ST Alpha - "It's not about effective tax rate, it's about marginal rate. " (Reading a Post)

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It's not about effective tax rate, it's about marginal rate.

Posted by spamlet Nov 19 '14, 08:01

If they bring back that much money as dividends, there's no way they're not in the 35% bracket. If they have avoided taxes overseas (as is the implication) they have no foreign tax credits to offset the 35% tax in the US.

Just because their ETR (worldwide) is lower than 35% it doesn't mean that bringing the money back wouldn't result in a 35% rate (and it's probably closer to 41% since it would be taxed by CA as well).

Responses:

[deleted] 10
- There has been one repatriation holiday and companies did bring back a lot of money when the rate was 5% instead of 35%. -- nm - spamlet Nov 19, 08:11 9
  - [deleted] 8
    - Understood, but there was more tax revenue. That has value on its own. -- nm - pmb Nov 19, 08:17 5
      - [deleted] 4
        
        I was mostly explaining yesterday, but as always I do care about fairness, but also practicality and effectiveness. - pmb Nov 19, 08:29 2
        
        [deleted] 1
        
        First, I understand that it's not 35% of nothing (but in many cases it is or is close). My point is that if we can effectively get more revenue for a - pmb Nov 19, 08:48
        
        a pragmatic " better than nothing ". -- nm - Reagen Nov 19, 08:27
    - The argument in your IM was that companies would not bring money back when the rate was lowered. They did and would. -- (link) - spamlet Nov 19, 08:16 1
      - [deleted]
[deleted] 4
- But they would pay 50% (in your example) on bringing the cash back. That's the effective tax rate on bringing the money back. -- nm - spamlet Nov 19, 08:10 3
  - [deleted] 2
    - $50 in tax on $100 in income is a 50% rate. -- nm - spamlet Nov 19, 08:15 1
      - [deleted]

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It's not about effective tax rate, it's about marginal rate.

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