Burger King buying Tim Horton's and moving to Canada

[ohiomike]

This may have been 'the way' in the past, the world has changed too much to go back to that kind of system, imho.  Now maybe it we could just hit a reset button somewhere, a 'do over' type of thing, but we cannot.  I also do not believe this is a political party problem but is a creation of both.

 

Legally allowing corporations, now, to simply move their headquarters out-of-country to avoid taxes, is a recipe for disaster.  We will never see the type of taxation reform that will support this type of movement either.  I would be in favor of a straight tax, one at 20% or more for business and 15% for personal income.  Close all the stupid loopholes that allow circumventing paying your fair share.  Stop giving back (refunding) income tax monies to people who never paid that amount in in the first place.  Ie., a person who only pays in $1k in income tax getting $5k  back in the form of a refund simply because they have so many deductions.  I know people doing that year after year.

 

And unions?  The blame for unions going far beyond their usefulness has to be shared by the other side of the contracts being signed, because it takes two sides to agree on -any- union contract.  Especially these days when most unions have been neutered.

 

Corps. like BK and TH, in today's world, if allowed to move their headquarters out of country to avoid taxes, should then be considered 'foreign', and their products sold here should be taxed/tariffed as such.  Make the playing field level with those corps. staying in the US.  Okay, 'allowed' is not a good word, but I think you get the gist of my statement.

Edited August 28, 2014 by ohiomike

[Tpoppa]

Right, but that's all the corporations income, none of their income are "wages" which are taxed at a much higher rate for "people".

It's probably the most shitty thing about our tax code, money earned by people is taxed higher than money earned by money.

No.  That is not accurate.  Income from corporate operations are not tax as capital gains unless the operations happen to be related to investments or interest.  Corporations do use loopholes to their advantage to shift income when possible.  

 

By definition, returns for shareholders are taxed as capital gains. 

 

http://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States#Tax_rates

 

Keep in mind that if capital gains were suddenly taxed at the income tax rate, the entire stock market would collapse.  It would create the worst depression the world has ever seen.

[smccrory]

Keep in mind that if capital gains were suddenly taxed at the income tax rate, the entire stock market would collapse. It would create the worst depression the world has ever seen.

I'm not an advocate of either but I don't think that's a sure bet. Nor conversely do I think that elimination of the capital gains tax would precede a new era of economic prosperity as Forbes argues. Both would dramatically change the investment landscape to be sure, but Wall Street is very, very smart and would find ways to profit from the new landscape. I know having worked with an investment wing of a very large bank, that there are business contingencies for both, and I know that some have already run simulations and have (re)organizational plans if either were to happen. Also remember that they have lobbies. Many, strong lobbies. So it's fairly unlikely that either will happen in the next decade or two.

Edited August 28, 2014 by smccrory

[Strictly Street]

Interesting observation from Bloomberg.

 

Burger King pays less than the U.S. corporate tax rate because it operates in many jurisdictions. Its effective rate in 2013 was 27.5 percent, one percentage point higher than the Canadian corporate tax rate of 26.5 percent.

 

So is all this really about un-patriotic companies and evil capitalists?

Over 1% of taxes?

Or a possible created political talking point that serves no real point?

 

http://www.bloomberg.com/news/2014-08-27/buffett-burger-king-funds-flip-obama-s-inversion-calculus.html

See Warren Buffets attitude on the whole thing.

 

“I proposed closing this unpatriotic tax loophole for good,” Obama said in his weekly address on July 26

 

the theater continues.

[bloodninja420]

You guys realize that BK is still going to pay the full 40% rate on all income generated from US operations. These tax inversions are not about getting out of that tax bill, it's impossible.

What they are about is paying the local tax rates on worldwide income. US is the only country I know of that demands it's corporations pay the US rate on global income.

It's utterly foolish because it raises only a pittance and encourages our corps to move headquarters.

And the whole sick game is made possible by the social justice warriors like you guys in this thead with zero command over the actual facts or economics of tax policy.

Pay a fair share, derp!

[smccrory]

You guys realize that BK is still going to pay the full 40% rate on all income generated from US operations. These tax inversions are not about getting out of that tax bill, it's impossible.

What they are about is paying the local tax rates on worldwide income. US is the only country I know of that demands it's corporations pay the US rate on global income.

It's utterly foolish because it raises only a pittance and encourages our corps to move headquarters.

And the whole sick game is made possible by the social justice warriors like you guys in this thead with zero command over the actual facts or economics of tax policy.

Pay a fair share, derp!

 

Well, we were having a largely rational discussion into you derped in.

[bloodninja420]

Pardon me for bringing some actual knowledge into play in my 2 posts in this thread.  All Im seeing otherwise is shoddy arguments built upon an incorrect understanding of the facts.

[Tpoppa]

This is more accurate 

Interesting observation from Bloomberg.

 

Burger King pays less than the U.S. corporate tax rate because it operates in many jurisdictions. Its effective rate in 2013 was 27.5 percent, one percentage point higher than the Canadian corporate tax rate of 26.5 percent.

 

 

Than this

You guys realize that BK is still going to pay the full 40% rate on all income generated from US operations. 

 

 

By moving to Canada the'll avoid being "double taxed" on income generated outside the US.

[smccrory]

Pardon me for bringing some actual knowledge into play in my 2 posts in this thread.  All Im seeing otherwise is shoddy arguments built upon an incorrect understanding of the facts.

 

What you brought were pejoratives, name-calling and incomplete data shrouded in an illusion of actual knowledge.

Edited August 28, 2014 by smccrory

[bloodninja420]

How it works is this:

 

As a corp headquartered in the USA, BK's tax rate is 35% on any money they repatriate to the US. 

 

For income earned in the US, BK writes a check to the IRS for the full 35%.

 

For income earned outside the US, BK still owes uncle same the 35%, but the IRS credits them for any tax bill payed to the foreign country. So if BK payed the Canadian gov 15%, they still owe the IRS 20%.

 

 

In Strictly Street's example, the reasons for BK's 27.5% current effective rate dont really have anything to do with international strategy. They reduced their bill by taking advantage of accelerated depreciation schedules, and tax credits relevant to the debt financing of machinery, and believe it or not, tax credits that let them classify parts of their business as "manufacturing." 

[Tpoppa]

First you said 40% now 35%.  Are you sure you know what you're talking about? 

[bloodninja420]

35% is the federal rate. 40% rolled off my tongue because that's the rate we use in our models that also need to account for state taxes. If you've every worked for the state of ohio you'd better hope I know what Im talking about-- Im portfolio manager for one of the pension funds!

 

Smccrony-- sorry to come off as a douche. Nothing I say is intended to be ad-hom. I just want to attack arguments that are wrongheaded.

 

For every major stock and corporate bond purchase our fund contemplates, interviews with the CEO and his direct reports are an important step in our due diligence. Without fail taxes are are pain point for every corporation with an international presence. And wouldn't they have to be for all these firms to seriously consider undergoing the cost of a reorg and leaving behind the most favorable bankruptcy and tort system in the world? 

 

The US's corporate tax policy just boggles my mind.  For these reasons:

- It's a form of double-taxation in the presence of capital gains and dividend taxes. Other forms of incorporation such as llcs, sole proprietorships, partnerships, and s-corps whose distributions are taxed only once, at ordinary income rates, are not subject to the double taxation. But our c-corps are.

- It doesn't actually raise much money at all. It was around 10% of treasury receipts, give or take, when I last looked.

- It incentivizes incredibly unhelpful behaviors on the the part of our corporations. Huge tax preparation bills, convoluted transfer-pricing structures, and in cases like BK, exit from the USA.

 

If our federal government really needs the money currently being raised by the corporate income tax, literally any other taxation option would be preferable. It's the worst tax imaginable. 

[smccrory]

NOW you come in with dispassionate, intelligent facts!  Next time, start there  .  Look, I may be a fan of social justice, but I'm no f'n derp.  My position is that even if you're a tax expert, that doesn't make your values trump others on the issues of macroeconomics.

• Agreed, double-taxation is unfair, but it's less unfair to lower-and-middle-class citizens who I'd argue should be encouraged to invest even small amounts of capital so they can participate in the monetary system and feel some level of co-ownership.  Personally, I'd get rid of the capital gains tax only as long as loopholes were compensatingly eliminated.  The wealthy already benefit disproportionately from public resources and infrastructure, so it's not unreasonable to tax them enough to keep peasant revolts at bay.
• I completely agree that the costs of the current tax code is badly distributed and duplicated, making the whole affair that much LESS efficient.  But it wasn't just social-justice liberals that created that mess.  The code has been jerrymandered so much, I don't think it's possible to assign blame anymore.  Don't tell Fox and MSNBC though - it would break their little hearts.
• 10% may not sound like a lot percentage-wise, but dude, that's still a very large amount of money for the government to give up.  Eliminate that income source and you'll either increase the deficit by 10% or will have to cut costs, which would putting millions of Americans out of work, not only in the government sector but private goods and services suppliers as well (the unemployed don't buy much).  Now don't twist my words to suggest I'm saying we have an obligation to employ workers regardless of their value proposition - I'm saying that there would be a shock which would take years for private employers to accommodate, IF at all, because you know that a large amount of that freed capital would never make it to the market.  Indeed, there are parallels in Detroit's draw-down that will keep sociologists and economists busy for decades.

That's a key problem in my mind.  We can talk and talk and talk about simplifying the tax code (which I'd again fully support) but I have no faith that Republicans will play fair if the Tea Party has any involvement, and changes WILL be slanted to the wealthy, who will take advantage of public resources and human capital in ways we haven't seen since the 1800s.  There wouldn't be enough on top to pay for goods and services that the bottom deliver and it would take several generations for the bottom to build back up.  Moat diggers and gun makers would do very, very well though...

[smccrory]

Now, I should apologize as well - reading my post again this morning, it's clear I'm less than unbiased, indeed the current tax code is F'd up, and it causes businesses to adapt in unintended ways.  Maybe someday the public discourse won't be so polarized and we can come to a series of rational, step-by-step simplifications...?

[DAC]

Rep for the post above. 

 

However, I do feel the need to point out that the comment below is somewhat inaccurate.  The wealthy actually benefit less than the average taxpayer re: infrastructure.  More so with regard to transfer payments.  The more wealthy you are, the less likely you are to use public facilities such as airports, etc.  They travel by private jet, have private security, pay to register multiple cars but only drive one at a time, travel only rarely via the interstate, and so forth. 

 

But again, your comment above is well taken.  We need more than two political party but our current federal elections "infrastructure" and media culture won't allow it.  Best example is Gary Johnson - he might have filleted Obama and Romney in the debates, or not, but never got the chance.  Probably never will.

 

 . . The wealthy already benefit disproportionately from public resources and infrastructure, so it's not unreasonable to tax them enough to keep peasant revolts at bay. . .

[smccrory]

However, I do feel the need to point out that the comment below is somewhat inaccurate.  The wealthy actually benefit less than the average taxpayer re: infrastructure.  More so with regard to transfer payments.  The more wealthy you are, the less likely you are to use public facilities such as airports, etc.  They travel by private jet, have private security, pay to register multiple cars but only drive one at a time, travel only rarely via the interstate, and so forth.

 

I appreciate the rep point, thanks man, and I totally agree with you about the 2-party system.  I'm thoroughly disgusted by the lack of shared ownership and accountability our current political pair has created.  I at first was excited about the Tea Party's potential to shake everyone up in that regard, but became repulsed by what I think is a divisively constitutional-literalist tenor, so maybe that's why I can barely stop myself.  It'll now be years before another opportunity comes along to re-merge the discourse.

 

Just to split hairs though, private jets more often use the thousands of rarely-used community airports funded by federal and state grants as well as local taxes.  Sure, there are fuel taxes and sometimes a landing fee, but those are minuscule compared to the staggering cost of maintaining tarmac, approach beacons, hangars and so on (this coming from a private pilot who myself also benefits from those things).  Perhaps the wealthy don't directly use highways as much, but their businesses do for ground transport.  Those businesses are also far more dependent upon public water and sewage and having safe, healthy, educated workers available (thus emergency response, health care and schools).  That's what the prez meant when he said that businesses aren't just built by themselves - there is an operating environment they depend upon.  Try opening a boutique candle store in Somalia.

 

Of course, the public also benefits greatly from (non-parasitic) businesses, so it's entirely unfair to depict businesses simply as users.  They generate jobs, stimulate credit markets (most of us can't pay cash for a house), uplift the quality of life and so much more.  That's what's usually lost on the far left.

 

The uproar about tax inversions is as much emotional and political as anything, sure.  That's because it plays against the American notion of fairness and heck, even patriotism.  It's hard for me to describe a company that loves this country in the same breath while describing how they moved their headquarters to reduce their tax obligation to the public that makes this great land available for business.

Edited August 29, 2014 by smccrory

[RCBS]

Not in the tax code, lots of loopholes for corporations, capital gains are taxed lower than most middle class income.

So they indeed enjoy the best of both worlds.

Has anyone noticed that we as a nation aren't really moving forward? Seems as to me we are clawing away just to keep current status. Maybe I'm just poor? Dollar is down, infrastructure is past its 50 year build life, healthcare is most expspensive in the world with only marginal care, our status in the world is no longer the greatest nation but instead of a bully who meddles and should address its own concerns before playing world police...Thanks Obama!

[aforrest4]

I was recently in Canada and there were Tim Hortons everywhere.

I wouldn't be surprised if there were more there than in the US.

[Strictly Street]

Burger King + Tim Hortons + Canada = Media Circus

Chrysler + Fiat + Italy = Crickets

[ohiomike]

Burger King + Tim Hortons + Canada = Media Circus

Chrysler + Fiat + Italy = Crickets

Oh, on some car sites the Chrysler issue is a hot potato with bitching galore.

[YSR_Racer_99]

People are pissed, not because it's illogical or illegal, but because it's unfair.  They benefit from U.S. infrastructure but don't want to pay for it.

 

Companies now have the ability to discriminate based on religious grounds and contribute massive amounts of political money to super pacs with only the vaguest of disclosure.  They enjoy public infrastructure in ways that go far beyond an individual's, so why shouldn't they pay for the very environment that enables their profit?

 

It's easy to say that the U.S. has high corporate tax rates which are driving companies out of country.  But like you guys allude to re: tax code, tax attorneys and CPAs make careers out of exploiting loopholes (and lobbying for loophole existence), and that will only go away if we vastly simplify the tax code.  But good luck making that happen without the balance being tilted even more towards corporations with corporate tax attorneys and CPAs on the scene to craft the simplifications.  It's like letting bankers and ex-bankers craft financial regulations.

I actually agree with this, but want to point out that most CPA's I've asked about simplifying the tax code say "yes, PLEAAASE".   They wouldn't go out of business, it would just become easier to do their bidness. 

Edited September 18, 2014 by YSR_Racer_99

[YSR_Racer_99]

I was recently in Canada and there were Tim Hortons everywhere.

I wouldn't be surprised if there were more there than in the US.

Yeah, they're kind of like Subway is here...  Or Starbucks in California.    Was in LA a few years ago, and there were literally two Starbucks shops caddy-corner across the street from each other.    Watched from the hotel window on Sunday morning as a group of Harley riders gathered at one for a meet-up. 

 

TH IS Canadian, after all...