Thursday, May 23, 2013

Have U.S. states figured out a way to avoid a global race to the bottom on taxes?

Apple's testimony the other day on it's corporate taxes brings up the question of what to do about them. It's a world wide problem and how do you avoid a race to the bottom (I just kept thinking that Ireland was the Delaware (in terms of incorporating) of the world). It turns out there has been a recent good idea for how states can deal with corporate taxes. Have U.S. states figured out a way to avoid a global race to the bottom on taxes?

"So a number of states have come up with a simple way to calculate what firms owe them in taxes: If a company sells its product or services in a given state, it pays a tax proportionate to the sales in that state.

Here’s how it would work. Let’s say a company earns 20 percent of its sales in California. The company would pay 20 percent of its worldwide sales to California at the state’s corporate tax rate. No need to worry about where the firm has offices or where its employees work — and no chance of the firms shifting their income to other states using elaborate, hard-to-trace methods."

Another model is getting rid of corporate taxes all together. I'm not so convinced.

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