Frayed Ends: Business, Economics, and Tax Policy 3.0

[FlagDUDE08]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Yeah. Its very likely that Wisconsin with Walker leading the charge is kind of heading off into uncharted territory. Wisconsin is starting to represent an alternative model to that of both Illinois and Minnesota. Not a good one...but a different one.

It does make one wonder, though... how many people will, in the coming few years, choose to cross state lines every day for work? I've seen it quite a bit, especially in the southern tier of NY (e.g. Binghmaton, Owego, Corning) where people will live in PA and commute to NY. Where I grew up in NY, it was commonplace to go to Vermont for services, and vice versa in a different part of the border. Also seen people living in MA commute to RI, live in NH and commute to MA; the list goes on and on. Although it's more prevalent in the northeast, you may still see some action amongst border villages.

 

[Kepler]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

It does make one wonder, though... how many people will, in the coming few years, choose to cross state lines every day for work? I've seen it quite a bit, especially in the southern tier of NY (e.g. Binghmaton, Owego, Corning) where people will live in PA and commute to NY. Where I grew up in NY, it was commonplace to go to Vermont for services, and vice versa in a different part of the border. Also seen people living in MA commute to RI, live in NH and commute to MA; the list goes on and on. Although it's more prevalent in the northeast, you may still see some action amongst border villages.

This is common along the western Columbia River. People live in southern Washington and work and shop in northern Oregon. Washington has high sales tax and no income tax; Oregon has high income tax and no sales tax.

 

[dxmnkd316]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

If you are going to change capital gains to regular income, don't you also have to eliminate the corporate income tax for consistency? Otherwise you are taxing shareholders twice, once on corporate income that could have been theirs instead, and again upon the sale of their ownership stake in the company.



and a portion of the payroll tax has already had the cap removed (for the Medicare tax portion). Not only that but the Medicare "payroll" tax has already been extended to apply to investment income as well.

For the Social Security portion of the payroll tax, does that mean you also uncap the income that is counted in the formula for social security retirement benefit? the cap on income subject to Social Security payroll tax is exactly the same cap on income that can be considered for accumulating credits toward one's retirement benefit.



Maybe we should go to the ultimate tax simplification form:
-- how much did you earn last year?
-- send it in.

Nope. Corporate income taxes might be a great example of a place where a flat tax might work. Might. The deduction game is a bit silly when you make eleventy billion a year. Certain things should be able to be written off, sure. Physical capital investments should be tax free. Invites more investment in the U.S.

Regarding the cap being removed already for part, great! Uncap the rest. I would keep the credit cap in place though. Or means test benefits. Anyone with more than say $1 million in assets (world wide assets, not just those at home) isn't eligible for benefits. That's just a first stab at a number. I have no idea if that's reasonable or too high. I would likely allow exclusion of farmland from that if it's currently being productively used.

 

[Kepler]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Regarding the cap being removed already for part, great! Uncap the rest. I would keep the credit cap in place though. Or means test benefits. Anyone with more than say $1 million in assets (world wide assets, not just those at home) isn't eligible for benefits. That's just a first stab at a number. I have no idea if that's reasonable or too high. I would likely allow exclusion of farmland from that if it's currently being productively used.

The farmland cases are a bit of a canard at this point, anyway, since about 95% of "family farms" are multinational agribusiness in disguise, but sure we should have some special provision for real farmers.

The idea of abolishing corporate income taxes does appeal to me, as long as it is accompanied by a concomitant increase in progressive tax rates and making all forms of income the same. A corporation's "income" is ultimately income to the shareholders when they cash out their shares. Hit it there -- when execs cash out their $60M in options, take $54M.

 

[unofan]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

The farmland cases are a bit of a canard at this point, anyway, since about 95% of "family farms" are multinational agribusiness in disguise, but sure we should have some special provision for real farmers.

The idea of abolishing corporate income taxes does appeal to me, as long as it is accompanied by a concomitant increase in progressive tax rates and making all forms of income the same. A corporation's "income" is ultimately income to the shareholders when they cash out their shares. Hit it there -- when execs cash out their $60M in options, take $54M.

The problem with that is it would just encourage OmniMegaCorp to stockpile its cash and never pay out dividends or distribute its money to shareholders directly. Instead, I could see it pretty clearly loading fringe benefits to its C-level employees under the guise of business expenses. Since the CEO of OmniMegaCorp is likely also on the Board of MegaOmniCorp and owns shares of UltimaSuperCorp, they won't care since they're still getting paid, just by different entities.

 

[joecct]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

What if you outlawed corporations?

Every person in the board room has to buy into the business and share in the profits and losses. No longer would it be possible for an officer to collect millions in compensation while running a business into the ground.

 

[Kepler]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

The problem with that is it would just encourage OmniMegaCorp to stockpile its cash and never pay out dividends or distribute its money to shareholders directly. Instead, I could see it pretty clearly loading fringe benefits to its C-level employees under the guise of business expenses. Since the CEO of OmniMegaCorp is likely also on the Board of MegaOmniCorp and owns shares of UltimaSuperCorp, they won't care since they're still getting paid, just by different entities.

Well, this is the Great Game, right? The rich punch holes in the tax boat, we plug the holes, then they punch more holes, and on it goes forever in "a continuous and sublime recapitulation."

So, we make benefits taxable for the C-suite. Don Draper has to declare SCDP's booze. They pay for a few years until they figure out another evasion scam, and on we dance.

 

[Kepler]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

What if you outlawed corporations?

Every person in the board room has to buy into the business and share in the profits and losses. No longer would it be possible for an officer to collect millions in compensation while running a business into the ground.

The original purpose of the corporation to protect an investor from losing everything when Drake sinks the ship on its way back from Cartagena de Indias is still useful. It's become a Magic Shield, though, for everything from campaign bribes to ducking prison terms for knowingly murdering consumers, and those protections should be stripped.

 

[joecct]

The original purpose of the corporation to protect an investor from losing everything when Drake sinks the ship on its way back from Cartagena de Indias is still useful. It's become a Magic Shield, though, for everything from campaign bribes to ducking prison terms for knowingly murdering consumers, and those protections should be stripped.

Too big to fail?

 

[dxmnkd316]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

The farmland cases are a bit of a canard at this point, anyway, since about 95% of "family farms" are multinational agribusiness in disguise, but sure we should have some special provision for real farmers.

The idea of abolishing corporate income taxes does appeal to me, as long as it is accompanied by a concomitant increase in progressive tax rates and making all forms of income the same. A corporation's "income" is ultimately income to the shareholders when they cash out their shares. Hit it there -- when execs cash out their $60M in options, take $54M.

Fair enough.

Regarding the CIT, I think that's a huge slice of the pie to try to reallocate. https://www.whitehouse.gov/omb/budget/Historicals

Between 10 and 13 percent of the total receipts. I wonder what percentage of American income comes from capital gains. I'm sure I could find it in the IRS, OMB, or census stacks if I looked hard enough. Either way, tax lawyers become rich.

 

[FlagDUDE08]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

What if you outlawed corporations?

Every person in the board room has to buy into the business and share in the profits and losses. No longer would it be possible for an officer to collect millions in compensation while running a business into the ground.

Board members do typically buy shares, although it's usually a small number for publicity's sake. What about this:

Remove the tax levied directly on corporations. Each corporation releases tax information on revenues and expenses to its shareholders. Every shareholder becomes required to file regardless of income, and enters this information into his/her 1040 form based upon the number of shares held at a particular increment (whether monthly or quarterly), similar to how Schedule E works for royalty trusts. Fund owners with multiple investors (e.g. Hedge, Mutual, ET, etc.) release their own tax information to their investors, although may be simplified based upon the information an individual owner would enter. This is charged at the normal income rate. Remove separate reporting and taxation of dividends, as this would be double dipping from the aforementioned information.

 

[Kepler]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Board members do typically buy shares, although it's usually a small number for publicity's sake. What about this:

Remove the tax levied directly on corporations. Each corporation releases tax information on revenues and expenses to its shareholders. Every shareholder becomes required to file regardless of income, and enters this information into his/her 1040 form based upon the number of shares held at a particular increment (whether monthly or quarterly), similar to how Schedule E works for royalty trusts. Fund owners with multiple investors (e.g. Hedge, Mutual, ET, etc.) release their own tax information to their investors, although may be simplified based upon the information an individual owner would enter. This is charged at the normal income rate. Remove separate reporting and taxation of dividends, as this would be double dipping from the aforementioned information.

I am the farthest possible from an expert, but that actually seems like a good proposal.

And I can't wait for corporations to start deflating their earnings statements to encourage more people to buy their stock as a tax dodge.

 

[FlagDUDE08]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

I am the farthest possible from an expert, but that actually seems like a good proposal.

And I can't wait for corporations to start deflating their earnings statements to encourage more people to buy their stock as a tax dodge.

Wait wait wait... Kepler actually AGREEING with an idea of mine?! Stop the presses!

The only potential issue is that it may actually force distributions, because shareholders will insist they have the ability to pay taxes on earnings instead of seeing the money be placed directly back into the company. Of course, the funds will be a little tricky, because it's a question of who pays. I am making an assumption that, as the share ownership is "passed" to the investor, that the fund managers may "pass" the tax directly to the investors, unless the managers are the final holder of the shares due to their setup.

Also, board members aren't as strong as one would think. Remember what happened to Darden's board (the corp that owns Olive Garden)? Shareholders cleaned them out.

 

[Kepler]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Wait wait wait... Kepler actually AGREEING with an idea of mine?! Stop the presses!

I know. God is dead and I'm not feeling well myself.

 

[St. Clown]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Wait wait wait... Kepler actually AGREEING with an idea of mine?! Stop the presses!

The only potential issue is that it may actually force distributions, because shareholders will insist they have the ability to pay taxes on earnings instead of seeing the money be placed directly back into the company. Of course, the funds will be a little tricky, because it's a question of who pays. I am making an assumption that, as the share ownership is "passed" to the investor, that the fund managers may "pass" the tax directly to the investors, unless the managers are the final holder of the shares due to their setup.

Also, board members aren't as strong as one would think. Remember what happened to Darden's board (the corp that owns Olive Garden)? Shareholders cleaned them out.

Which would then stymy growth of publicly traded companies as corporations would no long have the ability to reinvest their retained earnings into the company - because there wouldn't be any due to paying them all out to shareholders.

 

[St. Clown]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Really, what you would likely see is companies taking out loans in order to fund growth, and thus putting more money and power into the hands of those evil bankers. Oooooooohhhh.

 

[dxmnkd316]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

I am the farthest possible from an expert, but that actually seems like a good proposal.

And I can't wait for corporations to start deflating their earnings statements to encourage more people to buy their stock as a tax dodge.

Yeah, I can't see anything wrong with it on it's face either. This is weird.

 

[dxmnkd316]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Of course, the funds will be a little tricky, because it's a question of who pays. I am making an assumption that, as the share ownership is "passed" to the investor, that the fund managers may "pass" the tax directly to the investors, unless the managers are the final holder of the shares due to their setup.

They already do this. It was the same thing with funds that owned Medtronic when Medtronic inverted. That essentially gets absorbed by the fund and passed on as either fee increases or just a hit to the performance of the fund. (I'm not sure which, but it's one of them.) Take Vanguard. They aren't going to pay taxes directly (or maybe they would since Vanguard is an odd and very unique firm), the fund pays them as I understand it. I, as an investor in the VTSAX fund, didn't have to pay the taxes on Medtronic's transaction despite VTSAX owning Medtronic shares.

 

[dxmnkd316]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Which would then stymy growth of publicly traded companies as corporations would no long have the ability to reinvest their retained earnings into the company - because there wouldn't be any due to paying them all out to shareholders.

How so? Only a diseased company doesn't reinvest in itself. They aren't going to mortgage future growth (and potentially the viability of the company) for short-term taxes. At least not without being seen by the market as a diseased company. Keep in mind that most capital expenditures for production equipment are tax-free right now. That's a big incentive for corporations to spend money on themselves.

 

[St. Clown]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

How so? Only a diseased company doesn't reinvest in itself. They aren't going to mortgage future growth (and potentially the viability of the company) for short-term taxes. At least not without being seen by the market as a diseased company. Keep in mind that most capital expenditures for production equipment are tax-free right now. That's a big incentive for corporations to spend money on themselves.

Reinvestments back into the company are made with retained earnings. We have tax deductions to doing that now, but what's being proposed would strip those deductions from companies going forward.