{"id":370,"date":"2014-07-16T21:27:00","date_gmt":"2014-07-16T21:27:00","guid":{"rendered":"http:\/\/admin.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html"},"modified":"2014-07-16T21:27:00","modified_gmt":"2014-07-16T21:27:00","slug":"corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html","title":{"rendered":"Corporate income taxes, inversion, and related issues on which I am not an expert"},"content":{"rendered":"\n<\/head>

Oh, the joys of blogging. <\/p>\n

For the past several days, I\u2019d intended to write something up on corporate income tax. \u00a0The Chicago Tribune has had multiple articles lately on \u201cinversion\u201d \u2014 the process in which a U.S.-domiciled corporation acquires a foreign corporation and moves its headquarters to that foreign country, with lower corporate tax rates. \u00a0Walgreens, a local drugstore, is considering this move with its acquisition of Alliance Boots, a European drugstore chain headquartered in Switzerland, and recent articles have also described past or potential future such moves by local pharmas.<\/p>\n

But last night I couldn\u2019t find the article online that I\u2019d read a couple days ago, one in which the reporter labelled such countries as Ireland and the U.K. as \u201ctax havens\u201d as if they were no different than places such as Bermuda. \u00a0And I ended up playing Tetris, and then I noticed that a book was due at the library that I hadn\u2019t gotten around to reading, and soon enough it was past my bedtime.<\/p>\n

And then along comes Megan McArdle to share her insight<\/a>s on the corporate income tax:<\/p>\n

So here\u2019s my proposal: Eliminate the corporate income tax and take the money from people. That\u2019s what you\u2019re doing anyway, so do it in a simpler, fairer and more progressive way, by raising income taxes on the wealthy and taxing capital income (dividends plus capital gains) more like ordinary income. <\/p><\/blockquote>\n

To which my first response was: \u00a0duh! \u00a0Somewhere in my \u201csent mail\u201d mailbox I\u2019ve probably got a letter-to-the-editor on the topic \u2014 because she\u2019s right. \u00a0Corporate income tax is a mess, and far too many resources are devoted to dodging it, and corporations are making business decisions not based on what boots productivity but what is most tax-effective. \u00a0There are also endless games around which country has the lowest rate, and how taxes are or should be applied in the case of multinational corporations with expenses and revenues worldwide.<\/p>\n

There\u2019s one wrinkle, though: <\/p>\n

What would corporations do with their \u201cextra\u201d income? \u00a0If the U.S. were an isolated economy, it\u2019s easy: \u00a0the money is either reinvested in the business, paid out to employees as wages, bonuses, etc., or paid out to investors as dividends. \u00a0In the first case, this is a positive, right? \u00a0In the second and third instances, the money is taxed after all (and dividends can be treated as ordinary income). \u00a0We can boost the tax on high earners on the assumption that corporations will favor them in spending their new-found cash, or just figure that, in the end, even at current tax rates, we\u2019ll take in plenty of additional individual income tax. \u00a0(Would this approach also require moving employee benefits into the \u201ctaxable income\u201d category? \u00a0I\u2019m not sure.)<\/p>\n

But: \u00a0what about when the corporations move their money overseas \u2014 either as salary or dividends to overseas employees or investors, or in order to grow their business abroad (building a new plant, or call center, or the like), or because it\u2019s a foreign company in the first place, and they\u2019re just bringing their revenues back home?<\/p>\n

So that\u2019s where my pet idea comes in: \u00a0the money is taxed when it leaves the company or the country. \u00a0Let\u2019s call it the \u201c2-C\u201d rule. <\/p>\n

The \u201cleaves the company\u201d part is easy. \u00a0\u201cLeaves the country\u201d is a bit trickier: \u00a0do we tax profits that employers use in investment outside the U.S.? \u00a0Do we tax profits earned by non-U.S. corporations doing business in the U.S.? \u00a0In either case, we\u2019ve still got the mess that is cost center determination for multinationals.<\/p>\n

Maybe the alternative is a flat tax, not on profits, but simply on revenues and, quite simply, cash outflow from the U.S. \u00a0What\u2019s the right rate? \u00a0I don\u2019t know. \u00a0When I played around with the idea earlier the sticking point was that I don\u2019t really know what sorts of tariffs we apply on imported goods these days \u2014 because, in a way, for those firms that do nothing more than import goods to the U.S., sell them, and take home the profits, such a tax would function, to a degree as a tariff. <\/p>\n

My \u201c2-C\u201d idea isn\u2019t as simple as a \u201clet\u2019s dump the corporate tax\u201d approach, but it recognizes the issue of multinationals. \u00a0For all you tax experts, it\u2019s a starting point!<\/p>\n

Update: \u00a0some commenters at McArdle\u2019s blog pushed back on this by saying that at a closely held corporation, the owner-employees could simply spend corporate money to their own personal benefit \u2013 e.g, a \u201ccompany car\u201d and \u201ccompany-provided housing\u201d and \u201ccompany trips\u201d to Vegas \u2013 but that\u2019s already covered by existing laws on what sorts of benefits are taxable to the employee, centering around whether there\u2019s a legitimate business purpose to the expense or not.<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

Oh, the joys of blogging. For the past several days, I\u2019d intended to write something up on corporate income tax. \u00a0The Chicago Tribune has had multiple articles lately on \u201cinversion\u201d \u2014 the process in which a U.S.-domiciled corporation acquires a foreign corporation and moves its headquarters to that foreign country, with lower corporate tax rates. […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-370","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nCorporate income taxes, inversion, and related issues on which I am not an expert<\/title>\n<meta name=\"description\" content=\"Oh, the joys of blogging. For the past several days, I'd intended to write something up on corporate income tax.  The Chicago Tribune has had\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Corporate income taxes, inversion, and related issues on which I am not an expert\" \/>\n<meta property=\"og:description\" content=\"Oh, the joys of blogging. For the past several days, I'd intended to write something up on corporate income tax.  The Chicago Tribune has had\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html\" \/>\n<meta property=\"og:site_name\" content=\"Jane the Actuary\" \/>\n<meta property=\"article:published_time\" content=\"2014-07-16T21:27:00+00:00\" \/>\n<meta name=\"author\" content=\"Jane the Actuary\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Jane the Actuary\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html\",\"url\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html\",\"name\":\"Corporate income taxes, inversion, and related issues on which I am not an expert\",\"isPartOf\":{\"@id\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/#website\"},\"datePublished\":\"2014-07-16T21:27:00+00:00\",\"dateModified\":\"2014-07-16T21:27:00+00:00\",\"author\":{\"@id\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/#\/schema\/person\/ed9b99e0bd58c5eeeebae6b82fa5a77a\"},\"description\":\"Oh, the joys of blogging. For the past several days, I'd intended to write something up on corporate income tax.  The Chicago Tribune has had\",\"breadcrumb\":{\"@id\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Corporate income taxes, inversion, and related issues on which I am not an expert\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/#website\",\"url\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/\",\"name\":\"Jane the Actuary\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/#\/schema\/person\/ed9b99e0bd58c5eeeebae6b82fa5a77a\",\"name\":\"Jane the Actuary\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/8d6a493d380e87d49599d5487691c9fc?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/8d6a493d380e87d49599d5487691c9fc?s=96&d=mm&r=g\",\"caption\":\"Jane the Actuary\"},\"url\":\"https:\/\/www.patheos.com\/blogs\/janetheactuary\/author\/actuaryjane\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Corporate income taxes, inversion, and related issues on which I am not an expert","description":"Oh, the joys of blogging. For the past several days, I'd intended to write something up on corporate income tax.  The Chicago Tribune has had","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html","og_locale":"en_US","og_type":"article","og_title":"Corporate income taxes, inversion, and related issues on which I am not an expert","og_description":"Oh, the joys of blogging. For the past several days, I'd intended to write something up on corporate income tax.  The Chicago Tribune has had","og_url":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html","og_site_name":"Jane the Actuary","article_published_time":"2014-07-16T21:27:00+00:00","author":"Jane the Actuary","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Jane the Actuary","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html","url":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html","name":"Corporate income taxes, inversion, and related issues on which I am not an expert","isPartOf":{"@id":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/#website"},"datePublished":"2014-07-16T21:27:00+00:00","dateModified":"2014-07-16T21:27:00+00:00","author":{"@id":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/#\/schema\/person\/ed9b99e0bd58c5eeeebae6b82fa5a77a"},"description":"Oh, the joys of blogging. For the past several days, I'd intended to write something up on corporate income tax.  The Chicago Tribune has had","breadcrumb":{"@id":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/corporate-income-taxes-inversion-and-related-issues-on-which-i-am-not-an-expert.html#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.patheos.com\/blogs\/janetheactuary"},{"@type":"ListItem","position":2,"name":"Corporate income taxes, inversion, and related issues on which I am not an expert"}]},{"@type":"WebSite","@id":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/#website","url":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/","name":"Jane the Actuary","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/#\/schema\/person\/ed9b99e0bd58c5eeeebae6b82fa5a77a","name":"Jane the Actuary","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/8d6a493d380e87d49599d5487691c9fc?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/8d6a493d380e87d49599d5487691c9fc?s=96&d=mm&r=g","caption":"Jane the Actuary"},"url":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/author\/actuaryjane"}]}},"_links":{"self":[{"href":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/wp-json\/wp\/v2\/posts\/370","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/wp-json\/wp\/v2\/users\/2209"}],"replies":[{"embeddable":true,"href":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/wp-json\/wp\/v2\/comments?post=370"}],"version-history":[{"count":0,"href":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/wp-json\/wp\/v2\/posts\/370\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/wp-json\/wp\/v2\/media?parent=370"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/wp-json\/wp\/v2\/categories?post=370"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/wp-json\/wp\/v2\/tags?post=370"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}