Reply to thread

Message: <blockquote data-quote="John Roberts" data-source="post: 33924" data-attributes="member: 126">Re: 2011 U.S. Budget Cut in PerspectiveYes it's our right to take advantage of legal tax breaks, and blatant cheaters will get caught, but the whole reason for the 1099 brouhaha, that we luckily dodged, was to set up a mechanism to find unreported revenue. My private suspicion was this was laying a ground work for a future VAT. While small numbers of blatant cheating can be rooted out, wide scale cheating occurs when taxes become so high that people don't think they are fair. This is the situation in some other countries where underground cash and barter economies operate in parallel to avoid VAT transactions. The increasing movement to computer based payment systems seems to me to make tax cheating harder but we'll see. I make a distinction between taking advantage of tax law as written, and the popular big business practice of lobbying for tax rules changes, for either bottom line benefits, or in some cases competitive advantage against other companies.  IMO tax breaks that only help a small handful of companies is not tax law but industrial policy picking winners and losers that should be broadly inspected and only used for some (real) greater good. The "raise taxes" debate seems overly fixated on examples like GE paying no taxes one year. I don't even have to google that, GE has a finance division that lost beaucoup dollars in the recent derivatives collapse. They probably have enough real losses to carry forward for several years.   There seems to be some confusion between the nominal tax rate and the effective tax rate actually paid. Big companies are more capable of taking advantage of obscure tax breaks because they can afford the legal machinations often involved. So many large companies pay so little that the average effective rate is probably in the low 20% range, vs a nominal 35% or so rate. What I really don't like about this, is that this is yet another advantage held by big business over small business. Almost like big business is in partnership with government against small business (AKA "crony capitalism").  My suggestion is not to raise revenue by increasing the top line tax rate even higher, that will discourage business activity by those outside the crony tent, but instead raise revenue by closing (some) tax breaks and perhaps lowering the nominal rate, while increasing the effective tax revenue received. It should not be disputed that small business is a better vehicle for job creation than big business (Like Hon Hai announcing it will buy 1 million robot arms).     When we reach the point that the tax bite discourages earning more money that is a different and much better problem to have (however some argue that the dole does discourage job seeking). Right now I don't see the tax rate as the major impediment to growth and business activity. It has a macro effect on big business decision like "where" to expand, but for smaller domestic companies not considering leaving the country the problem is fear and uncertainty over ongoing regulatory expansion (over reach?). Unlike government, business can budget and plan for future ways to make lemonade from whatever lemons it is dealt (and business has the capital to do it). What business does not have is clear picture of what the future business climate will look like, with lots of evidence pointing to future higher costs and higher regulatory burden (health care bill is just one obvious example but there's more).JR</blockquote>

Verification

Top Bottom