8 ms·

yes, monetary velocity is the lifeblood of an economy, but no, lowering corporate taxes would only increase velocity at the top, and velocity in the upper echol

yes, monetary velocity is the lifeblood of an economy, but no, lowering corporate taxes would only increase velocity at the top, and velocity in the upper echolons of the economy is not good for the economy overall. instead, you want to create incentives that create velocity in the middle and lower strata of the economy, where it will do the most good. one option is to tax the money regardless of accounting technicalities that assign revenue to international subsidiaries. then it doesn't matter where the money resides accounting-wise, since there would be no special treatment of overseas cash. another tax-advantaged option that's entirely within apple's control is to distribute more of its income to its employees (especially retail employees who generate above average returns on investment for the retail industry), who in turn would spend the money rather than hoarding it, thereby increasing overall economic velocity (particularly in the lower tiers of the economy). we should hold the IRS (and government economic policy overall) to the singular task of making sure tax law is applied evenly and fairly across all economic strata, so that we all have an even playing field. we should not tolerate corporate welfare in any form. corporations are not babies.

valuearb 10y ago
"another tax-advantaged option that's entirely within apple's control is to distribute more of its income to its employees " You mean "shareholders's income". It's not Apples income to run social programs with. Lowering (or preferably eliminating) corporate income taxes benefits investment at every level, from Apple all the way down to startups. If your business plan shows that if you hit plan you will generate $1M in profit your first year, and will reinvest $600k in the business, the rest going to CA and US taxes. Now contrast that to the reinvesting the full $1M in the business. In the second case the business will be able to grow faster and increase company asset/equity value faster, of course it will be more valuable. And this means it's more likely to get funded.
- jliptzin 10y ago
  Wouldn't you be able to write off those investments against the $1 million in income? In that case it shouldn't matter what the tax rate is.
- deleted 10y ago
  [deleted]
- harperlee 10y ago
  > You mean "shareholders's income". It's not Apples income to run social programs with. I know you didn't say this exactly, but it is not true that a company exists solely for looking after shareholder's income. They also have other things to look after, such as social obligations. Here is an article with some more detail about it (PDF): https://centres.insead.edu/social-innovation/who-we-are/documents/troublingQ3_000.pdf https://centres.insead.edu/social-innovation/who-we-are/docu...
  - deleted 10y ago
    [deleted]
  - jimmywanger 10y ago
    The article you cite says that it's about what a corporation "ought" to do. It's not currently part of the corporate charter in the US, and unless explicitly called out, a company is ultimately only responsible for shareholder value. If that means tossing money at the local community so they can continue to do business there, they will do that.
  - valuearb 10y ago
    Yea that article is BS. The idea that corporations have obligations beyond their owners is pure parasitical nonsense. Obviously they have an obligation to behave legally, but their profits and assets are owned by shareholders. Tim Cook is worth around a billion dollars, he has massive personal resources to pursue charitable activities on his own. Should he reduce the dividend an aging widow depends on to use corporate resources instead?
- clairity 10y ago
  no, i don't mean shareholder's income. the income of a firm flows to many constituents, not just shareholders. the idea that a shareholder is the only important stakeholder is, frankly, myopic and self-centered. that's not to say that shareholders are unimportant, but they are but one part of a whole that makes a firm successful. apple's situation itself disproves your central tenet that lower corporate taxes equates to value generation. apple is fully taking advantage of lower corporate taxes, yet it's unable to invest its massive hoard of cash fast enough to generate any additional value. that money is literally wasted by sitting in apple's bank account. if more of that cash had been distributed to employees, some of it would have gone to buying more consumer products, like iphones (economic velocity), and some of the more enterprising employees would have decided to start a new venture (value creation).
  - valuearb 10y ago
    It's money is being loaned to thousands of businesses, creating massive value. Shareholders own the company, all its assets and all its profits. Without their willingness to allow their investment, assets and profits to be kept in the company, it doesn't exist. Suppliers and employees are only part of the equation because they are paid to be, and if they don't like their pay will walk at the drop of a hat. If your business becomes unprofitable your shares can be rendered worthless, and you can't "quit" and exchange worthless shares for ownership in a better company.
- specialist 10y ago
  Wages, salaries, sick leave, health insurance, and retirement funds are social programs?
  - simonh 10y ago
    I think the contention is that paying more if these than us. Ecesssry for staff recruitment and retention is basically that. My own take is that paying staff more than necessary can be counterproductive because it can lead them to retire early or feel wealthy enough to leave for less stressful or more enjoyable jobs, thus disadvantaging the company.
seanmcdirmid 10y ago
> one option is to tax the money regardless of accounting technicalities that assign revenue to international subsidiaries. So wait, how do you handle the Chinese who want to tax Apple as well? And would Apple be at a disadvantage to non-American companies like Lenovo or SAP, so we would have to tax all companies in the world on all business they do anywhere if they have a business presence in the USA. Otherwise, all companies would simply stop being American because they would be severely disadvantaged otherwise. Not workable.
- acover 10y ago
  Does a VAT work? The regressive nature could be removed by an income based rebate or UBI.
  - seanmcdirmid 10y ago
    VAT is how most countries that aren't the USA handle this problem. But even then, this isn't global taxation that the USA wants to implement uniquely, if something was made and sold outside of the USA, the USA would never have a chance to VAT it.
    - spangry 10y ago
      I honestly can't tell if you're being ironic/sarcastic here. If this is seriously what the US wants to do, no amount of domestic tax reform is going to achieve it. Military conquest would be the only option (at least for unilateral global taxation). Then 'domestic' tax reform afterwards.
  - spangry 10y ago
    I think it would. I'm starting to get that familiar 'realities are diverging' feeling reading some of the comments on this post. Other than the options you have suggested to deal with the regressive nature of consumption tax (which seem sensible to me), I thought the Republican tax proposal is essentially to: lower tax on returns to capital (by reducing the corporate tax rate) and institute a value-add consumption tax (in the form of a cash-flow tax).
WalterBright 10y ago
I'm curious where support for the idea that spending by upper echelons does not help the economy while spending by lower echelons is comes from.
- Baeocystin 10y ago
  The relative sizes of the two groups.
- Retric 10y ago
  History. If you for example compare US growth per capita with top tax rate you find the highest growth during high tax periods.
  - WalterBright 10y ago
    The highest growth occurred when there was no US income tax at all.
    - Retric 10y ago
      Only if you ignore population growth.
      - WalterBright 10y ago
        The US went from subsistence farming to industrial superpower before the income tax. The case for high taxes causing greater economic growth needs a lot more work.
        secstate 10y ago
        The greatest equalized economic growth. Go ahead and ask miserly monarchs how it works to grow the wealth of the few at the expense of the many. The U.S. could not long have tolerated robber barons without major social trials.
drawkbox 10y ago
Overall corporate tax revenue is only 9% of revenues and 6% for C-Corps with remaining in pass-through S-Corp, LLCs or sole-proprietors[1]. I think the tax revenue we get from corporate taxes people think is immense but it is not in terms of collected revenues but it is massive in terms of each businesses tax rate hit (35%+ non competitive today) to mostly small/medium biz. Companies having up to 1/3 more revenue to use for other things I think will end up in larger pay and will make up for the loss in corporate tax revenues going to income tax and a possibly dividend tax increase [1] https://taxfoundation.org/us-corporate-tax-revenue-low-because-high-taxes-have-shrunk-corporate-sector/ https://taxfoundation.org/us-corporate-tax-revenue-low-becau...
briandear 10y ago
Corporations don't pay taxes, customers do. Lowering taxes means prices go down which increases economic velocity far more than redistribution. Dead-weight loss is a real thing. $1 collected in taxes results in < $1 in economic benefit. $1 in tax cuts result in $1 in economic benefit.
- spangry 10y ago
  Well, you're correct in that taxes usually create dead-weight loss. But this is not always the case (e.g. taxes that price in negative externalities). And tax dead-weight loss varies depending on the type of tax: http://i.imgur.com/NxWo7DP.png http://i.imgur.com/NxWo7DP.png

valuearb 10y ago

"another tax-advantaged option that's entirely within apple's control is to distribute more of its income to its employees " You mean "shareholders's income". It's not Apples income to run social programs with. Lowering (or preferably eliminating) corporate income taxes benefits investment at every level, from Apple all the way down to startups. If your business plan shows that if you hit plan you will generate $1M in profit your first year, and will reinvest $600k in the business, the rest going to CA and US taxes. Now contrast that to the reinvesting the full $1M in the business. In the second case the business will be able to grow faster and increase company asset/equity value faster, of course it will be more valuable. And this means it's more likely to get funded.

jliptzin 10y ago
Wouldn't you be able to write off those investments against the $1 million in income? In that case it shouldn't matter what the tax rate is.
deleted 10y ago
[deleted]
harperlee 10y ago
> You mean "shareholders's income". It's not Apples income to run social programs with. I know you didn't say this exactly, but it is not true that a company exists solely for looking after shareholder's income. They also have other things to look after, such as social obligations. Here is an article with some more detail about it (PDF): https://centres.insead.edu/social-innovation/who-we-are/documents/troublingQ3_000.pdf https://centres.insead.edu/social-innovation/who-we-are/docu...
- deleted 10y ago
  [deleted]
- jimmywanger 10y ago
  The article you cite says that it's about what a corporation "ought" to do. It's not currently part of the corporate charter in the US, and unless explicitly called out, a company is ultimately only responsible for shareholder value. If that means tossing money at the local community so they can continue to do business there, they will do that.
- valuearb 10y ago
  Yea that article is BS. The idea that corporations have obligations beyond their owners is pure parasitical nonsense. Obviously they have an obligation to behave legally, but their profits and assets are owned by shareholders. Tim Cook is worth around a billion dollars, he has massive personal resources to pursue charitable activities on his own. Should he reduce the dividend an aging widow depends on to use corporate resources instead?
clairity 10y ago
no, i don't mean shareholder's income. the income of a firm flows to many constituents, not just shareholders. the idea that a shareholder is the only important stakeholder is, frankly, myopic and self-centered. that's not to say that shareholders are unimportant, but they are but one part of a whole that makes a firm successful. apple's situation itself disproves your central tenet that lower corporate taxes equates to value generation. apple is fully taking advantage of lower corporate taxes, yet it's unable to invest its massive hoard of cash fast enough to generate any additional value. that money is literally wasted by sitting in apple's bank account. if more of that cash had been distributed to employees, some of it would have gone to buying more consumer products, like iphones (economic velocity), and some of the more enterprising employees would have decided to start a new venture (value creation).
- valuearb 10y ago
  It's money is being loaned to thousands of businesses, creating massive value. Shareholders own the company, all its assets and all its profits. Without their willingness to allow their investment, assets and profits to be kept in the company, it doesn't exist. Suppliers and employees are only part of the equation because they are paid to be, and if they don't like their pay will walk at the drop of a hat. If your business becomes unprofitable your shares can be rendered worthless, and you can't "quit" and exchange worthless shares for ownership in a better company.
specialist 10y ago
Wages, salaries, sick leave, health insurance, and retirement funds are social programs?
- simonh 10y ago
  I think the contention is that paying more if these than us. Ecesssry for staff recruitment and retention is basically that. My own take is that paying staff more than necessary can be counterproductive because it can lead them to retire early or feel wealthy enough to leave for less stressful or more enjoyable jobs, thus disadvantaging the company.

seanmcdirmid 10y ago

> one option is to tax the money regardless of accounting technicalities that assign revenue to international subsidiaries. So wait, how do you handle the Chinese who want to tax Apple as well? And would Apple be at a disadvantage to non-American companies like Lenovo or SAP, so we would have to tax all companies in the world on all business they do anywhere if they have a business presence in the USA. Otherwise, all companies would simply stop being American because they would be severely disadvantaged otherwise. Not workable.

acover 10y ago
Does a VAT work? The regressive nature could be removed by an income based rebate or UBI.
- seanmcdirmid 10y ago
  VAT is how most countries that aren't the USA handle this problem. But even then, this isn't global taxation that the USA wants to implement uniquely, if something was made and sold outside of the USA, the USA would never have a chance to VAT it.
  - spangry 10y ago
    I honestly can't tell if you're being ironic/sarcastic here. If this is seriously what the US wants to do, no amount of domestic tax reform is going to achieve it. Military conquest would be the only option (at least for unilateral global taxation). Then 'domestic' tax reform afterwards.
- spangry 10y ago
  I think it would. I'm starting to get that familiar 'realities are diverging' feeling reading some of the comments on this post. Other than the options you have suggested to deal with the regressive nature of consumption tax (which seem sensible to me), I thought the Republican tax proposal is essentially to: lower tax on returns to capital (by reducing the corporate tax rate) and institute a value-add consumption tax (in the form of a cash-flow tax).

WalterBright 10y ago

I'm curious where support for the idea that spending by upper echelons does not help the economy while spending by lower echelons is comes from.

Baeocystin 10y ago
The relative sizes of the two groups.
Retric 10y ago
History. If you for example compare US growth per capita with top tax rate you find the highest growth during high tax periods.
- WalterBright 10y ago
  The highest growth occurred when there was no US income tax at all.
  - Retric 10y ago
    Only if you ignore population growth.
    - WalterBright 10y ago
      The US went from subsistence farming to industrial superpower before the income tax. The case for high taxes causing greater economic growth needs a lot more work.
      - secstate 10y ago
        The greatest equalized economic growth. Go ahead and ask miserly monarchs how it works to grow the wealth of the few at the expense of the many. The U.S. could not long have tolerated robber barons without major social trials.

drawkbox 10y ago

Overall corporate tax revenue is only 9% of revenues and 6% for C-Corps with remaining in pass-through S-Corp, LLCs or sole-proprietors[1]. I think the tax revenue we get from corporate taxes people think is immense but it is not in terms of collected revenues but it is massive in terms of each businesses tax rate hit (35%+ non competitive today) to mostly small/medium biz. Companies having up to 1/3 more revenue to use for other things I think will end up in larger pay and will make up for the loss in corporate tax revenues going to income tax and a possibly dividend tax increase [1] https://taxfoundation.org/us-corporate-tax-revenue-low-because-high-taxes-have-shrunk-corporate-sector/ https://taxfoundation.org/us-corporate-tax-revenue-low-becau...

briandear 10y ago

Corporations don't pay taxes, customers do. Lowering taxes means prices go down which increases economic velocity far more than redistribution. Dead-weight loss is a real thing. $1 collected in taxes results in < $1 in economic benefit. $1 in tax cuts result in $1 in economic benefit.

spangry 10y ago
Well, you're correct in that taxes usually create dead-weight loss. But this is not always the case (e.g. taxes that price in negative externalities). And tax dead-weight loss varies depending on the type of tax: http://i.imgur.com/NxWo7DP.png http://i.imgur.com/NxWo7DP.png