Corporate Taxes up or down?

Investment Analysis Clubs Macro Economic Trends and Risks
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Klutzes think lower corporate taxes would build more factories. Why? There is less to write off klutzes. Higher corporate taxes gets more factories built.

Note people are paying for the material below. You can fool a lot of people in this world. Everyone was smarter in 1932.

https://www.wsj.com/articles/companies-weigh-effects-of-potential-corporate-tax-rate-changeon-growth-investment-plans-12223c09

This summer’s dizzying political developments make it hard to pinpoint what could happen to the corporate tax rate. Vice President Kamala Harris has endorsed increasing the levy, currently at 21%, to 28%, echoing what the Biden administration has proposed. Republican presidential nominee Donald Trump, meanwhile, recently told executives he wanted a 20% corporate tax rate and has floated a levy as low as 15%. Neither may get the respective rates if their party doesn’t gain full power of Congress.

Are We Still Under Trump Tax Policy? Understanding the Tax Cuts and Jobs Act | U.S. Chamber of Commerce.

What happens when the corporate tax rate increases?

Higher tax rates have the opposite effect on business growth and innovation. As such, proposals to raise the corporate tax rate not only jeopardize America’s global economic competitiveness but also deal a blow to American workers and families in the form of lower wages and higher prices.Sep 9, 2024

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Whether higher US corporate taxes encourage a better economy is a complex issue with varying perspectives. Some argue that higher taxes can hinder investment and job growth, while others suggest they can lead to increased government revenue for public services and potentially boost overall economic stability.

Arguments Against Higher Corporate Taxes:

  • Reduced Investment and Growth:

Some economists believe that higher corporate taxes reduce the profitability of businesses, leading to less investment, slower economic growth, and potentially fewer jobs.

  • Global Competitiveness:

A higher corporate tax rate could make the US less attractive to businesses, potentially leading to companies relocating to countries with lower taxes, thus harming the US economy.

  • Higher Prices for Consumers:

Some argue that higher corporate taxes are ultimately passed on to consumers in the form of higher prices for goods and services.

  • Impact on Wages:

Some believe that higher corporate taxes could lead to lower wages for workers as businesses struggle to maintain profitability.

Arguments for Higher Corporate Taxes:

  • Increased Government Revenue:

Higher corporate taxes can generate more revenue for the government, which can be used to fund essential public services like infrastructure, education, and social programs.

  • Fairness and Inequality:

Some argue that higher corporate taxes are needed to ensure a fairer tax system and reduce income inequality, as corporations often have significant profits.

  • Stimulating Demand:

Government spending funded by increased corporate tax revenue could stimulate demand in the economy, potentially leading to increased job creation and economic growth.

  • Historical Evidence:

Some studies suggest that periods with higher corporate tax rates have seen stronger productivity and wage growth.

  • Tax Efficiency:

Some argue that the corporate tax is becoming a more efficient way to raise revenue as the degree to which it distorts business decisions is declining.

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2

And yet…

The global pharma industry will be most affected by changes in Ireland, where the rate is currently 12.5%. For many years, Ireland has attracted investment and re-domiciliation by pharma companies and CMOs with a tax rate lower than that of the US and most of Europe.

DB2

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Bob,

You do not understand basic economics.

I mean zero understand or comprehension. Down the toilet.

We are getting a great depression as a result.

The higher the corporate tax rate the more factories are built because the expense goes against taxes.

Ireland is not a major manufacturing hub. You have zero grasp of the materials involved.

But you are not alone. There is stupidity in numbers.

The WSJ, the NYT, WaPo…all do not care at all what happens to this country as long as they get their corporate tax cut.

Everyone was smarter in 1932.

4

Could be, but little Ireland is the third larges exporter of pharmaceuticals in the world.

Even with a population of just 4.5 million people, Ireland has a well-advanced pharma sector. Different local pharma and about 120 international pharma companies exist in the country. There are so many pharmaceutical companies in Ireland due to the low corporate tax rate of 12.5%.

DB2

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5

Yep.

If I were king, corp taxes would be at or near zero and individual income taxes (gains and dividends too) would be much higher to offset. Bring in the same amount of revenue (or maybe a little more) but create as much incentive as possible (carrot, not stick) to be located in the USA.

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…and review estate taxes, because money based inherited aristocracy is now threatening our demoractic republican foundations.

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Yep, stepped up cost basis at death would go away as well.

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corp taxes are about 10% of taxes paid and capital gains & dividends is already about 50% of taxes paid. So if you completely eliminated corp taxes (not what I’d do) the capital gains/dividend tax rates would only have to increase by ~20% to be revenue neutral…not be much higher. (Unless you think 20% is “much”)
This wouldn’t exactly work out because it would incentivize more people to look for ways to find loopholes. But then are 401K and Roth accounts loopholes?

Mike

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Not really. Tax rates are not that high a factor when considering where to locate a new manufacturing facility. Sub-25% tax rates are too low–unless the business is willing to face being nationalized or destroyed due to civil unrest. Businesses want/need/demand civil stability–because THAT is what enables them to run their business without domestic problems causing them to close or be substantially interrupted. Poor infrastructure? Corporation pays for it, no matter what is claimed.

Taxes are irrelevant if the business is destroyed or otherwise unable to function.

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Investment is based on projected ROI. The higher the taxes, the higher the gain from the investment needs to be, to realize the target net ROI.

Steve

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People will always seek loopholes, but if all income is taxed the same (note, if there is no or very low corp tax then the double taxation of divs goes away), then there will be few places one can hide income.

Sure, you can defer it (401k, deferred comp, etc.) but taxes will eventually be paid.

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Nope. But tariffs, if they must exist, would be set on every foreign corporation to exactly zero out any benefit of lower offshore tax rates, making it a fruitless game to try to dodge US taxes by locating elsewhere.

And that goes double for those corporations playing the double-Irish game and trying to pretend that their IP is offshore even after it was produced here.

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I like that idea, with or without using tariffs to accomplish.

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Steve

That is not true. Taxes paid are secondary considerations but expensing is financing

Jerry

Nonsense

The 50s and 60s even into the 70s proves this

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Ireland is the fifth largest producer.

But pharma sales like software sales are not heavy industrial output.

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Very true. So the question arises, why did the pharmas build factories in little Ireland when their markets were elsewhere?

[As has been pointed out, Ireland had a corporate tax rate of only 12%.]

DB2

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Pfizer and others went for the educated workforce. Ireland has the highest education rates per capita of any country but Israel.

Incorporating in Ireland when cash rich makes sense. Particularly if your industry is not capital intensive. If the industry is capital intensive and the market is very rich you write off expenses such as factory building.

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Both can be true. The German Economic Miracle (Wirtschaftswunder) was attributed in part to high corporate tax rates which encouraged reinvestment. This lead to the rise of German corporate powerhouses like Volkswagen, Siemens, Bayer (which owns Monsanto), BASF, Merck, etc. In many cases these companies grew by acquisition because they were essentially “forced” to invest profits. Due to this legacy, Germany still has high corporate tax rates compared to other industrialized countries.

On the other hand, nobody likes taxes so moving manufacturing to say, an English-speaking EU country with low corporate taxes has some appeal.

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Was that not the case in the US, at one time? I remember the pump seal company getting in trouble for “excess retention of earnings”, because they didn’t invest in the company, nor pay out the loot to their shareholders.

Then, the US became Shiny land. Productive endeavor gave way to financial manipulation.

Steve

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Yes it was. The US had fairly high corporate tax rates from 1945 to 1986 which have been declining every since (with a few ups and downs). This has lead to some offshoring for reasons discussed above.

When the TIG now was previously TIG, he announced a corporate tax holiday to encourage corporations to repatriate their overseas earnings. This lead to an enormous increase in the domestic demand for hookers and cocaine.

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