The law is the law
The US Securities and Exchange Commission has given Apple's finances a clean bill of health after a review of the company's use of an Irish subsidiary to dodge corporate taxes be more tax efficient. In May Apple's CEO Tim Cook was quizzed by a congressional committee about how it managed to pay such a relatively small amount of …
The law is the law
Or just plain criminal?
I know which one I would choose.
Not criminal, as it turns out, but definitely a good example of something. Not something I like.
>but the vast majority of the $362bn that came into the country was used to pay off shareholders and provide bonuses for management.
And almost immediately found itself in various tax havens/shelters all around the Caribbean. Trickle down your leg somewhere in the 3rd world economics in action.
To quote Father Ted "That money was just resting in my account"
"...but the vast majority of the $362bn that came into the country was used to pay off shareholders and provide bonuses for management."
How cynical you are. The wealth will trickle down, of course. Oh, wait.
"The 2004 Homeland Investment Act was signed off by President Bush as a one-off deal that would allow firms to repatriate funds with a tiny tax bite, again with the argument that it would stimulate employment, but the vast majority of the $362bn that came into the country was used to pay off shareholders"
But, err, that's what companies are for. To make money for the shareholders.
Which is fine, if you want to say "we want to repatriate this money with next to no taxes for the purposes of paying off the shareholders." That's called honesty. I've no problem with that; either the government - and the electorate - view that as acceptable fiscal policy or they don't. That's a decision for society to make, not a corporation.
Saying "allowing us to repatriate this money with next to no taxes will help spur innovation" is complete horseshit, and frankly I'm in favour of having people who are in such disproportionate positions of power lying so boldly to the public being thrown in jail. If we have to invent new laws for that to happen, I'm entirely down with that too.
"Trickle down economics" is a provable fallacy. It does not work. It has not worked. It will not work.
If you want to bring the money in to pay shareholders, have the goddamned testicular fortitude to say so. Don't lie.
To be brutally honest, Tim, I hold those who defend outright liars - or the "right" to lie about something like this as some sort of innate right of businesses and their owners - as people of even lower moral and ethical calibre than the douche canoes trying to pull one over on their nation.
Either what you - and those you champion - are about is decent, honest and honourable, or it isn't. If business is a moral end (or a means to a moral end) then stand up and defend the actions and decisions with no prevarication. If you cannot look upon your works, ye mighty, without anticipating despair from those your rule...
...then you'd better hope the pitchforks and torches don't maul your ass on the way out.
But I do say exactly this:
"If you want to bring the money in to pay shareholders, have the goddamned testicular fortitude to say so."
I'm all over Forbes as having said exactly that. Ship the money to shareholders as dividends. They will either spend it (Hurrah! A fiscal stimulus. And actually, one larger than the one Obama did) or they will reinvest it elsewhere. Which is a boost to US domestic investment: and at least some of that will be in the new companies which are what actually drive employment growth.
I specifically and directly state that they should lower or abolish that tax on foreign profits (actually, I argue that we should abolish corp tax altogether and just tax capital gains and dividends as normal income) precisely so that the cash gets paid out to shareholders.
You might say that. Apple doesn't.
And at least by saying that we can have an honest disagreement: you are arguing trickle down economics.
I want proof.
You're wrong - I believe dangerously so - but at at least you're honestly wrong. I can respect that. I don't respect Apple, or anyone else who isn't honest about such repatriation.
Your idea is fine, except for one glaring flaw. Liability. The reason why corporations in the US are double taxed (at least the reason I was taught in business school) is because corporations offer a liability shield to the management and directors.
If the law is changed so that you can take the life savings from the CEO and board members of a bankrupt corporation to pay off its debts, as can and will be done under a sole proprietorship or partnership, then I'm on board with that change. Otherwise there needs to either be a corporate level tax, or the capital gains and dividends need to be taxed at a higher rate than regular income to compensate.
I do agree that the current situation with a very high corporate tax, and very low capital gains and dividend tax makes absolutely no sense. Change the law so capital gains and dividends are taxed as normal income, and make the corporate tax say 10%. Then the cost for bringing money back into the US would be much less and companies would have far less incentive to hold it overseas on the hope of a future tax holiday, and be more likely to only hold what they really may need to use overseas.
The current tax situation with lower cap gains and dividend rates (seen as being paid by the individual) while sticking it to the corporations with their high tax rates (seen as being paid by big business) sounds better to the ears of the average voter. Which is why it is the way it is. And is another example of why an uninformed electorate makes bad decisions (but that's a whole other topic)
They just sat in bank accounts and nobody spent anything did they? It's buying stuff that creates employment, they don't seem to have considered that.
"...nobody spent anything did they? ..."
But if they do buy stuff, then the unwashed masses complain about the Learjets and Bugatti sports cars. These people can't catch a break.
So let's say I have a household of 6 (because I'm rich and can afford to reproduce somewhat.) I pull in roughly a half-mil a year. After taxes and some hand-waving, I'm left with about $200k. I plow that into a couple of houses and some cars; over the course of about ten years I acquire all the material wealth I really could want, before I start getting into the "just plain silly" jets and yachts kinds of purchases.
I'm no longer paying a mortgage. I don't really have much in the way of expenses. Even factoring in all my increased insurance costs and so forth I'm still looking at around $75K per year in outlay to support my family in a luxurious manner in secure neighbourhoods where I don't have to worry about getting robbed/killed/etc.
Now, admittedly, these are calculations I've done along the lines of Canadian cost of living, but I figure that after 15 years at $500K gross per year, paying my taxes properly I would be set for life. 10 years would buy me all the material goods I could want, set up 4 sprog for post-secondary education and so forth. Another 5 years would sock so much away into my retirement account that I no longer have to worry about that, ever.
As I see it, I could then work part-time for the rest of my life and bring in the $75K that I need to make the ends meet. I could spend the rest of my time writing the books that I want to write.
In fact, I am basically killing myself to try to get to exactly this place right now, because I really, really want to write those books.
But I just don't see "trickle down." More income doesn't equal more expenditure. In fact, it probably equals less. Instead of having to buy cheap consumer tat that breaks every year or two, I'd be able to afford proper quality stuff that lasts for generations. (And why would I buy anything else?)
At the end of the day, no matter how much money you make, you can only actually spend so much of it. You only eat so much, drive so many cars, live in so many houses, need so many sets of dishes...
Rich people aren't going to invest that money into high-risk ventures like a new business. Not unless they have so much that they are not only set for life, they've got some "rolling around in it" money too. Even then, they're far more likely to squirrel it away somewhere safe - or a significant portion thereof - "just in case."
I've thought long and hard about this. I've talked to a number of very rich people about the topic. While there is some divergence in opinion, the balance of people who have actually achieved wealth - or who are on the path to it - seems to be the same: hoard your money until you're sure you're set for life. Only then start risking the excess.
Not exactly a recipe for "trickle down economics." Unless you count "trickle down to the next generation, who will also hoard it."
Quote: "So let's say I have a household of 6 ..."
That is a well known fact. Middle (and above) class contribution to the economy through spending per dollar earned than the people who stack the isles in Wallmart. As you pointed out - your outlay towards your lifestyle is a fraction of your salary and you are trying to save the rest to preserve your lifestyle when you retire. That is not an option for a person on 25K£ per year. They spend all of it and save nothing. So those 25K go back in the economy stimulating it.
If it is just income "repatriation", most of the repatriated income will go to the "shareholders", very little (if any of it) will result as an immediate economic stimulus. It will settle in other investment accounts (usually again offshore) straight away.
US human citizens can use foreign tax to reduce their US taxes, assuming that the foreign taxes are higher. Irish taxes are lower, so no dice.
Since the US Supreme Court ruled that Corporations are humans for purposes of free speech and political lobbying and bribes ^h^h^h^h^h donations, why not just write a law to treat their profits as human income is treated?
Oh, I see. The bribes ^h^h^h^h^h donations. Of course...
The money abroad has been earned by a different legal entity, not the parent company.
Translating this to a rough human citizen equivalent, imagine that both you and your wife worked. You are taxed individually even though there is a legal relationship between you. Imagine further that she isn't a US Citizen and she lives in Dubin (you're going through a tough patch), she only pays Irish tax, not US tax. It's bad enough that the US taxes it's citizens who live outside of the country (most other nations don't for people that are out of the country for more than 6 months in the year), you now want to start taxing anyone with a legal relationship to them?
Now this talk of repatriation would be equivalent of her wire transferring cash to you in the US, at which point the IRS wants its cut.
Why do you think the UK has had tax avoidance stuff in place for years and years and years and ... years and then make changes when the plebs move in and start to use them?