[ocdtrekkie]

Well, one problem is this just encourages companies to collect and never disburse funds to employers or shareholders. Companies in some cases are holding onto hundreds of billions in cash offshore.

Your idea would make that money free to keep out of the economy and out of employee's hands.

[hntrader]

What would be the incentive for this?

The whole point is for stakeholders to eventually get paid in a taxable event; either shareholders through a capital gains taxable event or employees through an income taxable event.

Some tech companies are hoarding cash but I don't believe this is due to incentives created by taxation, although I could be mistaken.

[asdff]

What share price is higher? The lemonade stand, or the identical lemonade stand with a huge bag of money kept beneath the table? If you are a shareholder you only care about one thing.

[imtringued]

If the first lemonade stand did a stock buyback it would be worth just as much as the second lemonade stand. If the first lemonade stand issues a dividend and holders of the stock automatically buy more stock, then the share price will also be exactly the same as the second lemonade stand.

Why do companies do dividends or stock buybacks? Because they think investors can do better investments elsewhere with the money.

[asdff]

What about a third lemonade stand that took their huge sack of cash and instead paid their employees six figures? This would be the stand that is worth less to the shareholder, as that money in the sack has left the lemonade stand entirely and is now being spent by the employee elsewhere in the economy with a portion of it used for different taxes. This is also the stand that is worth the most to the public, as this sack of cash is no longer kept under a lemonade stand and is instead being used to pay sales taxes, property taxes, and income taxes. The fallacy is that many believe corporations are like this third stand, when really they are much more like the first or the second, where it is better for the shareholder and worse for the public to keep as high of a portion of money out of taxable pockets as possible and to pay as little as possible for labor.

[hntrader]

But that's marked to market value.

The shareholder still has to receive a dividend or sell that higher priced stock, which are both taxable events.

So I still don't get it.

[SavantIdiot]

> What would be the incentive for this?

Greed, son, greed. That is why 5 people in the US have more money than the bottom 100 million. They didn't work hard to become that rich, they stole it by not paying wages, health care, benefits, or sharing the wealth. Because they do not have to, nothing prevents them from keeping it and paying low wages in an economy where the ONLY jobs are working for them. (Look at the most recent jobs reports, delivery and couriers grew by double digits, most everything else fell: what do you do when there literally are no other jobs except delivering goods to people and peeing in bottles because you don't get a break?)

[valuearb]

Actually behavior rebuts your theory.

Apple has paid hundreds of billions of dividends to shareholders the last few years. It's borrowed money to do it because it would be taxed if it repatriated funds to pay dividends with.

If the corporate tax rate was reduced to zero it would have zero reason to keep foreign profits offshore, it would just repatriate them and pay dividends directly.

[imtringued]

>Apple has paid hundreds of billions of dividends to shareholders the last few years. It's borrowed money to do it because it would be taxed if it repatriated funds to pay dividends with.

Yeah, the reason why this strategy works is because Apple can pay dividends today and just wait for the inevitable tax holiday that comes when a republican president enters the white house. Similar schemes work with cryptocurrency in Germany. Holding onto Bitcoin for one year grants you tax exemption from capital gains. So you just borrow against your Bitcoin for one year.

Corporate taxes have been gamed so much they are purely cosmetic at this point, with some harm done to smaller companies. A better tax code is needed.

[valuearb]

I'd argue no tax code is needed, just treat C corps like S corps and LLCs.

1) Increase the incentives to save and invest in the U.S/

2) Restore progressivity to the tax code by taxing profits when paid to investors on a progressive rate based on their tax brackets.

3) Repurpose hundreds of thousands of accountants into doing actual business finance and development of wasting their efforts reconciling the differences between GAAP & a super convoluted Tax code accounting (and searching for loopholes)

4) Simplify business decisions and reward honest management based solely on GAAP accounting with no more "angles" to take advantage of tax code loopholes.

[SavantIdiot]

/china enters chat/

Right. That's great: the richest employees of apple get richer, and the people doing the worst labor live in dorms and work 18 hour days.

> If the corporate tax rate was reduced to zero it would have zero reason to keep foreign profits offshore,

Again, you seem to be ignoring the abundant evidence. Trickle down has never worked. Corporate tax rates are the lowest they've EVER been (down from >80% in the early 80's) and money still flows out of the US.

Please, study history and try again.

[valuearb]

The vast majority of Apple dividends are paid to investors, not employees.

The "worst labor" are jobs that are so much better than typically brutal Chinese rural labor jobs that thousands of applicants stand in line for hours to get them. And Apple audits its labor practices, unlike solely owned Chinese companies.

And the corporate tax rate has never been 80% in the U.S. it was 40-46% in the 1980s and highest ever was 53% in late 1960s. And corporate tax rates were lower than todays rates for the first 163 years of U.S. history, they were first raised above 20% in 1940 to help fund the war.

And even though the current corporate tax rate is historically low, it's still an impediment to returning foreign profits. Repatriating foreign profits costs a minimum of 21%, more with state taxes. For companies it's still cheaper (and legal) to keep the profits in their foreign subsidiaries and wait for a repatriation window, or borrow against some of the deposits to pay dividends.

You should try studying history as well.

[imtringued]

I don't think the argument is trickle down economics. The argument is that there is a race to the bottom and simply opting out from the race is the only way to win.

Trickle down doesn't work because republicans love pumping the supply side of the economy even when it is fully saturated. The days of a weak US economy are long gone. The real problem is that savings exceed investments. You either let the government create viable investments for the private market, or you just let the government invest directly.

[valuearb]

There has never been anything such as "trickle down economics", it's merely a political label to demonize lowering the tax rates on investments.

Arthur Laffer tried to argue that tax cuts would lead to an increase in growth enough to produce the same or more tax revenues, which clearly didn't happen. But tax cuts did clearly lead to an increase in growth.

Right now, even under the lower Trump corporate rates, if you want to invest in a U.S. Business you will lose 33-50% of your profits to Federal and State taxes. Thats a tax on investment, reinvestment and savings. If you want to convert savings to investment, just cut those taxes.

[Kiro]

No-no doubts the incentive of rich people wanting to be richer but I don't see how greed answers the question. What would the incentive be to just let the money sit in the company forever? Greed would be to maximize the outtake.

[hntrader]

I don't understand this.

If I'm a greedy shareholder, then I want dividends and cap gains, which are both taxable outside of company tax.

How does hoarding cash inside a company, which is out of my personal reach, help me to satisfy my greed? I can't buy a yacht with it until I get the money out.

[valuearb]

First of all, that money is never "out of the economy" whether its in a bank-account or a dividend it's circulating in the economy, either here or overseas.

Second, the main reason U.S. companies keep foreign profits offshore is they would be taxed if brought back to the U.S.

Your understanding of the problem is exactly backwards.

[refurb]

Why would a company just sit on funds like that? It makes no sense. Any cash a company has is usually in short term investments.

The current offshore “hoarding” is actually due to the current tax code.

[ocdtrekkie]

Is the problem the current tax code, or the fact that companies know they can pay politicians to change the tax code in their future to favor them, and they just need to wait it out?

If companies knew they were going to pay the tax one way or the other, there would be no point in hoarding overseas.

We should penalize companies for the behavior until it makes more sense for them to repatriate it immediately.