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1) It looks like I'm mixing up the California withholding rate with the tax rate. Thanks. 2A) Granted. If I had a magical tax wand, I'd obliterate corporate ta
by bhickey 11y ago
1) It looks like I'm mixing up the California withholding rate with the tax rate. Thanks.
2A) Granted. If I had a magical tax wand, I'd obliterate corporate taxation.
2B) It's an argument I've heard, but I'm more interested in avoiding arbitrage. My preferences might be mistaken. :)
3) If I hold the belief that we shouldn't tax income differently based on its source, Mankiw's argument doesn't have much force. His reasoning is sound, sure, but I'm not sold on the premise.
- harryh 11y ago1) Yes. This is true and annoying especially if you care about short term cash flow. If you super care about this you can play games with your W4 to cut down your withholding and instead pay quarterly tax payments. Though if you screw up and underpay you'll owe penalties. 2A) Indeed I agree. Though personally I put the chance of this ever happening at precisely zero due to the political optics. 2B) The difficulty of determining what is a capital gain and what is income is, in fact, one of the biggest theoretical arguments against a zero cap gains rate.
- newman314 11y agoWhy remove corporate taxation? From my perspective, corporations already pay a lower effective tax rate and have access to tax avoidance strategies that not available to the individual. I've read the argument that eliminating the corporate tax would spur growth but that's like saying eliminating individual income tax would spur consumer spending.
- harryh 11y agoBecause all taxes are taxes on people. Corporate taxes are just a convoluted and bad way of doing so.
- newman314 11y agoAre you proposing that eliminating corporate taxes would mean that somehow you would make more at the end of the day and be taxed less overall? I'm not sure I see that happening.
- harryh 11y agoIf you eliminate corporate taxes then the shareholders of the corporation would make more money(1). You can then make up for the lost corporate tax revenue by taxing those shareholders more. It would be a simpler and more efficient system overall. 1. Probably also the employees would make more and the customers would pay less for products as well. This has to do with something called tax incidence.
- newman314 11y agoThanks. I'll have to read more about tax incidence. But naively speaking, what's the incentive for a corporation to increase employee pay in this scenario rather than just maximize shareholder value?
- harryh 11y agoThe same incentive they have to pay you anything more than the minimum wage: the market. If there is more profit in the system how that profit gets allocated (higher wages, lower costs to customers, shareholder value) depends on the relative leverage of the various parties involved.
- bhickey 11y agoWhat Harry said. At the end of the day money is going to land in someone's pocket. It'll be paid out as wages and dividends. A company will spend it on equipment, vendors and consumables. When money is retained, it'll get priced into shares and will get taxed (albeit indirectly) once a shareholder realizes a gain. Corporations are really good at playing a tax minimization shell game. Big corporations are especially good. This leads to all sorts of nonsense like laundering profits through Bermuda and parking capital outside of the US. In the end all we end up doing is compounding the advantages of size to the disadvantage of smaller corporations. Meanwhile there's the added inefficiency of churning money into tax lawyers. My expectation is that revenues would increase if we set the corporate tax rate to zero and reallocated the burden to personal taxes.