The two main political parties in the US will have a difficult time in coming up with tax reform within the next eighteen months. The presidential elections in November will postpone any consideration of the issues. Fairness, whether real or imagined should be the goal of Congress and the Executive. But how do you easily reconcile corporate tax reform, which must consider lower competitive rates, the return of large cash assets to the US and the reversal of the rush to corporate inversions, with the perception of income and tax inequality as perceived by the beleaguered middle class in the US?
Indecent Disclosure, The Economist
The Republican candidates’ tax proposals are exorbitant.
Ask Republicans how best to reform taxes, and they will inevitably mention Ronald Reagan. In 1986 the Gipper slashed levies on earning; the highest income-tax rate tumbled from 50% to 28%. At the same time, Reagan simplified taxes by closing loopholes and killing off exemptions. Today’s Republican presidential contenders would dearly love to repeat the trick. But they have given up a key ingredient in the recipe. The 1986 reform cost nothing, mainly because taxes on businesses went up. In stark contrast, today’s Republican tax plans are jaw-droppingly expensive.
Read the full article at: http://www.economist.com/news/united-states/21684808-republican-candidates-tax-proposals-are-exorbitant-indecent-disclosure
Social Saints, Fiscal Fiends, The Economist
Opinions vary on whether firms can be “socially responsible” while avoiding taxes.
Pfizer has always prided itself on its commitment to corporate social responsibility (CSR). The drugs giant talks loftily about “embracing our responsibility to society”. It insists that it does as much as it can to make sure that the world’s poor can gain access to its products. It is particularly proud of the work that it does with NGOs and “other global health stakeholders” to strengthen and improve health-care systems. But this has not deterred it from seeking a gargantuan “tax inversion”. The company intends, as part of a $160 billion takeover of Allergan, to shift its tax domicile from America to Ireland, where Allergan is domiciled, and where corporate-income taxes are considerably lower. Pfizer’s shareholders no doubt rejoiced: in 2014 the company would have saved $1 billion of the $3.1 billion it paid to the US Treasury. But many Americans were outraged: Hillary Clinton, the front-runner for the Democratic presidential nomination, promised to impose an “exit tax” on companies that engage in such tactics.
Read the full article at: http://www.economist.com/news/business-and-finance/21684770-social-saints-fiscal-fiends-opinions-vary-whether-firms-can-be-socially-responsible
Illustration Credit: Brett Ryder, The Economist