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From the linked transcript: BLUMBERG: But fortunately, as you know, plank three I think is something that people can get around - a massive tax cut. SMITH: OK
by Dove 10y ago
From the linked transcript:
BLUMBERG: But fortunately, as you know, plank three I think is something that people can get around - a massive tax cut.
SMITH: OK.
BLUMBERG: Are you ready?
SMITH: Yeah.
BLUMBERG: A tax cut that's an insidious tax. It's felt everywhere in the American economy. It destroys jobs, stops innovation.
SMITH: I am all for it. OK. Who gets this tax cut?
BLUMBERG: Not who - what.
BAKER: If I'm being blue sky here, I would say the corporate tax is totally a waste.
FRANK: The corporate income tax makes no sense whatsoever.
SMITH: You are killing the voters here. So far we've got raised taxes on the middle class and eliminate taxes on corporations?
BLUMBERG: Yeah. And those were the two most liberal members of our panel, Dean Baker and Robert Frank. And here's the reason that they and pretty much all our panelists hate the corporate income tax, which by the way is one of the highest in the world here in the United States at 35 percent.
BAKER: It doesn't make sense really to tax the corporation as such. What we want to do is - I'm going to sound like a Mitt Romney here. What we care about is if the corporation is reinvesting the money. What's wrong with that? Why do we want them to prevent - why do we want to prevent the corporation from reinvesting the money?
What we might want to prevent is giving the money to wealthy shareholders or them buying a second, a third, fourth home, getting a new Mercedes every six months, whatever it might be. That's where we want to have the taxes. We don't want to prevent Microsoft or General Motors or whoever it might be from investing more in improving their product line. That's a good thing in my view.
BLUMBERG: So a lot of people, you know, when they think the corporate tax, they want to keep the corporate tax in place because they want rich people to pay more taxes.
SMITH: And rich people own corporations.
BLUMBERG: Right. But our panel agreed. If you want to tax rich people - and not all of our panelists agreed, by the way, that you should tax rich people more than others - but if you did, if that's what you wanted to do, just tax rich people - do that. Don't tax the corporation.
tldr: Taxing corporations prevents them from reinvesting the money and doing such things as advancing technology and hiring workers. It is a terribly destructive tax, discouraging exactly the sort of activity that drives the economy. It's the people who own the corporation that you're trying to tax, so tax them when they get the money.
- extra88 10y agoSo, eliminate corporate tax but at the same time increase capital gains tax, i.e. stop taxing it differently (less) than earned income? My concern with that is people shifting their wealth to be held by a private corporation instead of personally held; "it's not my yacht, it belongs to Extra88 Inc." I think additional changes would need to be made to the nature of corporations to avoid abuse.
- spoonie 10y agoIt is a risk yes, but that kind of argument wouldn't make it past an IRS auditor. There is a reason many C-level staff today aren't compensated with benefits like housing and transport.
- josho 10y agoYour example of the yacht is already handled by the tax code (at least in Canada, likely everywhere else too). That is, if you take the yacht for weekend excursions that is a personal benefit and you should be paying tax on that. A tax accountant might try to hide that, but if you get caught that's lying on your taxes and not looked kindly on. These areas are likely why the rich, like Trump, are often under audit. Because there are so many ways they can play the system to avoid taxes. Hmm, maybe I just made your point.
- grinnbearit 10y agoYou tax capital gains differently than earned income to incentivise investment over consumption. This is because consumption today is always more valuable than consumption in the future (the discount rate).
- extra88 10y agoCan you explain that? How does does the source of the money affect what I do with it (dividends & interest vs. pay from the sweat of my brow & intellectual output)? If consumption today is more valuable than consumption in the future, why would you want to favor doing something else today, e.g. investment?
- clairity 10y agobut corporations can already reinvest in themselves tax free, and on top of that capitalizable expenses get to be spread across tax periods for tax sheltering purposes. tax shields are so valuable to that they can actually be bought and sold as an asset separate to the corporation (in a not uncomplicated structure and set of circumstances iirc). typically this is done for shareholder benefit rather than for some coherent investment strategy (the benefit is not only capital but power and influence as well).
- subhobroto 10y ago> What we might want to prevent is giving the money to wealthy shareholders or them buying a second, a third, fourth home, getting a new Mercedes every six months, whatever it might be. That's where we want to have the taxes. We don't want to prevent Microsoft or General Motors or whoever it might be from investing more in improving their product line. That's a good thing in my view. Sounds like a use tax would be more beneficial? I have no formal economics training and would love to hear from the more educated.
- ant6n 10y agoI thought profits are taxed - so re-investing should happen before the taxation, no?
- onlyrealcuzzo 10y agoI've always wondered exactly this. Corporations aren't people. Why are we taxing them? I think it gets a little trickier then the interview goes, though. What's to prevent say, Bank of America, from buying its execs (and employees for that matter) second homes and cars and vacations with un-taxed money instead of paying them money directly in salary or in dividends?
- pzone 10y agoWell since providing benefits to employees without their paying tax on those benefits illegal, hopefully what prevents it is tax auditors.
- Terr_ 10y ago> Corporations aren't people. Why are we taxing them? IMO it is payment for special privileges. Limited-liability corporations are a way for owners (stockholders) to ask the government to give them a special exemption to avoid responsibility for certain mistakes or unprovable maliciousness. Imagine a Deepwater-Horizon situation. If the corporation is bankrupt and the still-solvent investors are allowed to walk away and ignore the mess... Who fixes things, and whose money gets used?
- prostoalex 10y ago> buying its execs (and employees for that matter) second homes and cars and vacations with un-taxed money This is taxed at personal income tax levels, and is also not deductible as an expense by the payer. https://www.irs.gov/businesses/small-businesses-self-employed/employee-benefits https://www.irs.gov/businesses/small-businesses-self-employe...