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Apple is accused of hording money and dodging taxes.
Corporate tax-dodging: not just a U.S. problem

In America Fortune 500 corporations pay 12.1 percent in taxes, on average, on their profits [source] versus the default rate of 34 to 35 percent that any small-to-midsize business (SMB) making over $335,000 USD per year in profit must pay.  With corporate tax rates plummeting in half over the last three decades, individuals and SMBs in America are increasingly left to shoulder the difference.  

The crippling inequality was highlighted in 2011 when General Electric Corp. (GE) pocketed $14B USD in profit, plus received a "generous" $3B USD tax refund from the federal government.  GE was a key donor to U.S. President Barack Obama and was repaid by its CEO being anointed head of America's "Council on Jobs" which helps advise Congress on corporate tax policy.

I.  Apple Pays Virtually No Taxes in Britain, While it Makes Billions

However, it's important to remember the U.S. isn't the only country struggling with the increasingly parasitic nature of politically active corporations.  Britain is currently grappling with similar issues.

American and domestic companies in Britain and other European Union states have been cleverly positioning their regional headquarters in the handful of member states with the lowest corporate tax rates.

For example Apple, Inc. (AAPL) made an estimated £6B ($9.50B USD) in Britain last year, but paid only £10M ($15.8M USD) in taxes.  That astounding figure, which has many British natives grumbling, comes thanks to the British tax code's rule that largely exempts companies based in Ireland from paying British taxes.

Apple has installed its regional headquarters in Cork, Republic of Ireland.  Thus it enjoys the low Irish 12.5 percent tax rate (which the British newspapers consider "ultra-low", but is ironically in line with the aforementioned current effective American rate for Fortune 500 firms), versus the 24 percent it would pay in Britain.

The Irish branch of Apple -- a subsidiary itself -- runs a series of shell companies that log British sales in "tax haven" regions like Ireland or the British Virgin Islands despite the fact that the physical point of sales is in Britain.  Apple Retail UK Ltd -- one of these shell companies -- made a reported £500M ($791.8M USD) in 2010, but only paid £3.79M ($6.0M USD) in taxes.

Experts cited in a report by The Daily Mail estimate that of the $99.8B USD (£63B) Apple made globally in 2011, 10 percent of it came from the UK.

Apple iPad Launch UK
Apple's loyal legion dutifully lines up for the iPad launch in London.  Apple is estimated to have to have only paid $15M USD in UK taxes, despite earning almost $10B USD from the island nation. [Image Source: Tim Ferguson/silicon.com]

This figure is hinted at in Apple's U.S. tax filings.  While Apple pays well above the current hyper-evasive rate of the Fortune 500, it only paid an effective rate of 25.3 percent -- below the supposed tax rate of 35 percent.  Apple credits this good fortune to "undistributed foreign earnings", which it plans to hold "indefinitely".  Such commentary might draw greater scrutiny by auditors in the U.S., except that Apple wisely based its U.S. financial operations in Nevada -- a state known for a lax approach to tax enforcement.

Apple, which recently announced a dividend for shareholders, is hoarding $97.6B USD (£60B) in cash -- more money than the entire gross domestic product of Serbia.  Valued at $590B USD (£370B), Apple is the world's most valuable company, and some experts it expect it to soon become the world's first company to be valued at a trillion USD.

The situation for Apple could soon be changing -- the U.S. Internal Revenue Service (IRS), has reportedly audited the company's 2007 to 2009 figures and has "suggested" "certain adjustments".  Those adjustments could be in the form of forcing Apple to pay millions in unpaid taxes -- either to Britain's HM Revenue & Customs or to the U.S. IRS.

II. Apple is Not Alone, U.S. Companies Enjoying Field Day of Tax Evasion

While Apple draws the brunt of the scrutiny given that as the world's largest and most valuable corporation it is a beacon of corporatism, other American companies are following in a similar line.

Amazon.com, Inc. (AMZN) has placed its headquarters in the tiny European Union nation of Luxembourg -- the same nation where deceased North Korean tyrant Kim Jong Il reportedly sheltered his $4B USD fortune. Google Inc. (GOOG) -- makers of the world's most used smartphone operating system and the world's most used search engine -- based itself in Ireland and has subsidiaries in the Caribbean and Luxembourg for more tax dodging gains.

Google told The Daily Mail that this scheme -- which many would call "tax dodging" -- is necessary in today's corporate atmosphere, as responsibility to shareholders.  States a Google spokesperson, "We have an obligation to our shareholders to set up a tax-efficient structure, and our present structure is compliant with the tax rules in all the countries where we operate."

Google Ice Cream Sandwich
Google also successfully dodged British taxes. [Image Source: Main Device]

In the U.S., Britain, and other wealthy nation states, change over such inequity is slow coming.  After all, increasingly corporations are responsible of paying federal candidates' way into office -- regardless of their political affiliation.  In office, these candidates inevitably look to serve their masters -- not the populous, but the corporations.

A recent University of Kansas School of Business study [PDF] found that $1 given to a federal politician was worth $243 USD of tax breaks, if you contributed over $1M USD.

Source: The Daily Mail



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Constitutional Amendment Flat Tax Time!
By stm1185 on 4/10/2012 6:36:12 PM , Rating: 3
25% every corporation, business, whatever, they all pay 25%, no deductions, loop holes, or otherwise, they all pay 25%.

15% every individual.

Everyone pays the same percent. No deductions, I dont care if you give to 3 charities and are raising 3 downs kids while working at McDonalds or are making 400 million a year as CEO of CheapChineseProducts INC, you pay the same % everyone else does. Fair. No longer should the middle class be burdened with high tax rates to make up for the lower class who dont pay at all or the higher class who bought the tax code.

Then restructure federal services to work efficiently off the money that brings in.




RE: Constitutional Amendment Flat Tax Time!
By retrospooty on 4/10/2012 6:40:20 PM , Rating: 3
"Then restructure federal services to work efficiently off the money that brings in"

I like the tax part... But your idea falls apart in the federal services section. Congress will never do it. Washington is broken and they cant do anything but add. Subtraction isnt part of thier skillset.

Good idea though.


RE: Constitutional Amendment Flat Tax Time!
By ritualm on 4/10/12, Rating: -1
RE: Constitutional Amendment Flat Tax Time!
By SPOOFE on 4/11/2012 2:08:29 PM , Rating: 1
Armed services? Perfect example: Military budget is up for debate every single year, with fierce battles waged over every nickel. If any expenditure could find ways to pinch pennies, this is it.

Compare that to social security, welfare, medicare/medicaid, which have their expenditures set in stone with nary a whisper of annual discussion over it. Not even the slightest prayer of reducing costs if nobody talks about it.


RE: Constitutional Amendment Flat Tax Time!
By bigdawg1988 on 4/11/2012 3:21:16 PM , Rating: 2
SS and Medicare are paid for through their own taxes. And they are debated every now and then. But try telling old people who have paid into the system for 40 years that you're now cutting those benefits!
I'd go up against the military any day....


By hiscross on 4/11/2012 3:22:38 PM , Rating: 2
I am 64 and I don't give a crap about SS or medicare, yet alone taxes. All 3 take money from me and provide almost nothing in return. For those who feel the government should give you someback after they took it from you by force (laws or by guns) then you deserve what you get.


By SPOOFE on 4/11/2012 6:04:59 PM , Rating: 2
quote:
SS and Medicare are paid for through their own taxes.

Technically, although the Treasury owes a humongous "second national debt" to the SS system for spending the '90s "surplus"; and the medical welfare systems partially paid for by the states are putting states into debt, requiring them to get money from the Feds... which comes out of the general fund.

And regardless all that: It's still less liquid capital in the nation. It's still money out of pocket for those little units of economic activity known as "people". It's still an obligation that the United States - its people and its government - have to cover.

And, finally... let's not forget that SS goes into the red this year.


RE: Constitutional Amendment Flat Tax Time!
By JasonMick (blog) on 4/10/2012 8:02:16 PM , Rating: 5
quote:
I like the tax part... But your idea falls apart in the federal services section. Congress will never do it. Washington is broken and they cant do anything but add. Subtraction isnt part of thier skillset.
Actually Congress would never approve a flat tax in the first place as it would remove a competitive barrier that helps limit the threat SMBs and upwardly aspiring individuals pose to their financiers.

Once you're in the 1% (or perhaps 0.001%) club, you do the best to keep anyone else from getting in.

But agreed, they would also take issue to eliminating waste, both in that it prevents them from serving their personal friends, themselves, and their financiers.


By retrospooty on 4/11/2012 8:44:41 AM , Rating: 2
True... they wouldnt agree to either part. So Ill just leave it as a great idea that will never happen.

Its pretty much human nature at work here. The problem with the human race is there are too many humans running it.

I always thing of Terminator 2 when John Connor asks the Term. "Do you think we will make it? (referring to the human race).The terminator says "it is in your nature to destroy yourselves".


By jRaskell on 4/11/2012 9:54:57 AM , Rating: 3
quote:
the 1% (or perhaps 0.001%) club


And someday, when the chasm between the top and everyone else finally becomes intolerable, that club will get a very rude awakening in the form of open rebellion. History is quite obviously doomed to repeat itself.


By Ringold on 4/11/2012 11:34:55 PM , Rating: 1
quote:
Once you're in the 1% (or perhaps 0.001%) club, you do the best to keep anyone else from getting in.


That's a zero-sum view, which a lot of those .001%'ers that I've met know better than to buy in to. More rich folk mean more customers, clients, companies to sell to and competitively buy from or invest in to usurp other established rich folk. They understand the capitalist process of wealth creation begets more wealth by being more inclusive, not by trying to be exclusive in some Middle Ages aristocratic class-based way. Democrats want us to think that way, though, to fuel class envy and warfare.


By jRaskell on 4/11/2012 9:52:55 AM , Rating: 3
quote:
Washington is broken


That's really all that needs to be said. Well, except maybe to add 'beyond repair'.


RE: Constitutional Amendment Flat Tax Time!
By Jjoshua2 on 4/10/2012 6:45:54 PM , Rating: 2
But then what use will all those lobbyists be whose sole purpose in life is to convince Congress to create tax loopholes?


By mcnabney on 4/10/2012 9:07:08 PM , Rating: 2
Who said Congress created loopholes?

The lobbying groups actually write the laws just the way they want them and hand them over to whatever party they are paying. Mostly on the Right due to businesses trending GOP, but plenty as well on the Left. You actually think the dipshiats you elect write those 5000 pages laws?


RE: Constitutional Amendment Flat Tax Time!
By ritualm on 4/10/2012 6:57:01 PM , Rating: 2
Do you honestly think corporations will buy into your idea and start paying taxes?

They won't.

Your idea is horrible.


By Camikazi on 4/11/2012 9:44:46 AM , Rating: 2
No, the idea is good the corporations are horrible and will try everything to make sure something like it never happens.


RE: Constitutional Amendment Flat Tax Time!
By Reclaimer77 on 4/10/2012 7:10:06 PM , Rating: 1
Nice rhetoric. Not believable, or possible, in any way. But you really sold out all the way in getting your point across. Nice.

quote:
Then restructure federal services to work efficiently off the money that brings in.


Uhhh any reason we can't just do that now, first? I like this part, because it actually makes sense.


By SPOOFE on 4/11/2012 2:10:42 PM , Rating: 2
quote:
Uhhh any reason we can't just do that now, first?

Nope, no reason we can't, although there are plenty of reasons why we won't.


RE: Constitutional Amendment Flat Tax Time!
By artemicion on 4/10/2012 7:12:17 PM , Rating: 1
"Fair" is a rather subjective standard.

As a multi-billionaire (not really) I would argue that it is not "fair" that 15% of my $1,000,000,000 income contributes far more to taxes than the 15% of your $50,000 (or whatever) income. I think it would be "fair" if everybody pays the same amount in taxes. (Feds collected $2.3 trillion in taxes, divided by 311 million population, equals around 7.4k per person.) Regardless of the fact that I make $1,000,000,000 a year, I should only pay $7,400 in taxes. Heck, the army and navy protect you just as much as they protect me.

As a single person living alone, I also think that you should pay for the $7,400.00 per person tax on behalf of your 3 kids and your non-working spouse. So you pay $37,000 in tax per year on your household's $50,000 income and I still pay $7,400 on my single person $1,000,000,000 income.

Also, since I'm already being taxed, my corporation shouldn't be double taxed just because I chose to organize my business as a corporation. And why should my employees be double taxed by having their employer pay more taxes? Every person pays $7,400. Corporations don't call the police, go to school, drive on roads, etc. People do. That's "fair."

I refute your definition of "fair."


RE: Constitutional Amendment Flat Tax Time!
By JasonMick (blog) on 4/10/2012 7:15:51 PM , Rating: 5
quote:
As a single person living alone, I also think that you should pay for the $7,400.00 per person tax on behalf of your 3 kids and your non-working spouse. So you pay $37,000 in tax per year on your household's $50,000 income and I still pay $7,400 on my single person $1,000,000,000 income.

Ha, you had me up till there. :)

I think it's pretty unfair that I have to pay taxes at all. After all I am a billionaire and employing hundreds of thousands of people. Without me, they would have no money to pay taxes.

They should each have to pay $7,400 per person and I should have to pay nothing, for employing and tolerating your unwashed masses.

And by all means don't let the people vote on such a thing. They're too stupid. Let's instead isolate power in a small privileged group of people, most of whom are members of my millionaire club themselves.

Now which Congressman, do I have to write a check to next?


RE: Constitutional Amendment Flat Tax Time!
By quiksilvr on 4/11/2012 9:52:27 AM , Rating: 2
http://upload.wikimedia.org/wikipedia/en/5/56/Mr_B...

But in all seriousness. His logic would make sense if people under the age of 25 should be exempt from paying taxes, with or without a job. $7400 a year is roughly $300 a paycheck. I say this because:
1) For the first 21 years, you're essentially in school.
2) You have tens in thousands of dollars of debt thanks to said education.
3) Usually I would say 21 then pay taxes, however since Bachelor's Degree is as valuable as a high school degree in this day and age, going for a Masters is unavoidable.
4) I'm 24 :P


RE: Constitutional Amendment Flat Tax Time!
By wangkom on 4/11/2012 3:45:06 PM , Rating: 2
That's fine. Your parents should have to pay for your taxes until you are 21.

Would make people think twice before having unprotected sex.


By freedom4556 on 4/12/2012 6:15:19 PM , Rating: 2
quote:
make people think before having unprotected sex


No it wouldn't, because they already don't think at all, else no one would do it. Abstinence plans don't work, because having sex is not a logical decision. There could be a screaming baby in the room, and some people would still have unprotected sex.


By kmmatney on 4/11/2012 4:42:26 PM , Rating: 2
If you want to be an engineer, you don't have to go into debt! I received my Masters in engineering at UCLA, and I was "paid" to get it. The school paid my Tuition, and paid me $1500/month on top of that, with my official job title being "Graduate Student Researcher". I wasn't special - this is what practically every graduate engineer gets, at all universities. And yet we still have a shortage of engineers in this country...


RE: Constitutional Amendment Flat Tax Time!
By rrburton on 4/11/2012 12:27:26 PM , Rating: 3
Oh my god, I just up voted Jason Mick.


By abscode on 4/11/2012 1:54:28 PM , Rating: 3
Oh my god, by commenting you really didn't.


RE: Constitutional Amendment Flat Tax Time!
By Reclaimer77 on 4/10/12, Rating: -1
RE: Constitutional Amendment Flat Tax Time!
By JasonMick (blog) on 4/10/2012 7:39:57 PM , Rating: 3
quote:
Taxes are no different. There is absolutely NOTHING wrong with taking advantage of whatever tax laws there are in order to pay only what you owe and nothing more. To do anything less would be insane.
I have to take issue with this remark, as a supporter of democracy/capitalism and an opponent of plutocracy.

"Class warfare" is a silly term in that neither party is proposing anything remotely close to what that term suggests. When you strip away the rhetoric (e.g. the Buffet Rule), both parties have left more than enough loopholes to maintain a thriving plutocracy, because after all, it was mostly the funding a small elite that put them in power.

Now if people started rising up and killing rich people en masse or leaving them homeless, then the term might have some meaning. But I don't exactly see a lot of rich people begging in the streets or left wanting, be it under Bush Jr. or Obama.

A flat tax is a perfectly fair, logical, solution. Anyone would have the chance to compete, and no one would be given an unfair taxation advantage.

Yes, trimming the government and eliminating waste/corruption is also a crucial goal. A flat tax doesn't fix everything, including -- most definitely -- misspending. But it's a start.

Sadly, it would never fly as it's inherently anti-plutocratic and pro-competition.

Democrats would oppose it on the grounds that it would supposedly disenfranchise the impoverished, while Republicans would cry that it was disincentivizing wealth.

Meanwhile both parties will steadily bake in a host of loopholes that can largely only be exploited by a small elite of top businesses and wealthiest individuals.

Neither side is interested in addressing the real problem: it's not that taxes are too high or too low. It's that taxes are being used as a competitive barrier to prevent upwardly aspiring members of society from achieving wealth.

The solution is not to tax the rich, or give tax breaks to the rich.

The solution is to level the playing field. Everyone should pay the exact same percent of their income, likewise for businesses. (Or cut out the businesses altogether and only tax individuals, dividing business earnings for taxation purposes among private or public shareholders on a yearly basis.)

In reality both parties on a federal level oppose a flat tax as it would rob them of a competitive barrier that their wealthy financiers have worked so hard to put in place, preserve, and expand.


RE: Constitutional Amendment Flat Tax Time!
By juserbogus on 4/11/2012 10:38:27 AM , Rating: 2
A progressive tax is a perfectly fair, logical, solution. Anyone would have the chance to compete, and no one would be given an unfair taxation advantage.

our progressive system (minus loopholes) taxes each individual exactly the same percentage on the money they make. nobody gets taxed at a lower or higher rate than anybody else (excluding cap gains) per the dollar then earn. Many people have no clue how their own tax system works.

quote:
Everyone should pay the exact same percent of their income, likewise for businesses.


that is unfair and illogical especially considering your position on plutocracy. such a system does not take into account the cost of just living... basic food, housing and healthcare are a MUCH larger percentage of an individual's income for the person who makes less.


RE: Constitutional Amendment Flat Tax Time!
By SPOOFE on 4/11/2012 2:14:32 PM , Rating: 2
quote:
such a system does not take into account the cost of just living... basic food, housing and healthcare are a MUCH larger percentage of an individual's income for the person who makes less.

Balanced out by the fact that the poor overwhelmingly use the systems paid for by public money compared to the wealthy.

If you're paying a huge percent of your income to pay for systems that you never use, where's the fairness?


RE: Constitutional Amendment Flat Tax Time!
By Leper Messiah on 4/11/2012 2:54:30 PM , Rating: 2
You're ignoring the fact that for a company to make money they need healthy, productive workers. What makes healthy, productive workers? A country with a strong infrastructure and good social services. Wealth is literally the concentrated surplus value extracted by Capital from Labor, since it owns the means of production. Your post also ignores the concept of Marginal Utility, in that poor people tend to spend all the money they get on things they need, whereas wealthy people can only buy so many boats and cars and vacation homes in the Bahamas. Our economy is built on the demand provided by working class America and a flat tax is going to crater that demand by either taking a huge amount of money out of the economy that is provided in the form of government services, or put an undue burden on the lower classes of American society, leaving them less money to spend on goods and services. When demand collapses and the government doesn't step into correct things, the economy ends up in a deflationary spiral, due to the vicious cycle of employers laying off workers because no one is buying their products, those laid off workers not buying anything, which further reduces demand, etc etc etc. This deflation of both the economy and the currency helps no one but the very wealthy.

You're making a faulty moral judgement with your claims of "fairness". How is multi-generational capital accumulation fair? How is it fair that someone can be born a billionaire while other people are doomed to a life of poverty based on who's vagina they popped out of? The number one determiner of how much money you have in America today is how much money your parents have. Economic mobility and equality goes down with flattened tax brackets, not up. Look at Scandinavia for example. They have some of the highest marginal tax rates in the world, yet they have amongst the highest levels of economic equality and mobility in their society.


By SPOOFE on 4/11/2012 6:11:40 PM , Rating: 2
quote:
You're ignoring the fact that for a company to make money they need healthy, productive workers

How many? ALL of them?

[quote]What makes healthy, productive workers? A country with a strong infrastructure and good social services.[/quote]
And our country has neither of those, nor any indication that we're trending towards either.

[quote]Wealth is literally the concentrated surplus value extracted by Capital from Labor, since it owns the means of production.[/quote]
No, that is not literally what wealth is. Wealth is mere abundance of resources. Labor is one resource, as is the value extracted from that labor.

[quote] Your post also ignores the concept of Marginal Utility, in that poor people tend to spend all the money they get on things they need, whereas wealthy people can only buy so many boats and cars and vacation homes in the Bahamas.[/quote]
Your post ASSUMES I ignore anything. Wealthy people buying so many boats and cars and vacation homes in the Bahamasa helps employ... other wealthy people?

The rest of your post is just pontificating jingoism. Enjoy your audience of one.


RE: Constitutional Amendment Flat Tax Time!
By ritualm on 4/10/2012 8:16:18 PM , Rating: 3
Seeing how you got trolled so hard there is so funny.

Class warfare? Warren Buffett summed it up nicely: "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."


RE: Constitutional Amendment Flat Tax Time!
By JasonMick (blog) on 4/10/2012 8:13:33 PM , Rating: 2
quote:
Class warfare? Warren Buffett summed it up nicely: "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."

++++

Cookie for you.


RE: Constitutional Amendment Flat Tax Time!
By Reclaimer77 on 4/10/12, Rating: -1
RE: Constitutional Amendment Flat Tax Time!
By JasonMick (blog) on 4/10/2012 10:05:12 PM , Rating: 2
The quote is good and valid, I never said anything about Bufett's plan. Personally I think the plan is a smokescreen. Would the President support a plan that hurts those who paid to get him elected? Maybe on paper, but not on tax day after all the loopholes. I mean SMBs pay the same as corp.s right? *wink* *wink* *nod* *nod*

But even if it was for real I wouldn't support it. I'm a flat tax proponent. Taxing anyone at a higher or lower rate than anyone else is inherently unfair. That is my opinion on the matter.


RE: Constitutional Amendment Flat Tax Time!
By just4U on 4/10/2012 10:16:28 PM , Rating: 2
I agree that a flat tax rate would be benificial.. (even here in Canada)I don't think it should be on your gross though.. rather your net profits for the year. Someone suggested a total flat tax no deductions and wow.. that would be scary for some of us..


RE: Constitutional Amendment Flat Tax Time!
By Reclaimer77 on 4/10/12, Rating: 0
RE: Constitutional Amendment Flat Tax Time!
By Reclaimer77 on 4/10/2012 11:23:55 PM , Rating: 1
As a side note, we would all love to be paying less taxes. But for some reason it's easier to point at the "rich" and accuse them of not paying enough, instead of lobbying to have your own taxes lowered.

This stems from another false premise that in order for your taxes to go down, someone elses needs to go up. Pure absurdity.

Adjusted for inflation, Federal tax revenues have tripled since 1965. Despite tax cuts, revenues continued to grow. The rhetoric that we're in a tax crisis somehow is divisive class warfare tripe. The spending and budget is the problem, NOT tax policy.

If the Government can't make due with $2.15 trillion goddamn dollars from income taxes alone, let alone all the other revenues, than I don't know what to say to that. Honestly, it's mind boggling.


RE: Constitutional Amendment Flat Tax Time!
By just4U on 4/11/2012 1:16:08 AM , Rating: 2
A flat tax (in my opinion) would simplify things overall. I would like everyone to be paying it though. Rich and poor alike. Oh sure, those living on government assistance would still get a pass.. but the rest wouldn't.

In the end though the wealthy would still land up shouldering the brunt of it. Why is that? Well, for one thing they'd probably have to pay more to those under them in order for those people to pay their fair share so that would mean they make less..


RE: Constitutional Amendment Flat Tax Time!
By Iaiken on 4/11/2012 5:07:55 PM , Rating: 2
quote:
Rich and poor alike.


You can't get blood from a stone. What do you do about the impoverished? Jail them for not paying their taxes? They didn't die this year so they obviously must have at least made enough to buy food. At some point you have to make exceptions so that the system makes rational sense. The problem is that the current exceptions are slanted both towards both the very poor and the very rich.


By Reclaimer77 on 4/11/2012 6:46:47 PM , Rating: 2
Exactly. And that's the problem with the "fair tax". It cannot really be "fair".

quote:
At some point you have to make exceptions so that the system makes rational sense.


We already have that. Literally half the country pays NO federal taxes.


By marsovac on 4/12/2012 4:23:31 PM , Rating: 2
You need to change the game to have fair taxes.
You need to pay them LATER, NOT UPFRONT.

Taxes should go like this:

- The country is only me and you
- I make 1000$ per month
- You make 3000$ per month
- Basic living costs for a single person per month is 1000$

This means:

- After a month I have exactly 0$ of savings
- You have 2000$ of savings
- Average savings is 1000$
- I pay AVG/(2/myRateInAVG) = 1000/(error) = 0
- You pay AVG/(2/YourRateinAVG) = 1000/(2/2) = 1000

Other scenario /3 people/ same basic live cost per month:

- P1 3000$, P2 5000$, P3 10000$
- average = (3000-1000+5000-1000+10000-1000)/3 = 5000$
- P1 pays: 5000/(2/(2/5)) = 5000 / 5 = 1000 (half savings)
- P2 pays: 5000/(2/(4/5)) = 5000 / 2.5 = 2000 (half savings)
- P3 pays: 5000/(2/(9/5)) = 5000 / 1.8 = 4500 (half savings)

Now adopt a constant as a multiplicator to adapt the percent of savings you want to take, higher or lower than 50%. And you have a fair tax.

It simply is not fair to tax the revenue you have. But the amount of money you save after each month.

Some people are NEVER saving anything because they are getting less by being PRE-taxed and have a low salary...


RE: Constitutional Amendment Flat Tax Time!
By retrospooty on 4/11/2012 8:54:11 AM , Rating: 2
I agree with you there... Its really not about the tax code to me. I think the rich should pay more as they benefit more from the American system.... But the problem is spending. WTF will it take to reduce federal spending.

I feel like our govt. is a shopping addict with a dead end job that has only so much income and 400,000 dollars in credit card debt and its increasing by 20 grand every month. Instead of stopping spending and figuring out what to cut they are off buying more crap they dont need every day, increasing hte monthly output to 30 grand as if that will help.


RE: Constitutional Amendment Flat Tax Time!
By Reclaimer77 on 4/11/2012 9:32:36 AM , Rating: 1
See I don't even know what that means. Do the rich benefit more from the military? The roads? The educational system? They already pay more in taxes anyway, that much is fact. But I don't understand this pervasive attitude that the rich are "benefiting" more than anyone else. It completely seems grounded in jealousy and class warfare. As if they don't really deserve to prosper because so many aren't, so we'll use the tax code to hammer them and make us all feel better.

quote:
But the problem is spending. WTF will it take to reduce federal spending. I feel like our govt. is a shopping addict with a dead end job that has only so much income and 400,000 dollars in credit card debt and its increasing by 20 grand every month. Instead of stopping spending and figuring out what to cut they are off buying more crap they dont need every day, increasing hte monthly output to 30 grand as if that will help.


Totally agree. And this goes back to my beliefs on taxes. The Federal Government of today has largely transformed itself into a massive wealth redistribution service. It's NOT about the day to day running of a decentralized minimalist Government anymore. The more you give them, the more they simply throw away. And even that's not enough, so as you said, they need "credit".

These spending levels are simply not sustainable. I can't believe we're talking about changing the tax code before we address this spending issue.


RE: Constitutional Amendment Flat Tax Time!
By retrospooty on 4/11/2012 10:30:02 AM , Rating: 2
"Do the rich benefit more from the military? The roads? The educational system? "

Yes, they do. Especially from the military. But I don't want to hijack this thread into that direction. I am not into class warfare and not into the notion that anyone is vilifying the rich. Its jsut this simple,they make more, they benefit more from the American financial system and should pay more. Not more than they do now, just more than the poor pay.

Someone here at Anandtech had a great tagline years ago. It went something like this.... "You don't see alot of wealthy people clammoring to become poor to take advantage of the tax benefits" Makes alot of sense to me.

Anyhow, yes, the spending has to stop. The scary thing is its not really in the narrative of any political campaigns on the national level. Where is the "massive spending cuts" party?


By Reclaimer77 on 4/11/2012 5:05:53 PM , Rating: 1
quote:
Its jsut this simple,they make more, they benefit more from the American financial system and should pay more.


They already do. What are we talking about here?

quote:
Yes, they do. Especially from the military.


You're going to have to explain this one to me. The rich benefit MORE from the military than the rest of us? And please don't disappoint me by repeating some "war for oil" nonsense.

quote:
Someone here at Anandtech had a great tagline years ago. It went something like this.... "You don't see alot of wealthy people clammoring to become poor to take advantage of the tax benefits" Makes alot of sense to me.


Awww that's cute. Plebeian socialist nonsense that has no bearing on anything. All that crap does is pit one class of Americans against the other. I wish we would stop doing this.

I guess I'm crazy. I still believe that people can rise up in this country, and that the Government has no moral claim to our earnings. But since unfortunately the "temporary" income tax is never going away, we should all be paying as little as possible.

quote:
Where is the "massive spending cuts" party?


The Tea Party? You know, Conservative Republicans. But good luck winning an election when so many millions of Americans are now dependent on the entitlement state.


By ritualm on 4/11/2012 1:19:16 PM , Rating: 2
Politicians with the balls to cut entitlements/government waste and say NO.

To be fair, what you described about the government also equally apply to a lot of people out there.


RE: Constitutional Amendment Flat Tax Time!
By bah12 on 4/11/2012 9:52:04 AM , Rating: 2
quote:
that the top 10% earners pay 70% of the total tax burden
Nail on the head.

Chris Rock gave a perfect example regarding alimony and OJ Simpson. Roughly quoting if you make $20 million and she gets 1/2, you aren't starving, but if you make $30K a year and she gets 1/2....you may have to kill her.

http://www.youtube.com/watch?v=Rm_DDttubQs

Same concept here, sure the GE's of the world can afford a higher percentage, but the $50K a year houshould barely holding on cannot go from a EIC refund every year to a 25% bill. It would be disasterous for those under the poverty line, and would cause several above it to fall below.


By Reclaimer77 on 4/11/2012 6:40:52 PM , Rating: 1
These people clearly don't care about that. They just want to punish the rich, no matter what the consequences or effect.

A tax policy clearly based in emotional rhetoric. Sounds like a great plan, right?

Why even monkey around with the tax code? They could achieve their objective more soundly through legislation. Just push a bill through Congress, and of course Obama would sign it, that nobody can net more than $1mil a year. And that every dollar after 1$million is automatically garnished and sent to the IRS. BAM! Problem solved.

It seems like about 80% of the people here would actually support that.


RE: Constitutional Amendment Flat Tax Time!
By juserbogus on 4/11/2012 10:55:43 AM , Rating: 3
quote:
Once you understand that the top 10% earners pay 70% of the total tax burden


Nice spin. whenever this to cited it almost always excludes the why they "shoulder" that burden. which is because the top 10% of earners OWN 80% of all the financial wealth in this country! So, given that, shouldn't they be shouldering 80% of the tax burden?


By SPOOFE on 4/11/2012 2:18:40 PM , Rating: 2
quote:
So, given that, shouldn't they be shouldering 80% of the tax burden?

No.


By just4U on 4/11/2012 3:13:56 PM , Rating: 2
The wealthy control the money.. If the poor are forced into paying more then that will be offset by the wealthy being forced into paying them more.


RE: Constitutional Amendment Flat Tax Time!
By wangkom on 4/11/2012 3:49:17 PM , Rating: 2
Why should someone making 30k pay nothing then? Because they choose to be lazy and work at McDonalds for 25 years they shouldn't contribute to our country at all?

You do realize you can tax the hell out of people that make a lot of money. Eventually they will take their money and flee the country.

We've already done a great job in moving all the jobs overseas, let's not move all the entrepreneurial people as well.


RE: Constitutional Amendment Flat Tax Time!
By Leper Messiah on 4/11/2012 5:23:36 PM , Rating: 2
You literally think people choose to be poor. Congratulations for being a terrible human being. Have you ever worked a retail or fast food job in your life? People working those jobs work FAR harder than some stiff pushing papers around making twice as much as they do. Success in this country has never about how hard you work, that's a Horatio Alger-esque myth perpetuated by wealthy people to divide Labor and ensure that they work harder. They say, "if you work hard, maybe one day you could be like me!" while neglecting to mention that they inherited their wealth from Daddy or Mommy and haven't done a damn thing in their life except leech off of society. Republicans and their ilk complain about welfare queens, when its the wealthy that leech far more from the government and society than the poor do. Privatize the profits, socialize the losses, that's been the Modus Operandi of corporations in this country for the last 30 years.

And if you want to go Galt and leave America because your taxes went up, don't let the door hit your ass on the way out. The last thing this country needs are more self-righteous, privileged assholes like you.


By Reclaimer77 on 4/11/2012 6:31:47 PM , Rating: 1
quote:
Have you ever worked a retail or fast food job in your life? People working those jobs work FAR harder than some stiff pushing papers around making twice as much as they do.


Yes let's start paying fry cooks and dishwashers $100,000 a year. I'm sure that wont cause an insane spike in the cost of food and other goods at all! The employer will just eat those costs and NOT pass them on to the population.

And to answer your question, of course I have. I still work hard. Don't hand me this working class hero crap, I am NOT a privileged person by any means. And I'll tell you one thing, putting myself through college and paying off all these goddamn loans were far harder than ANY fast food or warehouse job I've ever done. But it was worth it. Because now I don't HAVE to do those jobs anymore. There's a difference between a job and a career, moron.

Nobody told you to "work hard". Nobody took from you. Nobody gets rich working in fast food and everyone knows that. If that's as high as you aspire to be, that's all you'll EVER be! Your ideas are bitter, pathetic, and hateful. And you have the nerve to call me an asshole?

Thank you for being the poster child of the class warfare arguments I've been talking about. I couldn't have put such self-defeatist and vapid viewpoints down if I sat here and tried all day.


By wangkom on 4/11/2012 6:45:31 PM , Rating: 2
With the infrastructure of this country, yes. I think that people choose to be poor.

I worked and put myself through college with student loans. I wasn't handed anything.

Everyone has the ability to do the same and some people have everything paid for them without having any student loans.

It's the middle class that has the hardest time to get an education. For the rich, the cost is insignificant, for the poor, they get federal grants.

If someone is working for McDonalds for 20 years then yes, they chose to be poor because they elected not to invest in their own future.


RE: Constitutional Amendment Flat Tax Time!
By wangkom on 4/11/2012 6:53:06 PM , Rating: 2
And the reason why there is capital flight is because the government makes it an unfriendly environment for businesses to do what they are appointed to do (make money for their shareholders).

Sure, our government can tax them to hell until they have zero corporate profits but then they don't have money to give back to their shareholders and no money to reinvest into research and development.

With a cycle like that, they would soon become noncompetitive and be forced out of the market.

Why do companies like Microsoft and Apple keep on making amazing products? Because they have enough money hire the best employees and reinvest into the ideas/products of tomorrow.

The purpose of a corporation isn't to make a cash cow so that the government can keep on functioning with a budget (like ours has done for the past 3 years).

Like it or not, other countries will have different tax rates and regulations and corporations will always try to take advantage of that either domestically or abroad. It is up to our government to decide if they want to competitively tax them so that they will want to pay their taxes here rather than to some foreign government.



By Reclaimer77 on 4/11/2012 8:14:49 PM , Rating: 1
You're talking to a brick wall. These people do not believe in capitalism and that corporations reinvest anything. It's all greed this, money hoarding that, bla bla rhetoric, class warfare, jealousy.

quote:
The purpose of a corporation isn't to make a cash cow so that the government can keep on functioning with a budget (like ours has done for the past 3 years).


Well you have to understand how their side looks at this. Their conviction stems from a worldview comprised of:

1) the idea that the government actually owns every penny a person earns and they only allow people to keep so much (basically, they read tax rates in reverse, if someone has a tax rate of 25%, to big-government types, it doesn’t mean that the government gets 25% of their income, rather, it means that the government gives them back 75% of what they earned) and;

2) that the rich should pay progressively more in taxes so that the government has more money (because the government is the only entity that actually creates jobs).

If it were up to liberals, the wealthiest Americans would still be turning over 91% of their income to the federal government (or maybe only 70%, after JFK’s tax rates).


RE: Constitutional Amendment Flat Tax Time!
By Reclaimer77 on 4/11/2012 5:10:14 PM , Rating: 2
They earned their money. They don't "control" all the money. A fairy didn't decide to pick them above someone else with magical rich dust. Most people are rich because they worked damn hard for it or made better/different choices in life, and I'm sorry you people cannot accept that and hate them for it.

quote:
So, given that, shouldn't they be shouldering 80% of the tax burden?


No.


By juserbogus on 4/11/2012 5:51:45 PM , Rating: 2
and why?


By wangkom on 4/11/2012 3:42:55 PM , Rating: 2
I second this notion!

Except for the fact that we should allow the budget to remain the same. The government needs to cut back on spending.


By JasonMick (blog) on 4/10/2012 7:09:30 PM , Rating: 2
quote:
Everyone pays the same percent. No deductions, I dont care if you give to 3 charities and are raising 3 downs kids while working at McDonalds or are making 400 million a year as CEO of CheapChineseProducts INC, you pay the same % everyone else does. Fair. No longer should the middle class be burdened with high tax rates to make up for the lower class who dont pay at all or the higher class who bought the tax code.

Then restructure federal services to work efficiently off the money that brings in.

I support this as well, the exact rates are open to interpretation, based on how people see it fit for governance.

Sadly, the rulers in power would never allow it. Logic and fairness are inconvenient for those that are elected (hired) to keep a plutocratic system thriving and push barriers towards competitive entry.

And without extreme campaign finance reform, the kinds of federal politicians who would adopt such a scheme would never be voted into office.

And the current two pseudo-parties -- which in effect, both are the same at the federal level in that they share a common financial agenda when you strip away the rhetoric -- would never approve such campaign finance reform, so it's unclear how such a change would be enacted without a mass upheaval in the American political system.

It's clear things are going to have to get a lot worse before they get better.


By just4U on 4/10/2012 9:52:00 PM , Rating: 2
"25% every corporation, business, whatever, they all pay 25%, no deductions,"
----

As a small business owner who doesn't make alot of money I'd like to say that I don't like this idea.. Deductions should always be a factor since it takes money to make money. Operating costs, equipment, etc. should be deductable off your overall gross. You shouldn't be paying taxes on that.


By RedemptionAD on 4/11/2012 11:54:58 AM , Rating: 2
My personal solution is 20% corporate taxes on profits. No loop holes and a 20% personal taxes with a minimal amount of deductions. Corporation owners pay 20% on corporate side (aka the 20% listed above) and a seperate 20% on what they bring home for themselves. Although I have formally braught this solution with others bundled to the politcal end I have not yet recieved a response.


RE: Constitutional Amendment Flat Tax Time!
By wangkom on 4/11/2012 3:08:38 PM , Rating: 2
Since everyone talks about fairness, how about a flat tax for everyone.

No matter your income level. A flat 5k per person (man, woman, or child). Everyone breathes the same amount of oxygen, enjoys the same amount of freedom, drives on the same roads. If you can't afford your tax for a specific year, the government will put it in your tab and allow you to make payments against it.

Would also dis-encourage people from having 7 kids and living off the state.


By corduroygt on 4/11/2012 6:47:35 PM , Rating: 2
You social darwinists make me shake my head.


By nycromes on 4/12/2012 10:51:04 AM , Rating: 2
Everyone also seems to be forgetting about the effect that removing tax breaks will have on charities. If a tax code change ever goes into effect that removes the benefit for donations, expect a steep drop off in donations to charities and smaller donations overall.


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