Re:How to Stop Turning U.S. Corporations into Tax Exiles
by pzone on Monday December 14, 2015 @06:44AM
(#10730492)
I agree with you in general but there is another thing you're missing: the double taxation discourages investing in new businesses in the United States.
If a VC is looking at two very similar businesses selling internationally, with one seated in the US where their profits will be doubly taxed, and the other running in a different country where profits are not subject to this, then ceteris paribus, they should expect investment in the non-US company to be more profitable.
Re:How to Stop Turning U.S. Corporations into Tax Exiles
by throwawayukcyb on Monday December 14, 2015 @07:56AM
(#10730719)
ceteris paribus
i.e. unicorns and rainbows. You're essentially just responding to every response to your posts with "yeah but more assumptions make it true!"
Re:How to Stop Turning U.S. Corporations into Tax Exiles
by pzone on Monday December 14, 2015 @08:03AM
(#10730746)
No, it's not unicorns and rainbows. My argument does not rely on the existence of such ceteris paribus firms, my argument is that this will affect decisions to invest on the margin. Maybe right now, the margin is deciding between a great company in the US versus a crap company in Ireland, but the one in Ireland looks more attractive due to tax reasons. This policy change would push it back in the right direction. The point is that because there is a margin somewhere, it must be shifted by these policy decisions.
I don't see myself relying on strong assumptions. I am laying out some simplified models to explain the core mechanisms of what's going on.
The decline in the benefit of a lower corporate tax rate accelerates as you go lower. For example, going from 35% to 25% might reduce your corporate inversions by 75%. Going from 35% to 10% might reduce your inversions by 85%.
The challenge is to find the level where you gain the most as a nation overall. If you have something to offer other than just the low tax rate, it will never make sense to chase toward zero. The closer you get to that ideal level, the more other factors come into play to your nation's benefit in regards to keeping companies. The US has vast benefits for a company like Pfizer that would compensate for N% additional tax rate.