tax on returning money that is already offshore so that it can be brought back home to America where it belongs"
This shows the serious problem in understanding, the US is not where it belongs. It doesnt belong anywhere but where the company deems fit to put it. There is no right to that money for anyone but the company and by falsely assuming the government has some right to it results in 0% tax from that money.
If they would like the money to come back to the country which then works back into the US economy then not punishing people for making money might be a sensible approach.
Uh... Reg... you are writing a SLANTED story here and using Trumps words and twisting. The once on a generation comment had more to do with simplifying and changing our tax code. Repatriation of money is more about hump starting the economy and bringing jobs and revenue back here. We have the highest taxes for corporations in the world. Time to change that. You are nothing more than the disgusting main stream media and doing what they do.... create a false narrative.... if you are going to write something, be honest and stop twisting facts... it's DISGUSTING
"Simplifying the tax system" is code for "Poor people are going to get $100 a year back, people earning over $200k are going to stop paying tax"
Breaking things down to three tax bands? Probably good. Simplifying the commonest cases of tax? Probably also good - it blows my mind that pretty much every american fills in a tax return while most other countries just have it handled.
However underneath the simplification, buried in the numbers, is a system that effectively eliminates taxpaying for higher earners. Eliminating the AMT in particular would be catastrophic.
Coincidentally the AMT accounts for most of Trump's personal tax payments.
No, no that is not good enough. Profits have to be taxed.
Karl Marx said that Capitalism will always tend to break because it is fundamentally unstable. Because money gives power that gives more ability to accrue money. Ultimately the system fails because it does not successfully balance out the work/reward equation.
One of the purposes of government is to regulate economies to try to prevent that from happening, and the USA is failing in this basic duty through inept and corrupt leadership.
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