Sunday, November 20, 2011

Why Corporations should pay less taxes and individuals should pay more

Currently the US essentially has the highest corporate income tax rate in the world at 35% and by including state taxes. Many people probably think that because they are big, rich companies, they should be paying at least as high as the individual tax rate. Corporations also do not get tax breaks for capital gains like individuals do, nor do they get a tax break on dividend income unless it's from another US company in which they own 80% or more. This means that US corporations potentially have a higher tax base and thus may be paying even more taxes than individuals. So you may be saying, "So what? At least I'm not paying more taxes." Well...this is what we're seeing because of the taxes on corporations.

To put it conceptually, the government needs to fund itself and needs to get revenue in one way or another. This is not a debate about how much revenue the government should use, just a debate in the method in which they get it. If you think about it, the profits that corporations make are taxed twice: once by the corporation and a second time when distributed to their shareholders. This means that people can get more money if they plan around that. Any US citizen is taxed by the US government no matter where they live, so there's little to be done to avoid the individual taxes. However, corporations and the locations where the income is earned is pretty flexible given how flat the world has become. The result is planning around where the income is earned and in corporate tax planning.

I make a living off of helping corporations plan where their income is earned. Being a US practitioner, my expertise is in US tax law, and given the high US corporate tax rate, my planning is around shifting income out of the US. Globally, any tax practitioner knows that you plan around the US by avoiding pushing any income into the US. The common places to use with planning are Luxembourg, the Netherlands, and Switzerland which have given great incentives for corporations to move their businesses and income to their countries. They do it through tax rulings. Essentially their tax system is not solidified with rules that are intended to catch everything a company does, so most everything is negotiated with the tax authorities. The tax authorities will give you a lower rate the more income you are bringing into their country. In other words, they incentivize companies to move income out of their home country and into one of these European countries. They then receive tax revenue they did not have before and we in the US lose the tax revenue.

Perhaps this still is not completely clear, so let me run through a common example of how it's done. Google, a US company, was in the news for its 2.4% effective tax rate. That means that based on its billions in revenue only 2.4% is the amount anticipated that will be taxed. The report mentioned that it was using a Dutch sandwich structure and pushing income offshore to Bermuda. I do not know exactly what the structure entails, but I imagine it is something like this:

Google owns all sorts of brands and has operations throughout the world. Only one company can own the brand, so the other companies operating elsewhere in the world will pay a royalty fee for the right to use the license. The company that owns the brand or Intellectual Property ("IP") receives the royalty payments as income. This is where a lot of income shifting is done. Even though Google is based in the US, they set up companies in countries throughout the world and one of those locations is the Netherlands where they probably get a very favorable tax rate from a negotiated ruling. The Netherlands is probably willing to give a really low rate considering they generate billions in IP income. Let's take Google+ as an example. This is a more recent brand that Google developed. If they "developed" the brand in the Netherlands (the details of this can be complicated but it's what companies do globally), then any other company in the Google family that utilizes that brand pays a royalty to the Dutch company. The companies paying the royalty get a deduction just as they would from salary expenses. That means the US company gets a deduction that reduces the amount of US taxes that are charged.

Google also has a lot of cash built up and is generating a lot of new jobs. However, this cash is likely not available in the US and the jobs are likely going overseas. This is because it's too expensive to bring the cash back to the US (remember 35% tax rate on dividends) and the jobs are going overseas to support the development of IP outside the US. The bottom line is it's too expensive to do business in the US, so all the cash and potential jobs that are being created by our huge iconic US companies are going overseas where they can get more profit. This is not about patriotism or pride, this is simple economics. Companies will go under if they don't do similar planning because their competitors will be more profitable and run them out of business.

The solution? I am not completely sure, but I can tell you what the UK is doing. The UK had a 28% corporate tax rate, significantly lower than the US. However, they are lowering the rate further by reducing it by 1% each year until they get to 23%. They are also giving incentives for companies to do business there through some debt schemes and other strategies. Their version of the IRS (HMRC) is working together with my UK tax counterparts on how to give incentives to bring business and income back into the UK. In other words, they are supporting tax planning schemes that will compete with these Dutch, Lux, and Swiss schemes. I would love to sell work to clients on how they can save money and hassle by moving income into the US, but it would require a fundamental change in the corporate tax system.

I love my country, but we are behind the times and perhaps too prideful to lower the rate, thinking that since we are such an economical powerhouse and land of opportunity companies will do business here regardless. However, I think we are losing money and jobs at a tremendous rate and will continue to do so until we make ourselves competitive. If you want domestic examples of what happens economically, look at why Volkswagen moved their US headquarters from Detroit to Northern Virginia...taxes! Virginia has made themselves very business friendly and has given incentives for companies to move here. Companies move among states for tax incentives, so are we surprised that companies would completely leave the US given the disparity in tax rates between countries is even larger than the disparity between states.

Is this a solution to the jobs crisis? Perhaps. In order to lower the corporate tax rate, we can't be afraid of increasing the individual tax rate. The idea is that if we bring more money and business to the US, the number of jobs and the standard of living will increase and offset the cost of an increased individual tax rate. Look at the individual rates in the UK and Switzerland. These countries also have a Value Added Tax which may be described as a federal sales tax that is ultimately paid by the end consumer. We will be paying more in taxes out of our pockets but decreasing taxes paid by our US corporations that are providing us jobs. We will get paid more to offset the cost and over time make our country competitive again. So let's get off Wall-Street and over to the Hill and help Congress enact these cuts to provide future jobs and a better economy for our country. A number of people in Congress have put this on their agenda, but it would require a larger public support to see anything pass. I hope this article sheds some light on the situation and the action that our government needs to take. I think you will find that this is an issue that both sides would agree needs to see some action or we will be left in the dust with everyone moving offshore.

Saturday, July 16, 2011

Why I Believe

I've heard several friends ask how I could believe what I do. "You're smarter than this" one friend told me. I've had other friends of the same faith tell me they don't believe any more. Some of those cite flaws they've found, or inconsistencies they've seen in their faith, causing them to decide "it's no longer true." A popular song right now even suggests that Mormons are naive and "just believe."

I'm going to admit I don't get it. If you don't have the feelings I have about this religion you haven't felt the way I have about it. There is more light to see - I promise, and I beg of you to try and find it, or remember what you have felt before if you have felt it before - seek to expand on that. We should all be seeking to find truth, but more importantly, we should all be seeking to find happiness - true joy and inner peace inside.

To give a little background, I too have gone through this process. No, it wasn't just a matter of, as is common in my faith, praying and asking God if my faith is true or not when I was a kid, or even when I was older and receiving that "burning in my bosom" like others talk about in my religion. Yes, I've felt that, but like others I know we can easily deceive ourselves. The "burning in the bosom", to me just isn't enough to convince me of truth. It may be for some, but even those I encourage to keep seeking truth - it's not over when that happens.

I'm also going to admit there are definitely things that just don't make sense to me yet in my faith. I don't understand everything. I don't understand why the Church does some things it does. To be truthful to myself, I know there have been mistakes made by men in the history of the Church (at the same time I also know there have been many inspired men, which have made very correct decisions that become more evident over time). As a human being myself, I know I still make mistakes (we've all made mistakes, and we all learn to repent, some times over and over again - even the righteous David did this in the Bible). I also know our Savior was the only perfect being on the face of this earth. His Church could not be true unless its members were not perfect - His Church needs imperfect members that can repent, and take advantage of their Savior's atonement to grow, and learn from their mistakes. His Church needs imperfect members striving to do their best to learn to serve in the best manner they are capable.

That said, I've still had questions about the Church in the past. Trust me - I've heard it all. I've even had the same, very real contemplations before - "do I really believe in this? Maybe I really don't believe in this - there many things that don't make sense!" Having said that, every time I start going into that mode, I feel empty inside. There's something - something dark that takes over. In fact, it's not really anything taking over - it's that the light and happiness and peacefulness that was inside me leaves, leaving the darkness that is left behind. I really don't know what that is (My religion teaches this is the presence of the Holy Spirit that leaves), but it never feels good when I lose that light. I feel sad, and confused. Even more things don't make sense and I get even more sad and even more confused. I justify it, but that emptiness has never gone away when I have attempted to go down this path.

So here's why I believe: I believe because of the light this Gospel brings into my life. I believe because of the joy it gives me. I just haven't felt this anywhere else. I'll be first to admit that not all of it always makes sense - the Bible teaches us that there are "many mysteries of God." Even if you don't believe in the Bible or even God, I can't deny the feelings I have, and whether those are real or not (I believe they are), why would I ever give up these feelings and lose the joy this Gospel has brought me? How could I ever let anyone take this away from me? This is why I some times get offended when others try.

For those contemplating deciding the truth of this Church, see if you can seek ways to bring this light back into your life. Do good. Serve others. Read the Bible. Please, consider reading the Book of Mormon and don't just read it - see what you can truly learn from it. See what truths from it you can bring into your life, regardless of whether you're sure it's real or true or not. I'm of the belief that you can learn from anything if you put your heart to it. Pay attention to the light and happiness you feel inside and decide if this is something you want more of, or if you're okay losing it. Be completely honest with yourself.

Are you sad? Are you depressed in life? Do you still not feel "complete"? Maybe you're feeling what I felt. Seek the light I mentioned above and you will find it.

For me, I just can't lose these feelings or this light. I don't "just believe". I know these feelings are real. I know these things make me happy. I know they have made me a better person and have given me the direction I need to be the best person I can be. Most of all, I know these things all leave whenever I stop believing - I've seen this, and it's as real as day. No matter what these feelings are, this is the easiest way I've been able to bring joy into my life.

For that reason I don't "just believe". I know.

To be clear, I don't know everything. I don't know all the whys, or hows. I've never seen God in person, nor do I fully understand "an afterlife" (although I do think there are ways science could support it - maybe I'll talk about that later). I do appreciate the vision of an afterlife this religion teaches, and I know it applies to all. I do know the feelings, and the light I've felt. I know the happiness that has brought me. I know the fruits that have come from me paying attention to that light. If I find any better place that strengthens that light or grows it further, I'll follow it wholeheartedly, but right now I've found nothing that has done that for me so far. This is the best thing I've got, and I'm going to embrace it.

I only hope and pray that others can feel this too - it is something you just can't explain until you have experienced it for yourself. If you haven't - find it!

These statements are my own opinion and not necessarily those of the organization I work for.

Tuesday, June 28, 2011

Why Mormons Care About Religious Freedom

"But you aren't born into a religion."

I hear that statement all the time when people criticize my beliefs or can't understand why Mormons believe some of the things we do. "A Mormon Just Believes", as the Musical would imply, but the truth is most Mormons are very firm in reasoning behind the beliefs they have and many have gone through strong conversion processes to get there, born into the faith or not.

However, for people like me, the fact is, despite myself having been through a strong conversion process and not "just believing" (Bushman explains this well), I truly was born into my religion. It's more than just a religion and belief system for me - it's a culture, and it's part of my blood. As a fourth and fifth generation Mormon coming from numerous Mormon pioneers including Orson Pratt (the first Mormon Pioneer into the Salt Lake Valley) and Heber C. Kimball, and with a distant Great Grandmother that was one of Joseph Smith's last true plural wives before he was martyred, my "being Mormon" is quite comparable to many of my Jewish friends "being Jew". For me, even if I "didn't believe", I would still be a Mormon down to my bone. It's a part of me, as much as I am a part of it. It is more than just a religion to me - it is a culture, and my family.

Mormons, especially those with Pioneer roots like myself, can associate a lot with Jews. My ancestors were kicked out of their lands in search of religious freedom. They were tarred and feathered. They had an extermination order against them. Their homes were burned down by haters. This was all in the United States of America!

So when you see people like myself wanting to fight for religious freedom, and people like myself feeling a bit offended when we're made fun of publicly on Broadway, or people like myself getting a little worried when certain legal clauses change that could affect my ability to worship as I please in the future, you can see why we respond the way we do. Now you can see why I get a little excited (even though I have not made my choice yet) when there is actually potential for another Mormon to be President. Now you can see why I get mad when other people tell me that a Mormon can never be President in this country. My ancestors have seen this nation shun its own people out of their lands in the name of religion. It's happened once and it can happen again.

The fact is, despite all this, yes, "I believe", but it's not because of my ancestors or anything related to that. I believe because I have tested my faith and tried it and put it to the test. I know the fruits that come of it and they are sweet. I haven't found anything else that compares to what my faith has brought me. My ancestors taught me to do that. In fact, our entire faith is built around this premise.

However, it is because of where I come from that "I am". And because of that I hope to stand up to religious freedom wherever it is being threatened and fight it from my very core.

Monday, June 27, 2011


As a Mormon, and working full time for the LDS Church, I find myself sharing about my beliefs and my faith a lot more. As a tech blogger, I thought my main blog, just wasn't the best place for all of this. While I'll still probably talk about tech-related religion posts over there on occasion, I needed a place where I could just vent and talk about my beliefs, my faith, and maybe even a little politics here and there. This blog will be that. If enough of you subscribe I'll probably even consider getting a domain for it.

So tell me - what would you like to hear from me here?