How do we fix the economy???

Annachie wrote:Truth be know, the first line in any realistic taxation reform plan is probably: "After I stage a sucessful coup ..."

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Best post!

But, for the basics of my idea, or that which I thought of at the time, that wouldnt matter, because all the tax would be absorbed straight at the point of sale by the final company who actually sells the product, eg APPLE US, and any current tax minimisation attempts via ownership by holding companies would cause double taxation for the company, as the tax would be applied at the consumer buying, and at the service charge for buying the product between companies.


For ex: company A owns B, and B sells phones. Currently, A uses royalty costs as a cost minimiser to reduce the profits and tax of B, and then offshores it to C. My tax would be a Point of sale tax for B, eg a 20% tax, so a $100 phone becomes $120. so B has a tax of $20. A is required to have a financial location in the country for sales/services, and so is also charged for their licensing service to B, so to get the phone to B, they pay another 20% on their royalty cost charged to B.

So A as the parent has to have B pay the tax at point of sale to be allowed to sell the product/service at all, and if the compnay tries to long arm it between holding companies, the holding company at least one level up must also be registered in the country, so the company will also get taxed for attempting tax minimisation purposes.


So if Apple EU wants to sell the IP/royalty on a device, it can, it just so happens that the royalties are taxed before going offshore, as part of the cost of doing business. Integrating the companies would prevent the double taxation, but for the company to do so, it would further expose its true expenses to the country it deals in. So the tax is unavoidable, and company tax minimization through double Irish is also prevented as doing so would put a further tax on the item/service, so a company is incentivised to reduce complexity and tax avoidance to reduce taxes payable, so now they pay close to what the actual tax rate should have been.

biochem wrote:

The big guys aren't paying the VAT either.

The companies split themselves into multiple wholely owned subsidiaries to take advantage of tax law. For tax purposes the subsidiaries are treated as individual companies even though 100% of the stock is owned by the parent company. Amazon for example has a subsidiary located in Luxemberg and pays 3.5% VAT to Luxemberg and not the higher UK VAT etc. The lawmakers seem to be attempting to fix it but keep running into the law of unintended consequences. And of course if they are successful the brilliant accountants they employ will just come up with another scheme.

biochem wrote:

Spacekiwi wrote:Not an economist, but what if the corporate tax rate was switched for a business tax rate, like a value added tax?
So a business doesnt pay direct tax, but has a non tranferable tax on its goods and services. So a company cant offshore profits, as their moeny as already been taxed at point of sale?


Would this work?

The big guys aren't paying the VAT either.

The companies split themselves into multiple wholely owned subsidiaries to take advantage of tax law. For tax purposes the subsidiaries are treated as individual companies even though 100% of the stock is owned by the parent company. Amazon for example has a subsidiary located in Luxemberg and pays 3.5% VAT to Luxemberg and not the higher UK VAT etc. The lawmakers seem to be attempting to fix it but keep running into the law of unintended consequences. And of course if they are successful the brilliant accountants they employ will just come up with another scheme.

Ikea for example is something like 20 companies that purely support the shops. Mostly as consultancies iirc.

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Yes, 70% even on marginals (and personally I never assumed otherwise) is too high.

Please explaine what loopholes are in companies pay no tax that are exploitable? It does have problems, but being exploited is not likely to be one.
Perhaps I should explaine a touch.
Income is income. You earn anything you pay tax.
Company provides you a car, income.
Company provides a house, income.

Have 5 different jobs, 1 big bucket of income. (Not 1 job at normal tax and 4 at top tax rate like down here in Oz)

Tensh, budget positive not neutral. Minimally positive, but positive. A neutral budget will no doubt fall behind and go deficit as the year progresses. But that's more different philosophies than politics.


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Annachie wrote:Yes, 70% even on marginals (and personally I never assumed otherwise) is too high.

You keep saying that, and you keep not explaining the evaluating criteria you use to determine "too high" that is anything other than "70% sounds like a big number to me so it must be too high".

biochem wrote:That sounds like a reasonable place to start. The numbers and the tax % would have to be tinkered with until they came up with a revenue neutral solution.



And here is essentially the reason why USAs public budgets are screwed.

Why ever would you want a revenue neutral solution? USA is racking up debt faster than even its richest 1% is racking up bank accounts.

You need to raise taxes until you have a BUDGET neutral solution, PLUS a little bit extra for actually paying off your debts.
You´re about 2 steps from pulling a Germany in the 20s, and the only reason events haven´t skidded off that direction in the last decade is because China hates the idea of a broke USA unable to pay for their modernisation.

But US politicians are so scared of even mentioning the possibility of tax raises, that noone does what´s needed, while any raises that happen tend to be done as covertly as ever possible, which means they´re usually of the less good kind

You've got to start someplace.

US voters are the ones driving the no new taxes issue. The problem is WE DON'T TRUST THE GOVERNMENT!!!!! Historically whenever voters have been persuaded to allow tax increases to fund XYZ need, the politicians siphon the money away from XYZ need to their own cronies. So we don't trust them with more money. Basically it's like giving money to your drug addicted cousin to pay his rent and instead of paying rent he buys drugs. Would you give him money again? That's the way the voters feel.

Any revenue positive plan would also have to include significant spending cuts as part of the compromise. Because voters have been burned with these compromises before (tax increases happened but promised spending cuts never materialized), the spending cuts would need to be enacted in the same bill and would need to take place simultaneously to any new tax increases.

The wheels are definitely falling off. You can see it with the current election. When things are going well voters tend to just want to tinker with the system but follow the adage if it isn't broken don't fix it. So both parties tend to support moderate centrist establishment candidates. You'll notice that's not happening this year. However, things aren't so bad that people are nominating the real nutjobs like Hitler vs Communists (controlled by Stalin).

biochem wrote:Any revenue positive plan would also have to include significant spending cuts as part of the compromise.

And that´s just utterly stupid. You cut expenditures if there´s something to cut from without causing the total situation to become worse.

You can´t just run off and cut expenditures because you WANT to. If you do that, you will end up causing MORE expenditures because of the sideeffects from badly applied cutbacks.

Let´s say you cut $1B/year from education. Sideffects will probably cost you an extra $0.5B/year(that´s a normal level yes), ok so you´re still saving 0.5B/year right?

Well no, because you just made education worse, which means in 20 years or so(when the responsible politician is already retired of course, busy bragging about how awesome he was at getting great budget cuts through), you find yourself looking at a whole generation graduating with poorer than before education floundering in the real world, and the end result from lost tax revenue due to higher unemployment and less innovation and enterprising is probably SEVERAL billions per year.

This is why i loathe the vast majority of rightwing politicians, because they only look at the numbers here and now, they barely ever look at the long term.

biochem wrote:... However, things aren't so bad that people are nominating the real nutjobs like Hitler vs Communists (controlled by Stalin).

Yes they are. Trump talks about Muslims and Hispanics the way Hitler talked about Jews and Gypsies.

biochem wrote:You've got to start someplace.

US voters are the ones driving the no new taxes issue. The problem is WE DON'T TRUST THE GOVERNMENT!!!!!

Having lived in the US for nearly 20 years now I'm going to have to call bull on this one.

Not on not trusting the government... spot on there. But no that is not driving the no new taxes issue. People being spoiled children who want all the things government provides but are outraged at the idea of having to pay for them are driving that issue. Particularly on the right. I've lost count of how many times I've heard that taxes are theft.

Exhibit A: The *entire* Bush Jr presidency. Giant tax cut but government spending just kept going up and up and up.... deficit exploded... crickets from the right. When they weren't flat out going on national television and declaring "deficits don't matter" that is. They were just *fine* with the government spending money then, as long as they weren't footing the bill at tax time.

Tensh. It's not just the right that only looks as far forward as the next election.
It usually takes someone special to not do it.

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