Wouldn't it be simpler to just set corporate tax rates to zero, and instead raise taxes on income and -- especially -- capital gains? And the US already has a personal tax system where it doesn't matter where you earn income: if you're a US citizen, you have to consider US income taxes, period. So the problem where people try to push their personal income out of the country to avoid tax just doesn't crop up as much.
Do you mean income as in profit (= revenue minus expenses), or income as in revenue (not subtracting costs)? If you mean profit... that's what corporation tax is already. So I'll assume you mean revenue.
No it wouldn't. It would kill many businesses overnight, and incentivise the worst behaviour in the rest.
Consider a company that buys components for $100 and assembles them into a widget they sell for $105 to shops. (Who sell it for $110.) Let's ignore other costs.
Corporation tax at 20% would charge the company $1 per widget.
Income (as revenue) tax at 20% would charge the company $20 per widget, and the company would immediately have to stop producing widgets altogether, or substantially raise the price of widgets. It wouldn't have a choice. You as the end user would see the prices of everything in shops shoot up, and many things would disappear from the shelves.
If you used a lower tax rate, say 1% so that companies like this can continue, it will be far too low for companies that pay $50 for components and sell their widget for $100. Those would be charged only $1 on their profit of $50, keeping $49.
You want to incentivise (and indeed help) the former type of company. It's selling widgets at close to the cost of making them, and if it is so minded, it may use the highest quality materials it can afford.
But you have designed a tax that strongly incentivises, even requires, the latter type of company: Only pursuing opportunities that use the cheapest possible materials while selling at high prices. Never doing anything that brings in just a small profit.
Society does not benefit from businesses operating on vapor-thin profits. When (not if) anything goes wrong these businesses trigger a job-loss chain reaction that is impossible to avoid.
What you want are businesses who make enough in profits to build a solid safety net, evolve, compete, provide security and upward mobility to employees, suppliers and the entire food chain that surrounds them.
Profits are not bad. They are an absolute necessity for growth and stability.
I didn't say profit was bad. The discussion point was not about razor-thin margins. The 5% was just notional for discussion. The same problems occur with fat margins.
Building on your point that profits are necessary for growth, stability and job security, presumably you have in mind that the company gets to keep the profit, to use for those things as needed.
The GP proposal I replied to is a tax system which sets a legally required minimum profit margin, and then takes 100% of that required minimum as tax, though I expect the poster didn't think of it that way.
As the proposal is to force the company to make some profit percentage and take that directly from the company, the remaining profit the company can reinvest in growth, stability and job security is reduced. Aside from reducing the amount available to plow back, this also acts to amplify variance in profit from period to period, increasing instability in the company's finances. Reducing profit that can be used by the company and amplifying instability both reduce growth, job security, upward mobility etc. So much for understanding business.
It's also ridiculously harmful to the "food chain" because it would tend to destroy independent supply chain companies, and prevent new ones from being competitve.
The GP proposal takes the legally required minimum profit margin from every individual company in a supply chain, so the total tax taken is the required margin multiplied by the number of companies in the chain. I.e. more companies in a supply chain == proportionally more tax. This creates an extreme pressure to merge small supply chain companies into a giant conglomerates that pay less tax for the same task. I say extreme because it is: Merging brings a benefit of 10-100x tax saving.
If you like giant conglomerates that's fine, but if you want a food chain of independent companies, it's a disastrous policy.
The tax level in that proposal could be set low enough to allow small supply chain companies to survive without succumbing to tax pressure to merge, but if that was done, giant conglomerates would pay a tiny amount of tax, compared with small companies. There would still be a 10-100x tax advantage available to giant conglomerates. Since this entire discussion is a complaint about giant companies paying too little tax, presumably that is not the intended effect.
Some accounting could obviously be done to ensure giant companies pay a similar share to small companies in a chain doing the same thing, to remove the tax pressure to merge. But that's what we have already, that's corporation tax.
They're making a lot of profit.
Its competition that reduces profits
> Its competition that reduces profits
The revenue tax scheme sets a minimum profit level that every company is required to make. Competition can't reduce it below that level.
It's also set things up so where many companies build things in a chain of specialised companies, for example manufacturing components, assembling devices then selling those, and shipping them, the minimum profit percentage is legally required at each step, compounding.
Currently, supply chains consist of hundreds of companies working together. That won't be possible any more, as the new system forces every supply chain to merge into a self-contained conglomerate that does everything in one company.
Companies in that system will be forced to merge into giants or die, and in the end most will be giants. It's probably not the intended consquence of the policy.
Did you know they can export products at cost and still make up to 15% on their international sales? The world is not a level playing field.
Did you know it costs them darn near zero dollars to ship products within the US, while US companies have to pay full fare?
The ONLY way the US and Europe could rebuild a solid industrial base lost to China is to be so pro-business it would make most of the uninformed projectile vomit. If we can do that and maintain it for 25 to 50 years we might have a shot at it. Nothing else will work.
Either we are a nation of pro-business entrepreneurs to the core or we resign ourselves to living in outsourced utopia. That’s how bad it has gotten.
Pick any product and try to source all of its components and manufacturing in the US or Europe. You won’t get far. In most cases it is simply impossible.
If we want a solid future we need to stop vilifying business. The 65% who don’t have a clue will learn this only when it is too late to do anything about it.
Perspective: We couldn’t make PPE, the materials they require and the machines we would need to make them.
China's corporate taxes are much higher than 15%, so it's not like they would be directly affected by this. They might oppose the plan (I have no idea), but it's unlikely to be on an economical aspect of that's the case.
Or you just introduce CO2 tariffs and use them to wreck China in the process of building a CO2 neutral economy.
The idea of a CO2 neutral economy is another utopia fantasy sold to the ignorant voters by politicians. Easy to sell. Easy to form voting groups around it. Who doesn't want to be for "saving the planet".
And yet, we know, without a shadow of a doubt, that we cannot do a thing about atmospheric CO2 accumulation and the climate effects surrounding it. Not a thing. This is what we know --scientifically, not guessing here: If humanity left the planet today and all of our technology simply shut down, it would take somewhere around 50,000 and 100,000 years for atmospheric CO2 to come down 100 ppm. This leads to a very simple conclusion: If such an extreme measure produces a rate of change of 100 ppm / 100K years, a partial measure will not improve on that rate at all.
So, no, a carbon neutral economy will do nothing. Neither will switching to electric cars, full solar and wind power, etc. All fantasies. Sorry. We are being lied to and we are deceiving ourselves.
Isn’t that point precisely addressed by the Biden administrations of setting a global minimum tax rate? If every country, or at least every country without signify the trade barriers (who cares what happens in North Korea) has the same tax rate than there’s no incentive for companies to move their profits - or the entire company - abroad to save on taxes.