Corporate Taxes

The US has one of, if not the, highest tax rate on businesses in the world, at 35%.  As a result, our internationally operating businesses book their profits in their overseas jurisdictions and leave those profits there.  This much is well known.

Republicans want to lower the corporate-tax rate and let companies bring future global profits home without paying US taxes on top of foreign taxes. They are searching for a way to do that without giving companies an incentive to move more operations and profits to countries with far lower taxes.

Or so they say.

Republicans seem to be moving toward gerrymandering our corporate tax law even further, with the claimed goal of encouraging our businesses to repatriate their overseas profits.

As part of that overhaul, Republicans want to exempt foreign corporate income from US taxes to a large extent.  …  The 35% rate would come down and the minimum rate would be set below the new U.S. corporate tax rate.

The rationale for such a “minimum tax?”

A minimum tax would act as a “safety net” against companies trying to pay little or no tax on some foreign income, said Ed Kleinbard, a tax law professor at the University of Southern California.

On the other hand,

The countries that use tax systems Republicans want to emulate allow their home companies to bring back cash with little or no tax. They use a variety of rules to prevent companies from seeking to pay less tax by moving operations or profits abroad, but generally don’t have minimum taxes on active foreign profits.

But this misses the point.

And

The original House GOP plan to address foreign profits and prevent erosion of the US corporate-tax base was border adjustment….

This misses a separate point.

The first point: lower our corporate tax rate to the lowest in the world.  The Trump administration’s proposal of a 15% rate or House Speaker Paul Ryan’s (R, WI) proposal of 20% would come close to that (only Ireland’s 12.5% rate would remain lower).  Or eliminate corporate income taxes altogether, say I; a business’ tax bill is paid, in the large main, by the business’ customers anyway in the form of higher prices—and the final customer is the American consumer, who would benefit from lower prices.

Either of these would not only disincentivise our businesses from leaving their profits overseas, they would reverse the flow: foreign businesses would flock to set up shop in the US because of the tax advantages they’d obtain—the same advantages that currently encourage our businesses to set up “over there.”

The second point: it isn’t the government’s money; there is no legitimate “corporate-tax base” to erode.  There wouldn’t even be a drop in revenue to the Federal government: the ensuing flourishing economy would generate more revenue for the government than any revenue reduction from lowering or eliminating the corporate income tax.

And: it isn’t gerrymandering to simplify and lower the corporate tax rate, nor is it gerrymandering eliminate the tax rate altogether.  There isn’t any need to play games when so simple a solution is, or should be, so easily implemented.

Brain Burp

[Because this is a family blog.]

I had this one this morning while out on one of my walks.  It concerns a free market economy, bankruptcy, the bankrupt company’s employees, and what we ought to do about those employees.

In an ideal world’s free market, then, here is my gaseous expulsion.  It comes against the backdrop of my long-held disdain for the citizens of one State being forced to send their tax dollars to another State via the mechanism of Federal transfer payments in order to indemnify the recipient against its own foolish spending.  That backdrop also includes James Madison’s remark, on the occasion of Congress’ considering money transfers to Haitians after a devastating earthquake

that he could not undertake to lay his finger on that article in the Federal Constitution which granted a right of Congress of expending, on objects of benevolence, the money of their constituents.

However, our prosperity has grown to the point that our free market imperatives need not remain so cold, and it is in our society’s interests to help the dislocated—employees who’ve lost their jobs due to their employer’s bankruptcy, in the present case—get back on their feet and resume being productive members of their communities and the nation.

Thus: I say, regarding companies faced with bankruptcy, that if the participants in our free market economy—private citizens and their businesses—do not think a company worth saving, then the Federal government should accept that judgment and not intervene to bail out that company: the company, regardless of its size, should be allowed to fail.  I think the same tack should be taken by State governments, but that’s for the citizens of each State to decide.  In the event, Federal monies supporting bailouts should not go to those States that choose to do them.

Against that, I propose assistance to the employees of the bankrupt in the form of a Bankruptcy Jobs Retraining Program, which would operate along the following lines.

Employees below a certain level in the bankrupt company (the idea being, after all, to help the employees, not the “managers,” even if it was market events and not strictly management failure that generated the conditions leading to bankruptcy) would get a job retraining stipend.  It’s important to specify, too, that the stipend would not be an education stipend, but only a job (re)training stipend.  The stipend would have the following parameters:

  • expire after a specified number of days elapsed in training
  • be issued as a loan to the retrainee, with payments—principle and interest—due monthly. If the retrainee gets a job within a specified time after graduation and holds it for a continuous year (with “continuous” defined by the nature of the job: some, like construction, tend toward seasonality), the loan would be converted to a grant with no loan payments due.  Disposition of the loan in the event of the retrainee not working for a continuous year should include at a minimum these possibilities: the retrainee would make payments from the day of graduation, payments would simply accrue and not be due until failure to get a job or on leaving the job for any cause before the first year was up, retrainees aging out of the training program without graduation
  • could not be used more than once in any specified interval (for instance, a 10-year period). A lifetime cap seems infeasible because the (retrained) employee has no control over market events or management failures that might drive his new employer bankrupt
  • a retraining expense amount, not a living expense amount

The issuance of the stipend would be managed by two or three private enterprises that are independent of the Federal government and independent of each other.  These Stipend Issuers would be funded by no-strings grants from the government, and they would be solely responsible for dispensing the funds.

Stipend Issuers would develop market indices that identify and track the most employer-needed jobs that have the shortest labor supply—the largest job gap—independently of geography.  The Job Gap Indexes would rank the gaps, and the Stipend Issuers would pay the largest stipend to retrainees training for those jobs with the largest gap and that have the most expensive training.  Whether the expense and gap should be measured at a national level or regionally is a question to be settled in open debate.

Job Gap Indexes shouldn’t be that hard to develop.  Lots of investors and investment companies and other entities (e.g., The Wall Street Journal) already are quite skilled at developing indexes for assessing/tracking investment markets; a Job Gap index is not that different.

Retraining could be done anywhere, independently of where the retrained-to job is located.  A San Francisco resident, retraining for a job type where the largest gap is in New York, for instance, would be able to take the retraining program in San Francisco.

From that, Stipend Issuers would be authorized to commit a small per centage of their Federal Retraining Grants to relocation assistance, with the proviso that this diversion would be for assistance, not for the total cost of moving.

Since unions are, by their own definition, in the business of helping their membership, union members would see their stipends reduced by the total amount of union dues (including the portion the union claims was earmarked for political activities) paid by the union member retrainee in the twelve months prior to the employing company filing for bankruptcy.

What Hath Fracking Wrought

From AEIdeas comes one indication:

AEIdeas summarized the circled section:

In 18 of the last 19 months starting in December 2015, the energy share of consumer spending has been below 4% marking a historic period of the most affordable energy in US history (annual data on energy spending back to 1929 confirms this).

That’s evil oil and gas for you—making our lives easier and making that ease cheaper.

Congress Has 12 Days

There are 12 days left after their 5 September return from vacation, driven by the Obamacare requirement for health plan providers to commit by 17 September to selling their health plans for the next year or withdrawing, for Congress to pass a potful of legislation.

Two proposals regarding Obamacare are in the offing.  One would shore up the funds transfer of Federal dollars to those providers who are losing money in ObamaMart, and the other instead would send that money as grants to the States to help them generate their own health coverage plan programs.  This one also would eliminate the Individual Mandate.

Also looming is the debt funding deadline that necessitates raising the debt ceiling to pay currently committed-to bills.

Also: an immigration bill that rationalizes our immigration policy is in conference.  It severely restricts green card issuance (which is foolish IMNSHO), but it has the beneficial effect of that rationalization.

Also: an infrastructure restoral bill is under construction.

Also: bills to withdraw counterproductive, if not outright mendacious, Federal rules and rulings in the EPA, DoEd, Labor, etc that were intended to destroy whole industries (can you say, “coal,” boys and girls?), cancel rule of law on campuses, much too excessively favor unions over management (NLRB), and on and on.

Twelve days of Christmas?  Or is the Grinch coming? [/snark]  Not all of those necessaries have that 12-day deadline, but all of them need to be done quickly, since Congressmen—of both parties and in both houses of Congress—are too (how to put this delicately) chicken to do anything substantive in an election year.  Even were they around in DC doing their jobs instead of hiding out on their various campaign trails.

The Communist Worker’s Paradise

Here’s an example, People’s Republic of China style.  Including the fact that gender discrimination in the workplace is illegal in the PRC, while its governments at all levels blithely ignore those laws.

[A]bout 22% of women have experienced severe or very severe discrimination when seeking employment, according to Zhaopin Ltd, an online recruiter. … That percentage rose to about 43% for women with graduate degrees.

And

A trawl through job listings on Boss Zhipin, the recruitment site, showed some tech companies state explicitly that positions are just for men.

An e-commerce marketing job at NetEase Inc, one of the largest internet companies in China, recently stated that only male candidates need to apply because “the job is tough and stressful.

It begins early on in their society.

Parents often tell their daughters they won’t be good at math or physics or coding.

Welcome to paradise.