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Old 11-09-2012, 06:14 PM
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A comment on tax breaks. While this term is thrown around a lot it is often misinterpreted to mean that a company pays less tax to move operations overseas. From a corporate view this is somewhat true, but only in the sense that they move their profit center overseas to avoid paying higher US corporate tax rates. It goes something like this.

I'm selling widgets for $1000 and it costs me $500 to make and distribute, therefore I pay tax on $500 profit. But by building a plant overseas with a new company (which I own). I can sell the product from my new company to my old company for $800, after mfg and shipping my cost is $400 (lower wage and tax costs), and my new company pays tax on the $400 profit at a lower overseas tax rate. My old company adds $100 cost for distribution, sells the widget for $1000 and I only have to pay the higher US tax rate on $100 profit. I've still made my $500 profit before tax, but because of the lower rate overseas I get to keep more of it.

This is grossly oversimplified, but I'm just making the point that our tax laws are working against us. Keep in mind that we pay income tax, SS, Medicare, state, and local taxes, while the employer pays a match on SS, unemployment, workman's comp, etc, before they get to paying tax on profit. The more tax we pay, the harder it is to compete.
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