The Democrat Thread

[StrangeSox]

WI had one of the highest corporate tax rates in the country. I have no problem with him trying to make tax cuts there, and then trying to offset them.

 

Race to the bottom!

[Soxy]

Oddly enough, SOME of Walker's tactics would be more beneficial here than in Wisconsin. I think Walker is acting like an ass, but he's trying to make deep and difficult cuts, which Illinois needs. Quinn is raising taxes but making only small and insufficient cuts, which is more what Wisconsin needs.

 

Here's the thing: I don't have a problem with paying more into my pension and healthcare. 8-12% suddenly dropping from my paycheck? Ouch. It sucks, but at least I'm single and kid free. I feel worse for our custodians and the healthcare workers who are making $9 an hour (or the single parents). So, for those of us that are highly skilled workers (and can contribute to the inevitable brain drain) not a giant deal. Yes, it sucks that there hasn't been a cost of living increase in my institition in over 5 years. I know I have to make sacrificies--but I resent that he is painting public servants so negatively and making us bear a HUGE burden in this budget crisis (some of which he artificially created).

 

Part of the problem is that he wants public sector employees to pay the same rate for benefits as private sector employees--at least in the UW system you make much less than you would at a private college or in industry. So, he's taking away any possible benefit to working for the state.

 

None of this, of course, has a single f***ing thing to do with our right to collectively bargain. Nothing.

[Jenksismyhero]

That's my point.

 

Those difficult cuts have to happen because he chose to cut the corporate tax rate.

 

In trying to stimulate growth, something Illinois and Chicago specifically will see a huge loss from in the coming years.

[Balta1701]

In trying to stimulate growth, something Illinois and Chicago specifically will see a huge loss from in the coming years.

When people actually run the numbers on which businesses or high income individuals move into/out of states because of tax rates, the impact tends to wind up very small.

 

Service industries can't move. Industries that require a lot of infrastructure, like manufacturing or transportation, can't move. Banking centers can move, but rather than chasing corporate tax rates, they tend to chase lax regulations. In terms of building new facilities, the availability of space, cost of energy, cost of transportation, education of workforce, and most importantly health care costs wind up winning as well.

 

That doesn't mean if you immediately increased your tax rate to 2x New Jerseys you wouldn't sustain losses, but really, people don't get up and move, or really decide where they're putting facilities, based on 1-2% differences in corporate tax rates between states. Wealthy people don't move out of NYC or Chicago because of high tax rates, at least not in the aggregate.

 

In addition, since you're taxed on income earned in the state, even if you move your headquarters out of a state, it doesn't matter; you still pay IL taxes on things built or sold in IL.

[Balta1701]

Here's at least 1 version of a person re-stating it. (Piece originally from AP)

 

Businesses consider a range of factors when deciding where to locate, including the quality of schools, roads and programs that rely on a certain level of public spending and regulation. And evidence suggests there is little correlation between a state's tax rate and its overall economic health.

 

"Concerns about taxes are overstated," said Matt Murray, a professor of economics at the University of Tennessee who studies state finance. "Labor costs, K-12 education and infrastructure availability are all part of a good business climate. And you can't have those without some degree of taxation."

 

States' tax rates also do not predict their resilience during an economic downturn.

 

While high-tax states such as New York, New Jersey and California have been clobbered by the current recession, so too have states that pride themselves on low tax rates, including Nevada, Texas and Arizona. The collapse of the housing market and the financial industry meltdown largely drove the current conditions, sparing almost no state regardless of its level of taxes.

[Jenksismyhero]

When people actually run the numbers on which businesses or high income individuals move into/out of states because of tax rates, the impact tends to wind up very small.

 

Service industries can't move. Industries that require a lot of infrastructure, like manufacturing or transportation, can't move. Banking centers can move, but rather than chasing corporate tax rates, they tend to chase lax regulations. In terms of building new facilities, the availability of space, cost of energy, cost of transportation, education of workforce, and most importantly health care costs wind up winning as well.

 

That doesn't mean if you immediately increased your tax rate to 2x New Jerseys you wouldn't sustain losses, but really, people don't get up and move, or really decide where they're putting facilities, based on 1-2% differences in corporate tax rates between states. Wealthy people don't move out of NYC or Chicago because of high tax rates, at least not in the aggregate.

 

In addition, since you're taxed on income earned in the state, even if you move your headquarters out of a state, it doesn't matter; you still pay IL taxes on things built or sold in IL.

 

But that ignores the role a company plays in the market. Here's an article from my "hometown" in Champaign, where this tax hike is really going to screw people. It's a pretty weak economy to begin with, and this just makes it even worse. "Trickle down" is a very real threat in these communities that depend heavily on big businesses, who quite frankly have had enough of footing the bill for society.

 

http://www.news-gazette.com/news/business/...-out-illinois.h

 

So no, maybe Jimmy John's isn't directly affected, but if he moves his headquarters now you've just potentially closed a hotel or two in town, a bar or two, restaurants, and other service-based businesses. And for what? To pay for what? Services the states shouldn't have any business providing at the level they provide it? Imagine if State Farm decides to move out of Bloomington. Our Country Companies. Those towns would die within a year.

 

And true, Chicago can probably absorb the hit better than a town of 100k or less. But it's still going to take its toll. Businesses will leave. Some future businesses won't consider Chicago as a possible home (think Boeing would have moved here a few years ago now that Chicago one of the highest combined business tax in the world?)

 

Also, The Great Savior is so lost on what to do anymore, even HE is proposing cutting corporate tax rates. Why would he consider such a thing if it wouldn't help?

 

http://articles.chicagotribune.com/2011-02...-base-tax-works

[StrangeSox]

Race to the bottom!

[Balta1701]

Also, The Great Savior is so lost on what to do anymore, even HE is proposing cutting corporate tax rates. Why would he consider such a thing if it wouldn't help?

 

http://articles.chicagotribune.com/2011-02...-base-tax-works

The National corporate tax rate is another issue entirely. Even you ought to be honest enough to admit the current system is a joke. 2/3 of U.S. companies pay nothing in corporate taxes.

 

If you actually got the majority of corporate entities paying 1% in taxes, you could substantially cut the "nominal" tax rate.

[StrangeSox]

Actual and effective tax rates might be an important distinction, I dunno.

[Jenksismyhero]

The National corporate tax rate is another issue entirely. Even you ought to be honest enough to admit the current system is a joke. 2/3 of U.S. companies pay nothing in corporate taxes.

 

If you actually got the majority of corporate entities paying 1% in taxes, you could substantially cut the "nominal" tax rate.

 

How is that another issue? It's a tax businesses pay (assuming they have income after deductions). It's all factored into calculating whether doing business in State ( or Country) A is better than State B.

[NorthSideSox72]

Here's the thing: I don't have a problem with paying more into my pension and healthcare. 8-12% suddenly dropping from my paycheck? Ouch. It sucks, but at least I'm single and kid free. I feel worse for our custodians and the healthcare workers who are making $9 an hour (or the single parents). So, for those of us that are highly skilled workers (and can contribute to the inevitable brain drain) not a giant deal. Yes, it sucks that there hasn't been a cost of living increase in my institition in over 5 years. I know I have to make sacrificies--but I resent that he is painting public servants so negatively and making us bear a HUGE burden in this budget crisis (some of which he artificially created).

 

Part of the problem is that he wants public sector employees to pay the same rate for benefits as private sector employees--at least in the UW system you make much less than you would at a private college or in industry. So, he's taking away any possible benefit to working for the state.

 

None of this, of course, has a single f***ing thing to do with our right to collectively bargain. Nothing.

And I agree with you. I think that pension and health care costs for government employees is a pretty huge issue, which should be addressed... but I don't think that massive pay cuts in that sector is a good idea at all. It will have a lot of negative impact. And you are right that this is not part of the stupid idea to take away the right to organize.

 

[NorthSideSox72]

How is that another issue? It's a tax businesses pay (assuming they have income after deductions). It's all factored into calculating whether doing business in State ( or Country) A is better than State B.

Fed vs State taxes. Fed taxes won't change from state to state.

 

[jasonxctf]

How is that another issue? It's a tax businesses pay (assuming they have income after deductions). It's all factored into calculating whether doing business in State ( or Country) A is better than State B.

 

Corporations have a pretty sweat tax deal if you ask me.

 

Company takes in $1,000,000 in Revenue and has $1,200,000 in expenses, they pay $0 in taxes.

Individual makes $1,000,000 in Revenue and spends $1,200,000 in expenses, they pay $350,000 in taxes.

 

Seems fair.

[Jenksismyhero]

Fed vs State taxes. Fed taxes won't change from state to state.

 

well sure, but clearly if there's a benefit to cutting the federal corporate tax rate, there's a similar benefit to cutting the state corporate tax rate. that's my point

[Soxbadger]

Well Ive done some work for high income people who want to claim their residence is Florida (Fl has 0 state income tax). The problem is that income tax is based on where the income is generated. So unless they want to move their entire business to Florida and not sell anything in Illinois, they end up still paying IL income tax.

 

The best example is baseball players. They pay taxes where the income is earned. Thus when they play in Chicago they pay IL taxes (regardless of if they are on the Marlins or Dodgers), when they play in Florida they pay FL income taxes and so on.

 

Thats why when clients call in asking to move their business, etc., I generally have to tell them its not going to make much difference. Its just like the commercials that say to form your corp in NV/DE, its true that they have a lower filing fee, but the problem is if your business is in Il you have to then register as a foreign corp, meaning that you pay both IL/NV every year, plus double filing fee. You then also have to pay Illinois any income earned in this state.

 

Now there are differences for major corporations when it comes to headquarters/franchise fees, but most major corporations are going to still have a business presence and generate pretty equal revenue. In the end it usually does not make much sense to move your business, but most people like to sensationalize the truth.

 

I have only seen 1 instance where it made sense, and that was a retired man who no longer had any income outside of investments, none of them being land based and in IL, who owned a house in FL/IL. He was able to file for residency in Fl, terminate his residency in IL, and therefore pay less income tax. But its very limited circumstances.

[Jenksismyhero]

Corporations have a pretty sweat tax deal if you ask me.

 

Company takes in $1,000,000 in Revenue and has $1,200,000 in expenses, they pay $0 in taxes.

Individual makes $1,000,000 in Revenue and spends $1,200,000 in expenses, they pay $350,000 in taxes.

 

Seems fair.

 

Yes and no. We want businesses to spend and invest. That keeps the economy going and gives more money to businesses to hire people/keep people employed. The problem is the company that makes a ton of money and gives 90% of it to the CEO as a bonus.

[jasonxctf]

Yes and no. We want businesses to spend and invest. That keeps the economy going and gives more money to businesses to hire people/keep people employed. The problem is the company that makes a ton of money and gives 90% of it to the CEO as a bonus.

 

but dont we want the consumer to spend and invest too?

[Soxbadger]

Well the company that pays the CEO 90% just zeros out their profit so that they dont pay taxes at the corporate level. A big difference is whether the corp is a C Corp or a S Corp.

 

The best reason why Corps/LLC should pay more taxes is that they are getting unlimited personal liability protection for the owners. The business may go down, but the owner wont lose anything he didnt personally guarantee. Conversely if im a sole prop/dba and my business goes down, I lose everything.

 

Always makes me shake my head when a small business doesnt want to take on a corporate form. I dont care if you dont believe youll ever get sued, for a measly $175 a year you might as well get the potentially unlimited protection.

 

(edit)

 

In theory the CEO is paying income tax on the money earned, which is the equivalent of the individual paying taxes on their individual income.

 

The corporation just pays another tax at the corporate level that no individual ever has to pay.

 

 

Edited February 18, 2011 by Soxbadger

[StrangeSox]

The Packers are backing the AFL-CIO and the state unions:

 

http://www.jsonline.com/news/milwaukee/116231984.html

[Jenksismyhero]

but dont we want the consumer to spend and invest too?

 

Yeah, but what's the source of the money they have to spend/invest with?

[StrangeSox]

Yeah, but what's the source of the money they have to spend/invest with?

 

Yeah, but what's the source of money that businesses take in as revenue?

 

Businesses don't invest in capital resources and expand employment unless there's demand to be met. Demand doesn't grow very well when wealth is increasingly concentrated in the hands of a few at the expense of the many. Cutting corporate taxes while cutting workers' pay isn't going to spur demand. It isn't going to drive economic activity and increase Wisconsin GDP.

Edited February 18, 2011 by StrangeSox

[Soxbadger]

Its apples and oranges.

 

The CEO still pays income tax on the money he makes, just like you or me pay income tax on the money we make.

 

The difference is that a Corporation may also pay taxes on the money that the corporation makes. That is why there is a great incentive for the corporation to "zero-out" the books. Instead of making a profit and therefore having the profit taxed on the corporation it either turns the profit into employee bonuses or spends the money. Either way the corp avoids paying taxes at the corp level, but the employee still pays income tax.

 

[Jenksismyhero]

Yeah, but what's the source of money that businesses take in as revenue?

 

Businesses don't invest in capital resources and expand employment unless there's demand to be met. Demand doesn't grow very well when wealth is increasingly concentrated in the hands of a few at the expense of the many. Cutting corporate taxes while cutting workers' pay isn't going to spur demand. It isn't going to drive economic activity and increase Wisconsin GDP.

 

Businesses have other alternatives to obtain money (investment), people normally do not.

 

I just love the liberal mentality we've got right now. Instead of cutting government spending, we should increase taxes on everyone. Instead of actually paying off our debt, we should borrow MORE money to pay it off, the future be damned. Instead of addressing the 800 lb gorilla in the room (entitlements ruining every budget), we should run away to a different state to hide from our responsibilities. Instead of addressing the economy, we should devote a year of the presidency to passing healthcare reform that doesn't do jack s*** to fix the major problems of the system.

 

I don't agree with HOW the governor in Wisconsin came about his mess. BUT, as NSS said, at least he's doing SOMETHING to TRY and address the problems of his state. And i'd argue further that the state unions are a big part of the problem since they've successfully negotiated with moronic politicians to get us to where we're at. Who wants to campaign to take away money from teachers/police/fire/civil workers? No one, but it's gonna have to be done at some point if states are going to fix their budget problems.

[Balta1701]

It used to actually be the case that y'all were correct...there was, for decades, a very strong correlation between corporate profits and corporate investment. If there was cause-effect relationship there, then increasing corporate profits would directly lead to more investment.

 

However, this nearly linear relationship is flat out gone. It began deviating, with elevated corporate profits not matched by spending, in the late 90's. There was a brief bit of confusion following the 2001 recession...but since then, reported corporate profits have skyrocketed, while investment has lagged well behind. We are currently at similar "investment" levels to those in the late 90s, while corporate profitability is setting a new record each quarter. In this case, additional tax cuts for corporations clearly will do jack squat to increase investment; it'll just increase the spread between the 2 lines.

 

 

Meanwhile, the effective corporate tax rate, the taxes collected as a percentage of GDP, have been marching downwards for decades.

 

[Soxbadger]

I just love the liberal mentality we've got right now. Instead of cutting government spending, we should increase taxes on everyone.

 

I cant speak for all liberals, and im not even sure if I truly am a liberal (depends on who is defining it) but at least this "liberal" (being me) is in favor of cutting govt spending and raising taxes.

 

I can make the same argument about "conservative mentality". Instead of increasing taxes, they just want to cut spending on everything.

 

Both solutions are incomplete, the problem requires BOTH increasing revenue and decreasing expenditures. At least if we want to keep our society at the same level we have had it at for the last 20 or so years.

 

So we can pretend that one side or the other doesnt understand, or we can admit that the problem is that neither side actually cares about fixing the problem, they just care about their own personal agendas being pushed through.

 

If you really cared about balancing the budget, you wouldnt oppose tax increases or budget reductions.