Boston Globe: "Warren unveils plan for [blitheringly stupid] new tax on big corporations"

Dec 2018
2,367
742
New England
#1
From a recent Boston Globe story:

Senator Elizabeth Warren is proposing another new tax that targets the richest entities in the US economy, this time Amazon and the nation’s other most profitable companies. The Massachusetts Democrat wants to slap a 7 percent levy on profits beyond $100 million. ... "[Warren] described the idea as a 'new kind of tax that big companies can’t get around.'"
This is yet more proof that either Warren is woefully ignorant of the basic workings of the global economy or she's betting the voting public is.

Here's a simple process for legally evading this tax:
  • Let's suppose you're planning a new product, a widget.

  • You estimate the cost of producing widgets is $1b, and you estimate you'll make 1.5b in revenue.
  • Your annual profit will be $500m, and you realize you'll be subject to Lizzie's new "get 'em" tax.

  • Not being stupid, and for short money, you incorporate a new company in a country that has a reciprocal tax treaty with the US. Ireland or Switzerland will do.

  • You arrange things such that the intellectual property rights for your widget are owned by your Irish company. Your Irish company then licenses the rights to make and sell widgets to your US company.

  • By a happy coincidence, the cost of licensing the widget matches the revenue gained by selling the widgets minus the cost of your US operations, thus the US company shows no profit and pays no US taxes.

  • The profit instead is realized by your Irish company, and taxes paid on that profit enrich the treasury of the Republic of Ireland.

  • The US is left with nothing other than the smug satisfaction of Warren voters who are still convinced they've stuck it to your big corporation.

Warren may know all this and not care; or she just may be stuck in 1990's thinking, but the economy today is global, and capital will always out pace bureaucracy because our powers to tax stop at the border.
 
Likes: Sabcat
Jul 2014
14,231
8,645
massachusetts
#5
From a recent Boston Globe story:

Senator Elizabeth Warren is proposing another new tax that targets the richest entities in the US economy, this time Amazon and the nation’s other most profitable companies. The Massachusetts Democrat wants to slap a 7 percent levy on profits beyond $100 million. ... "[Warren] described the idea as a 'new kind of tax that big companies can’t get around.'"
This is yet more proof that either Warren is woefully ignorant of the basic workings of the global economy or she's betting the voting public is.

Here's a simple process for legally evading this tax:
  • Let's suppose you're planning a new product, a widget.

  • You estimate the cost of producing widgets is $1b, and you estimate you'll make 1.5b in revenue.
  • Your annual profit will be $500m, and you realize you'll be subject to Lizzie's new "get 'em" tax.

  • Not being stupid, and for short money, you incorporate a new company in a country that has a reciprocal tax treaty with the US. Ireland or Switzerland will do.

  • You arrange things such that the intellectual property rights for your widget are owned by your Irish company. Your Irish company then licenses the rights to make and sell widgets to your US company.

  • By a happy coincidence, the cost of licensing the widget matches the revenue gained by selling the widgets minus the cost of your US operations, thus the US company shows no profit and pays no US taxes.

  • The profit instead is realized by your Irish company, and taxes paid on that profit enrich the treasury of the Republic of Ireland.

  • The US is left with nothing other than the smug satisfaction of Warren voters who are still convinced they've stuck it to your big corporation.

Warren may know all this and not care; or she just may be stuck in 1990's thinking, but the economy today is global, and capital will always out pace bureaucracy because our powers to tax stop at the border.
So you're saying while we're backing out of treaties left and right, maybe we should back out of that tax treaty that makes a double irish possible?
 
Dec 2018
2,367
742
New England
#6
So you're saying while we're backing out of treaties left and right, maybe we should back out of that tax treaty that makes a double irish possible?
Um, no.

I'm saying Warren's tax will do little but drive taxable income offshore and also that Warren is preying on the economically illiterate.
 

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