They're selling the fruits of design and engineering work that happens in the US, and so this is arguably where most of the value creation happens, and that that should be taxed despite the fact that the nominal sale and creation is happening overseas.
Since the foreign countries tax the sales, they (and the earning of all Americans overseas) should not be taxed again to get the money back into the US. It is a BS way to operate and the US is the only country who tries it.
> They're selling the fruits of design and engineering work that happens in the US, and so this is arguably where most of the value creation happens, and that that should be taxed despite the fact that the nominal sale and creation is happening overseas.
There is an easy solution: Tax the corporation's US payroll. The obvious problem with doing that (or any other thing that causes effective tax rates to increase in response to employing US workers) is that it creates a large monetary incentive to move the "value creation" somewhere else.
The whole problem is that we're trying to tax stupid things. Taxing corporate profits is stupid because profits don't have a nexus with any particular jurisdiction, so they get moved to whichever jurisdiction has the lowest taxes. The only way to avoid that is to tax something other than profits -- something that actually exists in your jurisdiction. Payroll tax, consumption tax, etc. And between them, the consumption tax is better because a disincentive to buy things made in other jurisdictions causes less harm to the local economy than a disincentive to hire the people in your jurisdiction would.
Edit: People who downvote comments without providing any reasoning are cowards.
Sort of. Personal income tax (with the exception of half of social security and medicare) is paid by the employee. Some economists say it shouldn't matter whether it's the employee or employer who pays, on the theory that people will contract around it either way. They will sometimes but not always. In practice it creates a psychological advantage for the party not paying the tax during salary negotiations, because the number being negotiated is generally pre-tax. If the taxes subsequently paid are paid by the employee then it gives a perceptual advantage to the employer because the employee will actually receive less than the number agreed upon, and vice versa if the employer pays the tax on top of the salary.
It also changes who is affected by changes in the tax rate for all the employees whose compensation was negotiated before the rate changed. Making the payee of US payroll taxes the employer rather than the employee would similarly be a de facto raise for almost all US workers at the time of implementation because the employer would effectively begin paying your income taxes.
So what I mean is, make the corporation pay it, not the employee. Assuming you actually want a tax on labor at all, given that it discourages hiring in your jurisdiction.
> Personal income tax (with the exception of half of social security and medicare) is paid by the employee.
Sure, but income tax is different than payroll tax, and some payroll taxes (the federal ones that support Social Security and Medicare, particularly) are split between the employee and the employer.
> Making the payee of US payroll taxes the employer rather than the employee would similarly be a de facto raise for almost all US workers at the time of implementation because the employer would effectively begin paying your income taxes.
I think you mean "payer" rather than "payee". The payee of federal income and payroll taxes is the federal government, not either the employee or the employer.
> So what I mean is, make the corporation pay it, not the employee. Assuming you actually want a tax on labor at all, given that it discourages hiring in your jurisdiction.
To the extent the US has a tax on labor qua labor (payroll tax vs. income tax), that's already halfway true (income tax isn't strictly a tax on labor, since its not limited solely to labor income.
All of that is true, but it seems like a pedantic tangent. Are you saying that converting personal and corporate income tax into employer-paid payroll tax would not be more difficult for corporations to avoid paying than existing corporate income tax?
