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https://imgur.com/gallery/327ozJ9

If you’re Jeff Bezos
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This isn't really a new strategy. Putting your intellectual property in an offshore entity and paying royalties to the offshore entity goes back a long way. I recall the case of Geoffrey the Giraffe (the Toys R Us mascot) who resided in Bermuda for tax purposes. This resulted in some litigation, actually at the state tax level, as I recall, but I don't have all the details at hand.

And many computer tech companies have some sort of base (on paper at least) in Ireland for the same reason. Now many computer companies have a large physical physical presence in Ireland for other reasons as well. Ireland has favorable tax laws, an educated workforce, and they speak English as a native language.

Bill
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I've been following Facebook Expats groups and they talk about getting an address in South Dakota. No state taxes, you only have to visit once a year to be a resident, and you can keep your American car registration while living in Mexico.

https://www.weexpats.com/keeping-car-mexico-using-south-dako...

For us small guys.
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Similar games are played by multinational companies to move profits elsewhere. Earnings can go to home country by paying high prices for parts made in home country or intellectual property fees or management fees, royalties, license fees, etc.

Hence, multinational companies often pay no income taxes in the US. They are subject only to property tax--unless they work a deal to reduce those fees too.
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"multinational companies often pay no income taxes in the US. "

FATCA prevents individuals from doing the same...
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Hence, multinational companies often pay no income taxes in the US.

But then there's the issue of repatriation of earnings if US operations matters.

Lots of hypocrisy with fortune 100 CEOs at work here.

BruceM
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Lots of hypocrisy with fortune 100 CEOs at work here.


Is this the fault of the "CEOs" or our tax laws?
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Lots of hypocrisy with fortune 100 CEOs at work here.

Is this the fault of the "CEOs" or our tax laws?


It can be hard to find clear lines of distinction there. The CEOs and their supporters hire the lobbyists. The lobbyists write the tax laws, or at least the sneaky parts, and then convince our representatives to pass them. And we keep reelecting our representatives.

Lots of credit to go around.
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One easy way (especially for young people) is to avoid living, retiring or starting your career in high state tax jurisdiction. The benefit of not paying an extra 3-10% a year on your income over time is huge.

Mike
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The benefit of not paying an extra 3-10% a year on your income over time is huge.

I found the benefit of getting an extra 20-30%/year in income to be more beneficial, even though I paid more in taxes.

YMMV
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Good, the US corporate tax should be zero anyway. Companies are funded with after-tax dollars the vast majority of the time and the owners and lenders pay tax on their gains, dividends and interest.
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Another way to avoid paying taxes is to work in a foreign (tax free) jurisdiction and take advantage of the foreign earned income exclusion $107,600).

Keep in mind I fully realize that there are multiple factors at play such as possible higher compensation which may be available in the US or high tax states. Keep in mind some people have substantial unearned income that needs to be factored in as well. But if you want to “avoid” taxes, there are ways to do it.

In our mobile work from home or remote economy, many people will be able to work Or retire in low cost states or countries and avoid federal or state taxes.

Mike
(Currently working and paying taxes in Illinois - begrudgingly.)
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Good, the US corporate tax should be zero anyway. Companies are funded with after-tax dollars the vast majority of the time and the owners and lenders pay tax on their gains, dividends and interest.

What I've seen is that about 2/3 of corporate dividends go to non-taxed entities (retirement funds, non-profit endowments, etc.)
So based on that I don't think I would agree that they're funded with after-tax dollars the vast majority of the time.

https://www.taxpolicycenter.org/taxvox/only-about-one-quarte...
says only 25% of corporate stocks are in taxable accounts.


The problem I see with a 0% corporate tax is that the rich will pay less taxes than they do currently. I would expect anyone with means would create a shell corporation for themselves, and pay very little in taxes. If they're smart, they would pay themselves a modest salary that they'd pay income tax on, and the rest would still be their assets, but safely ensconced in John Doe Shell Corp. Still wholly owned by John Doe, but paying $0 in taxes, where before John Doe paid thousands (or maybe millions) in taxes.

Personally I would not be in favor of making our tax system more regressive, taxing high income and high net-worth people less, and increasing taxes on people below the median income/net worth. And that's what I see a 0% corporate tax doing. IMO the recent "tax cut" (TCJA) that increased taxes on people like me who are in the middle, while cutting taxes for the wealthy, AND increasing the deficit is worse, but that's a whole other topic.
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the US corporate tax should be zero anyway.

Oh baloney. They use services. They should pay a commensurate amount for them. Corporations use the courts, they use the patent office, copyright protections. They use the fire and police departments; the military protects their interests just as much (*more!) than individuals. They use the roads to transit goods, they have regulations which insure transparent markets (or so goes the theory) and a host more.

Companies are funded with after-tax dollars the vast majority of the time and the owners hand lenders pay tax on their gains, dividends, and interest.

My life is funded with after-tax dollars which I spend, it apparently needs to be pointed out, on goods and services which those same corporations produce. I would have no problem if you were proposing that I should pay no taxes, even though I consume government services, and corporations should pay the entire cost of running the country, but that would be a ridiculous concept to every thinking person, just as letting corporations free-ride is.

Taxes, with a few exceptions, are imposed when money changes hands. I pay taxes on dividends and interest when I receive them. I pay interest on gains only when I take them. Ongoing property taxes and a couple of other taxation artifacts, are reimposed year after year on the same property, but that is an exception. Corporations pay taxes on their profits, although I believe they should pay it on their income, just as people do. If that’s not a good idea, then corporations are not people, and should not have the same rights conferred.

This is not so hard to understand. If you create costs for others, you should help defray those costs. So it is with corporations - as well as people.
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This is not so hard to understand. If you create costs for others, you should help defray those costs. So it is with corporations - as well as people.

I don't disagree that corporations shouldn't be taxed; but the reality is that corporations never pay taxes. They put their tax burden into the price of their product/service and you and I pay their taxes through increased prices for their product/service. And when they can't be competitive in their market they look for ways to cut costs. One way is to relocate to an area that has lower taxes. Throw wages in there too.

I don't have a good answer, just pointing out that corporations can pass on tax costs. You and I can't, or at least I can't.

gcr
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They put their tax burden into the price of their product/service and you and I pay their taxes through increased prices for their product/service. And when they can't be competitive in their market they look for ways to cut costs. One way is to relocate to an area that has lower taxes.

Let's see what happens when we apply that same logic to workers:

Workers put their tax burden into the price of their labor and corporations pay their taxes through increased prices for their labor. And when the workers can't be competitive in their market they look for different jobs. One way is to relocate to an area that has lower taxes.

I don't have a good answer, just pointing out that corporations can pass on tax costs. You and I can't, or at least I can't.
You do. Just as much as corporations do.
The market for widgets from corporations is subject to supply and demand. And that's what largely sets the prices. And the market for labor is also subject to supply and demand.
If (for example) Kansas City, Missouri was taxing employees 10% more than Kansas City, Kansas, you know that people looking for jobs will be considering take-home pay as part of their decision making process - not just before-tax pay. A lot of people will add an extra 5 minutes to their commute for an effective 10% pay increase.
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Let's see what happens when we apply that same logic to workers:

Workers put their tax burden into the price of their labor and corporations pay their taxes through increased prices for their labor. And when the workers can't be competitive in their market they look for different jobs. One way is to relocate to an area that has lower taxes.


I don't see it that way. I have to increase my skill set in order to receive more for my labor. The company just tacks on the tax liability to their product.

And when you decide that you are being underpaid at your job, you move on to another company, similar to what a company does when they feel they can have better profits in another location.



I don't have a good answer, just pointing out that corporations can pass on tax costs. You and I can't, or at least I can't.
You do. Just as much as corporations do.
The market for widgets from corporations is subject to supply and demand. And that's what largely sets the prices. And the market for labor is also subject to supply and demand.
If (for example) Kansas City, Missouri was taxing employees 10% more than Kansas City, Kansas, you know that people looking for jobs will be considering take-home pay as part of their decision making process - not just before-tax pay. A lot of people will add an extra 5 minutes to their commute for an effective 10% pay increase.


I used to have arguments with our CEO about labor and benefits. If company A pays $2 less and than company B, but company B is a terrible place to work, which company will have the better and stable workforce? So in your situation above what are they getting from the government on that extra 10% tax? Is it worth it? It's a personal decision.

Where I live it's not uncommon to commute 30 to 40 miles in order to have a higher wage. That's far better than living in the large city. Luckily out here, 1 mile is done in less than a minute. I would never make it in a large metropolitan area.

There are a LOT of variables to consider, and looking at just one does not give a person a clear picture. Another example is on P&L statements. I was dinged every quarter because my indirect labor ran .5% to .75% higher than what they wanted to see. I would always counter by pointing out my material costs ran 4% to 6% under every other plant. I also had the least amount of scrap in the corporation. I always felt if you pay a little more you can expect more and recover the costs in other categories. That would end the discussion until the next quarter.

Kind of off subject now. Thanks for the discussion.

gcr
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Another way to look at it.
Reduce corporate taxes, prices go down. Theory is that creates more demand for product. Although incidentally it reduces government’s ability to provide the infrastructure services needed and services used by the poorer half of the country.
Raise corporate taxes, prices go up. That creates demand for higher wages. Higher wages also get higher personal taxes along with the increased corporate taxes. Incidentally the government has more money to spend on infrastructure services and services used by the poorer half of the country.
Which is better. (Assuming little corruption)
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Here's a better analogy.

I purchase a toaster. It doesn't matter whether I pay with my $10 an hour wage from last week or the $100 an hour job I have this week. I purchase it with wages that I have been taxed on.

The purchase price of the toaster has a percentage of the companies taxes included in the price. So am I not paying the corporations taxes?

I do my best to reduce the taxes I owe, but I've never been able to pass them on like a corporation does.

Don't get me wrong. They need to pay taxes for the infrastructure and all the benefits that they enjoy, but ultimately the consumer is the one who gets the bill.

gcr
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Reduce corporate taxes, prices go down

In today's real world, for the most part, when you reduce corporate taxes the savings are used to buy back shares, pay huge bonuses to senior management, and perhaps raise dividends. The benefit to consumers (or employees for that matter), not so much.

Gina
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I don't disagree that corporations shouldn't be taxed; but the reality is that corporations never pay taxes. They put their tax burden into the price of their product/service and you and I pay their taxes through increased prices for their product/service.

No, they really don’t. Prices are set by cost of materials, distribution costs, and everything else *before* the sale. Taxes come after, if at all.

Consider scenarios: Goofyhoofy’s Finer Screen Door Company builds a factory to produce screen doors. I spend a million dollars doing so. I sell them for $100, except I only manage to sell 100. My net income is $10,000. How much did I allocate for taxes? Nothing. How much will I pay in taxes? Nothing.

Scenario 2: I build the same factory, I sell them for $100, I sell 10,000! My income is $1,000,000. How much did I allocate for taxes? Nothing. How much do I pay in taxes? Nothing. (No profit.)

Scenario 3: Same factory. Same price. I still 100,000. My net income is $10,000,000. How much did I allocate for taxes? Nothing. But my net income is now $9,000,000. How much will I pay in taxes? Whatever the tax rate is times $9,000,000.

Nod one knows what their taxes are going to be before the game starts. I have run several businesses, and “taxes” have never been part of the price setting mechanism. That has always been determined by the market (competition0, COGS, and so on.

Fr simplicity I have ignored depreciation costs of the factory over howevermany years, but the concept remains: I have no idea what the taxes are going to be - or if there are going to be any at all. How can I “put that into the cost” when it’s not there in the first place and could range from zero to substantial?
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Prices are set by cost of materials, distribution costs, and everything else *before* the sale. Taxes come after, if at all.
———————
This has been a long-running debate, as long as I can remember. And one interesting way to put it is that corporations DO pay taxes, at least in the formal sense of remitting money to the government. But whether the economic burden of taxation falls on the customers, or the owner/shareholders depends on how much pricing freedom the business has. If you’re a regulated utility or a drug company with a lot of patent protection you pass the tax burden along to the customers. For most privately held businesses the corporate taxes are ultimately borne by the shareholders.

Bill
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Congratulations to gcr2016 for cyberantlers for message 131000 on this board.

In the good old days there would be a celebration in the cyberlounge.
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Congratulations to gcr2016 for cyberantlers for message 131000 on this board.

In the good old days there would be a celebration in the cyberlounge.


Put the drinks on my bill. I'll claim it on my taxes.:)

gcr
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pauleckler:

"Congratulations to gcr2016 for cyberantlers for message 131000 on this board."

cyberantlers? I must be missing something. Where do we see them?

Vermonter
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Cyberantlers are a traditional reward in Fooldom for posting an even 1000 message on a discussion board.

Once it was a big deal but now we don't hear so much about them.

I've never seen a pair of them though some have made photos of antlers covered in foil.

I would guess they are virtual.

Merely a long standing Foolish tradition.
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