[TheEzEzz]

> If the US had a globally competitive corporate tax rate (say 15%), it would make most of these tactics irrelevant.

Until Ireland further lowers its taxes. Your argument leads to a race to the bottom.

The problem with only taxing dividends is that corporations only pay out a small portion of their profits in dividends. I may theoretically be a billionaire in my holdings, but I only need a million in dividends per year to live my preferred lifestyle. Thus I only pay tax on the million dollars instead of on my billions. You can try and get at the money via capital gains, but what if the bulk of the money is being held by a foreign company, with only a small amounts to pay dividends to the owners filtering into the main company?

[yummyfajitas]

Ireland can't lower it's taxes to the point of unprofitability, so it will lower it's taxes until revenues raised == cost of services + small margin. That's a good thing.

Don't complain that others provide the same service at lower cost, try to innovate and outcompete them.

[yequalsx]

Well Bush II lowered taxes to the point of unprofitability (I assume you are speaking from a national governmental view). Governments engage in deficit spending and some foolishly lowers taxes at the behest of its monied interests.

You appear to assign to the government of Ireland some sort of rationality and ignore things like regulatory capture and corruption. Your belief that a government will only lower until "revenues raised == cost of services + small margin" is not rooted in fact.

[yummyfajitas]

You are referring to all government services and all revenue collected. I'm referring solely to services provided to corporations and revenue collected from corporations.

I fully agree that the losses from the War on Iraqis/SS/medicare/etc don't outweigh the profits made by taxing Apple/etc and providing them with a few cheap services (corporate registration, enforcement of contracts, etc). That's a separate issue.

Regulatory competition helps - if the profitable people/businesses flee from corruption/inefficiency, then those wasteful programs will eventually run out of money.

The existence of corruption and regulatory capture is all the more reason to have regulatory competition. If California is captured by corrupt special interests (e.g., prison guard unions), corporations can purchase corporate registration and contract enforcement from states which offer a better value.

[yequalsx]

I fully agree that the losses from the War on Iraqis/SS/medicare/etc don't outweigh the profits made by taxing Apple/etc and providing them with a few cheap services (corporate registration, enforcement of contracts, etc). That's a separate issue.

Ironic that you mention SS and Medicare. Two programs designed to help companies out (and people too). Do the cheap services include a road system? Do they include an education system capable of producing adequate workers? Do they include protection from enemies? These things are not cheap. And it is especially helpful to be located in a country with great influence that helps smooth things in other countries.

I think you don't understand what regulatory capture is. When an industry has capture the regulators that is a good thing from the perspective of that industry. Regulatory capture is what oligopolies want. It's the good kind of corruption from their perspective. Large companies don't flee from corrupt societies. They use that corruption to their advantage. Obviously there are counterexamples to this but overall the gist is correct.

[yummyfajitas]

The cheap services do indeed include a road system, which tends to be paid for by property taxes in a given locality. Apple pays for CA roads in proportion to the land they own in CA. Their works also pay for roads via gas taxes, and charge Apple commensurately.

Why should Apple be taxed on profits earned in Ireland to pay for CA roads?

As for protection from enemies, we should simply stop defending Ireland. Then Ireland will be forced to defend itself (from Iraq, I suppose) and charge corporations commensurately.

[yequalsx]

The first part of the article was about Apple avoiding California taxes by having a small office in Reno. You haven't shown that Apple pays its fair share of California's road system (don't ignore the federal road system), schools, sewers, police protection, or its use of American soft power for its purposes overseas.

But supposing Apple does pay it's share of all these things. Given our current deficit and that a large portion of our deficit goes toward maintenance of both soft and hard power and that such power is used for the benefit (not solely) of large corporations its clear that business are not paying their share of the burden. And a large portion of the current deficit comes from stabilizing the economy. Without infusions of cash into the system after Lehman went bankrupt Apple would have been greatly disrupted.

Corporations in the U.S. currently sit on a great hoard of cash. I don't know another hoard of cash government can access to pay for the maintenance of the system. From you last paragraph it seems it would be advisable for you to read the Wikileaks cables. Your view about the role of military power and its relationship with soft power the use of said power for the benefit of corporate interests appears to naive.

In an environment where public policy has been co-opted by corporate interests to serve business interests to the detriment of other interests it's hardly reasonable to think that "we should simply stop defending Ireland". Why would businesses want such a thing when they benefit from our power without having to pay for it?

[protomyth]

"Well Bush II lowered taxes to the point of unprofitability"

The US has been running up the debt for many years http://en.wikipedia.org/wiki/History_of_the_United_States_pu...

[yequalsx]

What you say is true. What I said is true too. Both statements are true. Bush II tax cuts are a very large portion of the current deficient that we have. Taxes are currently at a 50 year low as a percent of GDP. Bush II taxes greatly increased the deficit. Other tax cuts have too. I was just giving an example of the statement that I responded to being false.

[protomyth]

If they repealed all the Bush era tax cuts, the deficit would still be growing at a higher rate than before. Obama has run up the deficit at a faster pace (approaching double) than Bush and those tax cuts aren't even the major part of it.

The biggest problem is the lack of a passed federal budget in over a 1,000 days. This is causing a lot of budget increasing in a time when we cannot afford it. What the media and politicians (from both sides) chose to concentrate on is emotion grabbing (good for votes and ratings), systemic issues with how the government is being run are boring and not emphasized.

Low taxes don't kill budgets (check right after WWII when they had to drop), it is runaway spending. Income from taxes of all sorts has averaged 19% GDP, spending above that is the problem.

[yequalsx]

The point I made in showing that yummyfajita's remarks to be wrong stand. I might be wrong on my belief that repealing the Bush tax cuts would greatly improve the fiscal outlook of the federal government but this does not in any way detract from my point.

Your last two paragraphs are not germane to my point and they are wrong in any case. However, let's assume your last statement is correct.

Right now taxes around 15.4% GDP [1]. You seem to believe that 19% GDP in taxes is a reasonable amount to pay for government services. The GDP of the U.S. is around $15 trillion [2]. A 3.5% GDP increase in taxes to get us to 19% GDP for taxes would mean an increase of taxes by $525 billion. Current budgetary projections have the U.S. deficit at slightly over $500 billion in 4 years [3]. A lot of the current deficit is in non-recurring expenditures that are related to the fiscal crisis that started in 2008.

I might be wrong on my belief about the Bush II tax cuts being a large portion of our long term fiscal problems but from your sentence one must conclude that you agree that raising taxes by a reasonable amount would eliminate our long term fiscal problems.

[1] http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...

[2] http://data.worldbank.org/indicator/NY.GDP.MKTP.CD

[3] http://www.usgovernmentspending.com/federal_deficit_chart.ht...

[taligent]

Sorry but what a load of rubbish.

It has been clearly demonstrated time and time again that in periods of depression you DO NOT dramatically cut government spending. All it does is hamper growth which results in less tax income.

I have no idea why the US debt is being touted about as being the number one priority when surely increasing growth rates and reducing unemployment are key.

[greedo]

Or, one could say that increased spending despite decreased revenue has lead to an increase in the deficit.

It would be one thing if spending had been static during all the tax cuts; it's quite different in reality.

[lemming]

One thing to bear in mind is that for these really big companies, the huge attraction of Ireland is not the low corporate tax rate, it's that profits can be easily and legally sent to Holland, from where they can be sent to the Caribbean. I've seen similar stories from Google and Ikea, I believe they both pay low single digit tax rates on their non-US income due to this arrangement; in Ikea's case this is nearly all of it. It's really difficult to compete with that.

[forrestthewoods]

To me that implies that our current tax methodology is fundamentally wrong. In a global system with value placed on intellectual property and virtual goods, rather than manufactured products, the current tax design seems irreparably broken.

I don't know nearly enough about taxes or economics to propose a solution. Would a VAT tax at a lower rate be more consistent than a higher corporate income tax that may or may not be avoided depending on the corporation? Europeans seem to hate the VAT tax but I'm not sure if that stems from a high tax rate or the concept of the tax itself.

[toyg]

Jeebus Chrysler, VAT is the most regressive tax ever invented, please do not even mention it as a solution to anything. It's a flat (!) tax on non-avoidable consumption that is fundamentally unrelated to real wealth; it doesn't touch capital activity or in-activity, which means that rich people (whose wealth is sheltered as business capital on paper) simply don't pay it. It was a terrible gimmick invented by European governments to raise taxes on low-income individuals without telling them.

I hate to say this, but the only solution I can see to rise of worldwide corporations is... worldwide government, exactly like the answer to the rise of "national companies" in the XIX century was the creation of national governments of similar size. We can discuss about implementation details (the current arrangements -- going through WTO, WMF, UN etc -- are ineffective, opaque and/or fundamentally corrupt), but I don't see how else we could ever get out of this mess.

[Klinky]

Don't complain that others provide the same service at lower cost, try to innovate and outcompete them.

This is assuming that others are providing the exact same services for lesser cost. Right now on the front page of HN there is a story about a cheap iPod charger that can burn your house down or kill you because of the corner cutting done to make it so cheap.

[BCM43]

But that won't work if some very small country lowers it's tax to 1%. The US can't compete with that.

[ajkessler]

Why not? (Honest question.)

We have states that have no personal income tax. Not surprisingly, these states are doing fine because they raise revenue other ways.

[JamesLeonis]

Income tax only accounts for some of the taxes a state can take in. Property and sales tax are also forms states use to collect income, and they happen to be regressive in most cases.

If you look at the CFED chart [2], those nine states [1] with no income tax make up the top 9 slots where the bottom 20% pay many times more in taxes than the top 1% (as a percentage of income), from 3.8 times (Tennessee) to a whopping 6.7 times (Washington).

[1] http://www.irs.gov/efile/article/0,,id=130684,00.html

[2] http://scorecard.assetsandopportunity.org/2012/measure/tax-b...

[yummyfajitas]

...states [1] with no income tax make up the top 9 slots where the bottom 20% pay many times more in taxes than the top 1%...

By itself, this statistic is meaningless. A state with a progressive tax system but lower rates of inequality will score poorly on this metric than a state with higher inequality but an identical tax system.

I.e., you might be showing Tennessee has a regressive tax system, or you might be showing Tennessee has low inequality. Without more details we cannot determine this.

[Drbble]

Note that welfare benefits can cancel out a lot of taxes and restore the progressive effect.

[meric]

You can charge sales taxes. A company can't avoid those if they want to sell things to the country.

[acslater00]

That's great. If apple makes $1b, if the bulk of the money is held by a foreign SUBSIDIARY, my stock will go up, and I will pay capital gains. If they give it to me as a dividend, I will pay taxes on that. If they reinvest it in the company and the investment makes money, my stock will go up even more. And if they reinvest it in the company and squander it all, no taxes will be collected on the income, but they won't be able to write the loss off anything either.

The only thing that truly captures the vagaries of 'where money is held' is the stock price. Wall Street don't care if that money is in New York or Guatemala, if Apple has it it's making the stock go up.

[byrneseyeview]

The value of your stock is the net present value of the future dividends you should expect. If you put a billion dollars in cash on a rocket and launch it into space, the value of that billion dollars is not one billion. It's near zero, depending on the odds and cost of recovering the currency.

[jarek]

Wall Street does care about there the money is. That is why tech companies have spent huge sums lobbying for a repatriation amnesty.

[yummyfajitas]

Tech companies want repatriation amnesty so they can invest the money in the US. I have no idea why we want to prevent them from doing this.

[FireBeyond]

So they can invest -some- of the money in the US.

And pay salaries, bonuses and dividends with the rest - without paying the appropriate corporate income tax rate first. That's why.

[yummyfajitas]

The profits were earned in Ireland. Why is the "appropriate" corporate income tax owed to the US greater than zero?

Should Guinness also pay the US taxes for profits earned in Ireland?

[rmc]

Until Ireland further lowers its taxes.

Unlikely. Ireland is currently in an IMF/ECB bailout programme, and will be for a few more years. Financial policy decisions cannot be made by the Irish government, and must be approved by the IMF/ECB. Recent budget changes (e.g. a change to VAT rate) were discussed in the German parliament before the Irish parliament.