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Old 11-07-2007, 01:03 PM   #161
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ERD - In an ideal world there is logic in what you are saying.
However, I'm skeptical that corporations would pass on the savings in the real world.
Given that their mission is to maximize profits for the shareholders I think that would be their priority.
Given that the officers and directors options depend on delivering profits at an ever increasing level year after year to support and grow the stock price so they will maximize their own profit - I doubt the savings will be fully passed on, if at all....its not in their self-interest - larger capital gains and dividends at 15% tax rate would be.
I do believe that those that have a piece of the action in the corporations (officers, directors, shareholders) will benefit with increased dividends and capital gains, but many people do not participate at all or in a meaningful enough way for it to matter to them. Maybe its better for government to get the money upfront...are there any countries that are following the no-tax for corporations example - if so how has it worked out..
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Old 11-07-2007, 01:10 PM   #162
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Originally Posted by DanTien View Post
ERD - In an ideal world there is logic in what you are saying.

However, I'm skeptical that corporations would pass on the savings in the real world.

Given that their mission is to maximize profits for the shareholders I think that would be their priority.
I've heard this one before from people.....


[sarcasm] Yes, that is why a pack of gum is $250, those greedy corporations just want to maximize their profits [/sarcasm]

That is why I like free markets. That problem has already been solved. If businesses could charge whatever they like, they would. But they can't, because their competitors undercut them to take their business (and that fat, juicy profit ) away from them. And they keep doing that until... the profit margin is reasonable for the risk.

Really. Think about it.

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Old 11-07-2007, 01:28 PM   #163
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I've heard this one before from people.....


[sarcasm] Yes, that is why a pack of gum is $250, those greedy corporations just want to maximize their profits [/sarcasm]

That is why I like free markets. That problem has already been solved. If businesses could charge whatever they like, they would. But they can't, because their competitors undercut them to take their business (and that fat, juicy profit ) away from them. And they keep doing that until... the profit margin is reasonable for the risk.

Really. Think about it.

-ERD50
I have ERD. Not talking about lifting the price of a pack of gum from 50 cents to $250 dollars, talking about not passing on the savings and leaving the price about where it was. Consumer doesn't know any better.

Part of the strategy for many businesses is to minimize/limit/driveout competition so they can expand their margins. Surely you can think of some examples.
In some industries the cost of entry is prohibitive.

On paper free markets sound good, and I do like the idea of Smith's Invisible Hand (which I think is what you are inspired by) but you need a truly free market and it is not a lock that will work quickly or at all in our present environment. Sometimes governments paradoxically have to get involved to ensure there is a "free market when competition is about to be squashed "
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Old 11-07-2007, 01:39 PM   #164
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This is why I say ABOLISH corp taxes. We 'pick up the slack' either way!
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I have another reason... it is a hidden 'stealth' tax (is that redundant?)... If I could do it, I would abolish all corporate taxes and all other hidden taxes that are not specific to some use (ie, the gas tax if the money does not go to building and maintaining transportation needs)..

If people were forced to pay out of pocket the true amount they are paying I would think a lot of programs would get cut... but there is so much of our taxes that we pay but do not know it that helps out the politicians..
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Old 11-07-2007, 01:54 PM   #165
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ERD - In an ideal world there is logic in what you are saying.
However, I'm skeptical that corporations would pass on the savings in the real world.
Given that their mission is to maximize profits for the shareholders I think that would be their priority.
Given that the officers and directors options depend on delivering profits at an ever increasing level year after year to support and grow the stock price so they will maximize their own profit - I doubt the savings will be fully passed on, if at all....its not in their self-interest - larger capital gains and dividends at 15% tax rate would be.
I do believe that those that have a piece of the action in the corporations (officers, directors, shareholders) will benefit with increased dividends and capital gains, but many people do not participate at all or in a meaningful enough way for it to matter to them. Maybe its better for government to get the money upfront...are there any countries that are following the no-tax for corporations example - if so how has it worked out..
ERD did answer this in a way.. but I will add something... but ask a question first... have you taken an economics class? Why I ask is the last one I did we spent about 25% of the time showing what happens with increasing or decreasing taxes....

I will try and keep this short so I do not make to many mistakes.. I have not done eco in many many years.. but thing of the supply and demand curves... and real simple... if the price of something goes up, the demand for it goes down... if the cost of something goes up, the supply of it goes down... there is a happy point where the people who make things at a certain cost matches the line of people willing to buy at that price (remember in eco cost includes profit)...

So, if you raise the taxes on something, the cost to produce it goes up... not everybody is willing to pay that full increase in the tax so demand goes down... so the manufacturer will reduce the price a bit to increase demand.. the consumer does not pay the full cost of the tax increase and gvmt does not make as much tax as they had thought....

Now, do the opposite... reduce taxes... or eliminate them.. the cost to produce goes down.. and so will the price.. so the demand will go up and buy more... so then the cost to produce will go up (more plants etc... since we have to produce more).. but the outcome is not 100% of the tax cut is passed to the consumer.. but only a certain percent.. what is that percent?? Well, it is the slopes of the supply and demand curves etc. etc... it can be figured out easily...
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Old 11-07-2007, 01:55 PM   #166
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I have another reason... it is a hidden 'stealth' tax (is that redundant?)... If I could do it, I would abolish all corporate taxes and all other hidden taxes that are not specific to some use (ie, the gas tax if the money does not go to building and maintaining transportation needs)..

If people were forced to pay out of pocket the true amount they are paying I would think a lot of programs would get cut... but there is so much of our taxes that we pay but do not know it that helps out the politicians..
Toll roads and higher gas taxes make my bleeding eco-heart weep in joy.

However, I agree with DT. Abolishing corporate taxes? Exxon/Chevron/Shell made billions last quarter. I don't seem them passing it along to the consumer. Oil executives did get a nice bonus though.
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Old 11-07-2007, 02:02 PM   #167
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Sometimes governments paradoxically have to get involved to ensure there is a "free market when competition is about to be squashed "
Sorry, but this is not the case either... you can squash the competition as long as you do it legally..

Take an example... if I were able to invent a plane that can fly cross country using only 10 gallons of fuel.. and I decided not to sell it to anyone but open up my own airline... I could undercut the prices of all airlines by a LOT.. and drive them all out of business over time (as long as they could not figure out how to match me)... I did nothing illegal and still squashed the heck out of competition.. and the gvmt would not do anything about it... (or at least they should not do anything)...

Yes, when all competition was gone I could raise my rates up to get a high margin (think Microsoft), but not so high that others would want to come back into the industry....

Take a look at the buggy whip industry.... kind of got squashed did it not? and the ice transportation business (IIRC, the leading export from the NE states back in the 18th or 19th century was ICE...)
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Old 11-07-2007, 02:02 PM   #168
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I will try and keep this short so I do not make to many mistakes.. I have not done eco in many many years.. but thing of the supply and demand curves... and real simple... if the price of something goes up, the demand for it goes down... if the cost of something goes up, the supply of it goes down... there is a happy point where the people who make things at a certain cost matches the line of people willing to buy at that price (remember in eco cost includes profit)...
A few things:
1) Inelastic demand
2) Inelastic supply
3) There is another graph where taxes and revenue intersect nicely...it's not at 0% taxes.


The Invisible Hand is not benevolent nor is it malevolent. It also isn't perfect.
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Old 11-07-2007, 02:08 PM   #169
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ERD did answer this in a way.. but I will add something... but ask a question first... have you taken an economics class? Why I ask is the last one I did we spent about 25% of the time showing what happens with increasing or decreasing taxes....

I will try and keep this short so I do not make to many mistakes.. I have not done eco in many many years.. but thing of the supply and demand curves... and real simple... if the price of something goes up, the demand for it goes down... if the cost of something goes up, the supply of it goes down... there is a happy point where the people who make things at a certain cost matches the line of people willing to buy at that price (remember in eco cost includes profit)...

So, if you raise the taxes on something, the cost to produce it goes up... not everybody is willing to pay that full increase in the tax so demand goes down... so the manufacturer will reduce the price a bit to increase demand.. the consumer does not pay the full cost of the tax increase and gvmt does not make as much tax as they had thought....

Now, do the opposite... reduce taxes... or eliminate them.. the cost to produce goes down.. and so will the price.. so the demand will go up and buy more... so then the cost to produce will go up (more plants etc... since we have to produce more).. but the outcome is not 100% of the tax cut is passed to the consumer.. but only a certain percent.. what is that percent?? Well, it is the slopes of the supply and demand curves etc. etc... it can be figured out easily...
Texas - yes you did a good quick summary of supply-demand theory and price elasticity of demand/supply and its application in a perfect competition market and perfectly competitive industries. I will refer you to my previous answers of how I see it put into its imperfect practice in today's economy.
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Old 11-07-2007, 02:27 PM   #170
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Part of the strategy for many businesses is to minimize/limit/driveout competition so they can expand their margins. Surely you can think of some examples.
In some industries the cost of entry is prohibitive.
DT, if a business is operating in an area with no free market, they will charge what they can regardless of whether they have to pay an income tax or not.

You are not really addressing the question. Rather, you threw another variable into it that applies in either case.

Illegal monopolies need to be dealt with. It is a separate issue from whether we tax ALL companies or not.

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Old 11-07-2007, 02:32 PM   #171
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Sorry, but this is not the case either... you can squash the competition as long as you do it legally..

Take an example... if I were able to invent a plane that can fly cross country using only 10 gallons of fuel.. and I decided not to sell it to anyone but open up my own airline... I could undercut the prices of all airlines by a LOT.. and drive them all out of business over time (as long as they could not figure out how to match me)... I did nothing illegal and still squashed the heck out of competition.. and the gvmt would not do anything about it... (or at least they should not do anything)...

Yes, when all competition was gone I could raise my rates up to get a high margin (think Microsoft), but not so high that others would want to come back into the industry....

Take a look at the buggy whip industry.... kind of got squashed did it not? and the ice transportation business (IIRC, the leading export from the NE states back in the 18th or 19th century was ICE...)
Texas - I suppose that its true that it is possible to squash legally...The airplane story is a very good example of what a corporation would do if they had no competition and wanted to keep it that way. Yes, the buggy whip and Ice industry became non-factors when new tecnology came in to replace them....sometimes they adapt like Studebacker did from wagons to cars .
Can you give any recent examples of companies that have squashed competition and established a monopoly in the US and that have not faced government action to limit their sway.... Or those who were on their way to doing so and did not face government action...
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Old 11-07-2007, 03:54 PM   #172
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ERD - I reread our posts. I believe I'm responding to your assumption that the corporations will pass on their savings to the individuals - that competition will force them to keep their margins reasonable and thus the individual would reap the rewards of the free market. I'm not so confident that will happen, and part of that has to do with the limits on competition in different sectors of our economy.

Another question - will the individuals who would be shouldering the added tax burden that the corporations have been relieved of - be able to recoup enough to make up for the very real immediate added tax burden...
We know that the corps would have a real immediate benefit of a measureable amount.
Would the individuals of different walks of life get any benefit, a small benefit a benefit large enough to negate the added tax or even come out a head at the same relative percentage that the corporation knows it will receive..will they have to wait for an extended amount of time to realize it...
The individuals' outcome in this scenario is uncertain...
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Old 11-07-2007, 04:15 PM   #173
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Texas - I suppose that its true that it is possible to squash legally...The airplane story is a very good example of what a corporation would do if they had no competition and wanted to keep it that way. Yes, the buggy whip and Ice industry became non-factors when new tecnology came in to replace them....sometimes they adapt like Studebacker did from wagons to cars .
Can you give any recent examples of companies that have squashed competition and established a monopoly in the US and that have not faced government action to limit their sway.... Or those who were on their way to doing so and did not face government action...

Ahhhh... no...

But, I do find it interesting that AT&T was a monopoly and was required to break up into smaller pieces... and then after many years have morphed and combined back to... tada!!! AT&T Not many people would say they are a monopoly now..

Yes.. I am just having some fun with this one..
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Old 11-07-2007, 05:55 PM   #174
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Ahhhh... no...

But, I do find it interesting that AT&T was a monopoly and was required to break up into smaller pieces... and then after many years have morphed and combined back to... tada!!! AT&T Not many people would say they are a monopoly now..

Yes.. I am just having some fun with this one..
yeah that's a good one
like a plot in a horror film ..The Thing That Couldn't Be Squashed or Killed!

I just thought about Intel - they have had a dominating position in the chip markets that they produce in don't they? I'm not sure...I remember their margins were huge back when I owned them... I wonder if they've faced anti-trust actions
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Old 11-07-2007, 06:02 PM   #175
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ERD - I reread our posts. I believe I'm responding to your assumption that the corporations will pass on their savings to the individuals - that competition will force them to keep their margins reasonable and thus the individual would reap the rewards of the free market. I'm not so confident that will happen, and part of that has to do with the limits on competition in different sectors of our economy.
Yes, I do believe that businesses will pass on the savings, not out of the goodness of their cold capitalistic hearts, but from competition and the desire to MAXIMIZE profit by hitting the sweet spot between profit margin and volume. While there are bound to be some exceptions, I'd say that for the vast majority of the dollar spent by the lower class, the free market system is working in USA. I can't think of much that I buy that I feel the price is controlled, that I can't buy a competitive alternative (outside of stuff the govt has messed with). Look at all the hand-wringing over Exxon profits recently, and yet their profit margin was about 9-10%. I don't know much about the oil industry, but it does not like an easy business.Why don't they just raise prices and make 15-20% profit?

Cable TV comes to mind as one - but I don't buy cable, and hey, JMO but poor people don't need it either.

Sorry, but I guess I need to turn the question back on you - show me some significant areas where a poor person is NOT able to buy what they need in a competitive market. Excluding things the govt has meddled in - food price supports, etc. That does not mean that the price is what they want it to be, but where the seller is making higher than market/risk profit margins, and 'gouging' the consumer.

Why are DVD players so cheap now? Why didn't they just keep the price up when component prices fell, and efficiencies increase? There are so many counters to your belief, that I have to ask you to show some significant ones to support your belief.

-ERD50
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Old 11-07-2007, 06:11 PM   #176
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yeah that's a good one
like a plot in a horror film ..The Thing That Couldn't Be Squashed or Killed!

I just thought about Intel - they have had a dominating position in the chip markets that they produce in don't they? I'm not sure...I remember their margins were huge back when I owned them... I wonder if they've faced anti-trust actions
Dan, time for you to start doing a little research.

Intel on Yahoo: Profit Margin (ttm):16.63%

Higher than your average big company probably. But I'd hardly claim that Intel was just taking it easy and letting the money roll in. They keep making faster, more power efficient chips on an aggressive schedule. I think they are pretty amazing for a big company.

They did get hit with some anti-trust action a while back. Something about releasing stuff in such a way that it made it anti-competitive for AMD, I forget the details. Settled out-of-court, IIRC.

AMD: Profit Margin (ttm):-36.29%

There is a big diff between a company having a large part of the market due to their ability to meet customer's demands, and a company abusing that position.

Apple and iPods could be another. But there are other good players available at good prices. Consumers have a choice.

-ERD50
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Old 11-07-2007, 09:14 PM   #177
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Minimum wage:

Those who believe the current minimum wage is too low, what should it be?

"Don't know" is not an acceptable answer, because then you don't know that it is too low now.
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Old 11-07-2007, 09:52 PM   #178
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erd - thanks but no thanks. I feel I've made my points as clearly as I can make them, I don't feel like belaboring them anymore than I have already. If that makes you feel that you have succeeded in defending your positions then that's ok with me. Its been entertaining and educational for me to discuss the areas we talked about and I thank you for the opportunity. Regards, good night and God Bless, Danny
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Old 11-08-2007, 11:58 AM   #179
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I am late to this discussion so I won't be surprised if people ignore me. But someone mentioned polling of economists on minimum wage. A poll of economists is not terribly relevant. What is relevant is the research. My cousin is a leading economist on minimum wage research and her and other researchers are showing that there is an economic benefit to increasing the minimum wage. Minimum wage trends: Understanding past and contemporary research

One other comment. It has been years since there has been any enforcement of the Sherman Act. I think one of the best things for our market, which will never be a totally free market, is to start enforcing antitrust laws.
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Old 11-08-2007, 12:32 PM   #180
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I am late to this discussion so I won't be surprised if people ignore me. But someone mentioned polling of economists on minimum wage. A poll of economists is not terribly relevant. What is relevant is the research. My cousin is a leading economist on minimum wage research and her and other researchers are showing that there is an economic benefit to increasing the minimum wage. Minimum wage trends: Understanding past and contemporary research

One other comment. It has been years since there has been any enforcement of the Sherman Act. I think one of the best things for our market, which will never be a totally free market, is to start enforcing antitrust laws.
Thanks Martha, I am interested in good info on the topic. I don't have time to read through it right now, but I wanted to acknowledge it.

I am on the fence myself, my gut tells me that there likely is a benefit, but there are also factors that offset *some* of that benefit. I'm trying to grasp just how big those factors are, and it looks (at a glance) that there is some good info in that link.

My gut also tells me that this is attacking the symptom, rather than the cause - and those approaches usually have the unintended consequences I warn about. But sometimes, attacking the symptoms is all we can do, and better than nothing? That may be the case with min-wage.

Anti-Trust - is that because most companies are settling out of court, or are afraid enough of govt intervention that they stay on the straight-and-narrow path (mostly)? The exception (with little actual remedy, IMO) was Microsoft, but we best stay away far from that topic lest this thread gets closed.

Any companies that you can name that you think should be brought up on charges? I would say the cell phone carriers, cable companies, phone companies (but VOIP is knocking at their door). Any others?

-ERD50
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