What are Liberal's position on higher corporate taxes causing business to move overseas?

To those who are Democrats, what is your position on higher corporate tax rates in the U.S. causing business to just move overseas? In many cases the businesses can still sell products and services to customers in the U.S., but since the business is located in another country it doesn't have to pay U.S. corporate tax rates. That basically forces more corporations and business to have to move overseas if they want to be able to compete in the marketplace and not have to pay the U.S. corporate tax.

Do you support President Trump's tariff proposals on imports from foreign countries into the United States?

 

One thing people always talk about is the top rate for businesses in the US compared to other countries. But businesses don't get taxed anything close to the top rate.

 

Neat link here between corporate tax rates and protectionism. Corporate tax can be used in 'beggar thy neighbour' tactics (see, for example, Ireland and how it skewed foreign direct investment into Europe in its favour). However, such tactics do not create a robust economy. That has to be based on positive attraction: skilled labour, infrastructure and economic stability. You won't get that by pandering to companies looking for the quick buck.

 

All corporations, foreign and local, pay applicable US taxes on profits in the USA.
All US corporations functioning in foreign nations pay applicable foreign corporate taxes.

The solution you and the idiot president should have taken instead of reduced taxes was to CLOSE the tax loopholes on corporations.

Keeping in mind the US corporate tax rate was 35%:
Of 258 continuously profitable US corporations over an 8-year period their effective tax rate was 21.2%.
18 of the corporations, including GE and PGE, paid no income tax at all over the 8-year period.
48 of the corporations paid an effective tax rate less than 10%.
Of those corporations with significant offshore profits, more than half paid higher tax rates in the foreign nation than they did in the USA.

Now...if the loopholes were not closed, or more loopholes were created, with the new 15% corporate tax rate, when the dust settles the average effective corporate tax rate might be 0-10% tops!! A complete 100% government giveaway...

 

But that only applies to certain types of businesses. For example, if I'm a manufacturer in Vietnam I can make products and sell them to a third party retailer who will then sell them in the U.S. That third party might have to pay U.S. corporate tax but it will only be a fraction of what the total profits otherwise would have been because they're only paying the tax on the profits from the markup resale. Do you understand?
So businesses are still making profits off the U.S. market without paying taxes in the U.S.

 

I get the impression that we're at the point now of groveling before corporations to appease them and keep them in our country, rather than actually exercising control over them. I don't know what else could explain their paying little to no taxes and the GOP now lowering their taxes even more.

 

In bold above is not a 'might'...it's a fact.

And it won't be a fraction of anything...it will be a corporate tax applied the same as all other corporations.

Nearly every car manufacturer, whether in the US or a foreign nation, buys subcomponents from nations all over the world. The same with Apple and most other manufacturers. We should not care what transpires outside of the USA...we should only be concerned with what happens in the USA with stuff that we can identify and control and tax as applicable...

 

Well...unlike 50-60 years ago, today the larger corporations buy and sell around the world, which gives them options how to conduct their business. Today a corporation can relocate anywhere in the world where it makes sense for them. They can outsource anywhere it makes sense for them. Therefore, in the grand scheme of things, if a corporation has trouble with their business model in the USA, they can simply look to foreign options to make it work. Each corporation will have difference issues with the US, from taxes, to infrastructure, to labor, etc. so in those cases in which government can negotiate something (grovel) to keep their business in the USA is not really 'groveling' but more about the US competing in a global marketplace...

 

Those type of firms are good for nothing. They look for short term gain in their 'race to the bottom' games. Reducing corporation tax can actually corrupt foreign direct investment and encourage politicians to operate according to the electoral cycle.

Simple rule. Keep corportation taxes high and encourage real investment through superior infrastructure and labour quality.

 

My answer? California. Liberal, and does well economically.

I think there's a lot that goes into the decision of where to locate a business/factory. Ridiculously high taxes can be a dealerbreaker, but lowering the taxes won't automatically mean companies will flood in, and raising it a bit won't automatically mean companies will flee.

Tariffs as a tool to prevent dumping are okay. General tariffs like this are just stupid. At best, the mining companies will benefit while the manufacturers will suffer. At worst, a trade war.

 

You still don't understand.

The issue is things being brought into the U.S. are not being taxed to the same level that those things would be taxed if they were being produced in the U.S.

Corporations only pay taxes on their activities that take place in the U.S., not their activities that take place overseas, even if those activities that take place overseas are essential to their activities in the U.S.

So again, they would have an unfair advantage compared to companies operating entirely in the U.S.

How does it matter if business activities done in another country are being taxed at a lower rate? Because this is money that is coming out of the American consumer market.

These are not flat sales taxes that we are talking about here. If a company, say manufactures something in Vietnam and then sells it in the U.S., it can split its company into two separate operations. That way they only have to pay a fraction of their overall corporate profits. They might manufacture an engine component, sell those components to another subdivision of their corporation, who then imports those components into the U.S. and sells them. They are only paying taxes on the difference between how much that individual corporate subdivision paid for them and how much they sold them for. Which in some instances could be pretty arbitrary.

The fact is you can earn US dollars while paying very little tax on it, as long as you are not in the US earning those dollars. Then those people who earned all this money from the US can later park their money back into the US without having to pay income tax (or corporate tax). Because technically they were not in the US when they earned that money. Something very unfair about that.
Why do you think so many rich people are renouncing their citizenship and funneling money through the Virgin Islands?

Unfortunately a lot of people are too brain dead to fully understand this, and many of the proposed solutions thought up by politicians to rectify the problem end up being even more unfair than the original unfairness they were intended to solve.

 

There is no tax on production so who cares where stuff is manufactured?

US and all foreign corporations pay applicable corporate taxes on their business dealings in the US. These same corporations when doing business around the world in each of those nations they pay applicable corporate taxes. The tax rates may not be the same, with some lower and some higher than the US, but no matter there are corporate taxes in all of these foreign nations.

There's no such thing as an 'unfair advantage'?

All businesses, US and foreign, have similar options in how they manage their businesses. If a US corporation wishes to have 100% of a product produced offshore but sold in the US this is fine. If a foreign corporation wishes to have 100% of a product produced offshore but sold in the US this is fine. And everything else in between is fine. All of them, no matter their locations, are paying the same applicable corporate taxes in respective nations.

I think you are talking about .01% of business owners and don't have any pertinent facts to back up your claims. Running multinational corporations is much more complex than who can benefit from tax policy...

 

Tariffs aren't the complete solution to corporations being overseas. Part of the reason is tax evasion by the rich.

I saw this video about the earn and spend before taxes benefits of starting a corporation. Let me know what you think.

This video is 6:13 dur, but the relevant part starts at 2:58.
The Greatest Secret Of The Rich

 

Tariffs, unless part of multilateral agreement, are never a solution.

Imagine the gains from firms owned by their workers....

 

I'm not sure why you'd say that. If one country is using slave labor, obviously you need some tariffs to protect the labor force in the other country from unfair competition.
Well that's just an example. More likely it could be lack of workplace protections or an absence of costly environmental regulations. In either case, the employment will move to the country with lower costs. Mounting long term trade deficits are not a good thing.

 

You still don't understand. A manufacturing corporation based overseas will, in practice, only have to pay taxes on a fraction of its profits. It will just claim the majority of its profits outside the country by dealing through a subsidiary. In other words, by splitting into two, only the company that actually deals directly with the consumer has to pay tax on profits, even though the other company is also actually making profits through those sales.

Here's an example. I manufacture something and sell it you in your country. My costs are 20 for production and 10 to get the product to you in your country. I sell it to you for 50. That means my real profit is 20.

But now instead of paying taxes on that, suppose I split my company operations into two. I manufacture and sell to myself for 30. Then I buy for 30 and sell to you for 50, deducting 10 in expenses. Now the profit that I have to pay tax on is only 10.

Because my effective tax rate is lower, I can sell for lower prices than other competing companies that are entirely based in your country.

 

Bit obvious really: we have the WTO and any unfair trade can utilise the dispute settlement process. This ensures that reaction is justified and not just political cretin peddling nationalism.

Trade imbalances reflect a savings imbalance. You need to learn some basic economics.

 

Oftentimes when those trade imbalances finally get around to correcting themselves, your country gets drained of its capital. Then the profits accrue to the other country who ran the trade surplus, rather than being spent in your country.

You don't want your country to sell off its assets. That's not even beneficial investment. (Investment would attract more capital, in this case the country has less capital)

Even Warren Buffet knows this simple fact of economics.

 

This is grunt. Why didn't you refer to the reason for the imbalance and why didn't you admit its inconsistency with your previous comment?

 

Look, you can raise corporate taxes. But if you do that without tariffs, all the business will just move their operations overseas.

The only other option I can think of is to move to an all sales tax approach, but I suspect many of you won't be happy with that either.

 

Nonsense! You'd have to show that countries with higher corporation tax rates show no foreign direct investment. We know that is bobbins! We know that tax is but one of the numerous variables at play (and the companies that inflate the importance of corporation tax you wouldn't bleedin want). There is no justification for tariff either way.

Sales taxes already exist. You forgot an argument.

 

Too bad you failed to provide a logical argument for that position.

 

Sounds like trade analysis has pass you by. There is only two justifications for unilateral imposition of tariff: optimal tariffs (based on terms of trade) and the infant industry hypothesis (based on dynamic comparative advantage).

Those supporting tariffs in the US are grunting mercantilism.

 

That statement, in my opinion, specifically referring to "optimal tariffs" can be a little deceitful. Because first you point to what is described by economists as a very open-ended and encompassing argument, so we have to regard it as not untrue. Yet, then, it's easy to turn around and say because there is only "terms of trade" there is nothing else (besides infant industry, of course). The mistake here is that the terms of trade argument is generally used to refer to a very specific type of situational argument. Because, like I said, you'll rarely find an explanation of it that is exactly logically formulated as to precisely what areas this argument can encompass. So, if we define the terms of trade argument within the strict confines of the particular type of example that is commonly given as an explanation, then your statement would have to be wrong. Thus, whether I am willing to accept your statement as true depends on exactly how you choose to define the "terms of trade" argument.

Oh, of course I've looked at the basic textbook examples of "terms of trade", but of course when it comes to valid tariff justifications, there's more to it than that.

(and strictly speaking there are several more potential tariff justifications, besides just optimal tariffs and infant industry hypothesis but we're not talking about that)

I believe your statement, Reiver, could be perceived to fall into the Equivocation fallacy category, making a statement that could potentially use a terminology in the broad sense of the meaning, while actually implying a narrower sense of meaning which would make the statement logically untrue.

Sorry to make this so complicated, but we do have to be a stickler for semantics if we're going to attempt to logically analyze statements conveying complex meanings like this.

I've already stated my argument to you, and rather than dispute the particulars of it, you just spout this economic dogma at me: "There are only two justifications for tariffs, so if your argument isn't one of them it must be wrong"

 

Complicated? Afraid not. You simply do not understand the economics. The optimal tariff reflects the impact of market power. The country imposing the tariff can use it to change world prices. It's market must therefore be a significant share of world demand.

What we have is a realisation that tariffs can only generate net gains in very particular environments. It's less relevant to the US on two levels. First, we are seeing decoupling where the US market is becoming less important in global trade. Second, the optimal tariff requires all other countries to roll over and be scared of retaliation. We already know that isn't credible.

Your argument isnt based on sound application of economics. Using the term 'economic dogma' is therefore a tad revealing...