Appropriate Report for April 15th

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SoonerTraveler

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http://www2.deloitte.com/us/en/page...14th-congress.html?id=us:em:na:eng:tax:041515

The politics of tax reform in the 114th Congress, a new report from Deloitte Tax LLP’s Tax Policy Group, reviews the major tax reform proposals that have been put forward in recent years with a focus on significant multinational, corporate, and individual provisions; addresses the substantive and political barriers facing tax reform advocates; and considers why, despite the uncertain legislative environment, ignoring tax reform would be a mistake. It also provides a high-level overview of the make-up of the 114th Congress, its two taxwriting committees, and the individuals who have had significant influence on the current tax reform debate.

***

Excerpt from page 27 of the report: Everyone across the political spectrum believes that our current tax system is broken and in desperate need of reform. Our current tax rules are too complex for taxpayers to comply with and too difficult for the regulatory agencies to administer.
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Pretty good read from Deloitte. Link to the report (pdf file):

http://www2.deloitte.com/content/da...f-tax-reform-in-the-114th-congress-041415.pdf
 
taxessharegdp.png


http://thesocietypages.org/socimages/2010/04/10/various-taxes-as-a-of-u-s-gdp/

Federal taxes in relation to GDP have stayed remarkably stable over the past 60 years other than the brief whammy of the great recession.

What is notable however is that corporate tax receipts have dramatically declined as a share of the total and have been replaced by payroll taxes. This is the main driver of income inequality. You take 2-4% of earnings away from one segment and give it to another segment of the economy and it's simple math who will end up way ahead.

The tax reform that would best suit the economy and country IMO is to lower payroll taxes back to the pre reagan and payroll tax holiday levels and pay for it by closing corporate loopholes. The 35% corporate tax rates are meaningless because the effective tax rates of S&P 500 companies is less than half the stated rate.
 
Simplicity > Complexity
Simplicity favors the open and honest.
Complexity favors the secretive and dishonest.

The ultra-complex United States tax code helps enable the marriage of big government with big corporations, also called crony capitalism.

GE's taxes: A case study
by Fortune Editors (April 4, 2011)
How a major multi-national company like General Electric manages its tax bill.

http://fortune.com/2011/04/04/ges-taxes-a-case-study/

GE’s tax department is well known for its size, skill and hiring of former government officials. About 20 years ago, GE’s tax employees totaled a few hundred and were decentralized. Today, there are almost 1,000. The department’s strong suit? Reducing the taxes GE reports for earnings purposes.
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Think of that. Almost 1,000 people employed by one corporate tax department. Many of these people move back-and-forth between highly paid government jobs to highly paid corporate jobs.

5 Ways GE Plays the Tax Game
http://www.propublica.org/article/5-ways-ge-plays-the-tax-game

Strategy No. 2: Hire the IRS

When it comes to interpreting the intricacies of tax accounting, few companies can match the depth of personnel GE hires for its tax department. What makes GE unusual, according to tax lawyers and accountants, is its practice of recruiting dozens of former tax officials from Washington's official tax world.

"An important rule to live by," a senior GE tax lawyer, Rick D'Avino, told a conference in 2007, "is to ensure that the tax team has as many former government tax experts as possible" to "help see both sides of an issue more effectively." D'Avino, a GE vice president, mentioned the IRS, Capitol Hill and Treasury as places to look when building a team and talked about how a former IRS lawyer working for GE helped the company build a "cooperative relationship" with the service.

The next year, GE hired the senior IRS official who was overseeing the service's transfer pricing program, under which large multinational companies like GE negotiate with the IRS about how to price products and services among subsidiaries. The subject is controversial because it can allow companies to shift profits to lower-tax countries.

Samuels, the head of GE's tax department, is a former Treasury tax official himself. No American corporate tax executive likes to publicly debate tax policy more than Samuels. He chairs a nonprofit international tax policy group in Washington. He teaches a course on taxes at Yale Law School. And he appears regularly at tax forums around the country.

His message has a few common themes. One is that the U.S. corporate tax rate is too high when compared to other developed nations. Another is that Washington's idea of taxing overseas business income for its resident companies smacks of arrogance and is out of step with tax systems in other countries.

These are arguments GE also makes on Capitol Hill -- through dozens of lobbyists who used to work on tax issues for the Treasury or Congress.
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Actually this is not unusual and is not in any way unique to GE, or to the issue of federal taxation. Crony capitalism is a disease infecting almost everything that big government regulates. Banking. Securities. Health care. Energy. Environment. And so on. The federal "bureaucrats" (i.e., members of the ruling class) freely move back-and-forth between big government jobs and jobs with big corporations.

No matter where they work, in or out of government, they will look you straight in the eye and tell you with great assurance: "I am here to help you." You see, they are only working for the greater good.
 
bocabull said:
taxessharegdp.png


http://thesocietypages.org/socimages/2010/04/10/various-taxes-as-a-of-u-s-gdp/

Federal taxes in relation to GDP have stayed remarkably stable over the past 60 years other than the brief whammy of the great recession.

What is notable however is that corporate tax receipts have dramatically declined as a share of the total and have been replaced by payroll taxes. This is the main driver of income inequality. You take 2-4% of earnings away from one segment and give it to another segment of the economy and it's simple math who will end up way ahead.

The tax reform that would best suit the economy and country IMO is to lower payroll taxes back to the pre reagan and payroll tax holiday levels and pay for it by closing corporate loopholes. The 35% corporate tax rates are meaningless because the effective tax rates of S&P 500 companies is less than half the stated rate.
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This is the worst idea I have ever heard. The largest corporations will move off shore and avoid the taxes legally. The small corporations will get hurt and increase costs to the extent they can making the tax flat or regressive on lower income people. Funds for social security will be reduced (although Johnson combined the funds and there really isn't a social security lock box as I understand things).
 
I agree that that tax code is too cumbersome, and I also agree that corporations need to be paying more.

I also no it's WAY more complicated than what anybody makes it out to be when they start talking about alternatives. With any new "tax code", there will eventually be good and bad aspects, and people that are helped as well as people that are hurt. There is no perfect system.
 
WTSooner said:
I agree that that tax code is too cumbersome, and I also agree that corporations need to be paying more.

I also no it's WAY more complicated than what anybody makes it out to be when they start talking about alternatives. With any new "tax code", there will eventually be good and bad aspects, and people that are helped as well as people that are hurt. There is no perfect system.
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It's really not that cumbersome. Especially with simple to use tax preparation software. The tax code is designed to encourage and reward certain economic behavior that is deemed good for the country. The country is on sound footing right now. In relation to GDP we are spending slightly less than the 50 years average. Tax receipts are slightly more than the 50 year average. The deficit is slightly less than the 50 year average. Unemployment rate is slightly less than the 50 year average.

We don't need more revenue or less spending. Steady as she goes. With corporate profits at records highs while median income is languishing the policy debate is whether it's good for the country to shift some of the tax burden from the middle class to the corporate sector. I think the answer is yes. What good does the billions Apple is piling up overseas do the country? We know if a family making $50k a year was given 2% payroll tax relief they would spend that money and grow the economy.
 
DenverSooner said:
This is the worst idea I have ever heard. The largest corporations will move off shore and avoid the taxes legally. The small corporations will get hurt and increase costs to the extent they can making the tax flat or regressive on lower income people. Funds for social security will be reduced (although Johnson combined the funds and there really isn't a social security lock box as I understand things).
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lol @ the ridiculous argument that the largest corporations in the U.S. are going to leave the worlds biggest market with the best workforce because some loopholes were closed that increased their effective tax rates by a few percentage points.

That's as silly as claim that wealthy people were going to forgo earning income if their income tax rate went back to 39.6 from 35 percent because it's just not worth it.
 
bocabull said:
We don't need more revenue or less spending. Steady as she goes. With corporate profits at records highs while median income is languishing the policy debate is whether it's good for the country to shift some of the tax burden from the middle class to the corporate sector. I think the answer is yes. What good does the billions Apple is piling up overseas do the country? We know if a family making $50k a year was given 2% payroll tax relief they would spend that money and grow the economy.
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This is a perfect example though of how I said it's not that easy, or black and white.

You want to raise corporate taxes? Fine. Corporations will turn around and slow pay increases to compensate for that. It's a cycle. For every tit there is a tat. For every law to increase corporation taxes, there is a counter move by them that takes their share right back.

Again, I'm not against change, I just don't think the answers are easy or obvious, like some make them out to be. It took a LONG time for the US economy (all aspects) to get where it is today.
 
WTSooner said:
I'm not against change, I just don't think the answers are easy or obvious, like some make them out to be. It took a LONG time for the US economy (all aspects) to get where it is today.
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I agree with this wholeheartedly. We're in a good place right now. No reason to upset the apple cart. The chart I posted shows how other than W's time in office federal revenues have been remarkably stable as a share of the economy.

The only outlier is corporate tax revenue falling and payroll tax revenue rising. I think a large part of this is the globalization of the U.S. Economy. 40% of S&P 500 earnings are now derived from foreign markets and they do not have to pay income taxes on those revenues. The support for that huge additional business is mainly done by U.S. workers paying payroll taxes. If Apple sells an iPhone in China they pay no U.S. Income tax on the profits. If they did it's doubtful they are going to reduce wages in the U.S. as they are always competing for the best talent. Before Clinton U.S. Citizens did not owe personal income taxes on offshore investments. Park your money in the Cayman Islands and capital gains were tax free. When that loophole was closed all it did was increase revenues with no ill effects. I would guess the same would happen if this corporate loophole was closed to address the globalization of large corporate profits.
 
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bocabull said:
40% of S&P 500 earnings are now derived from foreign markets and they do not have to pay income taxes on those revenues.
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This link may help clarify this issue.
http://taxfoundation.org/article/how-much-do-us-multinational-corporations-pay-foreign-income-taxes

PDF File:
http://taxfoundation.org/sites/taxfoundation.org/files/docs/FF432.pdf

***

Also, here is an applicable IRS summary:
http://www.irs.gov/taxtopics/tc856.html

You can click on the links within the IRS summary to "drill down" to more detailed information.
 
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Taxfoundation.org is not a reliable source. It's simply the lobbying arm for major corporations founded by General Motors and Standard Oil to oppose taxes. Current board members include Pepsico, Eli Lilly, Microsoft and ex republican congressmen on the take. Corporate tax receipts have dramatically declined in relation to GDP since this lobby was founded in response to FDR fixing the nations fiscal woes which caused the great depression.

I understand that foreign taxes are deductible. The problem is that U.S. incomes taxes are not applicable to offshore income which results in a significantly lower effective tax rates depending on where you do the foreign business.

Interestingly the oil & gas industry is not benefiting from this loophole nearly as much as technology, drug & consumer discretionary companies.

Company; Operating income; US Income Tax; Effective Rate
Recent Fiscal Year Data (millions)
Exxon; $51,630; $18,015; 34.9% link
Pepsico; $8,757; $2,199; 25.1% link
Microsoft; $27,820; $5,746; 20.7% link
Apple; $53,483; $13,973; 26.1% link

The Tax Foundation lobby scam has a measly $3 million/year budget. What a return on investment!! They have scammed the country out of hundreds of billions of tax revenues. Microsoft, as usual, is the biggest beneficiary to the tune of a 20% effective tax rate. What a shock they have always had a board member.
 
I'll preface my little story by saying that the class that consistently made me drowsy at OU was ECON 1, so I know next to nothing about economics. ;)

My mom passed away about a year ago and I did her taxes last week. Her total income for 2014 was about 10K. Only $140 was taken out of her pension and SS check for taxes. It should have been simple. I used Turbo Tax and everything was simple until I had to enter $42 from a 1099-MISC form. In the 1950's my grandfather bought some land in Wa****a County. Somehow, he became the owner of the mineral rights for less than an acre of it. My mom inherited it from him. It never paid her over $100 a quarter. But because she had a 1099 MISC form, I had to use a more expensive version of TurboTax and fill out a Schedule C form It wanted to know the name and address of the 'business' and on and on and on. Way too much trouble to get $140 back. I think I'll tell my sister she can have the mineral rights just so I don't have to deal with it come income tax time.

I am not one who complains about paying my taxes. I would gladly pay better taxes in Tulsa if we could have better roads. But there had to be a better, less complicated way.
 
Traveler, like I said TaxFoundation is not a credible source. It's a biased lobbying group representing large corporations to oppose taxation. They are manipulating you with meaningless data.

The loophole is not the foreign tax credit, which simply prevents double taxation. For example if Microsoft pays Ireland $100 million in taxes and owed the US $200 million, they would only have to pay the US $100 million after taking the foreign tax credit. The loophole is that they don't owe ANY U.S. income tax unless they repatriate the money, which they purposely don't to avoid paying any U.S. income tax on those foreign earnings. This is how Microsoft only has a 20% effective income tax rate when including all domestic and foreign taxes. Ireland has a 12.5% tax, they run all their foreign sales through Ireland and pay the 12.5% tax, they never bring the $ back to the US and pay no U.S. tax.

Trillions of untaxed U.S. Corporate profits are held offshore.

Even their propaganda includes this disclaimer. Read the fine print.

Figure-1.jpg


Their entire presentation is garbage. Their financial statements tell the truth.
 
bocabull said:
lol @ the ridiculous argument that the largest corporations in the U.S. are going to leave the worlds biggest market with the best workforce because some loopholes were closed that increased their effective tax rates by a few percentage points.
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I hate to break it to you but several major companies have undergone tax inversions recently. Prior to the inversions they would park intellectual property in a favorable country and lease it back to a U.S. operating entity effectively moving profits off shore. These companies don't stop doing business in the U.S. They simply move the tax situs of their profits to another country.

http://democrats.waysandmeans.house...rs-data-47-corporate-inversions-last-decade-2
 
George Soros May Face a Monster Tax Bill ($6.7 Billion)
April 30, 2015
http://www.bloomberg.com/news/articles/2015-04-30/george-soros-s-tax-bill

George Soros likes to say the rich should pay more taxes. A substantial part of his wealth, though, comes from delaying them. While building a record as one of the world’s greatest investors, the 84-year-old billionaire used a loophole that allowed him to defer taxes on fees paid by clients and reinvest them in his fund, where they continued to grow tax-free.
...

Just before Congress closed the loophole, Soros transferred assets to Ireland—a country seen by some at the time as a possible refuge from the law. The filings show for the first time the extent to which Soros’s almost $30 billion fortune—he ranks 23rd on the Bloomberg Billionaires Index—came from finding ways to delay taxes and reinvesting the money in his fund.
...

“No person has a constitutional obligation to pay any more taxes than he is required to pay,” says James Sitrick, a tax attorney who represented Soros for decades. If Soros “couldn’t legally do it, he wouldn’t do it,” says Sitrick, who worked on international tax policy for the U.S. Department of the Treasury.
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All of these guys that say they want wealthy people to pay more really mean they want everyone but them to pay more. It doesn't matter if they are named Soros or Koch. They all take steps to reduce their tax liability.
 
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