The rich have never paid much individual income tax on their capital income, and neither have the non-rich. For the most part, taxing capital income requires taxing it as earned, which requires corporate-level reporting and taxation. While Congress sets Individual tax rates higher for those who report higher levels of reported income, much capital income does not appear on individual tax returns—and never has. However, corporations and other large businesses have strong financial incentives unrelated to taxes to calculate their capital income, wages, and other payments accurately. Modern government relies upon these businesses, not the tax collectors of old who essentially went “door-to-door,” to be the primary agents for reporting income and collecting taxes.
When I read this article a few days ago, I thought it to be a very thoughtful article. (I have not changed my mind.). I think a neglected issue of businesses locating economic activity where taxes are lower is the waste to society as a whole that sometimes occurs from so doing. My wife once owned a store which sold a brand of bras that were shipped to Mexico just to be packaged, then they were shipped back to the country of origin. I am sure this was done to park profits there. I don’t think this is the only case of such a thing being done. But what is missing from the discussion is the waste from shipping back and forth.
Couple the corporate tax system with the international tax system (both of the U.S.) and you've got one incredible mess. Both were created when the U.S. dominated the world from a financial perspective. While we still have the largest economy, we no longer dominate. A better system than the "worldwide income" system coupled with credits would be to do what the states do, and consolidate affiliated companies and then split their income based of sales. (Some states use multiple allocation formulas, using wages and/or property as well.) Couple that with no deduction for wages to the extent U.S. sales percent exceeds the U.S. wages percent while making all corporations S corporations (with withholding obligations on the income shares of nonresident aliens), and you've got a much simpler and more logical system.
When I read this article a few days ago, I thought it to be a very thoughtful article. (I have not changed my mind.). I think a neglected issue of businesses locating economic activity where taxes are lower is the waste to society as a whole that sometimes occurs from so doing. My wife once owned a store which sold a brand of bras that were shipped to Mexico just to be packaged, then they were shipped back to the country of origin. I am sure this was done to park profits there. I don’t think this is the only case of such a thing being done. But what is missing from the discussion is the waste from shipping back and forth.
More like this, please.
Couple the corporate tax system with the international tax system (both of the U.S.) and you've got one incredible mess. Both were created when the U.S. dominated the world from a financial perspective. While we still have the largest economy, we no longer dominate. A better system than the "worldwide income" system coupled with credits would be to do what the states do, and consolidate affiliated companies and then split their income based of sales. (Some states use multiple allocation formulas, using wages and/or property as well.) Couple that with no deduction for wages to the extent U.S. sales percent exceeds the U.S. wages percent while making all corporations S corporations (with withholding obligations on the income shares of nonresident aliens), and you've got a much simpler and more logical system.