Canada = Great Right North: Cato Institute

[Admiral Yi]

Fredo, take a look at the WSJ link and tell me what you think about that table on corporate tax revenue as a % of GDP.

[alfred russel]

Fredo, take a look at the WSJ link and tell me what you think about that table on corporate tax revenue as a % of GDP.

I don't see a table in the link.

[ulmont]

For large C Corps, which are most of our publicly traded companies, the effective tax rate tends to be between 35-40% (state taxes are not included in the 35% number that is often quoted).

Cite please, I went ahead and provided links and everything.

[alfred russel]

For large C Corps, which are most of our publicly traded companies, the effective tax rate tends to be between 35-40% (state taxes are not included in the 35% number that is often quoted).

Cite please, I went ahead and provided links and everything.

Professional knowledge (you also cut off my qualifying comment).

Pick 5 publicly traded companies at random and I'll look the rate up real quick and you can judge for yourself.

[Admiral Yi]

I don't see a table in the link.

Oops.  It's in the 3rd link.

[alfred russel]

Fredo, take a look at the WSJ link and tell me what you think about that table on corporate tax revenue as a % of GDP.

It seems fair, for the reasons I mentioned above. We don't tax many small corporations at all, and we have popular business structures that aren't corporations but achieve many of the benefits (LLCs, LLPs).

[MadImmortalMan]

We don't tax many small corporations at all

Because their income goes through to the owner and is then taxed as regular income tax. So the effective tax rate of the corporation is whatever rate the owner happens to fall in.

[alfred russel]

Because I have too much time, I looked up the rates for the top 10 in the fortune 500 (for those under 35% I investigated why):

Exxon: 45%
Wall Mart: 34.2% (1.66% reduction due to foreign operations)
Chevron: 42%
ConocoPhillips: 58% (they didn't quantify, but said foreign operations were the primary reason it is so much over 35%)
GE: 5.5% (26.9% reduction due to foreign operations)
GM: N/A
Ford: N/A
AT&T: 36.1%
Hewlett Packard: 20.5% (16.9% due to foreign operations)
Valero: over 100% due to a wacky one time charge, in the prior two years was 32.1% and 33.1%, but over 35% when foreign operations are included.

So there are 8 companies, and with the exception of GE with an effective tax rate of 32.4% in the US, all are over 35% in the US. Obviously the companies that have flexibility to locate in lower tax jurisdictions are doing so, but GE Capital and Hewlett Packard have more flexibility than most.

[Zanza]

Because their income goes through to the owner and is then taxed as regular income tax. So the effective tax rate of the corporation is whatever rate the owner happens to fall in.

How much tax do you have to pay on dividends in America? Your normal income tax or less to compensate that the company has already paid considerable taxes?

[alfred russel]

Because their income goes through to the owner and is then taxed as regular income tax. So the effective tax rate of the corporation is whatever rate the owner happens to fall in.

How much tax do you have to pay on dividends in America? Your normal income tax or less to compensate that the company has already paid considerable taxes?

At the federal level, the rate is 15%. Previously it was your normal rate, but the lowering was part of the Bush tax cuts. Repealing that is on the table now though. At the state level, the rate ranges from about 0-10%.

The rule on foreign taxation is that you must pay the difference between 35% and what you paid locally when you repatriate the funds (which you usually have to do to pay dividends). For example, if all my profits are in the UK with a 28% tax rate, I will show a 28% effective tax rate as long as I don't bring the money back to the US. But once I do (either for investment or to pay dividends), I'll owe an additional 7% to the US government.

[Neil]

While we're on the subject of Canada, I find that the anti-Ignatieff ads have traction with me.

[Malthus]

Excuse me? 

You said the Cato Institute considers Canada more economically right than the US.  That doesn't follow from this article, and I sincerely doubt you'd find anybody at Cato who would sign off on that claim.

What an odd thing to say about an article entitled "Great Right North". 

[grumbler]

Coupla notes:
(1) this was a WaPo Op-Ed piece, not a Cato Institute study.  It was just repeated on the CI website.   Only one of the three authors works for the Cato Institute.
(2) The point of the piece was not to show that "Canada is now more economically to the right than the US," but to show that

Reports last week that the recession is draining Social Security and Medicare funds were just one more reminder that the United States needs to fix its finances. For inspiration, why not look to Canada? Long derided by American conservatives as "socialist" and praised by the left for its generous government spending, Canada is casting off those stereotypes. Over the past few years, while U.S. politicians presided over huge increases in spending and debt, the Canadian government tightened its belt, slashed tax rates and balanced budgets...
(snip)
Too often in the United States, Democrats reject cuts in taxes and spending because they consider them Republican causes. Yet in Canada, center-left governments implemented many of the reforms that made these impressive numbers possible. Perhaps we have something to learn from those "socialists" to the north.

The authors' thesis is that if a center-left-run country praised and derided as "socialist" like Canada's can cut spending and balance budgets, so can the US.  This is a rather unsurprising note.  The Clinton administration did much the same.

Now, it is true that these authors are cherry-picking their facts (and they acknowledge that, citing their facts only as "trends" to be "considered"). It is, nonetheless, an interesting observation, though hardly controversial.  It ignores the fact that the US has spent over a trillion dollars fighting a war in Iraq, of course.  That was not very discretionary after the war was started, and so doesn't support the implied contention of the authors that the US won't cut spending because the democrats think cutting spending is a Republican stance.

[Malthus]

Coupla notes:
(1) this was a WaPo Op-Ed piece, not a Cato Institute study.  It was just repeated on the CI website.   Only one of the three authors works for the Cato Institute.
(2) The point of the piece was not to show that "Canada is now more economically to the right than the US," but to show that

Reports last week that the recession is draining Social Security and Medicare funds were just one more reminder that the United States needs to fix its finances. For inspiration, why not look to Canada? Long derided by American conservatives as "socialist" and praised by the left for its generous government spending, Canada is casting off those stereotypes. Over the past few years, while U.S. politicians presided over huge increases in spending and debt, the Canadian government tightened its belt, slashed tax rates and balanced budgets...
(snip)
Too often in the United States, Democrats reject cuts in taxes and spending because they consider them Republican causes. Yet in Canada, center-left governments implemented many of the reforms that made these impressive numbers possible. Perhaps we have something to learn from those "socialists" to the north.

The authors' thesis is that if a center-left-run country praised and derided as "socialist" like Canada's can cut spending and balance budgets, so can the US.  This is a rather unsurprising note.  The Clinton administration did much the same.

Now, it is true that these authors are cherry-picking their facts (and they acknowledge that, citing their facts only as "trends" to be "considered"). It is, nonetheless, an interesting observation, though hardly controversial.  It ignores the fact that the US has spent over a trillion dollars fighting a war in Iraq, of course.  That was not very discretionary after the war was started, and so doesn't support the implied contention of the authors that the US won't cut spending because the democrats think cutting spending is a Republican stance.

In your opinion, is "economic freedom" as defined by the Cato Instute a fair description of being "economically to the right", according to them?

You (and Yi) may find this interesting:

http://www.cato.org/pressroom.php?display=news&id=159

The U.S. has slipped markedly in economic freedom since the year 2000
Bush's tenure has had a clear negative effect on economic freedom ratings

WASHINGTON -- Economic freedom around the world remains on the rise but it has declined notably in the U.S. since the year 2000, according to an authoritative study released today by the Cato Institute and Canada's Fraser Institute.

In 2000 the U.S. was the second-freest economy listed in Economic Freedom of the World, an annual report written by James Gwartney from Florida State University and Robert Lawson from Auburn University. This year the U.S. has fallen to 8th place, behind Hong Kong (ranked in first place), Singapore, New Zealand, Switzerland, the United Kingdom, Chile, and Canada.

More significant than the U.S.'s drop in the rankings is its fall in the freedom ratings: on a scale of 0-10, the U.S. fell from 8.55 in 2000 to 8.04, according to the Economic Freedom of the World Report: 2008 Annual Report.  Only five countries have experienced a greater decline over the same time period: Zimbabwe, Argentina, Niger, Venezuela, and Guyana.

"The rule of law, government spending, and regulation are the areas where the United States saw the most troubling declines in its ratings this decade," observes Ian Vasquez, director of Cato's Center for Global Liberty and Prosperity.

Economic Freedom of the World ranks 141 countries on a range of factors in five broad areas: 1) size of government; 2) legal structure and security of property rights; 3) access to sound money; 4) freedom to trade internationally; and 5) regulation of credit, labor and business.

[Emphasis added]

http://www.cato.org/pubs/efw/

The Cato Institute - in its official study, not an op-ed - finds as a matter of fact that Canada is now more "economically free". I would be curious to know what "ecomomically right" means, if not this:

The foundations of economic freedom are personal choice, voluntary exchange, and open markets. As Adam Smith, Milton Friedman, and Friedrich Hayek have stressed, freedom of exchange and market coordination provide the fuel for economic progress. Without exchange and entrepreneurial activity coordinated through markets, modern living standards would be impossible.

Potentially advantageous exchanges do not always occur. Their realization is dependent on the presence of sound money, rule of law, and security of property rights, among other factors. Economic Freedom of the World seeks to measure the consistency of the institutions and policies of various countries with voluntary exchange and the other dimensions of economic freedom.

[saskganesh]

While we're on the subject of Canada, I find that the anti-Ignatieff ads have traction with me.

the cons could hammer Iggy on being a supporter of torture. however, that's probably not where they want to go.