STRAT 1: CORPORATE TAX DEDUCTION

Observation 1: Resolutional Analysis

1. Resolution: The United States should significantly curtail the use of tax havens outside of the United States.
2. Definitions:

1. tax haven: a country to which corporations profit shift, invert to, or use in order to engage in evasion or avoidance.

3. Should implies policy
4. Weighing mechanism: net benefits [insert inequality framework if desired]

Observation 2: Background

1.  Evidence indicates a significant increase in corporate profit shifting over the past several years. Recent estimates suggest losses that may approach, or even exceed, $100 billion per year to the US government. In many other countries, the sums run into billions of euros.

1. This means fewer resources for infrastructure and services such as education and health, lowering standards of living in both developed and developing economies. (CRS)

2. The corporate tax is the tax levied on a corporation’s operating earnings; the current U.S. federal corporate tax rate is 35% on corporations making more than $335,000 per year (almost all of them). This is the third highest corporate tax rate in the world, and the highest of OECD nations.
3. The Organization for Economic Coordination and Development (OECD), of which the U.S. is a part, has an average corporate tax rate is 25%.

Plan:

The United States will cap its corporate tax rate at 15%.

Funding, enforcement: normal means.

Timeframe: immediate

Ad1) Domestic econ

Uniqueness:

1. Tapping companies is inefficient as firms pass the burden on to others. More efficient revenue is garnered by taxing directly those who ultimately pay—whether owners of capital, workers or consumers.
2. Corporate taxes do not raise much money: barely more than 2% of GDP (8.5% of tax revenue) in America and 2.7% in Britain.^[1] This number has been decreasing consistently over the past decades, from composing 40% of tax revenue in the 40’s down to less than 10% for the past 20 years.
3. Today, the more powerful companies can afford expensive lobbyists who create loopholes and the expensive lawyers who exploit them. Which is why the nominal corporate tax rate is 35 percent but the effective rate for some of the largest corporations is about 13 percent.^[2]
4. Effectively, the corporate tax rate obliterates small to mid-sized firms and encourages those on top to take advantage of loopholes, inversion, and profit shifting.

1. Most recent example is Burger King moving to Canada

5. The U.S. government taxes the income U.S. corporations earn not just domestically but abroad as well. Since firms also pay taxes on profits earned abroad to those countries’ governments, U.S. corporations pay a double tax on foreign-earned income. Most developed countries don’t use this system; they use a territorial tax system.

1. Not only is this double tax a burden on corporations in and of itself
2. it also puts them at a disadvantage compared with foreign competitors who are not subject to the double tax.

6. The number of U.S. jobs at major multinational corporations shrunk during the last decade by 2.9 million, even more than the 2.4 million jobs these companies created abroad.
7. U.S. companies were holding $1.95 trillion in foreign countries in 2013, according to calculations by Bloomberg News.^[3]

Links:

1. Plan discourages inversion and profit shifting to countries outside the US.
2. Plan increases corporate savings and efficient investment.

Internal Links:

1. Firms that do not profit shift or invert increase economic activity and cause widespread economic growth in the US.

1. Increase in jobs and economic activity increases mobility and decreases cyclical poverty
2. The wealthiest firms that no longer need to lobby and become advantaged through means like tax havens now compete more equitably with smaller firms leading to more fair competition, greater mobility, and lower entrance barriers to markets.

2. Savings are the key to unlocking investment and investment is the key to economic growth. We would see hundreds of thousands if not millions more jobs and the prosperity that leads to innovation in energy, medicine, etc.

Impacts:

1. Less cyclical poverty

1. Structural inequality and violence means that once you fall into poverty, it is almost impossible to climb out.  For example, where you can afford to live dictates what jobs are available to you, what education systems are available to you, what health care is available to you and what food sources are available to you.  The inter-sectionality of structural inequality creates a cyclical poverty effect in which you are never able to climb out.        

2. Reducing otherization

1. Inherent inequalities in the class structure of society are unavoidable.  However, their maximization by the overwhelming degree of disparity is unacceptable.  Democracy is reliant on the fundamental principle of equal voice.  When the poor are drowned out by the wealthy in some aspects, many jump to the conclusion that they can never make their voice heard and are marginalized.

1. §  Ex. Ferguson protests represent the marginalized going to extreme measures to make their voices heard. Yet despite the extreme effort, the media attention was largely negative and no actual policy has been proposed because of lack of political clout.

2. Poverty creates geographic, social and economic barriers that lead to otherization.  Otherization is the lynchpin to the justification of further violence perpetrated against the individual: structural and physical.

3. Reducing dehumanization

1. Poverty leads to forced decisions such as whether to pay for food or whether to pay for medicine; whether to feed yourself or feed your children.  It forces commodification in order to survive.   This forced commodification of the individual is worse than death because you literally are not seen as human, merely as a commodity that can be used as another person’s end.

4. Economic growth leads to energy innovation.

1. Massive environmental impacts

5. Medicine innovation

1. Increase in number and quality of lives
   

Solvency:

1. Abolishing corporate tax would create its own problems, as it would encourage rich people to turn themselves into companies. But a lower rate on a broader base would be more efficient and would probably raise more revenue: America, whose companies face one of the world’s highest corporate-tax rates on their worldwide income, also has some of the most energetic tax-avoiders. (Economist)
2. Companies could instead spend lobbying dollars on developing new products and services and increasing sales. Not only do corporations lose, their customers lose as well, because these products and services either take longer to get to market or never make it there at all. And despite the United States’ high tax rate, economists project that lowering the rate would actually increase tax revenue because corporations could dedicate more resources to taxable, profit-generating activities.

Ad2) Global economic well-being

Uniqueness:

1. The US started regulating transfer pricing before most other countries. As a result, the US has had over 20 years to slowly build up a cadre of transfer pricing professionals and a body of institutional knowledge among the IRS, taxpayers, and consulting firms. And with that has come a gradual improvement in our understanding of what works and what doesn’t from a practical point of view.
2. There is a gradual convergence of transfer pricing rules around the world and end results gravitate towards the rules the United States has established

1. The US was one of the first adopters of formal transfer pricing regulations.
2. The US began emphasizing profits-based approaches over transaction-based approaches before most other countries.
3. And now the US’s simplified approach toward low-value intra-group transactions seems to be earning widespread acceptance as well with the new BPS project.^[4]

3. US has high threshold of internal and external review requirements for firms and specifically has the most institutions like PwC that specialize in consulting for transparency and avoiding inequitable profit shifting.
4. Countries like India, and countries in the EU do not have as effective institutions leading losses upwards of billions of euros and equivalent currency per country each year.

1. In most recent meeting with Obama, President of India expressed that he wants to work with President Obama to advance transparency and reduce profit shifting to India in order to build up more effective taxing models

5. The Economist says that tax havens “serve as domiciles for more than 2m companies and thousands of banks, funds and insurers. Nobody really knows how much money is stashed away: but total estimates range conservatively around $20 trillion.”
6. Saving and investing revenues so that more capital is available for future growth, or to sustain the business through hard times, would be the smarter decision for many businesses, but those saved and invested revenues incur more taxes. “High corporate taxes disincentivize corporate saving, which leads to more instability in the business world,”

Link:

1. Plan diverts other businesses to funnel funds through through the US.
2. Plan signals commitment to OECD stability and increases global economic trust.
3. Plan increases savings of businesses in the US.

Internal Links:

1. Because the United States’ existing transfer pricing institutions and transparency regulations are decades ahead of other countries and being used as the standard for OECD regulations, net tax avoidance and evasion will decrease.

1. US drastic shift towards contributing to global economic transparency signals commitment to transparency policies that will trigger more OECD agreements and increase trust between nations.
2. Increases trade and comparative advantage which means less wasted resources and higher degrees of specialization and innovation
3. Increased economic globalization leads to more common efforts in combating pollution by overcoming the tragedy of the commons as multinational corporations now have truly global interests

2. Global savings and stability see internal link application from ad 1 on a global scale.

Impacts:

1. Global environmental policy will be more genuine and has extremely high incentive to be effective which will incur real change.
2. Global economic trust and interdependence reduces conflict and will lead to better political coalitions for fighting injustices internationally.
3. $20 trillion unlocked and repatriated to become global savings and investment

1. cross apply domestic impacts but now on global scale

STRAT 2: STOP TAX HAVEN ABUSE ACT

Observation 1: Resolutional Analysis

1. Resolution: The United States should significantly curtail the use of tax havens outside of the United States.
2. Definitions: contextual
3. Should implies policy
4. Weighing mechanism: net benefits [insert inequality framework if desired]

Observation 2: Background

1. Evidence indicates a significant increase in corporate profit shifting over the past several years. Recent estimates suggest losses that may approach, or even exceed, $100 billion per year. (CRS)
2. Estimates of the cost of individual evasion have ranged from $40 billion to $70 billion. (CRS)

Observation 3: Plan

USFG will pass through an act of Congress and signed by the President the “Stop Tax Haven Abuse Act” in its revised form proposed most recently in January 2015.

1. passed and enforced by normal means
2. timeframe: immediate
3. Key provisions include

1. Stopping U.S. companies that are managed and controlled in the U.S. from claiming to be foreign to avoid taxes.
2. Closing loopholes that allow high-tech and pharmaceutical companies to license the patents for their products to sham shell companies in tax havens so they can book their profits there and avoid taxes.
3. Requiring full and honest reporting from companies to determine if they’re booking profits to places where they are doing legitimate business, versus a P.O.-Box tax haven subsidiary with no employees.
4. Modify rules relating to inverted corporations by making it more difficult for companies to avoid U.S. taxation by merging with foreign firms and by restricting earnings stripping after a merger.