Hello, Ireland!

This blog looks at an important piece of the economy – our corporations.

More specifically it reviews our corporate tax rate(s) and their economic impact.

Before going further, some of you already know that I don’t believe in taxing our corporations at all. Publicly traded corporations are legal entities that are owned by shareholders – holding various numbers of shares in the company.

These shareholders eventually come down to individuals who – based on their income – pay income taxes.

When the federal or state governments tax the corporation, they’re actually taxing each shareholder the same amount of tax on every share held by each shareholder – regardless of individual shareholder income. And they talk about ‘fair.’

With the 2017 Trump tax cuts, the corporate tax rate went from 35% to 21%. The White House wanted 15%, but 21% was the best it could get out of Congress at the time. If President Biden has his way, the corporate tax rate will rise to 28% next year.

Just for an example for understanding my position, a senior citizen primarily living on Social Security and paying taxes on that income – and let’s say, holding 25 shares of some major corporation on the New York Stock Exchange, is currently pre-paying 21% in taxes on the net income the corporation is paying out as dividends. Then, that senior citizen pays taxes on the dividends as personal income as well. So, all shareholders get taxed twice. The first-time shareholders never see it.

So, Hello Ireland!

Anyone who thinks corporations sit still while governments tax them whatever they want has their blinders on. Some 269 major, international corporations have moved their headquarters to Ireland. You see, along with a few other smaller financial legalities making it easy and favorable, Ireland has a corporate income tax of 12.5%.

Companies like Google, Apple, Microsoft, Facebook (META), Twitter (X) Airbnb, PayPal, eBay, LinkedIn, Indeed and Pfizer are all headquartered in Ireland simply for the reason of taxes. There’s a multitude companies more we’d all recognize.

Sitting at 21%, the federal government collected $475B in corporate income taxes in 2023. That’s 10% of the total taxes collected. Individual income taxes make up 52% while payroll taxes sit at 33% of total federal taxes.

The total corporate income taxes collected has been in decline for many years in the U.S. regardless of the rate. In the 1950s and 1960s, corporate tax revenues represented an average of 4.2 percent of GDP — in 2022, they represented just 1.7 percent.

Now, put on your simple economic hat for a moment.

Corporate tax revenues to the federal government are declining because fewer and fewer major corporations technically headquarter themselves here. Throw in the corporate tax rates collected by states and you create more incentive to move, like Johnson & Johnson in New Jersey may do any day now.

It doesn’t take a guru economist like the late Milton Freidman to imagine the real cost to the American economy by taxing corporations. It doesn’t take a dreamer to imagine the positive, job-creating impact of not only lowering our corporate tax rate but eliminating it.

Making the U.S., with its largest markets for goods and services in the world, the place to stay or come to would result in plethora of capital investment and spending. That capital would be spent on headquarters, building plants, hiring people, and selling products. The income taxes from individual investors and workers would skyrocket, making current corporate tax collections look puny in comparison.

Why not make the entrepreneur and innovation capital of the world the place where those bright and courageous people want to stay and get/be rich.

As an aside, if we were to eliminate corporate income taxes, we would also eliminate a complex menagerie of tax code giving certain write offs and ‘benefits’ to certain industries and businesses. It would also eliminate corporate lobbying – which too often becomes a sad temptation for our federal representatives.

If we want to make the U.S. competitive as a place for headquarters and corporate investment, and would also reduce incentives to shift profits abroad, at a minimum our corporate income tax rate should be lower than every other country, or at best eliminated altogether.

Nothing personal, but it would be great to say “Goodbye” Ireland right after we say “Goodbye” to government corporate income taxes.

Hello prosperity.

**************************

Have a great and prosperous week.

Hug somebody.

References:

https://itep.org/corporate-taxes-before-and-after-the-trump-tax-law/https://taxfoundation.org/blog/another-us-company-moves-ireland-tax-reasons/https://www.thegreenhotel.ie/blog/major-companies-european-headquarters-ireland/#:~:text=Which%20Major%20Companies%20have%20their%20European%20Headquarters%20in,7%20Twitter%20…%208%20eBay%20…%20More%20itemshttps://www.pgpf.org/budget-basics/the-us-corporate-tax-system-explained#:~:text=In%202023%2C%20the%20federal%20government%20is%20projected%20to,%244.8%20trillion%20in%20federal%20tax%20revenues%20that%20year.

SPIDER Bites

This week’s trivia question is: He pitched 749 games in his 22-year career, including a perfect game – who is this MLB player that has an award for great pitchers named after him? The answer to last week’s question re: name of the first permanent English settlement in North America: Jamestown.  First established in 1607, Jamestown served as the Virginia colonial capital until 1699. Now it’s only an archaeological site, located several miles SW of modern Williamsburg.

The 8-horse field in the 1- and 3/16-mile Preakness Stakes yesterday was bested by Seize the Grey.

You have to acknowledge determination, but not erudition, to the President’s program to forgive student debt. Last week, for the umpteenth time since 2021, SCOTUS struck down a $430B forgiveness program by President Biden, noting again that only Congress can pass appropriations. This isn’t difficult to understand for most of us.

More bad economic news. The April CPI came in at 3.4% over a year ago. Wholesale prices surged .5% in April. Inflation is far from being quelled. That bad news was accompanied by Consumer Confidence in April at its lowest level since July 2022, when inflation was at a blistering 8.5%. Retail sales were down in April from the revised downward numbers in March.

Meanwhile Central Banks around the world are replacing their U.S. treasury bills with gold. As demand for treasuries decreases, despite the high interest rates they’re now paying (meaning higher risk), those rates will go even higher (supply exceeding demand) which in turn will make borrowing money even more prohibitive for businesses and consumers – especially home buyers. At the same time the cost of U.S. government debt service has become bigger than the defense budget. Are we in big trouble?

The stock market doesn’t think so – to my confusion.

As fast-food restaurants lay off employees and/or close in California with the implementation of the $20 minimum wage requirement, workers in other industries are questioning why their minimum wage remains at $16 per hour. Ask the brilliant people running the legislature who apparently know best how to run everybody else’s business.

With COVID restrictions in many areas, high school seniors in 2020 missed their graduation ceremonies and now many are missing their college graduations as ignorant, pro-Hamas protestors have universities caving and cancelling commencements. Thank Allah we live in Florida.

The judge in Trump’s NY trial rescinded his former ruling and allowed the former president to attend his son’s HS graduation Friday. Meanwhile, the prosecutor’s star witness sounds like a real scumbag.