During the summer of 2016, the Central Statistical Office of Ireland reported something astonishing: the small nation's gross domestic product had increased 26% during the previous yeare (a number which will then be revised upwards). It would have been an incredible achievement if the growth had actually taken place.
But it was not, as government officials acknowledged from the start. Rather, it was an illusion created by corporate tax games. At the time, I nicknamed it "pixie economy", a currency that has blocked ; Fortunately, the Irish have a sense of humor about them.
What really happened? Ireland is a tax haven, with a very low tax rate on corporate profits. This prompts multinationals to set up Iris h subsidiaries, then use creative accounting to ensure that a large portion of their profits go to mydials declared go to these subsidiaries.
In 2015, a few large companies seemed to have gotten even more aggressive about their profit shifting, which led to an increase in the value of output that They said they were doing in Ireland - an increase that was nothing real.
To understand the big proposed corporate tax reform by the Biden administration, what you need to know is that it's all about the sprites.
One way to think about the huge The corporate tax cut that the Republicans rammed through gh in 2017 is that its underlying premise was that the leprechauns were real. That is, the architects of the tax cutôt insisted that companies had moved their operations overseas to avoid US taxes, and that lowering those taxes would bring millions of jobs back home.
This did not happen. In fact, the tax cut had no visible effect on business investment, probably because it dealt a false problem. American companies had not moved jobs overseas to avoid taxes; they had just avoided taxes.
The real impact - or indeed the lack of it - of the income tax on business decisions becomes evident if you look at where companies bring in big income abroad.
If they really reacted to taxes by making large foreign investments which eliminated American jobs, we would expect to see a large chunk of their profits come from large production centers like Germany or China. Instead, more than half of profits that US companies report abroad come from small tax havens, including places like Bermuda and the Cayman Islands where they do not have any real business activity.
By the way, it's not just an American problem. The The Monetai Fundre international estimates that around 40% of foreign direct investment in the world - mostly cross- business investment, as opposed to "portfolio" purchases of stocks and bonds - are investment "Ghost", accounting fictions set up to avoid taxes. This is why, on paper, Luxembourg, with only 600,000 inhabitants, receives more foreign investment than the United States.
So the real problem with US tax policy is not the loss of jobs, it is the loss of income - and the reduction Trump tax has compounded this problem.
Essentially, the Biden administration 's Made in America tax plan is an effort to recoup lost income both as a result of the transfer Trump's profit and tax cut, to help finance large-scale public investment.
As the name of the plan suggests, administration experts - at this point it's hard to find a tax expert who did not join the Biden team - believe certain aspects of the US tax code have prompted the displacement of jobs overseas. But they see the problem as the consequence of the details of the tax code rather than the overall burden of taxation.
And while they believe tax reform can improve incentives to invest in America, the main focus of the plan - even things like the proposed 'a minimum tax rate of 21% on foreign profits, underlined by Janet Yellen , Secretary of the Treasury - dorelies not so much on these incentives as on increasing revenues from the corporate income tax, which is primarily the responsibility of rich and on strangers , an d is at a historic lows as a percentage of GDP
What about warnings from entreprise groups that increasing corporate taxes would have dire economic consequences? Well, they would say that, wouldn't they? And if the tax increase had such a negative effect, why did the tax cut not produce visible positive results?
Corporations The tax plan therefore seems to be a very good idea. Part of that is because President Biden, unlike his predecessor, hired people who know what they are talking about. And it also marks a welcome break with the ideology that says the only way to help American workers is through indirect action: cut taxes on corporations and the wealthy in the hope they deliver. somehow a pot ofgold at the end of the war. Rainbow.
What Biden's team seems to have concluded, on the contrary, is that the way to create jobs is to create jobs, mainly through public investment, rather than by chasing unicorns and elves. Since the (partial) creation of direct jobs must be financed by new taxes, the new taxes should be imposed on those who can afford to pay.
Refreshing, isn't it?
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