“Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” –Learned Hand, writing in Helvering v. Gregory, 69 F.2d 809, 810 (2d Cir. 1934).
“What we need as a nation is a new sense of economic patriotism, where we all rise or fall together. We should not be providing support for corporations that seek to shift their profits overseas to avoid paying their fair share of taxes.” — Jacob Lew, US Treasury Secretary, July 2014
‘Puter knows Learned Hand has the better of the argument, logically, philosophically and legally, but corporate tax avoidance is a hot button issue these days, so ‘Puter’ll give you his thoughts, some of which may surprise you. (Hint: ‘Puter thinks we should raise personal income tax rates).
‘Puter’s listened to the keening, moralistic rants from liberals within and without the Obama Administration concerning American corporations avoiding taxes through inversions. In an inversion, an American corporation merges with an overseas corporation chartered in a tax-friendly foreign jurisdiction in order to avoid America’s highest in the world tax burden.
The New York Times editorializes today, predictably stating “[i]nversions completed to date are expected to sap the Treasury of nearly $20 billion in taxes in the next decade.” Yes, $20 billion is a lot of money, but it’s a drop in the bucket compared to the approximately $3.7 trillion we’re spending this year alone, much less over a decade. It’s a mere 0.05% of a decade’s expenditures, assuming flat expenditures.
There is a simple way to end the problem of corporations moving overseas to avoid hefty US tax rates: end corporate taxation altogether. Before liberal start reflexively supporting Hamas and buring flags, there are real advantages to eliminating corporate taxes, provided the revenue is recaptured through taxation of individuals.
Ending corporate tax frees up significant capital to be reinvested in business, creating more jobs for current workers or increasing dividends which benefit retirees and pension plans. It also ends uneconomic allocation of legal and accounting resources currently dedicated to gaming a corrupt and unwieldy tax code. Fewer lawyers can’t be a bad thing, right? It also gets the government out of businesses’ shorts, second guessing their allocation of profits and resources, while leaving intact important government regulatory functions like OSHA and the SEC. With no corporate tax code, there’d also be significantly fewer lobbyists plying Congress with trips, campaign contributions and Lord knows what else.
To recover the “lost” revenue, tax all dividends and capital gains on security sales as ordinary income. This eliminates the so called Buffet problem, ensuring Warren (or Jimmy, for that matter) pays the same effective tax rate as his secretary. It also eliminates the Left’s much hated (and rightly so) carried interest deduction that allows hedge fund players to treat income as capital gains for tax purposes. It encourages investors to buy and hold stock, rather than flipping in and out of stocks in microburst trading patterns to take advantage of fractional swings in daily trades since any gain will be immediately taxable as ordinary income when realized. With no artificial advantage to borrowing (interest is deductible currently), corporations would likely equity finance more frequently, meaning less burden on banks and potentially lower leverage rates.
With a zero corporate tax rate, the overseas dollars held by US corporations would flow home. Not all of them, to be sure, but with no tax consequences, capital will go where it’s most efficiently used. And a zero tax rate will encourage other multinational corporations to move headquarters and operations to the United States.
There’s a lot of advantages to getting rid of corporate taxes, but Left and Right will each have to give. The Left will have to eliminate taxes on corporations, and the Right will have to increase taxes on individuals.
‘Puter’s not holding his breath.
Always right, unless he isn’t, the infallible Ghettoputer F. X. Gormogons claims to be an in-law of the Volgi, although no one really believes this.
’Puter carefully follows economic and financial trends, legal affairs, and serves as the Gormogons’ financial and legal advisor. He successfully defended us against a lawsuit from a liquor distributor worth hundreds of thousands of dollars in unpaid deliveries of bootleg shandies.
The Geep has an IQ so high it is untestable and attempts to measure it have resulted in dangerously unstable results as well as injuries to researchers. Coincidentally, he publishes intelligence tests as a side gig.
His sarcasm is so highly developed it borders on the psychic, and he is often able to insult a person even before meeting them. ’Puter enjoys hunting small game with 000 slugs and punt guns, correcting homilies in real time at Mass, and undermining unions. ’Puter likes to wear a hockey mask and carry an axe into public campgrounds, where he bursts into people’s tents and screams. As you might expect, he has been shot several times but remains completely undeterred.
He assures us that his obsessive fawning over news stories involving women teachers sleeping with young students is not Freudian in any way, although he admits something similar once happened to him. Uniquely, ’Puter is unable to speak, read, or write Russian, but he is able to sing it fluently.
Geep joined the order in the mid-1980s. He arrived at the Castle door with dozens of steamer trunks and an inarticulate hissing creature of astonishingly low intelligence he calls “Sleestak.” Ghettoputer appears to make his wishes known to Sleestak, although no one is sure whether this is the result of complex sign language, expert body posture reading, or simply beating Sleestak with a rubber mallet.
‘Puter suggests the Czar suck it.