Limit Professionals Compensation

[ERD50]

Corporations ....

In theory they pay 35% rate, but with loopholes they are paying 15-20%
The rest of us are picking up the slack.

This is why I say ABOLISH corp taxes. We 'pick up the slack' either way!

If they don't pay the tax, then we 'pick up the slack'.

IF they DO pay the tax, we get hit with it in the price of goods.

PEOPLE pay corporate taxes, not corporations. It would be more efficient to abolish corp taxes, the corps hire people to comply and to find the loopholes. If it costs them $1 to avoid $2 in tax, it is a 'good deal' for the corp. But the citizens pay the $1 in the cost of the product, then they have to make up the $2 that the corp avoided. So, we end up paying $3, instead of just $2! And that corp staff could be put to work dong something productive, not figuring out how to move costs around. It is a lose-lose proposition! It exists because of this 'smoke-and-mirrors' idea that corporations pay taxes!

This seems to seldom come up, and it seems so obvious. Recently, the governor of IL tried to increase business taxes. I was amazed, yet pleased by the response - the press, everybody actually took him to task for the folly of this. They all said that it is the PEOPLE that will pay that tax in increased prices. And it will drive businesses across the border. The Gov dropped the idea.

Same thing applies in the global market.

-ERD50

 

[Danny]

This is why I say ABOLISH corp taxes. We 'pick up the slack' either way!

If they don't pay the tax, then we 'pick up the slack'.

IF they DO pay the tax, we get hit with it in the price of goods.

PEOPLE pay corporate taxes, not corporations. It would be more efficient to abolish corp taxes, the corps hire people to comply and to find the loopholes. If it costs them $1 to avoid $2 in tax, it is a 'good deal' for the corp. But the citizens pay the $1 in the cost of the product, then they have to make up the $2 that the corp avoided. So, we end up paying $3, instead of just $2! And that corp staff could be put to work dong something productive, not figuring out how to move costs around. It is a lose-lose proposition! It exists because of this 'smoke-and-mirrors' idea that corporations pay taxes!

This seems to seldom come up, and it seems so obvious. Recently, the governor of IL tried to increase business taxes. I was amazed, yet pleased by the response - the press, everybody actually took him to task for the folly of this. They all said that it is the PEOPLE that will pay that tax in increased prices. And it will drive businesses across the border. The Gov dropped the idea.

Same thing applies in the global market.

-ERD50

That will cause massive unemployment in the Tax avoidance industry ERD - have you no heart - they have mouths to feed too (with silver spoons)? Oh, no!- they probably will move over to helping even more the wealthy concoct new schemes to avoid paying taxes.

 

[ERD50]

That will cause massive unemployment in the Tax avoidance industry ERD - have you no heart - they have mouths to feed too (with silver spoons)? Oh, no!- they probably will move over to helping even more the wealthy concoct new schemes to avoid paying taxes.

Does that mean you agree that we should abolish corp taxes? I couldn't tell by your answer.

And I have no problem with eliminating non-value added jobs. They are a drain on society. They are smart people, they will find a job in a value added area. They might even be motivated to start their own business, and create a bunch of low level jobs. That would be a good thing for the lower class. But that's just speculation, I'd rather deal with facts.


-ERD50

 

[Danny]

Does that mean you agree that we should abolish corp taxes? I couldn't tell by your answer.

And I have no problem with eliminating non-value added jobs. They are a drain on society. They are smart people, they will find a job in a value added area. They might even be motivated to start their own business, and create a bunch of low level jobs. That would be a good thing for the lower class. But that's just speculation, I'd rather deal with facts.


-ERD50

No, trying to be funny actually, with all due respect we defer on this one, ERD. I'm not saying I can't be convinced, but you would have to show me a real life example of how this has worked out.

 

[bright eyed]

This is why I say ABOLISH corp taxes. We 'pick up the slack' either way!

If they don't pay the tax, then we 'pick up the slack'.

IF they DO pay the tax, we get hit with it in the price of goods.

PEOPLE pay corporate taxes, not corporations. It would be more efficient to abolish corp taxes, the corps hire people to comply and to find the loopholes. If it costs them $1 to avoid $2 in tax, it is a 'good deal' for the corp. But the citizens pay the $1 in the cost of the product, then they have to make up the $2 that the corp avoided. So, we end up paying $3, instead of just $2! And that corp staff could be put to work dong something productive, not figuring out how to move costs around. It is a lose-lose proposition! It exists because of this 'smoke-and-mirrors' idea that corporations pay taxes!

This seems to seldom come up, and it seems so obvious. Recently, the governor of IL tried to increase business taxes. I was amazed, yet pleased by the response - the press, everybody actually took him to task for the folly of this. They all said that it is the PEOPLE that will pay that tax in increased prices. And it will drive businesses across the border. The Gov dropped the idea.

Same thing applies in the global market.

-ERD50

What about all the millions in subsidies they happily take, paid for by taxes? Or the roads, services and other things they often need built, paid for by the public? Just the cost of doing business - bringing jobs to a particular community?

i'm not opposed to the millions the casino's are now delivering to CA's pot... or gamblers paying more...

 

[saluki9]

Sweden is supposed to have very high productivity and standard of living despite high taxes,(I don't have time to get the stats ERD) I'm not going to accept the dissatisifaction of your seat mate (or was that your unhappiness) and extrapolate it for 9 million swedes - can you give me the facts that backup the 80% tax rate you mentioned?

Was it you or Robert that railed against "bleeding heart lefties" - well I'll just say thank god for them and for the one with JC for initials (Jimmy Carter!)

Sorry, I was wrong, their highest tax rate was 87% now it's down to an oh so reasonable 65%. I don't think that includes their confiscatory payroll taxes.

Marginal Tax Rates, by Alan Reynolds: The Concise Encyclopedia of Economics: Library of Economics and Liberty

 

[Danny]

Sorry, I was wrong, their highest tax rate is 87% not 80%

Marginal Tax Rates, by Alan Reynolds: The Concise Encyclopedia of Economics: Library of Economics and Liberty

Thats 1979 (87) 1990 (65) - I have a stat that says the top rate for individuals in 2007 is 60% and Corporations 28%

I prefer dealing with current stats if possible it makes the discussion more accurate and useful for everyone.

 

[ERD50]

What about all the millions in subsidies they happily take, paid for by taxes? Or the roads, services and other things they often need built, paid for by the public? Just the cost of doing business - bringing jobs to a particular community?

i'm not opposed to the millions the casino's are now delivering to CA's pot... or gamblers paying more...

I'm opposed to govt subsidies to business. The exception, and Robert Reich agrees, is where there is a benefit to society, but not a sufficient profit motive for a business. In those cases, it may make sense for govt to provide a head-start.

We all use roads, etc. Doesn't it make more sense to just pay the tax, than to have a company pay (and pay to void) the tax, and then we just pay for it in the price of the goods? Simple is better, I think, and no corp tax is simple. It also makes our products more competitive in the world market, creating more local jobs. Isn't that a good thing?

I can't see ANY negative to eliminating corp taxes. DT points out that the accountants may be laid off, but I really do not see the reduction of non-value added jobs as a bad thing. Maybe painful for some in the short run, but the alternative is worse, IMO.

I am opposed to casinos, ethically. Don't they collect too much from the poor? Yes, it's voluntary, but I still think it is a stupid thing for our govt to condone. JMO.

-ERD50

 

[Danny]

ERD, if you let corporations get out from under their tax obligations, wouldn't that lift the individuals tax burden and would that increased burden fall fairly?
Would the theoretically lower cost of goods and services benefit everyone fairly?

 

[ERD50]

ERD, if you let corporations get out from under their tax obligations, wouldn't that lift the individuals tax burden and would that increased burden fall fairly?
Would the theoretically lower cost of goods and services benefit everyone fairly?

Since the poor spend all of their money to get by, the reduced cost of goods would benefit the poor the most.

You are correct that taxes collected from individuals would need to increase to replace what was previously collected from businesses (unless we are dreaming about a smaller govt). Two things to remember though:

1) - the cost of goods should be reduced by even more than just the tax burden, they will be reduced by the cost of compliance and avoidance (as I simplistically showed before).

2) Since our tax system is currently 'progressive' (maybe not as progressive as you would like, but still 'progressive'), I think it's safe to assume that any increases in the individual tax rates would remain progressive. So, not only would the lower cost of goods assist the poor the most, but also the income tax 'burden' would fall progressively on those with higher income.

So it still seems to me, that liberals/progressives should be calling for reduced taxes on business if they want to help the poor, not increased taxes on businesses.

Of course, any real tax reform seems to be a dream anyhow, but I fail to see any negatives to this. If it were to be done, I think it would need to be staged in, so that prices and taxes would adjust gradually over time.

If you want, I can get into the 'non-value' job issue in a bit more detail, but later.

-ERD50

 

[Danny]

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..

 

[ERD50]

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.

-ERD50

 

[Danny]

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 "

 

[Texas Proud]

This is why I say ABOLISH corp taxes. We 'pick up the slack' either way!
-ERD50

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..

 

[Texas Proud]

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...

 

[eridanus]

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.

 

[Texas Proud]

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...)

 

[eridanus]

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.

 

[Danny]

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.

 

[ERD50]

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.

-ERD50

 

[Danny]

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...

 

[Danny]

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...

 

[Texas Proud]

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..

 

[Danny]

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

 

[ERD50]

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