What is your take on companies leaving the US?

[Dream of Freedom]

I was reading this and wondered what you all thought of the US policy of taxing foreign income in general and what happens when people and companies leave.

http://www.joshuakennon.com/basic-overv ... nversions/

[jacob]

"Capital (and people) go to where they are treated the best". Those who leave, consequently get treated better, by definition. The question is what happens those who are left behind.

To put it less cryptically, it would be wise if the US aligned their taxation policy with the rest of the world.

[Chad]

"Capital (and people) go to where they are treated the best". Those who leave, consequently get treated better, by definition. The question is what happens those who are left behind.

To put it less cryptically, it would be wise if the US aligned their taxation policy with the rest of the world.

Yep. It's not like companies are actually paying the current tax rate anyway, even if they stay.

[jennypenny]

It's kinda funny that people are rushing in, but businesses are rushing out. <-- except the banks, of course

This won't end well.

[RealPerson]

The high corporate US tax compared to the rest of the world has significant consequences for the US economy. First, profits generated overseas stay overseas, because repatriating them exposes the company to a big tax bill. This capital is then not available for US investments. Secondly, corporations are now merging with foreign companies, and moving their headquarters to the smaller oversease company they absorbed. Not good for the economy either.

Then, politicians are wringing their hands and accusing US companies of being "not patriotic". What nonsense! We lose tax income and jobs. Corporations are doing what they legally can to minimize taxes and maximize profits for shareholders. That is what they are supposed to do.

[Tyler9000]

Incentives matter.

[Chad]

Except that one could make an argument that we built their company while they flouted our laws. While, I think the tax laws need changed (lowered with loop holes taken out). These companies are taking advantage of the US.

[GandK]

This is one of those things that it's pointless to worry about. Because our nation values freedom, we're not going to pass laws that prevent - and are not likely to pass laws that inhibit - such things. So, as others have pointed out, companies are going to do whatever they want.

All we have to do to solve this problem is tax their income from US sales and stop worrying about their gross profits (or lack thereof). Point of sale tax, no more corporate welfare or cheesy accounting gimmicks necessary. Sales tax only at the federal level, and let the state they live in tax their premises. Then let them park their headquarters wherever they see fit!

Problem solved. Only downside (apart from the whining and crying in board rooms across the globe) is that some prices would go up, but no company is going to stop selling to the spending-est nation on Earth.

[jacob]

For that matter, what's your take on people leaving the US. The US is one of the only countries that taxes its citizens living abroad [based on citizenship](*). The other two are the Philippines and Eritrea.

All other countries tax according to residence.

(*) For wage income there's a significant deduction that should cover a lot of the middle class range. However, you still have to file US taxes. This, incidentally, is not normal compared to others.

I remember a few years ago there was a huge spat about one of the facebook founders abdicating his US citizenship and paying his exit tax (not many countries have those kind of capital controls either). Several politicians were up in arms about the lack of patriotism, etc. seeing those potential millions or billions leave their control.

[Chad]

For that matter, what's your take on people leaving the US. The US is one of the only countries that taxes its citizens living abroad [based on citizenship](*). The other two are the Philippines and Eritrea.

For one, I don't subscribe to the Supreme Court's ruling. Corporations aren't people, so I don't think this would necessarily be an apples to apples comparison.

I'm ok with US citizens leaving the US.

I'm not ok with the US taxing US citizens in other countries. The government is being a little overzealous with the heavy handed taxation and rules (foreign bank account rules, etc.) with US citizens overseas. They get away with it, because this isn't a large enough population to fight back effectively. But, I'm sure they feel like they have to do it considering everyone bitches about taxes, but then wonders why the US doesn't have one airport in the world's top 100, bridges collapse, ports aren't up to par, schools are sliding, etc. (To be clear, this isn't all about money, but money is one of the variables.)

Obviously, a large portion of both the personal and corporate tax code need to be overhauled. The danger is that extreme views get a hold of this process and go too high in taxation or too low.

[JamesR]

It definitely is bizarre for USA to tax citizens living/working abroad. On the other hand, the USA tries to maintain bases all over the world and act as the world's police, so perhaps it's all to help pay for that.

Speaking of corporations not being people, it's a damn shame they get the same rights as an individual. I suspect that the common scapegoats on both sides of the political fence could actually have a common cause in sociopathic corporations (by virtue of being individuals w/ legal requirements to see profit or else).

Scapegoat-wise, for liberals it is "capitalism", and for conservatives it is "excessive government controls/spending". What liberals really mean by talking about "capitalism" is negative impact by corporations. For libertarian/economic conservatives, they should be concerned about excessive corporation influence in lobbying & party funds.

Sorry for the thread jack

[jacob]

Wait ... seeking profit (maximizing shareholder equity) is not a legal requirement. It's a meme started by---I think---Milton Friedmann a few decades ago. Corporations could just as easily seek higher payouts for their CEOs (a more common recent development), employees (see Henry Ford), go on an acquisition binge (whenever the market peaks), etc.

[RealPerson]

Wait ... seeking profit (maximizing shareholder equity) is not a legal requirement.

It may not a be written legal requirement, but it certainly is a de facto IRS requirement. I tried to maximize CEO compensation through deferred compensation, thereby reducing my corporate taxes. I was promptly rewared with an audit by the IRS. Four months later (!), the case was closed with no adjustment because everything I did was legal. Still, it shows you what the IRS flags for an audit. I would say that maximizing your corporate profit is a requirement in reality.

[Chad]

Wait ... seeking profit (maximizing shareholder equity) is not a legal requirement.

It may not a be written legal requirement, but it certainly is a de facto IRS requirement. I tried to maximize CEO compensation through deferred compensation, thereby reducing my corporate taxes. I was promptly rewared with an audit by the IRS. Four months later (!), the case was closed with no adjustment because everything I did was legal. Still, it shows you what the IRS flags for an audit. I would say that maximizing your corporate profit is a requirement in reality.

Has nothing to do with making profitability the only goal. It only shows that when you game the system, even legally, there is a good chance you do something that would trip an audit warning. Really, any significant change year to year be it a financial or tax audit will probably raise a red flag for any auditor.

[RealPerson]

Has nothing to do with making profitability the only goal. It only shows that when you game the system, even legally, there is a good chance you do something that would trip an audit warning. Really, any significant change year to year be it a financial or tax audit will probably raise a red flag for any auditor.

I am not sure what gaming the system means. Congress passes laws and I complied with all the laws. I would think that is how the system is supposed to work. Luckily I didn't "lose" any emails or had to take the fifth. I am only a private citizen, so I have to comply with the law. I hired a specialized big law firm to make sure everything was legal. It was very much worth the legal expenses.

[jacob]

Seemingly related (especially for tech companies)

http://www.zdnet.com/how-one-judge-sing ... 000032257/

[RealPerson]

Seemingly related (especially for tech companies)

http://www.zdnet.com/how-one-judge-sing ... 000032257/

+1. The overreach of the US Government and its disdain for the laws of other nations are a real force to be reckoned with.

But it is ironic that we as US citizens still enjoy a lot of protection inside the USA as compared to people in other countries. For example, there is no fifth amendment in most other countries.

[Chad]

Has nothing to do with making profitability the only goal. It only shows that when you game the system, even legally, there is a good chance you do something that would trip an audit warning. Really, any significant change year to year be it a financial or tax audit will probably raise a red flag for any auditor.

I am not sure what gaming the system means. Congress passes laws and I complied with all the laws. I would think that is how the system is supposed to work. Luckily I didn't "lose" any emails or had to take the fifth. I am only a private citizen, so I have to comply with the law. I hired a specialized big law firm to make sure everything was legal. It was very much worth the legal expenses.

Yes, but many of the methods used to avoid taxes by corporations, and for certain high net worth individuals, while legal, are against the spirit of the law. That's gaming the system.

An article giving an overview

“Many large U.S.-based multinational corporations avoid paying U.S. taxes by using ac¬counting tricks to make profits made in America appear to be generated in offshore tax havens—countries with minimal or no taxes,”

http://www.forbes.com/sites/conniegugli ... tudy-says/

http://www.nytimes.com/2013/05/03/busin ... d=all&_r=0

I'm not suggesting we should enact a tax law that retroactively punishes these companies or people. I'm only noting that what they do, while legal, isn't entirely ethical.