Trump Plan to Overhaul Tax Code.

[Brian Peacock]

[Forty Two]

I'm still waiting for proof of the claims about the tax plan, and an explanation as to how the 1% benefit. I've heard the allegation that they will, but I haven't seen the explanation based on the proposal.

Svarty just provided the explanation. Of course you disagree with it. We wouldn't expect anything different.

It wasn't much of an explanation, and offered without any proof.

As Svarty says, this will lead to increased profits for shareholders (at least initially, until the bottom falls out of the system), most of which are institutional and represent the uber wealthy.

That would, it seems to me, result in increased revenue, because if shareholders profit, that profit is reported by the company to the shareholders on a schedule K-1. They have to pay income tax on that at their individual income tax rate.

As I said, in the short term this would be the case. But if the cuts are unsustainable in terms of government revenue, then the whole system collapses. What will the individual income tax intakes look like then?

Are the cuts unsustainable in terms of government revenue? Will the whole system collapse? Some detail needed here.

The purpose of reducing the corporate rate is to compete with the 186, give or take, other countries that have lower corporate tax rates than the US. In a global economy, companies with the flexibility to choose a tax domicile will try to pick the lowest cost, most beneficial environment they can find. If you're double the rate of some other place, companies will look to that other place. If you want to incentivize companies to stay in the US, then a low corporate tax rate is one thing that can be done.

So, if companies are leaving the US to other tax domiciles, then the IRS loses lots of tax revenues as a result. If the US can keep them here, and even draw others here, then ultimately the tax revenues could conceivably go up, by increasing the number of companies here paying taxes over time.

I understand that perfectly. Which is why I pointed out in my first post in this thread that it is simply a race to the bottom. It's ultimately unsustainable. I don't know what the solution is to this problem, other than some sort of broad international agreement to halt the race to the bottom very soon. I actually think we are way past the point where current corporate tax rates are sustainable. Almost every western country is running deficits. This isn't going to change with increased cuts to government revenue.

It's not necessarily a race to the bottom, as eventually the rate is low enough that it's not worth companies going elsewhere to save. The transition to another taxing authority takes time and money of it's own. However, settling in around 15% may well be the equilibrium, as that seems to be where most other low corporate tax countries are settling.

I don't see a race to the bottom, do you? Are countries jumping on the bandwagon, and going lower, only to have another company go lower, and then they again reduce to become the lowest? It doesn't seem as if that's happening.

What makes you think we are way past the point where corporate tax rates are sustainable? Evidence, or just a feeling?

[pErvinalia]

I'm still waiting for proof of the claims about the tax plan, and an explanation as to how the 1% benefit. I've heard the allegation that they will, but I haven't seen the explanation based on the proposal.

Svarty just provided the explanation. Of course you disagree with it. We wouldn't expect anything different.

It wasn't much of an explanation, and offered without any proof.

Because the non-contrarians among us know that the majority of dividend payouts and share capital increases goes to the rich. He shouldn't have to offer proof. But with you the bleeding obvious is apparently mystifying stuff.

As Svarty says, this will lead to increased profits for shareholders (at least initially, until the bottom falls out of the system), most of which are institutional and represent the uber wealthy.

That would, it seems to me, result in increased revenue, because if shareholders profit, that profit is reported by the company to the shareholders on a schedule K-1. They have to pay income tax on that at their individual income tax rate.

As I said, in the short term this would be the case. But if the cuts are unsustainable in terms of government revenue, then the whole system collapses. What will the individual income tax intakes look like then?

Are the cuts unsustainable in terms of government revenue?

They have been for the last 30 odd years, so it would appear that they will continue to be so.

Will the whole system collapse? Some detail needed here.

The system has to collapse if every country keeps running deficits and drawing down on more debt.

The purpose of reducing the corporate rate is to compete with the 186, give or take, other countries that have lower corporate tax rates than the US. In a global economy, companies with the flexibility to choose a tax domicile will try to pick the lowest cost, most beneficial environment they can find. If you're double the rate of some other place, companies will look to that other place. If you want to incentivize companies to stay in the US, then a low corporate tax rate is one thing that can be done.

So, if companies are leaving the US to other tax domiciles, then the IRS loses lots of tax revenues as a result. If the US can keep them here, and even draw others here, then ultimately the tax revenues could conceivably go up, by increasing the number of companies here paying taxes over time.

I understand that perfectly. Which is why I pointed out in my first post in this thread that it is simply a race to the bottom. It's ultimately unsustainable. I don't know what the solution is to this problem, other than some sort of broad international agreement to halt the race to the bottom very soon. I actually think we are way past the point where current corporate tax rates are sustainable. Almost every western country is running deficits. This isn't going to change with increased cuts to government revenue.

It's not necessarily a race to the bottom, as eventually the rate is low enough that it's not worth companies going elsewhere to save. The transition to another taxing authority takes time and money of it's own. However, settling in around 15% may well be the equilibrium, as that seems to be where most other low corporate tax countries are settling.

I don't see a race to the bottom, do you? Are countries jumping on the bandwagon, and going lower, only to have another company go lower, and then they again reduce to become the lowest? It doesn't seem as if that's happening.

Have a look at corporate tax rates from 30, 40, 50 years ago. Of course it's happening. The very reason given for corporate tax cuts is to be competitive with lower taxing jurisdictions. That's the very definition of a race to the bottom. The only way it can be avoided is if the rate stabilises an no county breaks ranks.

What makes you think we are way past the point where corporate tax rates are sustainable? Evidence, or just a feeling?

The widespread and continual deficits and ballooning debt levels in the west. If corporate tax cuts where going to bring a dividend like you'd expect if we were on the right side of the laffer curve, we would have seen booming revenue and job creation over the last 40 years. We haven't seen it.