Posted on 02/24/2003 1:38:02 PM PST by Willie Green
All lot of those espousing similar views to yours would be the first to say, "Let's drill in ANWAR (to which I agree) to reduce our dependence on foreign oil", yet at the same time are all for the industrial base in this country going overseas.
We are becoming totally dependent on foriegn manufacturers. At any time they could cut us off and where would our economy be?
I know that your going to call this simplistic and say that would never happed because they depend on us too much.
But; what if they did?
I look at this issue from a long-term perspective. We, as a nation, are becoming far too lax in protecting what we have. From many fronts we are being attacked as the greatest nation on earth. There are many smaller entities picking away at our defences. Every politician, and many corporations, are giving away little bits of power and control over what happens in this country. Looked at individually it doesn't seem like much. When you add it all up, however, the sum total of erosion of our way of life is getting close to the point of no return.
It's not that big paying and I have a wife and 8 kids to feed. Actually I make so little I don't pay a dime of federal taxes and I get 3000 dollars of rich peoples money in child tax credits to boot. :-D
You're funny. Yeah, China is going to throw millions out of work so that we can buy our stuff from India or Poland.
We are becoming totally dependent on foriegn manufacturers. At any time they could cut us off and where would our economy be?
See above
I know that your going to call this simplistic and say that would never happed because they depend on us too much.
You're right about this being simplistic.
But; what if they did?
You should spend your time worrying about something that is more likely to happen, like an asteroid hitting the Earth.
Sorry, my earning potential is totally maxxed out and I like my job. I can't wait for the child tax credit to go to 1000 bucks. Maybe I'll upgrade my Honda ACE to a Harley.
The gmt says I can't afford them and deserve the tax break+, not me.
Biblewonk doesn't have his hand out, and isn't looking for a handout. Actually, it's the IRS (Congress) who sends our money to him, without his even asking for it. He didn't go anywhere to apply for it; he doesn't have to qualify for it. All he does is file a tax return, just like you and me, and tell the truth on it.
So, you're barking up the wrong tree. If you feel the need to b*tch at somebody about the tax laws, take it to your elected representatives. I happen to think the Child Tax Credit should only go as far as reducing income tax liability to zero (it shouldn't turn a taxpayer into a tax recipient). But, that's not the way it works. I can't fault Biblewonk and others like him for filing an honest tax return.
Thanks Newgeezer!
We are becoming totally dependent on foriegn manufacturers. At any time they could cut us off and where would our economy be?
I know that your going to call this simplistic and say that would never happed because they depend on us too much.
The same has been said about the oil producers.
You do make some interesting points.
This is not a simple issue, with no easy answers.
The fact remains that given the choice, people are generally going to buy the least expensive product, whether we like it or not.
And we have to work with that basic assumption.
A communist country putting out fake numbers, I'm shocked.
Many on this thread fear China will put us out of business. I fear their military, not as much now that Clinton isn't around to gut our military. I don't fear their economy, just as I didn't fear Japan's economy. If we get our act together, we'll have plenty of jobs and prosperity for everyone.
If the doom and gloom on this thread had been around when the pilgrims landed, they'd have turned around and gone back. And we'd all be speaking Cherokee instead of English.
The Citizenship Penalty
US citizens are at a decided disadvantage when competing with foreign nationals in a similar business. Non-citizens (foreign nationals) can run their profits through an IBC (International Business Corporation) in a country that does not tax investment income, get a Green Card and live in the USA if they choose and only report and pay tax on US earnings, while US citizens must also report and pay taxes on almost all types of offshore earnings, as well. This is yet another reason why many wealthy Americans are leaving the USA and renouncing their citizenship. The following simple model is used by thousands of foreign nationals to undercut US businessmen and still make a healthy profit.
A Case Study
Let's look at two people running the same type of business. The first person is a US citizen. We shall call him Joe. The second person is a foreign national with a Green Card. We shall call him Jose. Both people buy and sell products in the USA. In our case study, both people buy 1000 widgets from Apex Widget Corp. in the USA, at a cost of $500,000. Both people sell their widgets to Ajax Thingamajig Company in the USA for $1,000,000. Both people recognize a $500,000 gross profit before taxes. Let's assume a reasonable 25% of sales price ($250,000) for marketing costs and another 5% ($50,000) for overhead, creating a total cost of $300,000. That brings the total net profit before taxes to $200,000. No matter how he structures his company, Joe must pay taxes on $200,000. Yet the foreign national, Jose, legally only pays taxes on $5,000. Lets look at how this can happen.
As stated above, Jose's citizenship is from another country. Remember that the USA is one of only two countries arrogant enough to tax the offshore income of its citizens. Jose forms an offshore company, Jose International, in a country that does not tax businesses income. He also forms a US company, Jose USA.
Jose Int'l. (Jose's offshore company) buys widgets from Apex for $500,000 and sells them to Jose USA (his US company) for $695,000, recognizing a $195,000 offshore profit. Jose USA, then sells the widgets to Ajax for $1,000,000, recognizing a $305,000 gross profit, which after marketing and overhead, calculates to a $5,000 net US profit before income tax. Now, this is important. Although Jose has recognized the same total $200,000 pre-tax profit as Joe, as a foreign national, Jose does not have to report or pay tax on the $195,000 offshore income from Jose Int'l. Joe, on the other hand, being a US Citizen, must pay tax on the full $200,000 profit, even if he sets his companies up in the same way as Jose. So you see, since Joe is a US citizen, he must pay what amounts to a Citizenship Penalty, in the form of taxes on his offshore income. Now these numbers can be tweaked with expenses, different tax rates and such, but the effect remains the same.
The following table demonstrates where the profits go and how the foreign nationals have a decided tax benefit. In this example, Joe USA (light blue background) is the US owned company. The two Jose companies (pink background) are as described in the previous paragraph.
|
|
Apex Expense |
Sale to |
Sale to |
Less |
Taxable |
US Taxes |
Net After |
|
Joe USA |
-$500K |
(NA) |
+$1,000K |
-$300K |
$200K |
$76,000 |
$124,000 |
|
Jose Int'l. |
-$500K |
+$695K |
(NA) |
$0 |
$0 |
$0 |
$195,000 |
|
Jose USA |
(NA) |
-$695K |
+$1,000K |
-$300K |
$5K |
$1,900 |
$3,100 |
|
Citizenship Penalty on $200K Profit |
>>>>> |
$74,100 |
<<<<< |
||||
On a deal that netted both Joe and Jose $200,000, before taxes, the US citizen, Joe, effectively had to pay a $74,100 US Citizenship Penalty (assuming that both Joe and Jose are taxed at 38%, a number that varies year to year). This reduces Joe's net after tax profit to only $124,000 while Jose recognized a net after tax profit of $198,100. With such an advantage, the foreign national, Jose, can reduce his selling price the next year, either taking away Joe's customers or forcing Joe to cut prices so low that he cannot afford to stay in business. Of course, after Joe closes down operations, Jose will raise his prices again. Also, since Jose's US income is very small he will likely pay an even lower tax rate, thus increasing the effective US Citizenship Penalty to Joe.
This is not just something that I dreamed up or read about. Since I am in the Import/Export business, you could say that I am Joe and that I personally know several Joses. According to the foreign nationals that I know who are structuring their business like this, there are a few hoops to jump through in order to stay legal in every country. But, there are so many people doing this, that offshore attorneys can structure such a package in just a few minutes.
But, here is the kicker. There are thousands of foreign nationals using this type or similar types of strategies to great advantage and the numbers that we are talking about are not $200,000 or $1,000,000 as in the example above. The amounts are in the TENS of MILLIONS of DOLLARS for each case. Do the math. That translates to BILLIONS of DOLLARS being legally sent offshore by foreign nationals every year. What's worse, we are seeing more and more, that many of the foreign nationals engaged in this type of business are (you guessed it) US EXPATRIATES... Big surprise!
Our tax system is the real culprit here. Since we cannot tax foreign nationals on their foreign income, it would seem that the obvious answer to the Citizenship Penalty is to allow US citizens to exclude offshore income from taxation, as almost every other nation does. But, even this fix would only eliminate the Citizenship Penalty and would NOT solve the real problem of wealthy citizens leaving and taking ALL of their wealth out of the USA. The only thing that will stop that exodus is an equitable tax that gets the government out of our personal business, rewards US investment and does not attempt to punish the wealthy for their wealth.
At this time, the only such tax system even being discussed, is the National Retail Sales Tax (NRST). In fact, surveys have shown that the NRST would not only stop this exodus, but would actually reverse it.
As I mentioned above, the same kind of penalties demonstrated here, incur to US owned companies, who must compete with foreign owned companies that sell within the US.
It's the PENALTY that you pay for being a US citizen or a US corporation.
Your imagined/dream world of 20 to 40% reduction in prices wouldn't be enough to compete with China or Mexico...Where would a 20 to 40% reduction in service costs come from for example, when the NST promise is everyone would get 100% of their paychecks?
C'mon, who are you trying to kid? Everyone knows Joe doesn't pay taxes, Joe's company only collects, then remits the taxes. < /sarcasm >
Using the nst logic, If you eliminate Joe's taxes (actually shift directly to individual consumers) and IF he lowers his prices accordingly (as you nst shills assure us would happen) his net income/profit would be the same as now.
Using your own graph, Joe's income tax is only 7.6% of his gross sale...8.6%(+-) would be the most Joe could reduce his price to maintain the same 12.4% profit, not 20 to 40% as you nst shills claim.
Conversely, under your NST plan to eliminate taxes on a select group, the labor intensive service industries would have to (if they could) RAISE their prices 30% if they wanted to offset the new tax...How is that good for business?
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