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Obama Proposes One-Time Tax On $2 Trillion US Companies Hold Overseas
mrspoonsi writes with news about a new proposed tax on overseas profits to help pay for a $478 billion public works program of highway, bridge and transit upgrades. President Barack Obama's fiscal 2016 budget would impose a one-time 14 percent tax on some $2 trillion of untaxed foreign earnings accumulated by U.S. companies abroad and use that to fund infrastructure projects, a White House official said. The money also would be used to fill a projected shortfall in the Highway Trust Fund. "This transition tax would mean that companies have to pay U.S. tax right now on the $2 trillion they already have overseas, rather than being able to delay paying any U.S. tax indefinitely," the official said. "Unlike a voluntary repatriation holiday, which the president opposes and which would lose revenue, the president's proposed transition tax is a one-time, mandatory tax on previously untaxed foreign earnings, regardless of whether the earnings are repatriated." In the future, the budget proposes that U.S. companies pay a 19 percent tax on all of their foreign earnings as they are earned, while a tax credit would be issued for foreign taxes paid, the official said.
This is clearly aimed at companies abusing the "Double Irish" system. Seems like the rate should be set much higher, so that companies are punished and lose more than they would if they did the right thing and repatriated profits and paid the normal tax rates on them.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
Which will be to shit all over this idea. Mind you, I agree that so-called "windfall taxes" are a bad idea, but corporation that profit from shipping jobs overseas, hiding assets overseas, etc., are nothing if not "un-American", a label the hypocrites of the far right are very fond a throwing about. So yeah, another populist idea that is going to go nowhere.
People forget that the United States has one of the highest corporate tax rates in the world, and we impose it on American companies foreign-earned capital if they should bring the money back to the States. If you are responsible to the shareholders to be stewards of their investments, you have to take whatever measures you can to avoid heavier than necessary taxes. Hence people park their money off American shores.
This seems like a cash grab to me, where the better option is to really reform the tax code to be equitable within and outside the United States; then the responsible steward of their investors money would feel more free to have that capital here. 20% of 10 million is a lot more than 35% of zero.
"Who are you?" "No one of consequence." "I must know." "Get used to disappointment."
It's well understood what they are doing, because the companies are quite open about it. Back in the 90s Apple invented something called the Double Irish, which is where they register is shell company with no employees or other interesting in Ireland and have all the other Apple corporations around the world pay their profits to it in exchange for using the Apple name. Starbucks, Google, Amazon and others all do the same. Since the local corporations don't make any profit (due to the "crippling" fees they pay to Apple Ireland) they pay next to no tax.
So why doesn't Apple Ireland pay tax on all the money it takes? Irish law states that corporations that are headquartered overseas pay corporation taxes where their headquarters are. So Ireland says they pay in the US, the US says they pay in Ireland... and thus they pay no tax on all that money.
Of course they are quite open about this and list the money held in Ireland as part of their balance sheets. Apple is currently taking low interest loans to pay shareholders based on the vast reserves it has in Ireland, rather than bring some of that money back and pay ~40% tax on it.
The EU is working on a fix where corporations pay tax based on how much business they do in each country. This seems to be the best that the US can come up with, given the political climate.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
Not really - the EU also wants to close this loophole.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
I thought it was the corporations stealing by leeching off society and then not paying the membership fees. If they don't want to pay any tax they are free to leave society and stop stealing our free education and training, healthcare, roads, police and judicial services etc.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
"to avoid paying their fair share"
That phrase "fair share" is dishonest. It is vague and subjective, while pretending to be objectively normative.
That is exactly right.
Social Security and Medicare costs are only going to get worse as our population ages. And those costs are what is really tanking the federal budget. Not welfare queens or other conservative mythical leaches on society.
And over the past 20 years, our wages have declined and our standard of living has declined also - but worker productivity has gone through the roof.
Big business and the billionaire class has taken the difference and none of that has ended up in the workers hands. We are working longer and harder and our lives are getting worse.
That $2 trillion represents part of that difference.
Nobody's talking about "taxing other countries".
US law says that, if you're a US citizen, you're liable for US taxes. Doesn't matter where you live or where your money comes from. However, it also recognises that it's not nice to subject citizens residing overseas to double taxation--so if you live in $country and pay $country's taxes on your income there, the US will often accept this as having fulfilled your obligation. But if you've income that you're not paying taxes on, anywhere, and the IRS finds out, they will come calling.
What Obama is apparently intending is to extend this philosophy to US corporations, which currently enjoy a much better deal than you or I. They pay US taxes on profits reported in the US. They don't pay US taxes on profits reported in other countries--and here comes the important part--even if they report those profits in $nation, which happens to have negligible or even zero corporate taxes. Whereas, if I move to $nation and they don't make me pay income tax there, then I get to pay it to the US.
So corporations currently get a huge overseas tax dodge that you and I don't. Quoth TFS,
In the future, the budget proposes that U.S. companies pay a 19 percent tax on all of their foreign earnings as they are earned, while a tax credit would be issued for foreign taxes paid, the official said.
So in other words, US corporations making money overseas would be subject to taxes on it in a manner very much like how US citizens are already subject to their overseas earnings, and with same proviso that they won't be doubly taxed.
Okay, go ahead and explain how this is "retarded" or unfair. Seems pretty smart and fair to me.
Il n'y a pas de Planet B.
Except that's not what Apple is doing. See the fact that Apple US paid 6 billion dollars in US taxes on 18 billion profit.
That is what they told you. The US Senate grabbed Apple's IRS paperwork and found a check for $2.5 billion.
What Apple Europe (which is in Ireland) does is holds all the profits that Apple makes in countries other than the US, because they can't bring that money back into the US. The US wants to charge a second round of taxes, even though European taxes have already applied.
European taxes have not been collected because of the tricks Apple uses. The EU is pursing Apple for dodged taxes as well. One of Apple's subsidiaries paid absolutely no taxes at all for 5 years despite $30 billion in profits. $0 taxes, $30 billion profit.
This is the same thing that the US does to dual nationals - a US/UK dual citizen working in the UK will pay income tax both to the UK and to the US, because the US thinks they're entitled to taxes on money made abroad.
Does said US citizen get to hold his US passport? Does he get to use US Embassies? Will he be rescued by the US military if kidnapped in Iraq? All that costs money. And the guy gets to deduct from his US tax bill anything paid in the UK anyways.
The reality here is that what should change is the US's policy of taxing all money everywhere, whether or not it ever had anything to do with the US.
As long as it has nothing to do with the US.. I agree the US shouldn't tax it. Last time I drove through Cupertino though, I'm pretty sure I saw a giant Apple logo behind a bunch of people carrying Apple Ids. At least one of Apple's Irish subsidiaries has zero employees though.
Because hiding your profits overseas is some sort of essential liberty, right?
The profits were earned overseas, mostly from products and services created by non-Americans and sold to non-Americans. There is no rationale reason for America to be taxing these profits. No other country has this kind of extraterritorial tax. Most economists agree that it is counter-productive, and just encourages companies to base their headquarters somewhere other than America. Business taxes should be based on where the economic activity occurs, not where the business is registered.
Anyway, this proposal has ZERO chance of passing a Republican Congress. This is about electoral politics, not tax policy. The loser here is Hillary Clinton. To win in the general election, she has to position herself as a moderate centrist, that can win in the Midwest, and maybe even pick off a Southern state. But by steering the Democratic party into hare-brained anti-business claptrap, Obama is diminishing her ability to do that.
If they don't want to pay any tax they are free to leave society
Wrong. They are not free to leave. The Obama administration prevented AbbVie from leaving, and is fighting efforts by other companies to leave.
stop stealing our free education and training
So if an Italian buys a car from a factory in Britain, he is "stealing education" if he doesn't pay tax to America?
Stolen, huh? So I assume you would rather the government dissolve, leaving no infrastructure, no property rights, and no justice system? You'll have to staff your own protection, since you don't want police or military defense. I guess the biggest guy wins... hope you like that new dictator.
But then I suppose you wouldn't care for that so much. You might at least want to form an alliance with your family and neighbors. Perhaps you'll agree not to steal from each other, and have the toughest men keep watch over the town and keep the dictator's army out. But they need to eat and can't keep watch all day while also worrying about growing their own crop, so the town decides that everyone should give part of their goods in exchange for the protection.
Then your town and others nearby might decide, we are reasonable folk and aren't each other's enemies. So you form an alliance and pool your resources to focus protection on the outer borders. Oh and since one town has a great market for clothing, and another has a nice oil well, and yet another has fertile land, now you need roads to travel between the towns. You pool your resources to help built those roads.
This is a system of government, funded by taxes. It is the inevitable outcome of humanity, and will continue to grow bigger so long as the people are mostly satisfied with that government.
All my liberal friends think I'm a conservative, all my conservative friends think I'm a liberal.
That phrase "fair share" is dishonest. It is vague and subjective,
A tax code which permits corporations to hide profits while taxing citizens normally is dishonest.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
You haven't thought things through well enough. You imagine that you can pay for "protection from highway bandits" and that this is somehow different from government. Wake up. That is what government is. Protection from highway bandits. If you somehow managed to convince everyone to eliminate the U.S. government, then the question of roads would immediately pop up. Without roads you can't get to work or deliver products to markets. You can't have markets, because thieves and bandits would raid them. So, you would pay for your own private guards. Pretty soon, you would find that there are businesses providing protection. You would hire them, and so would other companies. But they would fight each other. Somehow, the fighting would ultimately get resolved. Either some warlord would emerge from the fighting as victorious leader who would impose order, or people would get together and vote on rules so that private protection companies would not fight. Rules, and a rulemaking process would evolve from your garden of eden of liberty. You can't avoid it. There are other people living on the planet. You have to get along with them. It isn't easy. You can't just say, "hey, this is my stuff, everyone keep their hands off of it" and expect everything to be fine. Again, wake up. Where did you get the stuff? Were you born with it? Did God pre-ordain that you own it? You don't think far enough ahead, and think about what will happen if you get rid of government. It will evolve again. And again. Everywhere. You can either react to it like it is some alien creature, or you can plan ahead, and try to optimize the rules that eventually evolve. Because rules will evolve, by force. It can either be a democratic force, or a dictatorial force. Or some mixture. But try not to be so simplistic in your thinking. It is frustrating to read.
Join the IParty!
Roman, go spend some quality time in the library (at taxpayer's expense, mind you) and read up on some history. Look at how well neo-anarchists have provided for the 'general good'. Look up some actual, functioning examples of libertarian philosophy.
And if you find any, come back here and tell us about it.
Yes, capitalism is pretty screwy. Doesn't work well. Not a stable system, needs lots of inputs to keep from feeding back on itself and destroying everything in sight. No, this 'civilization' will not last forever and has a number of major issues with it at the moment.
But your goofy system won't work beyond a 12 pack of brownies.
Faster! Faster! Faster would be better!
Almost all of the design and administration of Apple is done in California. But surprisingly the "Company" is a foreign company where they have no factories, no designers, no corporate officers and just a bank account.
So yes, by using the talent and ingenuity of US workers and then claiming that they're an Irish Company they are stealing the value that US Society has invested into its workforce (and supplied the infrastructure for that workforce to get to the job site etc).
Personally I believe that we should tax not based on where they are located but where most of the value is created. If you are Microsoft and 90% of your workforce is in Washington State but you are incorporate in "Nevada" because you have a PO Box there then you should be taxed at 90% Washington 8% California and 2% Nevada tax rates. Similarly if 80% of your operations are in the US then you are 80% a US company and 80% of your revenue is taxable under US tax law.
Everybody knows that Apple is a California company. To say otherwise is dishonesty. It might legally be correct that Apple is a subsidiary of an Irish shell corporation but they're cheating the system and doing something that doesn't pass any sort of sniff test of truthfulness.
You're completely off-base on the Hillary thing. To help Hillary, Obama need to take the party further left. It relates to the concept of the Overton window , the range of ideas that the public sees as palatable "centrist" positions. If you drag the dialog of the extreme edge further, then it makes less extreme ideas seem more reasonable. The Democrats need to get on this, as the right has been doing this for some time. People like Limbaugh and Hannity push the edges out so their candidates don't have to.
By pushing "anti-business claptrap" Obama gives her room to distance herself from him, room she can use in the election as she sees fit.
Personally, I don't feel that closing tax loopholes exploited by multinationals is "anti-business", more like "pro-fairness", if you allow one business to cheat, you force all to cheat to stay competitive.