Right-Wing Lauds Saverin Decision To Renounce Citizenship

[LaCroix]

I know what a corporation is.

Being legally assigned [some] rights of persons doesn't make them people, any more than Parliament can turn me into a horse.

So you've conceded and are just picking nits over semantics, then?

[HMS Conqueror]

It's not semantics. If corporations were literally people that were the final recipients of their incomes, there would be no double taxation.

[LaCroix]

More semantics.

edit: Apple, for instance paid no dividends - they were the sole recipient of their income. Like all corporations are by default, unless they want to pay dividends.

You know, that's why they are called 'incorporated' entities. Unlike non-incorporated entities. Read up on economics and taxation - the principles of transparent taxation, such things.

[PainRack]

It's Heritage. It always compiles things into some version of 'Democrats, taxes, or secularity is dooming America'.

How true.

But its funny, as LaCroix pointed out, if Facebook had been pioneered in Singapore and Saverin given stock options as compensation for his initial investment and work finding advertisers, he would had been taxed at a progressive 20%.

[HMS Conqueror]

More semantics.

If you simply declare it so, without giving a reason, I simply declare you wrong.

Personally I do not see the difference between a person and a corporation as semantic. Rather the opposite: the equivalence is purely semantic.

edit: Apple, for instance paid no dividends - they were the sole recipient of their income. Like all corporations are by default, unless they want to pay dividends.

It doesn't matter. The cash reserve increases the value of the shares and when you sell the shares you pay CGT on your gains.

If you want to extract usable income - not value of assets on a balance sheet, but money you can actually spend - from a corporation you pay CGT. The "controversy" with Buffett, for instance, is that he draws about $40m from his companies and pays about 17% tax on this transaction. It ignores the fact he already paid a 35% corp tax on most (all?) of that and on the rest of his actual earnings that he doesn't draw as personal income.

[LaCroix]

More semantics.

If you simply declare it so, without giving a reason, I simply declare you wrong.

Personally I do not see the difference between a person and a corporation as semantic. Rather the opposite: the equivalence is purely semantic.

It is called a legal person. The fact that it cannot vote or get married is irrelevant to the fact that while doing business, it has all the rights that a real person would have. That's what we are talking about. Claiming that it isn't a real person just like you can't be declared a horse is a pure semantic nitpicking which is completely irrelevant to the topic of taxation. To the IRS, a corporation is an entity equal to a person.

edit: Apple, for instance paid no dividends - they were the sole recipient of their income. Like all corporations are by default, unless they want to pay dividends.

It doesn't matter. The cash reserve increases the value of the shares and when you sell the shares you pay CGT on your gains.

Which is a capital gain unrelated to the actual economic gains a company had made. Selling your share of a company to another person who is willing to pay more than you paid for it does not take any money out of the company. It is simply a contract between you and the buyer, and gains on this contract are subject to taxation.

Also, a companies stock value can decrease or increase independently from the actual business results - extreme example: During the IT bubble, lot of companies were created, and did absolutely nothing but propose plans. People believed in those, their share value soared, people sold these shares and then the company suddenly crashed when people realized it was nothing but talk.

[HMS Conqueror]

Let's take a total reductio: the government sets corporation tax to 100%. Dividends reduce to zero. Liquidating the company would result in all its assets being taken in lieu of tax. You claim this has no effect on the tax rate paid by people who own shares in corporations. Do you agree?

Which is a capital gain unrelated to the actual economic gains a company had made.

???

The shares are priced according to the value of the company. If I form a holding company that has $1,000,000 in it and has no expenses, do you expect it to trade at less than $1,000,000? If so, I have some snake oil to sell you.

[fgalkin]

Bloomberg starts the ball rolling. Factual, but opionated.
http://www.bloomberg.com/news/2012-05-1 ... e-ipo.html

It voices the opinion that taxes on expats are burdensome.

Taxes on expats ARE burdensome. And ridiculous, as the expat has to pay the local tax of whatever country he resides in, then pay the IRS with what's left.

Also

ome of the world’s largest wealth-management firms have ramped up efforts to fight tax evasion ahead of Washington’s implementation of the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion by Americans with offshore accounts. HSBC Holdings Plc, Deutsche Bank AG, Bank of Singapore Ltd. and DBS Group Holdings Ltd. all say they have turned away business.

The 2010 law, to be phased in starting Jan. 1, 2013, requires financial institutions based outside the U.S. to obtain and report information about income and interest payments accrued to the accounts of American clients. That means additional compliance costs for banks and fewer investment options and advisers for all U.S. citizens living abroad, which may depress banks’ returns.

Big wealth-management firms don't like to do business with American citizens because spying on their finances for the IRS costs them money.

Gets expanded to opinions like this
http://blog.heritage.org/2012/05/11/fac ... ed-shores/
Taxes are evil!

And this is all Obama fault, especially for raising taxes later! We should reduce taxation immediately! He's driving away the rich!

The Heritage Foundation has always been ridiculous, and is not worth our attention beyond simple mockery.

Have a very nice day.
-fgalkin

[LaCroix]

Let's take a total reductio: the government sets corporation tax to 100%. Dividends reduce to zero. Liquidating the company would result in all its assets being taken in lieu of tax. You claim this has no effect on the tax rate paid by people who own shares in corporations. Do you agree?

I earn, say 100000 $ per year - my tax rate is X%. I don't earn any extra money due to my investment not giving any return. A so-called ' bad investment'. My income stays the same, so my tax rate stays the same. So no, it doesn't have any effects on the tax rate you paid. You simply have to find a better investment for your money.

I have enough of your petulant whining of "but I don't like it, because I don't understand how it works."

Simple solution -I'll try bigger letters, maybe you can comprehend written words better that way.

Don't make your company an incorporated company - make it a NORMAL COMPANY, and you DON'T HAVE TO PAY FUCKING CORPORATE TAX.

If you CHOOSE to make it a corporation , BEING FULLY AWARE THAT YOU HAVE TO PAY EXTRA TAXES TO RECEIVE THE BENEFITS A CORPORATION HAS, YOU HAVE TO PAY TAXES TO COMPENSATE FOR IT. That's called FREE CHOICE. Your whining of but I want to eat my cake and have it, too, doesn't help your case. People can choose not to pay this corporate tax. They just think it is worth it.

Which is a capital gain unrelated to the actual economic gains a company had made.

???
The shares are priced according to the value of the company. If I form a holding company that has $1,000,000 in it and has no expenses, do you expect it to trade at less than $1,000,000? If so, I have some snake oil to sell you.

O really?

So you don't remember the fact that VW had stock prices of 1000€ per share for a short period of time when speculation drove the price up? I don't remember VW suddenly selling 10x more cars - it was just that some hedge-fonds had to have a certain number of these in their portfolio for some reason and desperately bought them, or something like that.

The same at the height of the IT bubble, and during the housing bubble. Commodities were traded at the stock market at values far higher than their actual price. Same story, you have no clue what you are talking about. Go read a book.

[Terralthra]

Corporations aren't people, they just have some legal attributes of them for convenience of managing large organisations. All corporations and all money is ultimately owned by people.

Look at it like this: suppose you incorporated as a "consultancy" with one employee (ie. you) and contracted with your current employer to work the same hours in the same job. You aren't mysteriously earning more money just by being called a corporation, but you now pay more tax.

Nonsense. Salaries paid to employees to continue operating are a business expense, and fully tax deductible for the purposes of calculating taxable income. A business (sole proprietorship) such as you describe has as its only income the wage you'd have received from your employer, which it immediately pays to you. Income (your wage) - tax deductible business expenses (your wage) = taxable income $0. $0 * 35% corporate income tax = $0 tax paid by the business.

Please don't spout about shit you don't know about.

[fgalkin]

There is really no reason for a corporation to exist in the US, unless the owners want it to be so, as there are numerous alternatives, such as LLCs which provide limited liability, while avoiding corporate taxation issues.

Have a very nice day.
-fgalkin

[Blayne]

Karma's a something something Senator's Schumer and Casey talk about making it so that anyone who renounce citizenship to avoid taxes can't come back.

While I think taxing expats on income earned from overseas is ridiculous this however isn't that.

[HMS Conqueror]

I earn, say 100000 $ per year - my tax rate is X%. I don't earn any extra money due to my investment not giving any return. A so-called ' bad investment'. My income stays the same, so my tax rate stays the same. So no, it doesn't have any effects on the tax rate you paid. You simply have to find a better investment for your money.

I have enough of your petulant whining of "but I don't like it, because I don't understand how it works.

It's one thing to say something stupid; no need to be snooty about it.

Simple solution -I'll try bigger letters, maybe you can comprehend written words better that way.

Don't make your company an incorporated company - make it a NORMAL COMPANY, and you DON'T HAVE TO PAY FUCKING CORPORATE TAX.

If you CHOOSE to make it a corporation , BEING FULLY AWARE THAT YOU HAVE TO PAY EXTRA TAXES TO RECEIVE THE BENEFITS A CORPORATION HAS, YOU HAVE TO PAY TAXES TO COMPENSATE FOR IT. That's called FREE CHOICE. Your whining of but I want to eat my cake and have it, too, doesn't help your case. People can choose not to pay this corporate tax. They just think it is worth it.

Woah, calm the fuck down.

This is an argument about whether corporations are literally human beings. No one is threatening to eat your children.

You want to tax people who own shares at a massive rate - fine - but be honest about it. Say you want them to pay 60% marginal rate. Don't claim they actually do pay a far lower rate than they rarely do, using some accounting trick to obfuscate the true rate.

Which is a capital gain unrelated to the actual economic gains a company had made.

???
The shares are priced according to the value of the company. If I form a holding company that has $1,000,000 in it and has no expenses, do you expect it to trade at less than $1,000,000? If so, I have some snake oil to sell you.

O really?

So you don't remember the fact that VW had stock prices of 1000€ per share for a short period of time when speculation drove the price up? I don't remember VW suddenly selling 10x more cars - it was just that some hedge-fonds had to have a certain number of these in their portfolio for some reason and desperately bought them, or something like that.

The same at the height of the IT bubble, and during the housing bubble. Commodities were traded at the stock market at values far higher than their actual price. Same story, you have no clue what you are talking about. Go read a book.

Companies that have cash flow are valued on the basis of their expected future cash flow, as well as on the basis of the present assets. That doesn't mean their present assets are somehow non-existent.

[PainRack]

Dude. That's shitty logic.

If you have to pay VAT/GST on top of income tax, does that count as double taxation? If you have to pay licensing fees, would that be triple taxation?

Here's the thing. One can "avoid" being taxed on dividends/capital gains. Simply not realise capital gains, usually by reinvesting it in the States or the corporation don't pay dividends, focusing on other activities which increase the stock prices.

Unless the corporation is literally owned by a single individual/group, then claiming that individuals are taxed at a much higher rate is nonsensical. Unlike companies, corporations get to claim other forms of deductions, just like a normal individual does. That's why GM for example paid effectively zero % corporate tax.

So, what double taxation exists? In the States at least, where tax deduction credits exists in a complex tax code, a shareholder enjoys a multitude of tax deduction credits that simply isn't available to a business owner or from other income.

One way to game the system is to simply take a salary at the corporation you own for example. The salary might become applicable for higher income tax rates than the CGT, but combined with the dividends, you as an individual are realising more income that is taxed at a significantly lower rate. That's how Warren Buffet does it afterall.

[Grumman]

Karma's a something something Senator's Schumer and Casey talk about making it so that anyone who renounce citizenship to avoid taxes can't come back.

While I think taxing expats on income earned from overseas is ridiculous this however isn't that.

Why not? Taxing expatriates is ridiculous, but an unsubtle "screw you" to expatriates who give up their citizenship to avoid this ridiculous taxation is not?

I'm against it on general principles, even without the motivation and horrendous title (ex-PATRIOT Act? Really?). As long as you're not a criminal (and tax avoidance is not a crime), you don't have any infectious diseases and you're entering openly so that the country can confirm these two facts, I am in favour of making it easier, not harder, to travel between countries.

[Blayne]

Because the guy in question made the income in question from a US company, based in the United States, hiring US workers and otherwise benefited from the US social contract in virtually every way and is ditching his citizenship to not be taxed a measely 57 million$ (iirc) and is FYIGM incarnate?

Yes, if I work washing dishes in Singapore I completely agree I shouldn't have to pay taxes when out there and the laws are largely stupid, the US I think is IIRC virtually one of the only countries that tax people on citizenship vs residency. I agree that's bad, I am however saying that in this case they are justified.

[Simon_Jester]

Given the US's economic position, it produces a disproportionate number of wealthy expatriates. You don't get a lot of American migrant workers looking for menial jobs in Singapore; you do get a lot of American multimillionaires looking for tax shelters.

US law regarding expatriates might reasonably be unusual, to reflect this.

[Blayne]

Feel free to correct me if I'm wrong but my impression is that the way it works now is that if you go overseas and invest in busnesses there, you will still have to file tax stuff with the IRS and pay US taxes even if you do not live in the US and didn't make a cent in the US after moving outside? How's it work?

[HMS Conqueror]

Dude. That's shitty logic.

If you have to pay VAT/GST on top of income tax, does that count as double taxation? If you have to pay licensing fees, would that be triple taxation?

VAT and sales taxes are double taxation. And no one denies that VAT/sales tax add to your tax bill, they just tend not to include it in a calculation of tax as a percentage of income because the amount of VAT any given individual pays varies wildly depending on how much and what they buy. This is why these are often called "stealth taxes".

Nb: I'm not arguing that double taxation is bad, only that it exists. You can make an honest argument that people with corporate income should be double taxed at 35% both times, rather than at 35% and then at 15%. Not necessarily one I agree with, but I'm not arguing against it here.

Here's the thing. One can "avoid" being taxed on dividends/capital gains. Simply not realise capital gains, usually by reinvesting it in the States or the corporation don't pay dividends, focusing on other activities which increase the stock prices.

One can avoid income tax by being unemployed. Do you see the problem with this as an argument that no one pays income tax?



e:

One way to game the system is to simply take a salary at the corporation you own for example.

Not really key to the argument but that's precisely the worst way, because then you're double taxed at 35% (presuming it's not such a piddling business you dont enter high band income tax, in which case you're not rich anyway) both times, rather than at 35% then at 15%.

US law regarding expatriates might reasonably be unusual, to reflect this.

The US already levies income tax on ex-pats, so I'm not sure what more they can do short of sending out Mossad-style hit squads. A lot of these people aren't US citizens anymore anyway.

[Simon_Jester]

Here's the thing. One can "avoid" being taxed on dividends/capital gains. Simply not realise capital gains, usually by reinvesting it in the States or the corporation don't pay dividends, focusing on other activities which increase the stock prices.

One can avoid income tax by being unemployed. Do you see the problem with this as an argument that no one pays income tax?

Unrealized capital gains are actually a viable strategy for very wealthy people.

If your stock holdings increase in value by fifty million dollars a year, you're making money hand over fist and you won't necessarily be able to find ways to spend it all. You can let your paper wealth roll in without selling it all and avoid incurring any capital gains taxes. Sure, you'll have to sell it all off eventually (assuming you don't just die of old age and pass this pile of stock on to your heirs), but you don't have to do it now. There's no real reason to sell most of your stock and incur capital gains.

And that's ignoring and elaborate tax jugglery of the sort that you can get when you can afford to pay one of the smartest accountants in the nation out of pocket change.

Now, if you only have an income of, say, a million dollars a year... not so much, because you can conceivably spend that kind of money every year until you die.

US law regarding expatriates might reasonably be unusual, to reflect this.

The US already levies income tax on ex-pats, so I'm not sure what more they can do short of sending out Mossad-style hit squads. A lot of these people aren't US citizens anymore anyway.

I think you didn't understand me.

"Might reasonably be unusual:" it makes sense for US tax laws on expatriates to be unusual. Which they are, what with the whole 'taxing income earned overseas,' which most countries don't do. My point is that this makes sense, or at least makes more sense than if Mexico or the Philippines or even a country like Turkey did the same thing. Most 'expatriates' who live and work overseas from those countries are migrant workers- they don't make enough money to be worth pursuing for tax evasion anyway, and a fair amount of their money goes to the home country anyway in a lot of cases. But for American expatriates, there's relatively more people who are middle-class or rich by American standards, taking advantage of cheaper living conditions and tax shelters.

So it makes more sense to tax them as a practical thing, remembering that the first rule of taxation is "you can't get blood from a stone."

[HMS Conqueror]

Unrealized capital gains are actually a viable strategy for very wealthy people.

If your stock holdings increase in value by fifty million dollars a year, you're making money hand over fist and you won't necessarily be able to find ways to spend it all. You can let your paper wealth roll in without selling it all and avoid incurring any capital gains taxes. Sure, you'll have to sell it all off eventually (assuming you don't just die of old age and pass this pile of stock on to your heirs), but you don't have to do it now. There's no real reason to sell most of your stock and incur capital gains.

And that's ignoring and elaborate tax jugglery of the sort that you can get when you can afford to pay one of the smartest accountants in the nation out of pocket change.

Now, if you only have an income of, say, a million dollars a year... not so much, because you can conceivably spend that kind of money every year until you die.

Like you say, you have to sell the stock to get any benefit from it, and then you pay CGT.

Actually there is something of a loophole here: if I own stock in a company that holds a lot of cash, that company can invest the cash and I earn interest on the pre-tax lump sum. If I withdraw it immediately, unless I want to spend it immediately I will invest it and then only earn interest on the post-tax lump sum. I guess (but don't quote me!) that this is why dividends have gone out of fashion, and is arguably responsible for large structural distortions in the economy, because companies like Apple and Microsoft that are good at one thing try to hang on to their money and become venture capitalists, which is not what they're good at. But it doesn't much reduce the tax rate and actually increases the absolute tax take.

Also, should be pointed out that the corporation tax is the 35% increment, not the CGT. So if Warren Buffett never withdraws his earnings from Berkshire Hathaway, he still paid 35% tax on money he can't spend, not 15% tax on money in his pocket (which is what is being claimed).

I think you didn't understand me.

"Might reasonably be unusual:" it makes sense for US tax laws on expatriates to be unusual. Which they are, what with the whole 'taxing income earned overseas,' which most countries don't do. My point is that this makes sense, or at least makes more sense than if Mexico or the Philippines or even a country like Turkey did the same thing. Most 'expatriates' who live and work overseas from those countries are migrant workers- they don't make enough money to be worth pursuing for tax evasion anyway, and a fair amount of their money goes to the home country anyway in a lot of cases. But for American expatriates, there's relatively more people who are middle-class or rich by American standards, taking advantage of cheaper living conditions and tax shelters.

So it makes more sense to tax them as a practical thing, remembering that the first rule of taxation is "you can't get blood from a stone."

You're right, I misread.

Though the real 'practical' upshot is that most of people (ie. people on lower incomes) can't leave the US on a semi-permanent basis because it's too expensive, and those who can have a strong incentive to renounce their citizenship entirely. It's not indeed the Berlin Wall, but it's much closer than most countries.

[Simon_Jester]

Also, should be pointed out that the corporation tax is the 35% increment, not the CGT. So if Warren Buffett never withdraws his earnings from Berkshire Hathaway, he still paid 35% tax on money he can't spend, not 15% tax on money in his pocket (which is what is being claimed).

This is only true if "Berkshire Hathaway" and "Warren Buffett" are the same entity.

And if they are, then why does "Berkshire Hathaway" get all the advantages of being a corporation? The whole point of corporations even existing is that they're artificial 'people' with some (if not all) of the rights of natural-born human beings. This is... I won't call it a legal fiction, but if it's a legal fact, it sure means that corporations should have some of the responsibilities of human beings (like taxes) to go with having distinct rights and the benefits of being a distinct person.

If money made by a corporation that you own stock in is really your money before it gets transferred to you, then why is the corporation (not you) liable for the corporation's crimes? And I could come up with other examples of this question, but I must go.

[HMS Conqueror]

Corporations exist to abstract ownership rights for a lot of people. That's why they are "legal persons": so they can jointly exercise rights that the individuals who own them already possess but which it would be impractical to co-ordinate individually. They are not literally people and anyone making that argument is simply an idiot.

[PainRack]

The real reason why dividends and CGT isn't true double taxation is that it gets to have tax deduction applied to it. TWICE.

There are plenty of ways to have tax reduced, such as paying yourself a moderately high salary, which allows you to draw money out of the corporation and market it as expenses, giving you more income than if you had released it out as dividends. If you combine this with a dividend payout, you potentially get to have more income at overall gross taxes for the income you as a person draw out.

This ignores tax credits given to companies and etc such that General Electric paid no corporate tax, even as it reaped in significant profits that year.

[HMS Conqueror]

There are plenty of ways to get income tax deducted in the US, but that doesn't mean income tax isn't single taxation and thus tax doesn't exist in US. Moreover, CGT/corporation tax exists in countries other than US, many of which don't have major deductions.


Moreover on the topic of deductions, there are basically two important types:

1. Deductions based on losses, ie. if you lose money you don't pay tax equal to what you would have paid on profits of the same amount in future years. This doesn't apply to wage earners because no one gets a negative wage.

2. Subsidies to promote non-market behaviours the government likes. GE was a net recipient because of environmental subsidies, so if you have a problem with that, it's with the USG environmental policy, not with GE, which was doing exactly what the government was paying it to do.