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Washington knows to get America working again they have to change Corp Tax Code

It’s quite possibly the only thing Grover Norquist and Bill Clinton have ever agreed upon. Of course Norquist insisted they would have to Cut Corporate Taxes, while both agreed a “Stream-lining”, an elimination of all the “Special Interest Loop Holes” would restart the economy and spur hiring again.

Currently the US Corporate Tax Code rewards MultiNational Corporations / Wall St. Conglomerates with Tax incentives to Offshore manufacturing facilities. So much so the Corporate Tax Code should be renamed “The China Express”

It also hinders and suppresses “Start-Ups”, the Cottage Industries that have long been touted and statistically proven to be the real “Job Creators” of the American Economy.

What is Washington doing about it – Absolutely Nothing

What specific sections of the IRC would you say need to be changed?

As it stands, Corporations get double taxed on their gross income. 34-35% on gross income and 15% for dividends. Additionally, when it comes to offshore manufacturing facilities in China, is it really fair to re-tax corporate subsidiaries that creative products in China, in Chinese factories with Chinese workers and have to pay Chinese income tax? How would America compete in the world? Again, who would even want to trade with America if there's a tax treaty made that guarantees a double tax? Of course when these products are shipped back to America and sold a sister domestic corporation, they're taxed again.

The Effective Mean Rate of Corporate Taxes in the USA is 27%. China has a Flat Corporate Tax of 25% with an additional VAT of 10% on all goods produced or received.

Of course the Foreign Tax Deduction allows Corporations a deduction equivalent to any foreign taxes paid.

Additionally the Foreign Profits Exemption allows them not to pay any taxes on foreign profits until those funds are repatriated into the United States. Of course the Corporations reported the funds "Off Shore" until the "Tax Holiday" Bush Jr. signed into law in 2004 and again in 2007 and no taxes were paid at all.

Point of Interest - this does not cover Tax Avoidance realized by Intra-Corporation Transfer Pricing which helps corporations avoid taxes, not only in the country of origin but also in the country of destination. Current estimates of Intra-Corporation Transfers account for 60% of all Global Trade.

Personally I don't think the US should tax foreign profits at all and should stream line the Corporate Tax code to resemble something more in line with a VAT.

The statutory corporate tax rate is 34%-35%. Look it up. IRC 11(b)(1).

A foreign tax paid deduction is only available if the corporation pays tax abroad. It is essentially preventing double taxing.

A foreign tax credit for corporations is a very limited below the line deduction and the domestic parent corporation must meet relationship requirements with their sister corporation.

I doubt that 60% of corporations are using transfer pricing for tax avoidance. There's no way they're getting this past the large and mid sized operating division of the IRS, especially when these big corporations are continually audited by the IRS under the Coordinated Examination Program.

La_resistance wrote:The statutory corporate tax rate is 34%-35%. Look it up. IRC 11(b)(1)..

Your right - that is the "Statutory Tax Rate" meaning Prior to deductions, and yes I did error. The 2004 Effective Corporate Tax Rate was 25.2% as audited by the GAO

http://www.gao.gov/new.items/d08950.pdf

But don't take my word for it - Here is a good article explaining how many Corps pay little or no taxes

http://www.bloomberg.com/news/2010-10-2 ... holes.html

Freakindj wrote:

La_resistance wrote:The statutory corporate tax rate is 34%-35%. Look it up. IRC 11(b)(1)..

Your right - that is the "Statutory Tax Rate" meaning Prior to deductions, and yes I did error. The 2004 Effective Corporate Tax Rate was 25.2% as audited by the GAO

http://www.gao.gov/new.items/d08950.pdf

But don't take my word for it - Here is a good article explaining how many Corps pay little or no taxes

http://www.bloomberg.com/news/2010-10-2 ... holes.html

Talking about the effective income tax rate without mentioning specific deductions that you have a problem with is a little misleadng. I think the problem with your argument is the assumption that corporations are the tax problem. Interestingly, it's actually individuals who account for the largest amount of tax unpaid.

Source: http://www.businessweek.com/news/2012-0 ... -2006.html

No I don’t maintain Corporations are the problem nor that Taxation is the problem. The problem lies in the United States method of Corporate Taxation.

The United States is going it alone Taxing Foreign Profits when in fact we should be using a “Territorial Corporate Tax System”. This current Corporate Tax Code creates pressure on large Wall St. Conglomerates and MultiNational Corporations to include “Foreign Subsidiary Corporations” in their portfolio to offset US Corporate Taxes incurred with in the United States. This also opens the door to manipulation by foreign countries whom create “Corporate Tax Havens” with little or no taxation that serve merely as paperwork corporations. Often times these foreign subsediary corporations can be nothing more then a mailbox, never receiving or handling the goods they are accessed in tax filings for increasing the “Value” of the goods some 300 – 500%.

This places too much pressure on Conglomerates and Multinational Corporations to move manufacturing facilities offshore to take advantage of these loopholes in the US Corporate Tax Code.

Additionally the US Tax Code provides incentives to foreign countries to bypass Free Trade Treaties by granting preferential Tax treatment or special reduced tax rates to whole industries that primarily produce “Export Goods” as we have seen recently with German Auto Manufactures operating in China or as they did with US Microchip Manufactures operating in China.

The US Corporate Tax Code needs to draw a firm line between profits and goods and treat goods entering our borders with a VAT.

The US Tax Code additionally has a very large problem with “Intellectual Assets” allowing the Proprietary Rights to be transferred to a tax haven foreign subsidiary while Operating Cost and R&D Tax Credits are deducted here in the USA.

Tax policy definitely needs to be revamped. It has to be made attractive for corps to do business here. Likewise, tax breaks for those at the very top should only be given if they invest in infrastructure and/or necessary social programs.