Well J has me thinking again... Here are the comments that I found of interest...
"Nope. You are not the one I am paying. Your tax deduction allows you to keep more of your own money, and the taxes you do pay partly support the cost of your kids' educations." J Ewing (G2A Pay For)
"The first is a service a company willingly pays, even though it may be incidental and "overhead" expense to the business. Bureaucrats peddling meddling over-regulation are NOT an expense we willingly pay and one we do not need-- indeed would be wealthier without." J Ewing (G2A DFL and Jobs)The first seems to say that us Parents should be allowed to reduce our tax contribution just because we chose to have kids. And in some way we deserve this benefit because it is our money. (ie instead of "make work" policy, this may be "make babies" policy) The second infers that the government/society is forced wasteful spending that is against "our" will.
I kind of believe that we all contribute into the "community chest". This may be a forced contribution, yet the amount is set by our society's will and it is the charge for being part of this society. The decision to provide credits, allow deductions or fund certain activities is society's way of encouraging or discouraging certain behaviors. Thus this child credit is there to encourage citizens to have kids or help subsidize their care. Also, society then chooses to spend the money on things that they think will improve our country. (ie have value) The point being that once it is in the "Community Chest", society is using it to benefit some group of citizens.(ie education funding benefits parents, children & society)
J's comments lead me to believe that another view is that there should be no "community chest" and that people should only fund what they agree with. The other expenditures that society chooses are apparently waste. I'll let him reply with more detail regarding this philosophy.
Thoughts?
There seems to be a small but growing trend to take ones marbles and leave the country rather than contribute to the community chest.
ReplyDeleteShould You Renounce Your U.S. Citizenship?
A very interesting article, it gives global competition a very different spin... Be competitive with your government and tax rates or lose your wealthiest citizens...
ReplyDeleteThat taxing foreign gains thing we do is very disturbing, since I assume they also have to pay taxes in that country.
My only hope is that Jesse made good on his threat and ditched us...
There are deductions and what not for foreign taxes paid. But the point of this kind of tax planning is to shift income to low tax jurisdictions. The problem is while it's nice to have that money in jurisdictions where it isn't taxed, for some strange reason, those aren't the jurisdictions where you want that money located. So these folks propose measures to have these monies repatriated. The argument is that they can be used to invest, create more jobs. The suspicion is that they will just be distributed to already well compensated executives, and to the lawyers and lobbying firms that argued for the change.
ReplyDelete==Hiram
My point was that if I as an American citizen invest money in a venture in Germany, make a profit in Germany, pay taxes in Germany, etc. Why in the world do I have to pay income or capital gains taxes to the USA?
ReplyDeleteIt makes no sense to me.
And I am not talking about the games that Apple plays with offshore order taking legal entities.
They don't invest in Germany. The profits are made here and through various legal maneuvers assigned to places like Switzerland. If you did in fact pay taxes in Germany than your American taxes would be reduced accordingly.
ReplyDeleteIt's like with football players. When the Vikings play a game in another state, the income for that game is taxed there and deductible in Minnesota. This happens with anyone who travels for business presumably.
--Hiram
That is not the sense I got from the article. And even if one can deduct the taxes paid, you would still pay again on the remaining profit.
ReplyDeleteAnd yes a lot of real profit is made totally over seas, unless you think only Americans buy our product...
My point was that if I as an American citizen invest money in a venture in Germany, make a profit in Germany, pay taxes in Germany, etc. Why in the world do I have to pay income or capital gains taxes to the USA?
ReplyDeleteIf you pay taxes in Germany, you shouldn't pay taxes again on that income in the United States, and I don't think you do. Here is a link:
http://www.irs.gov/taxtopics/tc856.html
--Hiram
Never mind the argument that our tax policy must "compete" or capital and income will flow elsewhere, because it is true, like it or not. Now Sen. Schumer's solution is to put up a big fence to keep rich Americans from leaving, even if they renounce their citizenship. Maybe we could call it the "Berlin Wall" to keep Americans from going to 10%-flat-tax Russia.
ReplyDeleteYou folks always want to claim that public schools can "compete" with one another and therefore offer the best education at the lowest price. Fine. Apply that, then, to the rest of government. Let it compete internally to do only what it should be doing, for only the proper cost of doing it, meaning that taxes would fall to globally competitive levels and we would all have a greater sense that we were contributing to the common good rather than wasting barrelfuls of money on every conceivable special interest group.
J. Ewing
"You folks always want to claim that public schools can "compete" with one another and therefore offer the best education at the lowest price."
ReplyDeleteDo I? Public schools these days do compete with each other, but I am not sure that results in the best education, or for that matter lower prices. Competition in education or anywhere else, ensures neither.
Income taxes have their problems, but then so do all taxes. No one method of taxation is a panacea for raising revenue. The fact that multi national corporations find it so easy to find strategies allowing them to assign income effectively earned in the United States to other, low tax jurisdictions is one such problem. Better policy would be to more closely link taxation with the benefits a corporation actually receives in a jurisdiction in which they operate. Property taxes can have that effect. But the political reality in our dysfunctional age is that no reform of any kind is possible so we are frozen into a status quo, one that business is not actually too unhappy with.
--Hiram
--Hiram
Hiram,
ReplyDeleteA US citizen or a US corporation that earns profits (interest, dividends, Capital Gains or business income) in a country outside of the US is taxes by the US and State (Worldwide income is taxed in the US). You can claim either a deduction or a tax credit for foreign taxes paid on that income. However, because the taxes rates in the US are normally higher than in the foreign country, your overall tax rate is the US rate.
IRS Tax Topics Link These words from the link, "intended to reduce the double tax burden ", mean the following to me.
ReplyDeleteI earn a $1000 in a foreigh country and pay 10%(ie $100) there. Then the USA charges me taxes on $900. (ie $1000 - 100) Which means that $900 has been fully taxed twice. What a bummer...
"wasting barrelfuls of money on every conceivable special interest group" That seems to be the problem and blessing of a Democracy... Everyone votes with their personal wallet and beliefs in mind. Either to withhold money from the community chest or withdraw money from the chest. No wonder we have a huge National Debt.
One man's waste is apparently another man's excellent investment. (ie beauty is in the eye of the beholder)
"I earn a $1000 in a foreigh country and pay 10%(ie $100) there. Then the USA charges me taxes on $900. (ie $1000 - 100) Which means that $900 has been fully taxed twice. What a bummer.."
ReplyDeleteI am no expert on taxation, but as I understand it, you have the choice of a tax credit or a tax deduction. In the above example, if you had chosen the tax credit, the one hundred dollars you paid in foreign taxes would have wiped out your US tax bill.
Numbers guy, for me the question relates not to US corporations, but foreign corporations, which may or may not operate in the US, to which US income is assigned. It's that income that goes untaxed, as I understand, in the US, and which corporations want to repatriate to the United States.
--Hiram
If you choose to take a foreign tax credit in your example the following would be the result;
ReplyDelete$1,000 non-US profit at 10% foreign tax rate and 28% US tax rate. Foreign tax of $100. US tax of $180 [($1,000 X 28%) - 100]. Total tax paid $280.
Hiram, your US tax is NOT WIPED-OUT!!!
the "philosophy of taxation" has to start with the philosophy of spending. If it is our philosophy that government should give everything to everybody – every need, want and frivolous desire of humankind – we're going to collect a lot more taxes than we would if we put strict limits on what government was responsible for doing and left everything else up to individual freedom and responsibility within the free market. It is simply wishful thinking (a leftist talent) that people will voluntarily pay more taxes than they are required to pay, especially if they do not believe their tax dollars are being spent wisely or efficiently. Spending $60,000 a year (federal spending alone) on every poor family of three is not an effective use of tax dollars OR human capital.
ReplyDeleteJ. Ewing
Numbers guy, in that case it wouldn't, but I think there it's also the case that the tax bill would be the same whether the income generated abroad or at home. At that's the way it should be. The dollar is the same to the recipient no matter where it comes from.
ReplyDelete"the "philosophy of taxation" has to start with the philosophy of spending."
Maybe, but it isn't. When we have a need, we find a way to pay for it. That's human nature, and we ignore it to our peril. After Pearl Harbor, nobody seems to have said, we just can't afford to fight WW II. After 9/11, near as I can tell, no one looked at the short term, let alone the long term costs of fighting multiple wars in the middle east. Are babies conceived only after extensive and exhaustive cost benefit analyses? Is our decision to grow older also based on the results of such analyses?
--Hiram
"if we put strict limits on what government was responsible for doing and left everything else up to individual freedom and responsibility within the free market"
ReplyDeleteCurrently our elected Representatives draw these lines. Any better ideas of how to draw them?
Better ideas? The strict letter of the Constitution would be a good start. Of course, that would eliminate between 50% and 80% of what the federal government does today. I'm willing to cut back gradually, starting with elimination of the deficit in two years, followed by a balanced federal budget requirement. Oh, and without any tax increases. None.
ReplyDeleteJ. Ewing
The strict letter of the Constitution would be a good start.
ReplyDeleteThe constitution isn't, nor was it intended to be, a policy document.
J,
ReplyDeletePlease help us understand your interpretation of the Constitution. I assume you are once again saying that the United States Supreme Court is incorrect in their interpretations. Since I am pretty sure anything a bit controversial seems to be brought before them by one side or the other.
John,
ReplyDeleteI will give my interpretation of the US Constitution;
1) If it is NOT allowed for the Federal Government to do by the constitution, then it is a STATES Right (i.e. Education, Property Rights, Intra-State Commerce, and Abortion). Defense of our borders and inter-state commerce are within the duties allowed the Federal Government.
2.) Small and Limited Federal Government. The States and Local Government should be where most of the power resides.
Does that help?
My philosophy on spending is that given our current large deficit we need a president who will hold down the growth in spending, which is why I will be voting for Obama. The record shows that spending increase at a lower rate with a democrat in the White House.
ReplyDeleteObama spending binge never happened
Commentary: Government outlays rising at slowest pace since 1950s
NG,
ReplyDeleteIf this is the case, then why hasn't the Supreme Court done anything. Thoughts?
You should not mistake powers for duties. They are two separate things. In any event, the constitution granted Congress power over inter state commerce. And that's why Congress can make laws with respect to things like education and health care.
ReplyDeleteThe founders lived in a world where it took three days to travel from Boston to New York. Nevertheless they did have the foresight to see us as one nation economically and financially, a view which suits this world of airplanes and the internet very well.
--Hiram
If this is the case, then why hasn't the Supreme Court done anything.
ReplyDeleteThe natural state of courts is to do nothing. They must be roused from their torpor. Courts can only decide the cases before them. That said, in recent years, it's become clear enough that we have an activist court, bent on translating it's various legal theories into law, something that surely would have horrified the framers of the constitution.
--Hiram
Hiram,
ReplyDelete"In any event, the constitution granted Congress power over inter state commerce. And that's why Congress can make laws with respect to things like education and health care."
K-12 education is "Inter-State Commerce"???? What two States are involved if the student, parents, school and teachers are in MN?????
The teachers are licensed by the State. It is a STATE RIGHT NOT the FEDERAL GOVERNMENT(Intra-State)!!!!!
John,
ReplyDelete"If this is the case, then why hasn't the Supreme Court done anything."
Recent courts have make some of their decisions based on politics rather than the LAW!!!! Unfortunately Congress has not done it JOB of Impeaching Rouge judges, so they have no actual check & balance that the US Constitution created!!
"Rouge judges" I assume these judges are socialists-- "Reds"?
ReplyDeleteJ. Ewing
Laurie, you are correct! While I am not sure it is fair to blame Bush for the deficit in fiscal '09 (the budget estimate that year was for a deficit about 20% of that amount), spending did balloon that year and has stayed high through the Obama years. A review of the total picture, however,
ReplyDelete(http://www.heritage.org/federalbudget/growth-federal-spending-revenue)
shows that somebody in government assumed that the "bubble" in federal revenues could go on forever, when the correct, sensible and anti-Grecian formula would have been to reduce spending to match revenues. The other factor here is that spending hasn't grown because Congress-- the Democrat Senate, that is, has failed to pass a budget in over three years, and thus spending is "stuck" at pretty much the same amounts as it was three years ago. In other words, NOT due to careful stewardship, but massive dereliction of duty.
Tell you what, though, I will quit blaming Obama for the spending spree, and criticize him instead for running up massive debts and not trimming them in the slightest. Remember, the deficit that he promised to "cut in half in his first term" was roughly $350 Billion at the time. Now it's 4 times that, not 1/2.
J. Ewing
Heritage Spend Revenue
ReplyDeleteStrange question why did Bush and Crew let spending growth exceed revenue for the 8 years? It seems they should have paying down the debt during the time of the "bubble" in federal revenues.
http://home.adelphi.edu/sbloch/deficits.html
ReplyDeleteHere's another link which shows that "Bush" had a Democrat Congress to work with and, even at that, had the deficit coming down near the end of his term, until the "financial crisis" (I use quotes because I think TARP was a mistake). The problem has long been that federal spending on entitlements runs on autopilot, and there hasn't been much "discretion" in discretionary spending, either. No politician is rewarded for saying "no" to anybody with their hand out for a handout. At some point we have to have that balanced budget amendment AND a cap on taxes as a percent of GDP. At this point it doesn't matter much how much of anything we might want to fund, about half of the federal budget must simply "disappear" without raising taxes.
J. Ewing
Here's another analysis of the "Obama the miser" theme:
ReplyDeletehttp://www.powerlineblog.com/archives/2012/05/barack-obama-skinflint.php
Somebody, at least, has read the book "How to Lie with Statistics."
Adelphi deficits
ReplyDeletePowerline Skinflint
The flat tax is a federal income tax system that applies the same low rate across the board. Its success depends on the tax rate proposed.
ReplyDeleteTax Specialist in London