So the Corporate tax thing
In my last post I was lamenting the fact that I cannot get into anything approximating a substantive discussion with people who do not share the same opinions and views that I do. Over at DelawareLiberal, I waded into the fray about corporations and profits with a question:
"Please explain how you will tax corporations and not have them pass that cost on to consumers."
Makes sense, no? My point is that any tax on corporations turns them into tax collecting agents not taxpayers. To a business, taxes are simply overhead like the cost of raw materials that have to be recouped from customers. Given that the DL crowd has a visceral hatred for corporations (despite the fact that they all seem to work for them) I should have known that there would be no explanations forthcoming.
Jason responded with:
Do you see any place at all where I'm defending billionaires, Paris Hilton, The Walton family, or trust funds? Do corporate taxes have anything to do with any of those?
For good measure I'm labeled "empty headed" and he casts aspirsions on my intelligence and patriotism. Strawman arguments and ad hominem attacks apparently pass for a response for Jason.
DonViti offers the closest thing to a response (albiet not to me)
That may be true but they are all the same in that they are "serving a need" and making money in doing so. There is nothing to stop anyone from opening a company that makes social responsibility part of it's core business. I'm not sure why "helping people" and cost cutting are considered opposite things. A business that increases profitablility would be more able to assist the aforementioned population, no? Unfortunately, life is a series of tradeoffs. The business in question can either help the population they were designed to serve or pay their employees and stakeholders from that money but not both. Sure they could split it but each dollar must be allocated toward A or B not both. Such businesses do exist and many of them are profitable. The whole Fair Trade Certified movement is a prime example. In my view, it's the perfect way to do this. There is nothing that prevents a bank, computer company or whatever from defining it social responsibility and teaming up with other likeminded businesses to create a certification program that only allows members who adhere to that standard. Think of it as a ISO9000 for whatever practice they wish. In fact, I think there is a need there. There could be a coalition of businesses that only use renewable energy resources, recycled products, spend n% of profits on community development efforts, ecological standards, labor standards etc. Where, I ask, are the liberals on this one? If they did create this voluntary certification program I'd be the first to cheer them on. Indeed, if they did so, they'd have a powerful way of changing corporate behavior. They'd also be able to patronize only business that carried the desired seal of approval.
Anon then jumps into the fray with a thoughtful (if misguided comment):
This one has, at least, a kernel of truth. Corporations do try to avoid profits to a degree. They are trying to maximize the use of their dollars. When he says that they'll do just about anything, he has a point. One of the things they do is to give money and things away to charity. That's an offset against profit. Just like you writing off your donations at the end of the year. Remove that deduction and see where charitable giving goes.
Jason comes back with:
He actually has a point here but instead of using reason or explaining his point he resorts to poo flinging. The question of shareholder vs. stakeholder is an intricate one. Entire books have been written about the topic. How is stakeholder value determined? If, for example, a company has $1MM in profit for the year how should that money be spent? Increased wages for workers? What of community development? Increased community development? What about capital improvements? Capital improvement what about ROI for investors? ROI for investors, what about marketing etc. These are tradeoffs that large multi-nationals make every day. They have armies of accountants and actuarials to figure it all out.
I comment again and ask Jason to clarify his response:
Jason reponds with:
As noted before, he didn't answer. He just flatly stated they "wouldn't be allowed" to make that much money. So much for deep thinking.
Jason again:
He's right about that. There is no debate because he's not debating. He makes wild claims and then calls me names when I ask for something, anything to elaborate or explain. He finishes with yet another strawman to boot.
Joe actually tries to make a point:
He has a point. The problems noted are many but not related to corporate taxation. By now you've noticed the goalposts moving here. First the problem was that corporations don't pay any taxes. Then they simply make too much money. Now it's the CEO's who are evil and greedy.
The distinction between "earning" and "making" money is interesting. The implication is that CEO's don't deserve that money because they don't really "work". How this is so is never explained. These guys work 7 days a week. Every week, every year. No exaggeration. Why this ire is reserved for CEO's and not actors in Hollywood, musicians or sports stars is not explained. Your average sports figure makes more than a great many CEO's but I'll wager the CEO is giving more of his money to charity than rappers or sports figures. Acting is particularly difficult or dangerous. Actors can make a movie in 3 months and get paid tens of millions of dollars. Did they "earn" it or merely "make" it?
Being a CEO is a very tenuous situation and there are only a handful of people who are good at it. They are very highly paid because they are making huge huge decisions that impact thousands of people. The disparity of earnings for CEO's is a relatively new phenomenon. Largely this is due to indirect compensation. That is, tying executive compensation to stock performance. The idea being that if you tied the financial performance of the firm to the executive he'll be more likely to push the company to perform. Sounds good in practice but the Law of Unintended Consequences rears its ugly head.
Now CEO's who run out of ideas *cough* Sandy Warner *cough* http://en.wikipedia.org/wiki/Douglas_A._Warner_III they tend to look for someone to merge with so they can get their options bought out and retire. That's great for him and some of the shareholders but not necessarily good for the community or even the business itself. Sometimes things that maximize shareholder value are not the best idea. For example, cutting product quality might lead to an increase in sales but ultimately will hurt the business. Long term thinking is becoming the exception and not the rule.
I opted out of further commenting as I can only bang my head against the wall so many times but the thread continues:
Companies were "constrained" by makeing as much money as they wanted to (by taxation). That would mean the top marginal rate would have to be 100% after an unspecified number. That is, the government would get every single dollar or profit over a certain amount. So, if that number were 6.5$ billion per quarter, and we're using Jason's example of a company making $11 billion per quarter that would mean the government would take 5$ billion in taxes. Given that the margin is ~7.1% their profit margin would be cut to ~3.6%. Earnings go way down so people then move their money out of oil companies and into something else. That means less money for explaratory drilling, efficiency improvements, refining capacity etc. All those things would lead to a higher cost of gasoline which in turn makes prices of virtually every good and service in America higher. That associate rise in cost would lead to reduced demand for said services and goods which would slow the economy down significantly. Is that what Jason wants? A depressed economy lower than we have now? I'm the one who's uninformed and stupid?
Secondly, they do share the burden of paying for schools, roads, bridges etc, not only by virtue of taxation but by employing people who are also taxed for those same things and buy things from other people.
Foolishly Steve Newton decided to ask a serious question:
Score another one for Jason. Now he's added false dichotomy to strawman and ad hominem. Belgium and Bangladesh are not opposites.
Jason is actually right here. Good corporate tax policy does encourage companies to invest in their growing business. What he fails to understand is that the two main reasons companies do not grow are taxes and regulations which serve to hamper that growth. His version of "good" corporate tax policy is to take anything deemed excessive or "fair". The problem is that "fair" is never defined. I have never, ever had any liberal define "fair" for me when it comes to taxation. They can't and they won't. To do so would limit their ability to punish anybody they don't like with taxation. Jason also fails to understand that taxes act as a brake on the economy. The higher the taxes the slower your economy will grow.
Lastly, what the hell does "hoard" mean? What company has ever hoarded money? What would be the point? If they spent it, that's not hoarding. If they give it to the employees (and yes, that includes the corporate officers) that's not hoarding. If they invest it in stocks, bonds, savings account or even a Christmas club, that's not hoarding either. The only imaginable way to "hoard" it would be to put it in a big pile somewhere like Scrooge McDuck. That would, of course, be insane.
I would ask for clarification but I'd only be told I'm stupid and that everyone knows companies hoard their money (or some such stupidity).
Lastly, I've never said everyone is or should be an island. If anything I'm the biggest promoter of trade and commerce around. I simply think that people who legally earn their money and pay their required taxes are free to dispose of that capital however they see fit so long as they stay within the constraints of the law.
In the end though, one commenter was ultimately correct:
Sadly true.
"Please explain how you will tax corporations and not have them pass that cost on to consumers."
Makes sense, no? My point is that any tax on corporations turns them into tax collecting agents not taxpayers. To a business, taxes are simply overhead like the cost of raw materials that have to be recouped from customers. Given that the DL crowd has a visceral hatred for corporations (despite the fact that they all seem to work for them) I should have known that there would be no explanations forthcoming.
Jason responded with:
Duffy asks…
Please explain how you will tax corporations and not have them pass that cost on to consumers.
Easy. They might not make $11 billion dollars in profit one quarter.
I can’t get over what a bunch of empty headed zombies these Republicans have been turned into. There was a time in this country when we felt we were “all in this together.” Now, the Republicans who comment here, feel the need to protect Sam Walton’s billionaire off-spring from any bumps and bruises the free market might occasionally apply.
Instead of giving a single thought to the country, it is all about making sure Paris Hilton keeps her trustfund intact for these deep thinkers and patriots.
Do you see any place at all where I'm defending billionaires, Paris Hilton, The Walton family, or trust funds? Do corporate taxes have anything to do with any of those?
For good measure I'm labeled "empty headed" and he casts aspirsions on my intelligence and patriotism. Strawman arguments and ad hominem attacks apparently pass for a response for Jason.
DonViti offers the closest thing to a response (albiet not to me)
9 Delaware's Brilliantest Blogger // Aug 12, 2008 at 11:19 am
The goal of any business is to cut costs while maximising profits
that would be Milton Friedmans goal. Some business go in business to serve a need to a specific population. Some, gasp, even do it to help people and don’t have the goal of cutting costs as the utmost
That may be true but they are all the same in that they are "serving a need" and making money in doing so. There is nothing to stop anyone from opening a company that makes social responsibility part of it's core business. I'm not sure why "helping people" and cost cutting are considered opposite things. A business that increases profitablility would be more able to assist the aforementioned population, no? Unfortunately, life is a series of tradeoffs. The business in question can either help the population they were designed to serve or pay their employees and stakeholders from that money but not both. Sure they could split it but each dollar must be allocated toward A or B not both. Such businesses do exist and many of them are profitable. The whole Fair Trade Certified movement is a prime example. In my view, it's the perfect way to do this. There is nothing that prevents a bank, computer company or whatever from defining it social responsibility and teaming up with other likeminded businesses to create a certification program that only allows members who adhere to that standard. Think of it as a ISO9000 for whatever practice they wish. In fact, I think there is a need there. There could be a coalition of businesses that only use renewable energy resources, recycled products, spend n% of profits on community development efforts, ecological standards, labor standards etc. Where, I ask, are the liberals on this one? If they did create this voluntary certification program I'd be the first to cheer them on. Indeed, if they did so, they'd have a powerful way of changing corporate behavior. They'd also be able to patronize only business that carried the desired seal of approval.
Anon then jumps into the fray with a thoughtful (if misguided comment):
12 anon // Aug 12, 2008 at 11:29 am
where do you think corporate profit goes?
It goes onto the loss statements for last year…
Profit is an accident. Corporations do not want profit because they don’t want to pay tax on it..
They do everything in their power to spend down their revenue before it turns into corporate profit. Executive bonuses, dividends, stock buybacks - just about anything except wage increases will do.
An executive bonus or divident is far preferable to building a new factory. Because if you build a new factory, you might fail and lose money! And to succeed, you would actually have to work, and the money wouldn’t even come in right away.
Whereas with a bonus or dividend, you have cash in hand right away! And your stock price goes up - everybody wins!
This one has, at least, a kernel of truth. Corporations do try to avoid profits to a degree. They are trying to maximize the use of their dollars. When he says that they'll do just about anything, he has a point. One of the things they do is to give money and things away to charity. That's an offset against profit. Just like you writing off your donations at the end of the year. Remove that deduction and see where charitable giving goes.
Jason comes back with:
13 jason330 // Aug 12, 2008 at 11:37 am
Thank you anon, but I fear your lesson is falling on empty-headed zombie ears.
The goal of a corporation should be to maximize stakeholder value - not shareholder value at the expense of every other stakeholder.
A little bit of knowledge is a dangerous thing, and the little bit of knowledge that these zompbies have about capitalism makes them think that taxes are an unvarnished evil and that anything that prevents an owner (shareholder) from making more money is the work of the devil.
He actually has a point here but instead of using reason or explaining his point he resorts to poo flinging. The question of shareholder vs. stakeholder is an intricate one. Entire books have been written about the topic. How is stakeholder value determined? If, for example, a company has $1MM in profit for the year how should that money be spent? Increased wages for workers? What of community development? Increased community development? What about capital improvements? Capital improvement what about ROI for investors? ROI for investors, what about marketing etc. These are tradeoffs that large multi-nationals make every day. They have armies of accountants and actuarials to figure it all out.
I comment again and ask Jason to clarify his response:
19 Duffy // Aug 12, 2008 at 12:50 pm
“Easy. They might not make $11 billion dollars in profit one quarter”
How is that, in any way, a substantive response to my question? Are you suggesting that you’d put a maximum number on the profit a company may make? Is that a raw number? Is it based on some sort of sales equation? Will it be applied to other industries or just oil companies? You call me an empty headed republican (I am neither) and then offer nothing in return.
Jason reponds with:
20 jason330 // Aug 12, 2008 at 12:51 pm
Dummy,
You asked I answered. Get over yourself. Maybe you should try getting away from the tube and crack a book someday
As noted before, he didn't answer. He just flatly stated they "wouldn't be allowed" to make that much money. So much for deep thinking.
Jason again:
22 jason330 // Aug 12, 2008 at 12:55 pm
Look. There is no argument here. There is no debate. You nuts think that corporations have some kind of God given right to make as much money as they want no matter what.
That is an opinion. It is a stupid opinion that I don’t happen to agree with.
He's right about that. There is no debate because he's not debating. He makes wild claims and then calls me names when I ask for something, anything to elaborate or explain. He finishes with yet another strawman to boot.
Joe actually tries to make a point:
25 Joe C // Aug 12, 2008 at 1:11 pm
When the guys with the offshore accounts make (not Earned) over 400 times what the men on the factory floor earn, there is a tremendous problem. The CEOs can just close up shop without worry having already met all their financial needs. The workers are simply out of luck and forced to beg for government programs his former bosses lobbied so successfully against.
He has a point. The problems noted are many but not related to corporate taxation. By now you've noticed the goalposts moving here. First the problem was that corporations don't pay any taxes. Then they simply make too much money. Now it's the CEO's who are evil and greedy.
The distinction between "earning" and "making" money is interesting. The implication is that CEO's don't deserve that money because they don't really "work". How this is so is never explained. These guys work 7 days a week. Every week, every year. No exaggeration. Why this ire is reserved for CEO's and not actors in Hollywood, musicians or sports stars is not explained. Your average sports figure makes more than a great many CEO's but I'll wager the CEO is giving more of his money to charity than rappers or sports figures. Acting is particularly difficult or dangerous. Actors can make a movie in 3 months and get paid tens of millions of dollars. Did they "earn" it or merely "make" it?
Being a CEO is a very tenuous situation and there are only a handful of people who are good at it. They are very highly paid because they are making huge huge decisions that impact thousands of people. The disparity of earnings for CEO's is a relatively new phenomenon. Largely this is due to indirect compensation. That is, tying executive compensation to stock performance. The idea being that if you tied the financial performance of the firm to the executive he'll be more likely to push the company to perform. Sounds good in practice but the Law of Unintended Consequences rears its ugly head.
Now CEO's who run out of ideas *cough* Sandy Warner *cough* http://en.wikipedia.org/wiki/Douglas_A._Warner_III they tend to look for someone to merge with so they can get their options bought out and retire. That's great for him and some of the shareholders but not necessarily good for the community or even the business itself. Sometimes things that maximize shareholder value are not the best idea. For example, cutting product quality might lead to an increase in sales but ultimately will hurt the business. Long term thinking is becoming the exception and not the rule.
I opted out of further commenting as I can only bang my head against the wall so many times but the thread continues:
jason330 // Aug 12, 2008 at 1:34 pm
Duffy,
This is the last I’ll say about your stupid ill-informed opinion.
Not long ago companies were constrained from making as much money as they wanted to. It was thought that it served the public good if they shared the burden of paying for schools, roads, bridges, etc.
Now they don’t it is my opinion that we are worse off for it. It is your opinion that we are not.
Companies were "constrained" by makeing as much money as they wanted to (by taxation). That would mean the top marginal rate would have to be 100% after an unspecified number. That is, the government would get every single dollar or profit over a certain amount. So, if that number were 6.5$ billion per quarter, and we're using Jason's example of a company making $11 billion per quarter that would mean the government would take 5$ billion in taxes. Given that the margin is ~7.1% their profit margin would be cut to ~3.6%. Earnings go way down so people then move their money out of oil companies and into something else. That means less money for explaratory drilling, efficiency improvements, refining capacity etc. All those things would lead to a higher cost of gasoline which in turn makes prices of virtually every good and service in America higher. That associate rise in cost would lead to reduced demand for said services and goods which would slow the economy down significantly. Is that what Jason wants? A depressed economy lower than we have now? I'm the one who's uninformed and stupid?
Secondly, they do share the burden of paying for schools, roads, bridges etc, not only by virtue of taxation but by employing people who are also taxed for those same things and buy things from other people.
Foolishly Steve Newton decided to ask a serious question:
29 Steve Newton // Aug 12, 2008 at 1:39 pm
Not long ago companies were constrained from making as much money as they wanted to.
Other than by higher levels of taxation, I’m unaware of any legislation in American history that capped anybody’s profits.
Care to enlighten us with a specific example?
Serious question, as dv would say….
*
30 jason330 // Aug 12, 2008 at 2:02 pm
I was taking about taxation. Do I have to break everything down into 4th grade vocab for you now too?
Sheesh.
One more thing, just for the fake liberatarian.
My opinion on this matter is easily validated by looking at countries with exceedignly low corporate tax burdens. Do you want a society that looks more like Bangladesh or Belgium?
Score another one for Jason. Now he's added false dichotomy to strawman and ad hominem. Belgium and Bangladesh are not opposites.
34 jason330 // Aug 12, 2008 at 2:10 pm
Damn you are dumb Mike. Listen up, I’ll put this on the bottom shelf for you, then I am moving on.
Good corporate tax policy encourages companies to invest in growing their business while it provides money for things that we all (Duffy and Steve excluded - they think everyone should be an island) agree a society needs like schools roads, bridges, and the like while it discourages capital from being unproductively hoarded.
You happen to be of the stupid and ill-informed opinion that companies should be allowed to hoard their capital.
Jason is actually right here. Good corporate tax policy does encourage companies to invest in their growing business. What he fails to understand is that the two main reasons companies do not grow are taxes and regulations which serve to hamper that growth. His version of "good" corporate tax policy is to take anything deemed excessive or "fair". The problem is that "fair" is never defined. I have never, ever had any liberal define "fair" for me when it comes to taxation. They can't and they won't. To do so would limit their ability to punish anybody they don't like with taxation. Jason also fails to understand that taxes act as a brake on the economy. The higher the taxes the slower your economy will grow.
Lastly, what the hell does "hoard" mean? What company has ever hoarded money? What would be the point? If they spent it, that's not hoarding. If they give it to the employees (and yes, that includes the corporate officers) that's not hoarding. If they invest it in stocks, bonds, savings account or even a Christmas club, that's not hoarding either. The only imaginable way to "hoard" it would be to put it in a big pile somewhere like Scrooge McDuck. That would, of course, be insane.
I would ask for clarification but I'd only be told I'm stupid and that everyone knows companies hoard their money (or some such stupidity).
Lastly, I've never said everyone is or should be an island. If anything I'm the biggest promoter of trade and commerce around. I simply think that people who legally earn their money and pay their required taxes are free to dispose of that capital however they see fit so long as they stay within the constraints of the law.
In the end though, one commenter was ultimately correct:
26 Hube // Aug 12, 2008 at 1:14 pm
You’re. Wasting. Your. Time. Duffy.
Sadly true.
Comments
It's sad that there is a good answer to this question, but the lefties don't know it.
The main issue with taxing corporations is that while it does grow their costs (and therefore reduce their profit), the final price of their products is really set by the market and the consumer not by the corporations. If you increase their taxes a little they very well may decide to make less profit in order to maintain their current pricing and therefore their market share. On the other hand if you increase their taxes significantly, they will have to raise prices in order to maintain an operating profit margin and stay in business.
So essentially you can do this by nickel and diming them out of their profits. Small changes can be absorbed into their cost of doing business while large changes have to be passed on. Keep in mind that even the small changes will likely be passed on eventually, but they can be absorbed at least in the short term.
But hey thanks for reminding me why I don't bother to go to those sites.
Yes your point is well taken. There is some elasticity viz. taxes and margins but the bulk of the taxes are simply passed on to the consumer. If all w/in the industry are at the same tax rate, it's creates a common price floor below which nobody can operate w/o either dumping (which is illegal) or going out of business.
So if you raise the tax rate 10% on a given good or service, the consumer might see an 8% rise in price and the business absorbs the rest.
http://www.poorandstupid.com/2008_08_10_chronArchive.asp#8340520265165095420
And yes, I'm afraid you are wasting your time. No intelligent discussion there.
You also need to consider that once there is a major market shift or perturbation, that initial pricing strategy will go out the window. So at best you're going to see a lag between taxes going up and the additional costs being passed on to the consumer.
They also completely miss out on something Reagan figured out over 20 years ago. If you lower taxes, people will actually pay them because it is both easier and cheaper to pay the taxes than to pay accountants to hide their profits away in tax shelters.
It's nothing more than an in-club rah-rah session with very minimal intellectual vigor.
Maybe they do, but it's masked by their blind adherence to ideology.