Californians should be outraged by that. They are gonna need that money when the big quake hits and half the state is underneath the Pacific Ocean. All those tax dollars can go into relocation programs.
Hank...your version of this story is very different from what I thought was going on. Can anyone confirm that Hank is right? (Not that I don't trust you, but, you know...before I admit I was wrong and all, I'm going to need independent confirmation.) I'll say this...the next time one of these corporations need the US to stick up for them wrt to patent laws or tariffs, it would be delicious if the Commerce Secretary said, sorry, you're a Bermudan corporation. Why don't you put all of Bermuda's massive international clout to work for you?
Not just NJ, but anyone living outside of the 5 boroughs who works in any of the boroughs has to pay an extra income tax to NYC.
We have the same thing in Detroit. I live in the suburbs and work downtown. It it was a fee it would be one thing. But this is a tax for individuals who do not live in Detroit, but choose to work there. Unfortunately, I have no say in how the city is run. IE no vote. I find that highly unconstitutional.
I am not an expert on these matters, but I think if you read this, http://www.fourmilab.ch/ustax/www/t26-A-1-N-II-B-882.html, you will be able to see that foreign (read Bermuda) corporations can and do pay US income tax on their US income (as long as its "effectively connected" to US operations). As far as the US taxation of foreign income, it is quite complicated, but if you read through the Internal Revenue Code you will learn that US corporations are taxed on their worldwide income, but are entitled to a credit of income taxes paid to foreign nations (so long as the tax paid to the foreign nation does not exceed the US tax that would be due on the same income if it were earned in the US). Any tax people out there, to confirm?
In this particular situation its called taxation without representation. We started a little thing called the Revolutionary War over that a little over 200 years ago. They tried that crap where I live and people nearly came unglued. There is a major battle between the cites and the suburbs over everything. Its a grim situation at times.
I don't see a problem with this. Income is taxed where it is earned. Same thing if you work in multiple states during a year. You might pay tax in several states. So long as your state/city of residence gives you a credit for the tax paid to the state/city you worked in.
Help me understand this: OK- I did research on one of the corporations listed by California as doing this: Cooper They have 8 plants and all are in the United States except for one in England. Their Corporate Headquarters are in Houston. But Cooper is a Bermuda company so they can pay English taxes on their operations there instead of U.S. taxes?
Hmmm....I don't know the UK rate off the top of my head, but I venture a guess that it is lower than 35%. Moreover, they may have warehouses or other operations in foreign nations other than the UK, which would cause them to pay income taxes there. Those other countries quite possibly have rates lower than 35%.
Interesting that you used the term "choose to work there." They're not making you work there. If it's a burden, you can work somewhere else. But while you work there and benefit from their infrastructure (every time you drive on their toll free roads or use public transportation which is invariably subsidized by tax dollars) you have to play by their rules.
But why Bermuda? Why not just put a post office box in the UK? Why would all these huge corporations "relocate" to Bermuda if there wasn't some huge loophole they were exploiting?
This reminds me of the situation in Austin, TX. All these companies relocate there because it's such a magnificent city. The relocated employees will move into developments right outside the city limits to avoid Austin taxes. Then they bitch and moan when the City Council extends the city boundaries to include these developments.
Re: Hank Reardon's contention, it's simply irrelevant. The bottem line is that companies are buying a PO Box in Bermuda in order to pay less in taxes without CHANGING ANYTHING about how they do business otherwise. This is entirely different from Cal retiree moving to Nevada, unless he gets a PO box in Reno and claims that as a primary residence while continuing to live in that house in Daly City. Regarding the general issue of differential tax rates and their influence on business decisions: The only study I ever heard about strongly suggested that for most relocation decisions (as opposed to tax dodges) tax rates are well down the list, behind issues like wage structure, transportation infrastructure, location of vendors and customers and availability of suitable employees. I imagine it's the same for individuals. Having lived in low tax New Hampshire until I was 23, I decided to move to Boston because of the number of job opportunities and friends already there. I was aware that I would pay somewhat more in taxes, but other things were more important.
Hank brings up a good point. Here is some more info on corporate inversions: http://www.iie.com/papers/hufbauer0602.htm "Inversions are motivated both by the US parent corporation's desire to reduce the burden of US taxation on the activities of its foreign subsidiaries and by its desire to partake in the delights of earnings stripping. The core issue is not (emphasis theirs) US taxation of income from business activity transacted entirely within the United States; rather the core issues are US taxation of income from business activity entirely outside the United States (the extraterritorial income problem) and the US deduction for interest paid by US corporations to foreign parent corporations (the earnings stripping problem)."
I mistakenly read what he originally posted. Of course income should be taxed where it is earned. I though he was saying they accomplished what was attempted in my city. There was talk about charging people that lived in the suburbs but worked in the city a yearly fee on top of their taxes for the privelege to work in the city...now that is load of junk.
Maybe an simple example would help. ABC Corp. does business in the U.S. and Germany. US Income = $100 German Income = $100 U.S. Corporate Tax: Tax Rate = 35% For U.S.-based Corporations - taxed on all US & Int'l Income with credit given for taxes paid internationally. For foreign Corporations - taxed on U.S. Income German Corporate Tax: Tax Rate = 30% Taxed on all German Income A. Tax Burden if ABC is based in the U.S. German tax = $100 x .30 = $30 US tax = ($200 x .35) - $30 = $70 - $30 = $40 Total Tax Paid = $70 B. Tax Burden if ABC is based in the Bermuda German tax = $100 x .30 = $30 US tax = $100 x .35 = $35 Total Tax Paid = $65 By moving their base to Bermuda, ABC Corp. can save $5 in taxes--a 7% reduction in their tax burden.
1. My guess is that the answer to #1 is, most companies will earn income in several countries. They have to pick one. 2. I wonder if they move to Bermuda for the same reason so many corps. are incorporated in Delaware. Not so much for taxes, but for legal reasons.
Well, this is the key question. The only reason to choose Bermuda is that it does not have a corporate income tax. The legal/financial environment is not better there than in many other countries (including the US). As someone else mentioned, I suspect these "inverted" companies are trying to strip earnings from other countries to Bermuda. However, that is probably not easy to do, particularly since US tax laws have many provisions designed to prevent it. I think they are going to prevent the US from taxing their non-US income.
Well, I believe that most tax treaties that the US has entered into with foreign nations limit its ability to tax foreign corporations. Moreover, the US has chosen in its own tax laws to only tax income of foreign corporations that is from US activities. Consequently, a business need only meet the local requirements of organizing a business under a foreign nations laws to achieve this "inversion" situation. Corporations are not persons, after all. You are certainly correct. Almost all US companies have not gone to inversions for these reasons. Bermuda really doesn't have much to offer businesses except for its low (absent) income tax burden. However, if US businesses find that there European competitors have an advantage in income taxation, more may look at these kinds of schemes. I am not advocating these schemes, but rather trying to explain what little I know about them to end some of the misunderstanding shown here.
Depends on what time of day/month you go down there. Sailors and Marines just got paid yesterday. It may be tough trying to do the stumble-step back to your car in San Ysidro for the next couple of days. Monday night, on the other hand, won't be so bad at all