Size Of Government - What Do We Really Want?

[jdw_fire]

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Originally Posted by Texas Proud Seems this flawed logic is being debated at other places... Online Debate: Higher corporate tax rates encourage business investment. | Debate.org

just because you think it is flawed dosnt make it flawed. it is interesting that the pro side (higher tax rates encourge reinvestment) of the debate you linked actually won that debate, thanks for posting it.

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Originally Posted by Texas Proud I think that I will go with one of my professors advice when I asked about the gold standard.... he asked me if my friend really believed that it mattered and I said 'yes'.... he said 'there is nothing you can say to change his mind'.... So, there is nothing I can do to change your mind that your logic is flawed... there is a lot of evidence to show WHY it is flawed out there.... I don't wish to waste my time looking for it.....

the same can be said about you, as nothing can be done to change your mind. since you dont provide evidence that my logic is flawed i see no reason to believe you. i could just as easily say your logic is flawed.

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Originally Posted by Texas Proud Your real estate example is not valid... you were getting deductions from the gvmt that made it more profitable to invest which caused capital to be invested in a place that was not the best investement without that tax incentive.... IOW, if the only reason you invested was for tax reason it is a bad use of capital....

just because you say my example isnt valid doesnt invalidate it. dont we, as citizens of this country, want more investment in this country, even if it isnt "the best investement without ... tax incentive"? i dont know about you but i do want more investment and job growth here, in the USA, and i am in favor of using the tax code to accomplish it. just because the best investment, from a world view, would be to move jobs out of this country doesnt mean that is what i want to take place. i was looking for a way to encourge job/economic growth in the USA and i still dont think that the generic platitudes about capital flow and best investment have refuted my suggestion. i agree with the pro side of your linked debate on the point that lower tax rates incentivize the taking of company profits (thus paying low taxes on those profits). i will repeat here that the low tax rates that we are currently experiencing is not encouraging company reinvestment or job growth, yet back when tax rates were higher (in the late 1990s) we had both economic and job growth. low tax rates in this country over the last decade have incentivized CEOs to make fast profits (taking them and paying the tax) at the expense of workers and reinvestment. maybe the low tax rates even encourged the financial problems we had in the late 2000s because so much of the illicit profits could be kept by the people making and selling all those synthetic financial products.

[jdw_fire]

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Originally Posted by ERD50 Well, I re-read your earlier posts, and this post, and I do believe I'm understanding you perfectly. You support higher tax rates, period.

this is proof that you dont understand me "perfectly" and makes me wonder if continuing this dialog has any point. you attribute things to me that i didnt say and you seem dead set against the possibility that higher taxes could be beneficial to this country. your mind is made up and it seems there is nothing that can be said that will change that. however, that belief of yours doesnt make you correct.

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Originally Posted by ERD50 The relavent question is not "Can I present a scenario where someone re-invests with 50% tax rates?", the relavent question is "Do 50% tax rates provide more/less incentive to re-invest than 25% tax rates?".

and i think i did address that question exactly.

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Originally Posted by ERD50 I don't have time now to provide examples point by point, but I notice you provide 'explanations' of how a business owner might behave - but you totally ignored my numbers that show re-investing with 25% tax rates puts more in the pocket of the owner, and the ratio of money in pocket w/wo re-investment is the same. It is not greater with higher tax rates. Seems to me the bottom line is the motivator for a business.

i did address your numbers but since you dont think i did let me give you another example, 1 from the residential real estate business. i dont know if you are aware but when upgrading a house, the owner rarely gets his money back for the cost of a given upgrade (unless said upgrade is required to make the property liveable). for example, when adding a bedroom to a house the owner can expect the value of the house to go up by about 80% of the cost of the remodel. so with no tax advantage, i.e. a regular home owner who cant deduct the expense, this remodel doesnt really make sense immediately prior to sale. for the real estate business person who plans to flip this house, is in the 25% tax bracket and can deduct the cost of the remodel, since s/he will really only be paying 75% of the cost of the remodel s/he may consider it but because of the variability in the real estate business, it may very well not make sense to do the remodel. however, for that same real estate business person who still plans on flipping this house but now s/he is in the 50% tax bracket, it makes sense to invest in this remodel because the owner only has to pay 50% of the cost of the remodel (the government pays the rest in refunded tax money) and s/he is likely to do the remodel provided the business is sufficiently capitolized. so if there is already net profit in the company this remodel is very likely to take place. hence, economic/job growth as a direct result of higher tax rates.

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Originally Posted by ERD50 ... If we look at it just a little differently, clearly it would be less of a 'sacrifice' for the $750K take home person to re-invest $500K than the $500K take home person. With $750K income, he (or she/it - I'm not going to type it each time) would still have $250K take home to enjoy. So who is more likely to re-invest $500K?

please recognize that the person reinvesting only 2/3s of his after tax profit ($500k at the tax rate of 25%) back into his business isnt getting as large an investment in his business (only $666.67k worth of equipment/employees) as the person who invested all of his after tax profit ($500k at the tax rate of 50%) which would result in $1M worth of equipment/employees. so given your example, at the higher tax rates more investment gets done and hence more economic/job growth would take place. even if this person in the 25% tax rate invested the remaining $250k after tax profit in something other than his business the total investment would still be less ($250k + $666.67k < $1M). however what i am also suggesting is that since taking the money out of the business is so cheap when the tax rate is 25%, that is what is likely to be done, atleast it is more likely to be done at the 25% tax rate than when the tax rate is 50%.

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Originally Posted by ERD50 I won't suggest that it couldn't happen, I'm saying that as far as general trends, it doesn't make economic sense that higher tax rates motivate re-investment and it won't happen generally. CFOs will make the same calculations that I did.

maybe, maybe not. i think they are more likely to think about this the way i have suggested and when the tax rates are low they will pull as much money as they can out of the business because it is cheap to do so.

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Originally Posted by ERD50 Quote: ...however since in this line of reasoning the business owner is making the reinvestment because of the higher tax brackets it was appropriate to not have the business owner make the reinvestment in the case where the tax brackets werent higher. And that is circular logic. IOW, to 'prove' that red cars are faster than blue cars, I painted this very fast car red, and a very slow car blue. And so it goes. All you 'proved' is that re-investing in a very profitably business will increase the value of the business and increase future profits. You did not demonstrate that higher tax rates motivate this more than lower tax rates.

no it isnt circular. what you quoted here wasnt my attempt to prove that higher taxes would motivate more reinvestment in business. i talked to that topic earlier in that post. and i already explained what you quoted and here you AGAIN attribute something to me that i didnt say.

[nun]

I'm amazed this thread has lasted so long. Military should shrink, military benefits should shrink as they are ridiculously rich, SS and Medicare ages should be increased, more progressive tax so that the richest pay more, reduce tax rates on the middle class but increase revenue by eliminating tax deductions like mortgage interest, massive infrastructure investment to employ people and get the US in a position to remain competitive with The rest of the world.

[moderator edit]

[Alan]

Thanks folks, time to move on.

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