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Dustin Howard over at Americans for Limited Government tackles one of the key factors contributing to the rise of corporate inversions: high corporate taxes. I would also argue that another mitigating factor is foreign-earned income, which the United States government lays claim to — and is the only major country to do so. Under U.S. tax law, U.S. companies are forced to pay both foreign- and domestic-earned income, putting them at a global disadvantage.
At any rate, Howard’s piece is a worthwhile read on the equally detrimental effect of high corporate tax rates. I have shared it in its entirety below.
“How should policymakers stop the bleeding of American jobs overseas? There’s one easy answer among many harder ones, and that is to stop making it so expensive to do business in the United States.
Many things price American workers out of competition, whether it be the current mix of trade rules, currency manipulation and other unfair labor practices but the easiest to address domestically is the corporate tax rate. Government’s unwillingness to do with less is making it considerably harder for Americans to even work.
Seriously, why should American corporations pay a 39 percent rate, among the world’s highest, to headquarter here when they can “invert” to Ireland and pay 12.5 percent, less than one third the domestic rate?
If the corporation can keep most of their American workforce and keep 26.5 percent more of their money as an alternative by cutting the corporate tax rate, wouldn’t that a good thing?
Why would the U.S. maintain a policy that discourages business from even being on American soil?
Democrats propose a solution to this phenomenon: punish the innovating refugees that refuse to pay into their racket. They believe in taxing the profits of inverted firms. One problem: extrapolating from a recent study by economist Wayne Winegarden for the Pacific Research Institute, this actually further discourages firms from even retaining their American workforce, and encourages them to simply export their products outright from their new foreign addresses.
Call it a lose-lose proposition, where American workers lose jobs, American businesses leave and revenues drop while the deficit increases; Ireland should chip in and send Democrats a fruit basket.
If taxing inverted companies suddenly sounds unappealing, here’s an alternative: make inversions less attractive as a means of generating profit. The U.S. is a free country, so it looks bad when it punishes corporations for acting in their best interest. Instead, why not lower the tax rate to a more competitive, attractive rate, and then focus rolling back the regulatory state that is literally paid by taxpayers to make businesses less productive?
The first step on this path would be to begin reducing the cost of business with a comprehensive set of tax reforms that clean up our messy corporate tax code, and give businesses a sense of calm when planning for the future.
Besides it’s not like the corporate tax generates that much revenue anyway, at just 10.6 percent of $3.2 trillion of total receipts in 2015, according to the Office of Management and Budget. By far the most revenue comes from individual and payroll taxes.
As things stand, corporations are seeking foreign shores to chart out profitable futures, mainly because the business climate in the U.S. has made itself so volatile that it cannot accomplish that at home. The data supports the notion that punishing corporations that choose foreign domiciles will hurt working Americans more than it will avenge or protect them. The limited government solution is to let individuals choose what works for them, and to tax them at a reasonable rate so they do not move out of necessity.
As stated above, lowering the corporate tax rate is just one part of the solution. America has fundamental problems across the board that put us at a global disadvantage that should also be addressed.
The corporate tax rate is a necessary first step to signal to the world that we are restructuring the policies to make the U.S. more attractive among competitors. Creating jobs in America begins with keeping the economy free and competitive, and that cannot happen without fiscal restraint and limiting government, but also cannot happen if we’re taxing ourselves to the stone age.
by | ARTICLES, BUSINESS, GOVERNMENT, TAX TIPS, TAXES
Tax Refund Offsets Pay Unpaid Debts
If you can’t pay your taxes in full, the IRS will work with you. Past due debts like taxes owed, however, can reduce your federal tax refund. The Treasury Offset Program can use all or part of your federal refund to settle certain unpaid federal or state debts, to include unpaid individual shared responsibility payments. Here are five facts to know about tax refund offsets.
1. Bureau of the Fiscal Service. The Department of Treasury’s Bureau of the Fiscal Service, or BFS, runs the Treasury Offset Program.
2. Offsets to Pay Certain Debts. The BFS may also use part or all of your tax refund to pay certain other debts such as:
Federal tax debts.
Federal agency debts like a delinquent student loan.
State income tax obligations.
Past-due child and spousal support.
Certain unemployment compensation debts owed to a state.
3. Notify by Mail. The BFS will mail you a notice if it offsets any part of your refund to pay your debt. The notice will list the original refund and offset amount. It will also include the agency that received the offset payment. It will also give the agency’s contact information.
4. How to Dispute Offset. If you wish to dispute the offset, you should contact the agency that received the offset payment. Only contact the IRS is your offset payment was applied to a federal tax debt.
5. Injured Spouse Allocation. You may be entitled to part or the entire offset if you filed a joint tax return with your spouse. This rule applies if your spouse is solely responsible for the debt. To get your part of the refund, file Form 8379, Injured Spouse Allocation. If you need to prepare a Form 8379, you can prepare and e-file your tax return for free using IRS Free File.
Health Care Law: Refund Offsets and the Individual Shared Responsibility Payment
While the law prohibits the IRS from using liens or levies to collect any individual shared responsibility payment, if you owe a shared responsibility payment, the IRS may offset your refund against that liability.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
Additional IRS Resources:
Tax Topic 203 – Refund Offsets
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The following is a short version of a recent talk by Ben Eisen regarding the minimum wage issue as a poverty-fighting tool. It is undeniable that the percentage of full-time workers in poverty is much less than part-time workers. “He explained – using sound economic theory and admirable coverage of empirical findings – that the minimum wage is as effective a tool for fighting poverty as is gasoline as a tool for fighting fires.
One of the stats that Ben cited is that only three percent of workers who work full-time year ’round live below the poverty line, while sixteen percent of workers who work only part-time live below the poverty line. (I can’t recall if Ben’s stats are for Canada or the U.S., but because the general trend no doubt holds in nearly all countries, whether Ben’s specific stats are for Canada or the U.S. doesn’t matter for purposes of my post here.)
Here’s a mental experiment (one that I might have offered, in some form, in the past): suppose that Pres. Hillary Clinton or Pres. Bernie Sanders – displaying to the public her or his courageous opposition to poverty – cites the stat that Ben mentioned and then proposes that government outlaw part-time work. “Because every worker should be able to live decently upon his or her earnings,” proclaims the president, “and because working full-time enables a worker to earn more income than that worker earns when working only part-time, it shall hereby be the law of the land that every worker must be employed full-time.”
I’m pretty sure even the most ardent supporter of the minimum wage would balk at such a proposal. But why? What’s the difference between minimum-hour legislation and minimum-wage legislation? If government dictates that each worker shall be paid no less than $X per hour, and if this diktat has no effect on workers other than ensuring that no worker is paid less than $X per hour, what reason is there to suppose that if government dictates that all jobs shall be full-time jobs that this diktat have any effect on workers other than ensuring that all workers will now be employed full-time – and, hence, that the number of people living in poverty will fall?
Put differently, if government can work miracles when it dictates hourly wages, why can’t it work miracles when it dictates hours of work?”
by | ARTICLES, GOVERNMENT, TAX TIPS, TAXES
Military Members: Get Free Tax Help
The IRS offers free tax help to members of the military and their families through the Volunteer Income Tax Assistance program. VITA is available both on and off base including sites for military members overseas. Here are five tips to know about free tax help for the military:
1. Armed Forces Tax Council. The Armed Forces Tax Council oversees the military tax programs offered worldwide.
2. Certified Staff. Military VITA certified employees staff their sites. They receive training on military tax issues, like tax benefits for service in a combat zone. They can help you with special extensions of time to file your tax return and to pay your taxes or with special rules that apply to the Earned Income Tax Credit.
3. What to Bring. Take the following records with you to your military VITA site:
- Valid photo identification.
- Social Security numbers for you, your spouse and dependents; or individual taxpayer identification numbers (ITINs) or adoption taxpayer identification numbers (ATINs) for those who don’t have Social Security numbers.
- Birth dates for you, your spouse and dependents.
- Your wage and earning forms, such as Forms W-2, W-2G, and 1099-R.
- Interest and dividend statements (Forms 1099).
- Health coverage information forms such as Form 1095-A, 1095-B or 1095-C.
- Exemption Certificate Number for exemptions that you obtained through the Marketplace.
- A copy of your last year’s federal and state tax returns, if available.
- Routing and account numbers for direct deposit of your tax refund.
- Total amount you paid for day care and the day care provider’s identifying number. This is usually an Employer Identification Number or Social Security number.
- Other relevant information about your income and expenses.
4. Joint Returns. If you are married filing a joint return, generally both you and your spouse need to sign. If you both can’t be present to sign the return, you should bring a valid power of attorney form unless you are eligible for an exception. Publication 501, Exemptions, Standard Deduction, and Filing Information, has more details.
5. Health Care Tax Law Help. IRS Free File can help with tax provisions of the health care law. The software will walk you through the lines on the tax forms that relate to the Health Care Law. If your income was $62,000 or less, you qualify for Free File software. If you made more than $62,000, you can use Free File Fillable Forms.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
Additional IRS Resources:
Military Pay Exclusion – Combat Zone Service
Publication 4940, Tax Information for Active Duty Military and Reserve Personnel
Publication 3, Armed Forces’ Tax Guide
Gathering Your Health Coverage Documentation
IRS YouTube Videos:
Military Tax Tips – English | Spanish
by | ARTICLES, BLOG, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
According to an economist at the Congressional Budget Office (CBO), the federal government should examine the question of taxing drivers by the mile as a means of raising higher revenue for highway programs.
According to the Washington Examiner, “Chad Shirley, CBO’s deputy assistant director for microeconomic studies, gave a presentation that says federal gas tax revenues are falling short of federal spending on highway programs. But to resolve that problem, Shirley didn’t propose less federal spending, and instead offered three suggestions.”
1) Charge drivers more through the implementation of a “vehicle-miles traveled charges.”
2) Charging them more when traffic is bad. Shirley calls that “congestion pricing.”
3) Charging tolls on “additional existing interstates.”
The idea of a “vehicle miles traveled tax,” or a “VMT” tax, was considered in 2011 in a bill that never came to fruition. That plan “foresaw the installation of equipment on people’s cars and trucks that would measure how far they drive, and the collection of taxes electronically through a reading of those devices at gas stations.”
Whether or not these new suggestions will be considered again remains to be seen. The CBO says that its three suggestions are not higher taxes or fees, but as an attempt to “make federal highway spending more productive for the economy.”
Such proposals are invasive of people’s privacy, and represent another ridiculous attempt at trying to regulate the behaviors of people.
by | ARTICLES, GOVERNMENT, TAX TIPS, TAXES
Interest Rates Remain the Same for the Second Quarter of 2016
WASHINGTON – The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning April 1, 2016. The rates will be:
- three (3) percent for overpayments [two (2) percent in the case of a corporation];
- one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
- three (3) percent for underpayments; and
- five (5) percent for large corporate underpayments.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate determined during Jan. 2016 to take effect Feb. 1, 2016, based on daily compounding.
Revenue Ruling 2016-06, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2016-13, dated March 28, 2016.
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The great Don Boudreaux a friend of mine, made mention of this picture last week over on his superb blog, Cafe Hayek. The picture is apparently a favorite among Trump supporters.
“What to say? Perry Potts Eidelbus, a Facebook friend, describes it as “a distillation of economic ignorance into pure form.” Indeed. It’s much like Trump himself: the very image of economic ignorance.
Trump is doing now from the political right what Paul Krugman has done so successfully over the past decade and a half from the political left, which is the following: boisterously assuring people that their untutored instincts about the economy are indeed accurate – telling people that what they immediately see in economic affairs and policies is all that there is to see in economic affairs and policies (that is, that there is no ‘unseen’ whose reality can be perceived and understood only by looking beyond that which is immediately obvious). According to this bastardized, pandering version of economics, actual consumable goods (such as are pictured here) are reckoned to be costs, while toil is reckoned to be a benefit. The economic problem is not rooted in scarcity, it is rooted in abundance. Social benefactors, therefore, are those who promise to deny to us the fruits of the economy’s abundance (along with, by the way, our economic freedoms) as they bestow upon us ever-greater scarcity that will bless us with the need for more toil.
The photo shown here is, in short, itself an intellectual cargo ship loaded down with countless tons of economic ignorance.”
by | ARTICLES, BLOG, CONSTITUTION, ELECTIONS, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
Obama weighed in on the current Apple-government dispute, saying that access should be made necessary.
From Reuters:
U.S. President Barack Obama on Friday made a passionate case for mobile devices to be built in such a way as to allow government to gain access to personal data if needed to prevent a terrorist attack or enforce tax laws.
Speaking at the South by Southwest festival in Texas, Obama said he could not comment on the legal case in which the FBI is trying to force Apple Inc. to allow access to an iPhone linked to San Bernardino, California, shooter Rizwan Farook.
But he made clear that, despite his commitment to Americans’ privacy and civil liberties, a balance was needed to allow some intrusion when needed.
“The question we now have to ask is: If technologically it is possible to make an impenetrable device or system where the encryption is so strong that there is no key, there’s no door at all, then how do we apprehend the child pornographer, how do we solve or disrupt a terrorist plot?” he said.
“What mechanisms do we have available to even do simple things like tax enforcement because if in fact you can’t crack that at all, government can’t get in, then everybody is walking around with a Swiss bank account in their pocket.”
The Justice Department has sought to frame the Apple case as one not about undermining encryption. A U.S. Federal Bureau of Investigation court order issued to Apple targets a non-encryption barrier on one iPhone.
The FBI says Farook and his wife were inspired by Islamist militants when they shot and killed 14 people on Dec. 2 at a holiday party in California. The couple later died in a shootout with police.
“Setting aside the specific case between the FBI and Apple, … we’re going to have to make some decisions about how do we balance these respective risks,” Obama said.
“My conclusion so far is you cannot take an absolutist view.”
Obama was speaking at the South by Southwest festival in Austin about how government and technology companies can work together to solve problems including making it easier for people to vote.
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CNSNews remains a go-to source for analyzing information on the U.S. Treasury, tax revenue, and such. Here they are again, scrutinizing tax receipts for FY2016 through the end of February. In a nutshell, the U.S. government continues to run a deficit, and the amount of taxpayer responsibility continues to increase. From CNSNEWS:
The U.S. Treasury hauled in a record of approximately $1,248,371,000,000 in tax revenues in the first five months of fiscal 2016 (Oct. 1, 2015 through Feb. 29, 2016), according to the Monthly Treasury Statement released today.
Despite these record tax revenues in the first five months of the fiscal year, the federal government nonetheless ran a deficit of approximately $353,005,000,000 during the same period.
In February alone, the Treasury ran a deficit of $192,614,000,000.
The record five-month tax haul of $1,248,371,000,000 equaled approximately $8,263 for each of the 151,074,000 people in the country who had either a full or part-time job in February.
The record taxes in the first five months of this fiscal year exceed by about $63,263,220,000 in constant 2016 dollars the then-record $1,185,107,780,000 in tax revenues (in constant 2016 dollars) that the Treasury took in during the first five months of fiscal 2015.
However, even while taking in a record $1,248,371,000,000 in tax revenues from October through February, the Treasury was spending $1,601,375,000,000, according to the Monthly Treasury Statement. Thus, so far this fiscal year, the Treasury has run a deficit of $353,005,000,000.
The largest source of revenue in the first five months of this fiscal year was the individual income tax, which brought the Treasury $597,524,000,000. The second largest source was Social Security and other payroll taxes, which brought in $428,181,000,000.
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Based on data from H&R Block as we are halfway through filing season, it is apparent that compliance with the Obamacare penalty is still a difficult task.
This is the second year that the penalty has been levied; for 2014 taxes, the fee was $95 or 1 percent of qualified income — whichever was greater — and for 2015 taxes it is $325 or 2 percent of income, whichever is greater. The average penalty is $383, while last year it was $172, which corresponds roughly to the rise in penalty costs.
However, about 3/5, or 60% of filers “who received advanced tax credits to help them buy private plans on Obamacare’s web-based exchanges must pay a portion back to the IRS because they underestimated their actual income for 2015.” Interestingly, this is an increase from last year’s figure of 52% who had to repay a portion of their advanced subsidy. Thus, compliance and income estimation is getting worse, not better, after two tax seasons.
The average subsidy amount of that Obamacare enrollees must pay back has also increased slightly this year — $579, up from $530 last year.
In contrast, about 33% of taxpayers overstated their income and received additional subsidy funds from the IRS; the average amount was $450. Those that got the number correct and saw no adjustments was a paltry 3%.
The confusion is sure to continue with next year’s filing season. The minimum penalty for no insurance will double again to $695 or 2.5% of income, whichever is higher. H&R Block calculations show that for an average family of four earning $60,000 would pay $975 this tax season (2015), compared to about $400 last year (2014), while next year the penalty would rise to $2,000 (2016).
