There is no such thing as a corporate tax.
Wrap your head around that for a minute. Sure, there's something called a corporate tax - the implication is that a greedy corporation run by fat fatty fatcats forks over some of its piles and piles of gold coins to Main Street's huddled masses. Cross of gold! 40 acres and a mule! Hanging by a thread! Social safety net!
Essentially, corporate taxes shrink the gross margin of a corporation. Before anything else happens, revenue gets multiplied against T - Tax Rate - to figure out Uncle Sam's cut. That money is then given directly to starving, sad poors in a large annual "Yes We Can" stipend. Sounds good, right? Take a cut from those fatcats! Main Street!
All you are doing is saying - hey people who buy stuff from this company! It's T more expensive now!
I mean, not directly. If you assume profit margins exist, theoretically they would be reduced by T and the remainder would be the new profit margin. There isn't a DIRECT impact. Except in mature industries, like manufacturing, where T is a crushing burden on razor-thin margins. In mature industries, T is a price hike equivalent almost directly to T.
So when you hear about reducing the corporate tax rate, they're saying one of two things:
1.) We're widening corporate profit margins (bad! Wall Street! Fatcats!)
2.) We're reducing consumer prices (Hmm...that sounds pretty awesome. The sky will rain iPhones!)
Liberals focus on #1 exclusively. Perhaps with good reason - there technically isn't a direct relationship between management decisions about margins and tax rates, and less mature industries are likely to just get a terrorist fist-bump of profit from our evil plutocrat Congress. But "corporate" tax cuts can create margins for companies that are competing globally, and allow them to have more margin flexibility to compete with other nations' companies and their alternative tax environments - like VAT, which kicks our asses.
Increasing margins would also stimulate job growth. The question then becomes - where? Obviously, that additional profit can be invested anywhere if competitive companies see fit to slim margins, which is the whole "then they ship it overseas!" argument. From a government's perspective, you want to keep that tax revenue base domestically, so I'd suggest making corporate tax cuts contingent on domestic job creation. Yeah, that's a distortion in a free and fair world trade environment, but we don't have anything resembling that. And I like American hegemony!
Corporate tax cuts contingent on domestic job creation are the fastest way to slim unemployment figures that are making a scary, recessionary climb. They take the engines of our economic growth - corporations, large and small - and encourage them to both do more business and to hire more employees. Is there revenue impact? Sure. But you recover some of it from the newly-employed and the rest can be trimmed from our bloated "murder Muslims" budget. Does that really sound so bad?
Yes, because we get lost in petty class war arguments about theoretical fatcats.
Subscribe to:
Post Comments (Atom)
4 comments:
I adore you, ADS, and you're much smarter than I with regards to things like finance and math (I was an English major! Math is like kryptonite to us!), but one thing you do that drives me batty is you're always going on about "class warfare." Everything's class warfare! The rich are oppressed by these teeming throngs of Teh Poorz! It's the guillotine all over again! Except, not really. You always say, and to a large extent I think you're right, that you base your opinions on reason and logic, but you sure do like to whip out the threat of some sort of Marxist pitched battled that just isn't happening and isn't going to.
I'm being somewhat tongue-in-cheek about it, but there really is a distinct resentment of the rich/poor in this country by members of various social circles. The intent is less to raise the specter of some horrible "war" and more to point out the classist anger that tends to tinge arguments about economic and taxation.
You live in a country where the CEO of FedEx ostensibly accused the poor of laziness the other day. Class war is real.
Would you go so far as to call corporate taxes on 'mature' industries regressive? Is there any decent data out there that can be mined for the percentage of income spent on low-margin (of the kind where the tax increase gets passed along to the consumer) vs high-margin (where some of the tax burden is absorbed by the business) goods across earnings brackets?
My basic assumption is that what you're describing would work out the same as a straight sales tax, but I'm not sure if the splint into kinds of goods mitigates the effect.
This and That, from the 2006 letter to shareholders:
"Berkshire will pay about $4.4 billion in federal income tax on its 2006 earnings. In its last fiscal year the U.S. government spent $2.6 trillion, or about $7 billion per day. Thus, for more than half of one day, Berkshire picked up the tab for all federal expenditures, ranging from Social Security and Medicare payments to the cost of our armed services. Had there been only 600 taxpayers like Berkshire, no one else in America would have needed to pay any federal income or payroll taxes."
Post a Comment