Re: Weaving the Strands: Business, Economics, and Tax Policy 2.0
It's just like if you earn money in two different states. You pay your non resident state taxes first, and your resident state credits those taxes paid against your bill due to it.
Not quite. Your resident state credits you with the
lesser of the actual tax paid, or what the tax would have been had you earned all of the income in the resident state, if the resident state's tax rates are lower.
Your answer highlights the problem: your resident state does NOT assess additional income tax on the income you earn in another state, if that state's tax rates are lower.
The way the US corporate tax rate works, it would be like a person who lives in NY and works in CT, pays CT income tax on CT income, and then NY state would step in and also assess additional tax on income earned in CT as well. That does not happen with state income tax.
However, if a company earns money overseas, and as long as it stays overseas, it only pays the overseas tax rate. However, if the company wants to bring overseas money into the US, it has to pay the highest corporate income tax in the world. That is really bad tax policy: we
want that money to come back onshore, don't we? then why not just have a lower corporate tax rate on repatriated money?
Corporations do not pay taxes, they merely collect them. The tax burden ALWAYS falls on someone else.
To quote Justice Learned Hand:
Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. [emphasis added]
Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934).
Why are people criticizing law-abiding folks for following the law? Isn't their behavior instead an indication that the law is flawed and should be changed?
