I don’t disagree with you on this point[/quote]
I’m glad you don’t disagree because that is, absolutely, the reason the credit exists.
It is the equivalent of your home state giving you a credit for taxes paid to a foreign state. Novel concept, I know.
I have no idea where reciprocation comes from. Either your home state offers the credit or it doesn’t. And while I haven’t worked with all 50 states, I have yet to come across one that has an income tax and doesn’t offer the credit.
What you are confusing, and the president was lying about, is an economic incentive that is the result of poor domestic policy and the behavior of the citizenry with actual tax laws and rules that give “breaks” or “subsidies” to companies that move over seas.
There is no gimme from the government that you get for globalization. The cost savings come from the fact it is cheaper to operate in a country other than America.
There are no breaks to reduce. That is the lie part.
Two points: 1) anyone that complains about globalization and buys Apple products is by far, the biggest hypocrite I can point to in this situation.
- Adding penalties, taxes or otherwise making operations worse in America will undoubtedly and unequivocally push more activity into foreign markets, encourage keeping more profits in the foreign markets, and a reduction of focus on domestic market places.
Globalization isn’t bad. The fact it costs you 35% of your profit to bring that profit back to America is the problem here. [/quote]
Good call to move this into this thread Beans-I had the same thought before signing off last night.
As far as your response to my first line (about it seeming equivalent to working in one state and not another) goes, the point of me saying that was to say “Yeah, I get it, you’re just replacing states with countries. Doesn’t seem weird to me in that regard.” It isn’t a novel concept-don’t see why you had to be flippant. The reciprocation I was alluding to is the system in some states where you do not pay the income tax in the first place. Rather than getting a credit for later, you just don’t give money to the state you’re working in. Instead the full amount goes to your residential state. Honestly, for the purposes of this discussion it was unneeded information.
As far as your two points: 1-I agree to a point? Not sure what response you want or expect on this one. If somebody is vehemently opposed to exporting jobs because 'Murica and then shops at Walmart/is an Apple slave sure. I don’t however see a problem
2-The point you make about the true benefit of moving jobs overseas being the reduced costs to operate in those countries is a given. I will take you at face value that there are no tax benefits (or loopholes) used to make moving overseas result in a tax break for these companies. However, I would hypothesize that there IS a marginal cost that could be imposed on business that outsource that would be small enough to make operating overseas and bringing money back to the US profitable for these companies but still raise revenue that is currently missed out on. Essentially finding a middle ground between “Full credit!” and “I don’t care if you’ve been taxed on that already, you’re paying full tax again”. There is a benefit to putting that money made abroad back into the US, it is just about skimming from the top of that benefit to increase revenue while making sure the bulk of that incentive is still in place.
I recognize that you are not going to like that. My incredibly overly simplified example would be Business A operates abroad and makes $100. It pays 10% tax on this and let’s say it costs 10% instead of 20% of revenue to run the operation. If, when they want to move the money back into the US, instead of saying “Well we tax 20%, so since you have paid 10% on tax already, we will take only another 10% now” (leaving them with $70) you would say “Well we tax 20%, and you have paid 10% on tax already. However, you are operating abroad, so we will take an additional 1%. You now owe us 11%” (leaving them with $69). The company would now save money compared to operating entirely in the US (where for the same revenue made they would have $60), still leaving incentive to move money back in, but also allowing you to raise additional revenue. They still save money and you have increased your share by 10%.
I’m probably missing something (not a CPA-an engineer) but this appeal to my common sense. I do understand that tax codes often tend to be anything but…