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Corporate tax rates and Jobs
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One of my liberal friends posted some meme on Facebook recently, and other friends jumped into the discussion that followed. The meme was about lowering tax rates on the wealthy but allowing a situation where veterans have to beg for food. So of course the first comment was as follows:

What about a country that raises taxes so high on businesses that they can't afford to hire veterans, who then have to beg at pantries? The United States has the highest corporate tax rates in the world.

In his followup:

They ship operations overseas to avoid the highest taxes on the planet. Then the Left blames them for shipping jobs overseas to avoid the highest taxes on the planet.

Then a different liberal friend posted:

Rarely does a corporation in this country pay the actual tax rate. Many pay no taxes at all. Funny thing is, I've got a hunch you know things like this yet it never stops you from spewing the talking points like a bot.

Next quote:
I just said a lot of them ship their operations overseas to avoid the taxes. I'd rather have them pay the same tax rates as everyone else and see if we can keep some of those jobs here. But I got a hunch you don't understand that.

And finally (from the original poster):
I have YET to hear a republican admit that Saint Reagan is responsible for our economic problems. Even Ross Perot knew what was going to happen after the Import tariffs got whacked.

So I got thinking...I didn't want to post my own opinions on Facebook because I have too many friends who think different things. I've learned to not speak up in the office. You don't generally change anyone's mind anyway, so why bother? All it earns you is hurt feelings.

So here I am on Rambler, posting my thought. I sort of agree that corporate taxes are sort of counterproductive and even double taxation in a way. Large corporations, if I understand correctly, declare profits every year, then divide those profits by shares, and pay a per-share dividend to the shareholders. So aren't they getting taxed on those profits twice, once at the corporate level (at about 35%) and again at the shareholder/individual level (at whatever their effective tax rate is)?

Maybe I have that wrong. Maybe corporations get to write off the dividends they pay out, and maybe they simply pay taxes on the amount of cash they retain in their own accounts. But I don't think that's the way it works. I think that those profits are taxed twice, first at the corporate level and second at the personal level.

So if the tax rate on corporations was reduced, what might happen? There wouldn't necessarily be the need to perform a series of gyrations at the end of the fiscal year to minimize profits, thereby minimizing corporate tax paid. So there would be more profits, probably, in each corporation. That would in turn lead to higher dividends, which would in turn lead to higher revenue at the individual level, perhaps.

Now, that's for big corporations. What about the little ones? The small- and mid-sized corporations? Like the one I ran?

Well, I know that at the end of each year, I ran through a series of financial moves in order to bump expenses into the current year and to move revenue into the next year. The point of those moves was to reduce the corporate profits to zero, or into negative territory, if I could.

One of the moves was to pay bonuses to myself and my staff. Yeah, one of the ways that a corporation can reduce its own profits is by paying its employees a bit more.

So what does that say about corporations that are shipping jobs overseas? If they're based in the US, that move lowers their expenses, and raises their profit, but I cannot for the life of me see how high corporate taxes result in jobs being shipped overseas. The only thing that could possibly result from shipping jobs to low-paying areas of the world is to increase profits, thereby increasing their corporate taxes.

In other words, greed.

If they're shipping their entire operations overseas in order to be based out of a country that has a super-low corporate tax rate, that changes things a little bit. But not much. Because then what's the motivation for shifting those jobs overseas as well?

It also has to be greed.

Why did Toyota and Mitsubishi and any number of Japanese car manufacturers move their manufacturing to the US? Because it must have made sense from a few angles. Maybe one angle was that their largest market was here in the US and it was in their interests to make sure that their customers could afford their products. Maybe labor costs here are less than Japan (I don't know about that one). Maybe costs in general are cheaper if the manufacturing facilities are closer to the sales facilities.

I just can't see how moving operations overseas would preclude having manufacturing facilities here in the United States, not for tax reasons. For increasing profits, yes. There would always appear to be an incentive for lowering your labor costs in order to increase profits.



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