My favoured candidate is for increasing corporate taxes and the other is for cutting corporate taxes in the US which seem to be the highest in the world. That is unfortunate for me, but given that the economy is presently the number one election issue in America and always has been for me in any election in here in Canada, I’d like to be convinced that increasing corporate taxes in America would be a good thing for the economy.
I just don’t understand why taxing corporations, the wealth generating engines of any economy helps. I don’t understand why corporations should be penalized for investing or saving for investing. As long as the money and assets remain in the corporation, no individual benefits.
Of course at some point point, individual stock holders will benefit from dividends and rising share values. Why can’t the government just tax dividend income like earned income and address stock values of shareholders through the capital gains tax?
And if the loss of revenue is an issue, why not just increase taxes on those who can afford it ?
It doesn’t. I work for a company with offices in the UK and US. Corporate taxes are higher in the US than UK. Guess where we make most of our profit? If US corporate taxes were lower, we would make more of our profit on the US and end up paying more US tax than we do now. So the US loses out by charging high tax rates.
I hope cooperate taxes isn’t just a campaign ploy to make it sound like helping the little guy against the big guy. Responsibly run business make a lot of contributions to society. The little guy benefits as well.
But how much do the corporations actual pay in taxes around the world? The statutory rate is often very different than the real corporate tax rate.
Just because the tax rate is officially X% is irrelevant if there are a loopholes that means almost nobody has to actually pay it. The only arguments I can see are that the system is inefficient and promotes tax avoidance and the costs that come with that. However, the cynic in me thinks that most large corporations would try to avoid paying taxes no matter what they are.
As far as the wisdom of raising or lowering corporate taxes, I would tend to think it’s a delicate balance that has to be determined based on a number of things I’m not qualified enough to accurately gauge. Some form of corporate taxation is needed under an income tax system to prevent individuals from accumulating tax-free income within corporations. It’s a vital and useful tax.
The problem is that global tax competition, while exposing inefficiencies, could/has led to “a race to the bottom”. Taxes have to come from somewhere, so we either collect more from individuals, finance our government on debt, or cut government services. Achieving a magic number than maximizes tax collection and global competitiveness, and minimizes tax avoidance and system inefficiencies is pretty difficult. I have no idea what the number is, but I don’t see why it can’t be higher than it is now. Ultimately, I think both McCain and Obama’s positions are reflective of their general views on the role of government.
One problem is that the very large companies can afford to pay many lawyers many hundreds of thousands of dollars to find ways to legally avoid corporate taxes. The small companies, the mom-and-pop stores, can’t afford that and so wind up paying high corporate taxes.
Personal anecdote: I was treasurer for a very small co-op art gallery, and the tax was a killer. After we went out of business, the person taking over said she had registered as a non-profit art organization and so paid no corporate taxes. Any profits, she took out of the company as her “salary.” There’s no real argument for it being a non-profit organization, but it was small enough to fly under the radar.
As another anecdote, my company’s purely UK divisions do get taxed less than my company’s purely US divisions, and by “purely” I mean, whatever money either company makes overseas is under the statutory tax agreement between the US and the UK. We opened up a call center in Ireland because US taxes were getting that bad.
Personally, I think the tax rates pre-Bush were fine, with LTCG pegged at 2 years of the investment (with ordinary income rates for less than that). Post Bush tax cut appears to be ok, too, but I’m willing to be convinced about the data. In theory, these taxes should have increased government revenue, and it appears to have helped the economy.
I would also like to see Obama’s plan of small businesses getting tax cuts, but one, I necessarily agree that having a bevy of small businesses makes for an efficient market (at least in terms of production); and two, how does one actually define “small business?” We have a sales group in my company that goes after the small business market, and we define that as anything under $20M in revenue.
This is only true if each country’s laws, environment, populace, markets, and other generalities, like infrastructure are are all substantially similar.
Large corporations are also the most highly scrutinized tax payers. Most corporations try to manged their various tax rates to get the best blended rate that they can. It’s a little more complicatied than looking for loopholes. Whilst shelters do exist, they are not as readily available as you might think.
Personal anecdote: corporate attorney for several large companies and they don’t spend that much looking for tax loopholes. None at all actually.