@ember
These practices are NOT new and have nothing to do with the Digital Economy. They're decades old in Australia. Back in those days, it was the converse though. Not to avoid income tax on the profits, but to avoid substantial customs excise on products. As with all things, very complex.

I disagree Ian it is simple tax avoidance to my mind. Maybe you are referring to the accounting tricks as complex and I'm sure that's true. Then again if this is true...

what has been outlined in these reports sounds an awful lot like money laundering on a grand scale.

then maybe it is complex after all. I'm ignorant of the actual details sorry. For once I don't blame the companies though. They'd be fools not to do it actually because if they didn't they'd be at a competitive disadvantage and that's no way to do business.

When I read about "its not fair", "the middle class will have to pay more", etc. I can't help but think it smacks of middle class hypocrisy. Once deductions are accounted for a middle income spectrum family of four in the USA pays an effective Federal income tax rate of 5.3%.

Middle class hypocrisy? Gimme a break. It's not like the middle class has anything to do with the structure of Americas tax system so how are they being hypocritical? If what you are saying is true then it means the poorest americans are paying more than their fair share of tax, and from everything I've read that is exactly the case. And that's not just hypocritical it is obscene, but that's just my opinion.

Then they all will leave.

Fear mongering BS. Isn't America the greatest country in the world? Why would they leave such a country? Again just my opinion and I don't wish to debate this.

Problem isn't taxation. Problem is spending.

Surely its both? (just discovered martinibuster already pointed this out, but I already typed it so I'm leaving it. Sue me)

The tax avoidance they're complaining about is not illegal according to the laws THEY created.

It's not that simple. It's not like Politicians/Congress/public servants snapped their fingers and whalla you have a taxation system. It is developed over decades even centuries and it's complicated and right there is the true heart of the problem. Governments around the world have been legislating to stop tax avoidance for a long time with little success and that's what brings us to this point. America has a spending and taxation problem and so far they haven't been able to fix either but that leads me to my final point which is actually positive.

What all this means is that finally, FINALLY congress is taking action to fix the UNBELIEVABLY MASSIVE taxation shortfall the US has. I applaud them for that. As I said governments around the world have been trying to stop tax avoidance with little success and from what I see, the US system of basically naming and shaming the biggest target has the best chance of actually succeeding. My fingers are crossed for them because as always this affects economies around the globe, because I would argue that the world economy needs a healthy US economy although it becomes less important as the Chinese economy grows but that's yet another issue.

Fear mongering BS. Isn't America the greatest country in the world? Why would they leave such a country? Again just my opinion and I don't wish to debate this.

I know that my town had a lot of good businesses once, and then we got greedy and tried to tax them more and more, so they left for a different town a few states over. That town didn't want to tax them much at all, they just wanted the jobs it would provide.

To be fair, we'd have to tax Apple pretty hard for them to leave, but if we started attacking other large businesses who don't have the same cash flow as Apple, maybe they do leave? I agree something needs to be done, but it needs to be fair. It's bad enough that everything is getting outsourced, now I fear we'll lose entire companies.

I agree something needs to be done, but it needs to be fair. It's bad enough that everything is getting outsourced, now I fear we'll lose entire companies.

The solution is not that as complex as politicians try to make it sound, so they can continue accepting "campaign contributions" from the lobbies these companies are involved in.

(1) Close some of the loopholes so these companies' effective tax rates are equivalent to those of smaller businesses.

(2) Offer them tax incentives to manufacture in or move operations to the US and provide US jobs. This may bring that effective tax rate right back down again, but at least the country will be getting something for the money - jobs.

Tax incentives, instead of tax cuts. Really, it's that simple. Don't give them a carrot and hope for the best. Tell them what to do to get the carrot, and then withhold it until they've done it.

We could also consider putting as much tariff burden on foreign companies as they put on our exports (if we have any anymore). This would make it easier for our companies to compete in a global economy.

There are a lot of solutions, it's just the politicians don't want solutions. They want to keep getting contributions from lobbyists.

@diberry

(2) Offer them tax incentives to manufacture in or move operations to the US and provide US jobs

It might surprise you that a great many people complain that would be "Tax Avoidance".

It was only a short while back that certain prominent people across Britain were being pilloried for taking advantage of government tax incentives, and being labelled tax avoiders.

Funny world. Damned if you do, damned if you don't.

Nothing surprises me in politics. All I'm saying is: if you HAVE to give businesses some kind of break regardless, you're playing a zero sum game. If you can give them the break in exchange for them doing something for you, that's better than giving it to them in exchange for nothing.

Middle class hypocrisy? Gimme a break. It's not like the middle class has anything to do with the structure of Americas tax system so how are they being hypocritical?

Home mortgage interest deduction, child care credit, saver's tax credit, 10% and 15% brackets pay no capital gains and dividend tax, college tuition credit for those earning $160K or less as a couple, lifelong learning credit for couple making $120K or less, etc.

If what you are saying is true then it means the poorest americans are paying more than their fair share of tax, and from everything I've read that is exactly the case. And that's not just hypocritical it is obscene, but that's just my opinion.

The very poorest Americans pay no federal income tax at all - they actually get money via the earned income credit. Close to half of all Americans pay no federal income taxes. 40% prior to the recession, by 2009 that number was 51%, and by 2011 it had dropped to 46%. The poorest 5th (20% bottom earners) pay about 4% in Federal income taxes, the next 20% about 10.6%.

In 1986 the top 10% paid 54.6% of all Federal income taxes. Today that number is 70.6%. The remaining 90% pay 29.4% of all Federal income taxes.

So tell me again.... who's paying more than their "fair share?"

Close to half of all Americans pay no federal income taxes.

Did you miss all the rebuttals after Mitt Romney said this?

The 47% stat refers to people who get back what they paid in thanks to deductions, in addition to people who don't even earn enough to file. Many of these people are middle or upper class, and the government gets to collect interest on their paycheck deductions for a year before returning it via a refund. That's a far cry from simply not paying in at all, but hey, if you want to do away with all the tax breaks for people getting married and having kids, fine with me. We're overpopulated as it is, but you'll find ALL governments invest a lot in making sure we stay that way, so good luck.

Many of the other people in this 47% category are: the military, retired people who no longer have any earned income to tax, and others in extremely low wage jobs. I believe taxes are not taken out of military paychecks to begin with, and obviously it's hard to take income taxes out if someone's not getting a paycheck.

The very poorest Americans pay no federal income tax at all - they actually get money via the earned income credit.

Huh? Nobody gets back more than they paid in.

I didn't vote for Mitt Romney, nor Obama, thank you. My candidate was a Libertarian. Nice try though. :)

The government collects no interest if you have your withholding setup correctly. Regardless of the category, it still disputes the claim that lower income earners are paying more... they aren't.

And yes, many people do get more back than they pay in. That's what the Earned Income Tax Credit is for many (not all since it adjusts based on income). The less you make, so long as you earned income, the greater the credit is.

For example, say someone makes $14K per year with one child, and they are a single mother head of household. They get a $3,169 credit for 2012. The first $12,750 of ADJUSTED gross income is taxed at 10%, which they will fall under. So say their adjusted gross is at the high end of the 10% bracket and they pay $1275 in federal income taxes.. yet they receive $3169 in credits. They've just gotten a refund check larger than the amount they paid in. This doesn't even factor in money received indirectly from other government programs they qualify for at poverty income rates (food stamps, for instance).

Do a lookup on negative tax systems and the EIC. It qualifies as one.

I didn't say you voted for Romney, I was saying you were evidently as misinformed about the 47% stat as he was and did not double check your sources. Everything you said about it was incorrect.

I know that my town had a lot of good businesses once, and then we got greedy and tried to tax them more and more, so they left for a different town a few states over. That town didn't want to tax them much at all, they just wanted the jobs it would provide.

Hey StoutFiles I'm just a new member and you are senior so with due respect maybe you are jumping to conclusions about why businesses are leaving your town? Can you be specific about these tax increases and what town you are referring to?

For disclosure I'm not American so go ahead and inform me :)

To be fair, we'd have to tax Apple pretty hard for them to leave...

I agree but there's more to it than taxation. The pull factor of America 'The Greatest Country in the World' is an example. Would you rather be a prestigious American company or a prestigious (insert any other country) company? The whole companies will leave if they are taxed fairly is bupkis IMO.

Uncountable books have been written on this issue and tbh I've only read snippets of relatively few but I've learnt enough to know that economic push/pull factors and a thing they call Glocalization (and economics in general) is often complex beyond human understanding. In other words the worlds smartest economists don't know, or at least can't agree.

The solution is not that as complex as politicians try to make it sound...

I've got a ton of respect for you diberry and usually agree with what you say but not in this case. The basics of economics are mostly simple concepts compared to say science and engineering but the simple concepts break down quickly when real world examples prove unexplainable.

I can see another comment directed at me but I've gotta run so I will quickly point to the GFC to illustrate the real world complexity of economics. There's lots of good doccos about the GFC and you really need to watch lots of them to get a balanced POV but you won't have to watch many to realise how difficult it is for governments to control economics/finance/tax avoidance.

If you're interested a good start is Inside Job:

[imdb.com...]

And the Khan Academy finance videos...

[youtube.com...]
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Okay then, why don't you take a shot at breaking down the numbers for everyone, since far you're brought ZERO facts about the percentages who pay, instead replying essentially with "you're wrong."

Because there are no non-debatable numbers for the real question here, which is: how much money does the government lose to middle class/poor tax deductions versus corporate tax deductions?

The reasons there are no reliable numbers:

--It's not always straightforward to determine what a multi-national earned overseas that perhaps, arguably, they should have to report to the US government.

--While the wealthiest two quintiles are said by the CBO to pay a higher effective tax rate than the others, those quintiles have more options to divert "earned income" into "companies" and other entities that act as tax shelters. You used to be able to divert almost your whole income this way (the infamous "$1/year CEO salary"), so for those individuals we need to look at their corporate tax burden to even begin to guess their actual effective tax rate as an individual. And even then, it wouldn't be apples to apples.

So it basically comes down to this:

You've got large numbers of people each getting an average of a few thousand in Federal tax breaks each year. You've got a smaller poor of wealthy people and companies, at least some of whom manage to pay effective tax rates as low as the lower income groups, and no way to determine precisely what they would have paid without those tax breaks being available. It's much easier to point fingers at the lower classes, whose taxation is well-documented because they can't take advantage of all these breaks and shelters. But the truth is, what the wealthy and corporations are costing us in tax breaks is much more difficult to estimate.