Outsourcing Jobs and Taxes

[FreakinDJ]

Outsourcing Jobs and Taxes

Obama's Proposed Tax Reforms

President Obama's 2011 State of the Union address called on Congress to "simplify" the system by getting rid of corporate "loopholes" and leveling the playing field, which would aid the country's competitiveness and growth potential. He asked for "revenue neutral" reforms, meaning they would neither increase nor decrease tax revenues. New York University tax expert Daniel Shaviro says that approach may leave some companies paying more at a lowered tax rate even if the tax code is simplified (Bloomberg). Many Republican lawmakers and business groups support comprehensive tax reform but view any tax break closures as "job-destroying taxes."

Tax Deferral: The United States taxes both domestic and foreign earnings of U.S. multinational firms. Firms time the payment of taxes on their foreign profits based on how their parent company organizes its foreign operations. If a parent company is organized through subsidiaries (separately incorporated in the foreign country), the subsidiaries' profits generally are not taxed until they are paid to the U.S.-based parent.

Tax Credit: To prevent multinational firms from being taxed twice, the United States allows firms to claim tax credits for income taxes paid to foreign governments. If the foreign tax rate is lower than the U.S. rate, the firm receives a credit to reflect the foreign tax paid. If the foreign tax rate for a subsidiary exceeds the U.S. tax rate, the parent firm has so-called "excess credits," which can sometimes be used to offset U.S. tax payments on income from another subsidiary, a procedure called "cross-crediting."

Transfer Pricing: Transfer pricing is the practice of allocating profits for tax purposes between parts of a multinational corporation. Differences in tax rates between the United States and other countries incentivize multinational companies to alter the prices they charge for goods transferred to their subsidiaries. Multinationals try to set prices at levels that minimize their overall tax liability by, for example, under-pricing sales to their subsidiaries in low-tax countries and overpricing purchases from them. This move effectively shifts reported profits to the lower-tax countries.

http://www.cfr.org/united-states/outsourcing-jobs-taxes/p21777

[Kat45]

1. "job-destroying taxes"?

Umm, what jobs (particularly in this country)?

[jmowreader]

2. The great tax/demand downward job spiral

The only thing that creates jobs is increased demand. The problem is, that's not the case in the field of job destruction.

Our crop of MBAs, none of whom can see past the end of this quarter, believe any increase in expenses is an excuse to cut jobs. If you are running a pizza chain and the price of tomatoes goes up, hence making a pizza more expensive to produce, the first thing guys like Herman Cain think is, "we have to fire people to reduce expenses, because customers won't pay more for a pizza."

This is not true. Customers WILL pay more for a pizza, which explains why California Pizza Kitchen and Little Caesar's Hot and Ready can coexist in the same markets. What they WON'T do is wait two hours for a pizza or eat a cold one because there's not enough labor in the stores to serve customers quickly and efficiently. Strangely enough, many of the people who shop on price will choose, of two items similarly presented, the more expensive one in expectation the more expensive item will in some way be better than the cheaper one. So...Mr. Cain cuts his workforce enough to compensate for increased material costs. Customers respond by not buying as many Godfather's pizzas. Herman Cain responds to the slowing of demand by firing more people--either not realizing or not caring that the decreased demand is a direct function of his firing people in the first place. And so it goes.

This shit will continue until corporations realize "doing more with less" eventually leads to "doing less." Which is better: 10 percent profit margin and realized profit of $700,000, or 5 percent profit margin and realized profit of $1 million? The MBA would say the 10 percent margin is better because you didn't have to spend so much money to get there. Everyone else would say $1 million in profit is better because more profit is always better.

[Yavin4]

3. +1

I've walked out of stores that did not have enough cashiers. I'm not going to stand in line for 20 minutes to buy a bottle of water.