With many corporations merging with or buying out foreign corporations and then taking on the identity of that foreign corporation to lower their tax burden, the liberal point of view is to tax them anyway at the same or higher rate than when they were an American Corporation.
For a little base information on the issue, America taxes corporations higher than any other developed nation in the world. The corporate tax rate for American corporations is 35% of all income earned by the corporation worldwide. No other country taxes their corporations on any income created outside the boundaries of that country because the nations where the income is produced are already taxing that income. So there is an incentive for a company to move outside of America to increase the profit margins for the stockholders who the corporations are ultimately responsible to. The tax rate for corporations in Canada is 26% but only on the income generated in Canada.
If the corporations move outside the confines of the high taxation of America, what is the next logical step for the corporate leaders? The corporate leadership moves outside the United States to protect their personal income. In the upper income bracket in America, the tax rate for individuals is 35% like the corporate tax, while in Canada; the highest tax rate is 29%.
EXAMPLE: A corporation making $10,000,000 profit in America and worldwide profits of $100,000,000 has to pay $35,000,000 in corporate taxes in America while if it were a Canadian Corporation the tax burden would be $2,600,000 for a difference of $32,400,000. That is a huge difference between the two and stockholders would support the move. All of the Chief executives in the company make $2,000,000 a year each. In America, their tax burden would be $700,000. In Canada, the taxes are $580,000. That is a difference of $10,000 per month. So the intelligent thing to do is move.
Now, to the liberal point of view to tax them at the same or higher rate than when they were an American corporation:
To continue to tax as if still and American corporation or raise the tax rate on those corporations America would have to then tax ALL foreign corporations doing business in America at the same rate. What happens when you put a levy on foreign goods being imported to America? Foreign nations put levies against American goods being exported, or even place embargos on American exports. Who gets hurt the most? America gets hurt the most. America is dependent upon the income produced in importing and exporting goods. If you cripple that system, you cripple America. Right now experts estimate that there is $2,000,000,000,000.00 in American corporation profits sitting overseas because the companies don’t want to pay the most exorbitant tax in the world on that income earned overseas. While liberals try to scheme ways to get their hands on that money, which will never work, Americans are the ones who are losing.
If America did not tax that overseas income, it would be brought back to America and most of it would be paid out in dividends to the stockholders and those dividends are……wait for it……..wait…….TAXABLE! But America wants to tax the income and then tax the dividends because in the case of the $2 trillion dollars it would get 35% of the bulk ($700 billion) and then 35% of the remainder that was paid out in dividends or ($455 billion) for a total taxation rate on that $2 trillion dollars of 57.75% (the $1.155 trillion taken in taxes).
What liberals don’t seem to understand is those corporations do not have to repatriate that money to America. Even though some are shouting to tax it even if it is not repatriated, the obstacle is you cannot prove how much is out there and therefore you cannot tax an unknown amount. The other issue that they seem to have a problem understanding is $455,000,000 in tax revenue is better by a long shot than $0 which is what we have while it sits overseas.
Also, now America can only tax the corporation on profits made in America. America is still losing out on what it was getting before. They are losing out in the example above on $31,500,000 in tax revenue from this one company. However, if you raise the taxes too high and it is no longer cost effective for an international corporation to do business in America, they close their doors on American operations and once again the big loser is America because now it gets $0 in tax revenue from that company AND all the Americans previously employed by that corporation are now unemployed; which jacks up the unemployment rate.
So now, the liberal approach has forced more and more corporations to become foreign companies to lower their tax burden and the leadership making the most income from those corporations has moved with the companies decreasing the American tax revenue to sustain American spending.
To maintain the level of social programs the government would be left with no choice but to tax the middle class at a higher rate because the upper class income has vacated our shores resulting in middle class income becoming the new upper class. You raise the taxes; you lower the buying power of the citizens thus increasing the consumer price index. When the consumer price index increases, inflation is the result which further decreases the buying power.
After a while, more and more people with educations and skills will leave the high cost of living country of America for more favorable treatment in other countries. As you export your knowledge workers, what you have left is a third world country.
Of course, when we become a third world country at least then companies in other countries will outsource their jobs to America and those who are left will be employed again; but who can wait that long?
The biggest issue I see is that liberals look at now without consideration for the future ramifications because that will be someone else’s problem and they can always say “look how we helped” even though their help is what causes crises down the road.