Where is the US economy headed?

okie wrote:

Duh! Sure they try to avoid paying tax, as everyone does, which of course is perfectly proper and legal. They do it in an effort to compete with their competition to stay in business.

Only if your original assertion is false. If, as you claimed, corporations don't pay taxes but merely collect them, then there would be no advantage to avoiding the tax -- it would simply be passed on to consumers. If, on the other hand, corporations actually pay the tax, then there would be an advantage to avoiding it.

Your evident confusion on this point is understandable, and, to a certain extent, excusable. The notion that corporations only collect taxes is what I call a "George Will-ism," the kind of statement mindlessly repeated by conservatives that, upon first hearing, sounds profound and true but, upon further consideration, turns out to be banal and false.

okie wrote:

My point is that business should be making business decisions based on good business reasons rather than tax reasons. Tortuous tax laws only end up hindering the most efficient business activity, and often cause companies to do things not in the best interest of consumers. The market should be dictating good business decisions, not politicians sitting in Washington.

If corporations merely passed on taxes to their customers, then they wouldn't make any decisions based on tax reasons. For them, the tax would, in effect, be invisible, a debit balanced out exactly by a credit in their ledger books. Your point, then, is only as defensible as your original assertion is meritless.

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I would like to note that it isn't perfectly proper to dodge taxes. Loopholes exist, but that doesn't make what they are doing moral or right.

When it is taken to the extent that Big Business has taken it today - namely, they buy congressmen to keep real tax reform (which would close their loopholes) from happening - it is most certainly not perfectly proper, but a subjugation of our democratic system and downright despicable.

Cycloptichorn

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Joe from Chicago, to go back to basic logic here, taxes are simply another cost of doing business. To say it isn't passed on is sort of a weird argument. If businesses did not pass on the cost of doing business, then everything would of course be free. If they weren't required to pay income tax, competition and lower cost would bring consumer prices down. Its called Economics 101. So, obviously George Will is perfectly correct.

And Cycloptichorn, the fact that businesses have to constantly lobby Congress does not indicate something they should not be doing. Instead it is an indication that Congress is far more involved than what they should be doing. A big part of lobbying is actually educating Congressmen that otherwise have no knowledge or clue about industries they are trying to regulate. They are mostly a bunch of lawyers. They generally do not have an educated background about oil and gas production, utility operations, agriculture, any activity for that matter. So lobbying is good and proper, and if not done, we would have alot more stupider laws than we have now.

P. S. One man's "loophole" is another man's "incentive." In fact, that is often why they are created, to create an incentive for businesses to do certain things that are perceived to be good for the consumer or the country.

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I think you guys are talking past each other a bit. Taxes are a cost of doing business and a Corporation that doesn't either recover its costs in its prices or reduce those costs isn't long for the business.

That said, corporations do indeed consider (for example) the local tax structure when considering where to locate facilities and staff. They also consider liability law and the behavior of state courts.

Many labor-intensive businesses have left California for this reason. Hawaii imposes a gross receipts tax on services - a powerful disincentive for the location of any consulting or service business there if there is an option to locate elsewhere. There are many other like examples.

The complexities of Federal tax law have created a huge industry of accounting and other consultants dedicated to the creation of structurtes for the evasion of taxes. I don't see any particular moral issues here as long as fraud is not involved. The government knowingly uses taxes to induce certain desired behaviors on the part of individuals and corporations. Those taxed have the right to adapt their behaviors accordingly to minimize their tax burden.

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<bm>

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Uh Oh ... now you guys have gone and done it; Thomas is here Laughing

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okie wrote:

Joe from Chicago, to go back to basic logic here, taxes are simply another cost of doing business.

Quite true, and I never said otherwise.

okie wrote:

To say it isn't passed on is sort of a weird argument.

I said it wasn't merely passed on. If every dollar of tax paid by a corporation was matched by a dollar increase in the price of the corporation's product, then you and George Will would be right: corporations don't pay taxes, they merely collect them. But just as a dollar's increase in the cost energy, or raw products, or labor to the corporation is not automatically passed on as a dollar's increase in price to the consumer, so too the cost of taxes is not necessarily passed on intact to the consumer.

okie wrote:

If businesses did not pass on the cost of doing business, then everything would of course be free. If they weren't required to pay income tax, competition and lower cost would bring consumer prices down. Its called Economics 101. So, obviously George Will is perfectly correct.

Assuming conditions of perfect competition. That's economics 102.

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Corporations pass expenses, including taxes, on to their customers. All else being equal, those which have the least to pass on are the most competitive. Obviously.

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At root, all tax revenue derives from the wage earner.

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timberlandko wrote:

At root, all tax revenue derives from the wage earner.

Thus George Will is correct, people pay taxes, corporations do not. I agree.

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timberlandko wrote:

At root, all tax revenue derives from the wage earner.

The problem is that the economy is a cyclical flow of funds, so there really is no "root" for the tax revenue to derive from. It's analogous to saying: "At root, all blood derives from the heart." This statement makes no sense because blood circulates. Similar logic applies to tax money.

okie wrote:

Thus George Will is correct, people pay taxes, corporations do not. I agree.

I agree with your conclusion, but not with your reasoning.

If you own a corporation, it makes no conceptual difference whether its profits are taxed as a corporate income tax on it, or as an individual income tax on you. There is a practical difference if corporate income is taxed at a different rate than individual income. There is a practical difference when the corporation resides in a different country than the individual owning it. There is a practical difference when the corporation, but not its owners, is on the verge of bankruptcy, or vice versa. But in principle, there is no difference. This does not depend on the company operating under perfect competition. It only depends on the ownership relation between the corporation and its owners.

But that wasn't your argument. Your argument was that corporation pass on the tax to consumers -- and, after Timber mentioned it, workers. This is generally untrue. What econ 101 tells you here is something different: For both workers and consumers, the outcome depends on the elasticity of supply and demand -- of products as well as the labor and capital that produces them. The more easily a party can adapt its supply or demand to a price change -- in other words, the more elastic its supply or demand is -- the smaller is the share of the tax burden it has to bear. Berkeley's Christina Romer explains the logic behind this in this Econ 101 slide. (PDF)

This point, like the previous, does not depend on competition being perfect or not. The difference between taxing a competitive and a monopolistic market is that the latter can be a net efficiency gain for society while the former cannot. But under competition and monopoly, which side of the transaction you tax has no distributional effect between the firm on the one hand, its customers, workers, creditors and investors on the other.

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I think you are splitting hairs. I realize businesses do not make a copy of their tax payments and tack it onto their products as some sort of surcharge or something. I also realize there are variations and nuances involved depending on many factors. But bottom line, taxes are part of the cost of doing business and must be incorporated into what their products can be sold for to make a profit. Thus, tax costs are passed on to the consumer, if you follow the money far enough to the ultimate source regardless of which path you follow. What are we arguing about here?

The same principle would apply to employees pay checks. If they did not have to pay income tax, social security, and all the rest, their wage scales could be reduced by business, and the businesses could provide products at a lower cost. Thus, who is ultimately paying for the tax, answer being the consumer? Its all of us paying the taxes. Businesses do not. They are only agents of ours in name only. Common Sense 101.

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okie wrote:

I think you are splitting hairs.

You say this as if it was a bad thing.

okie wrote:

What are we arguing about here?

We are arguing about the mistaken reasoning that led you to your correct conclusion. If all that matters to you is the bottom line, and if you regard it as hair splitting when people argue about the part above the bottom line, I can live with that.

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Thomas wrote:

timberlandko wrote:
At root, all tax revenue derives from the wage earner.

The problem is that the economy is a cyclical flow of funds, so there really is no "root" for the tax revenue to derive from. It's analogous to saying: "At root, all blood derives from the heart." This statement makes no sense because blood circulates. Similar logic applies to tax money.

Got me there; can't argue with that.

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Thomas wrote:

okie wrote:
I think you are splitting hairs.

You say this as if it was a bad thing.

Were . . . as if it were a bad thing . . . the subjunctive you know. Just because most of these yobs wouldn't know the subjunctive if it bit them in the @ss is no reason for an intelligent and well-educated person to ignore it . . . or you, for that matter.

Anyway, i'd not insulted you recently, and am reduced to this.

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Setanta wrote:

Anyway, i'd not insulted you recently, and am reduced to this.

Happy new year to you too, Setanta. Very Happy

Since were busy hairsplitting anyway, I have to correct myself: taxing a monopolist does have a redistributional effect. If the government gets the size of the tax right, its effect is that the government takes away the monopoly profit from the monopolist, with no change for the consumer. Because the monopolist loses something, the consumer does not, and the services bought with the tax presumably benefit both, this works out as a redistribution from monopolist to consumer.

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You mean like all those governors who get elected by promising to build more roads over the dead bank accounts of their campaign contributors.

(insert appropriate rolly-eyed emoticon here)

Happy new year to you, too, you crypto-liberal . . .

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Setanta wrote:

You mean like all those governors who get elected by promising to build more roads over the dead bank accounts of their campaign contributors.

I said "if" the government gets the tax right. I didn't say the government will ever get the size of a tax right.

Setanta wrote:

Happy new year to you, too, you crypto-liberal . . .

Ah, now you're getting insulting again. I will have to report your post to the moderators, but it's nice to see your fastball coming back.

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Thomas wrote:

The problem is that the economy is a cyclical flow of funds, so there really is no "root" for the tax revenue to derive from. It's analogous to saying: "At root, all blood derives from the heart." This statement makes no sense because blood circulates. Similar logic applies to tax money.

I'm not sure what your political philosophy is, being new here, but my thought is that everytime the "blood" circulates through the federal government, much of the nutrients, oxygen, etc. are siphoned off, expended if you will on wasted exertion applied to meaningless activities, so when the "blood" circulates back through the citizenry on meaningful wealth producing activities, much of its benefit is depleted. The government of course expends alot of this energy attempting to channel the blood to the arteries it deems appropriate, even creating additional arteries all the time, so that there is not enough blood for the most important arteries. The citizenry of course must produce more blood to mix with the existing blood, but question is, will the citizenry get sick and become anemic if the system becomes overloaded? How many leaches can the body stand?

And, what makes you think that if blood flows through something that it has anything to do with producing the blood?

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Our government is constantly expanding toi meet the needs of an ever-expanding government ...

While it is true we have the best politicians money can buy, the thing for which we should be most eternally grateful is that we get nowhere near the government we pay for

<rimshot>

Gotta love Will Rogers.

One more - just can't resiist:

I belong to no organized political party; I'm a Democrat

<rimshot + cymbal clang>

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Where is the US economy headed?

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