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The thing that most people fail to realize is that a lower corporate tax rate helps the overall enconomy and all Americans. Companies now suddenly have increase

The thing that most people fail to realize is that a lower corporate tax rate helps the overall enconomy and all Americans. Companies now suddenly have increased capital to spend on growth (hiring, R&D, and acquisitions). Additionally it boost earnings which will likely increase most people's retirement accounts and stock portfolios. Typical that I'm getting downvoted without any rebuttal.

thrillgore 10y ago
How much of the capital would realistically go to those, as opposed to shareholder payouts?
- xmj 10y ago
  Realistically what do you think shareholders do with payouts?
  - frebord 10y ago
    Shareholder's are investors, investors invest.
    - xmj 10y ago
      Then why insist on dividends, and not have companies reinvest?
      - WJW 10y ago
        Because they might want to diversify into areas other than where the company operates in?
      - civilian 10y ago
        Sometimes a company has matured, where it's captured most of it's market and it's been around so long that it's not very innovative. A company can be good at just "doing it's thing", and that's okay. But that means that--- if there is not more of the market that a company can efficiently capture, then it's time for the shareholders to reap their ROI. I'm sure you've seen lots of instances of failed innovation in big companies. This is a way to avoid it, and put money where it'll have better odds.
    - dsparkman 10y ago
      Shareholder's are speculators, speculators speculate. Most US public companies do not pay dividends to shareholders. An "investment" in this scenario is not an investment but speculation. You are speculating that you can convince others to pay more for my shares than I paid for them.
- jrmurad 10y ago
  Wouldn't many such shareholders be Americans as well? Americans who could do something more productive with these payouts than the government might with taxes? (Non-American shareholders could similarly reinvest these payouts in things which improve the global economy and, by extension, the livelihoods of Americans.)
- maxerickson 10y ago
  One of the arguments for lower corporate taxes is to move the taxation to the shareholders.
- dmix 10y ago
  Only a small percentage of companies are public and have CEOs making giant bounces off of tax cuts. This worldview that Bernie Sanders esque people hold, where every business person is a rich multi millionaire, ignores the reality of business... where the vast majority are small and medium sized businesses. The critique of George Bush's temporary tax credit was that it was used as bonuses rather than stimulating the economy. But a long term tax reduction is something you can actually plan for with expenditures like R&D. I've seen many people comparing the two disingenuously like they are the same. They aren't, that's not how business finance works. There have also been a number of examples in history where reducing the tax rate has actually increased tax revenue as companies are much more productive and more capital is available to invest in industry. The more revenue companies generate the more taxable income there is both from the company revenue and the incomes of employees they hire.
  - aanm1988 10y ago
    Didn't sanders tax plan involve closing loopholes used by big companies and taxing the wealthy more heavily? Neither of which would hurt your precious small businesses. They would hurt the corporate overlords though.
    - dmix 9y ago
      > Didn't sanders tax plan involve closing loopholes used by big companies and taxing the wealthy more heavily? Steve Mnuchin talked about closing these by simplifying the tax code during his senate hearing. This was Ted Cruz primary pitch for his tax plan... and in general on of the staples of tax reform people on both sides of the party. Bernie Sanders also said he would be comfortable with a 90% top tax bracket too, which completely failed when the socialist party tried to do it in France. Regardless, the goal should be increasing tax revenue, not tax rates. And the US government already takes in a massive amount of money. There's probably a million ways for it to be better spent and still dramatically improve the social safety nets and offer public healthcare. Yet whenever these goals are discussed it's always in the context of adding more and more spending. And re: closing loopholes, the usual result of these efforts such as Obama's various attempts, were to add even more complexity to the tax code. There are many ways to reach a goal. Just because you want lower taxes and a dramatically simplified tax code doesn't mean I'm against social policies.
djtriptych 10y ago
Right because GE builds roads and funds public schools.
- jrmurad 10y ago
  > Right because GE builds roads and funds public schools. I'm going to assume sarcasm so: http://archive.fortune.com/2008/06/30/news/companies/ge_philanthropy.fortune/index.htm http://archive.fortune.com/2008/06/30/news/companies/ge_phil... https://www.google.com/search?q=general+electric+charitable+contributions https://www.google.com/search?q=general+electric+charitable+...
  - djtriptych 10y ago
    Cool. GE paid an average of 5.2% tax over the last 15 years. But they donated millions and that's a lot right? http://www.taxjusticeblog.org/archive/2016/04/just_plain_wrong_ge_and_verizo.php#.WP6Z8lPyvfA http://www.taxjusticeblog.org/archive/2016/04/just_plain_wro...
- civilian 10y ago
  That's a mischaracterization of his argument. He's saying that a lower corporate tax rate would help grow companies, and the economy as a whole. We would continue to pay income and payroll taxes (which are the main source of tax income anyway), and that the benefits of a larger economy + more income/payroll tax income would offset the lowest revenue in corporate taxes.
  - djtriptych 10y ago
    Are you kidding? The idea that companies hire linearly with revenue growth should be dying by now no? Is this not hacker news? We think that will continue for the foreseeable future? Corporate revenue follows a power law distribution, and the top companies are not growing by hiring as many people as they can. Apple earns about $1M/US employee in profit. Federal tax rate (~30%) on that number is say $300k. Payroll tax is 12.5% of salary (~100k) or $12.5k. So Apple would need to hire 12x the employees overnight to make up the tax shortfall if we suddenly halved their tax liability to $150k. That's if they actually paid the nominal tax rate (they dont). This is all besides the fact that an inverse correlation between tax rates and economic growth is purely theoretical.
HaloZero 10y ago
Raising taxes on profits would also incentivize them to spend their cash or they would just lost more of it in taxes.
lutorm 10y ago
You mean https://en.wikipedia.org/wiki/Trickle-down_economics https://en.wikipedia.org/wiki/Trickle-down_economics ?
Eridrus 10y ago
Are most R&D activities not valid tax deductions? If they are, this should not significantly impact that.
apocalyptic0n3 10y ago
Hasn't this sentiment been repeatedly disproven in practical applications since at least Reagan?
b0sk 10y ago
Awesome. Let's cut it down to 0%. Why did you remove "snowflakes" from your post?
- nodesocket 10y ago
  Because I want to follow HN etiquette and stay civilized even though on HN opposing views are immendiatly squashed and silieneced without proper debate.
rpedela 10y ago
That is the ideal but that isn't reality. The big corporations have large departments devoted to tax avoidance. Where does that saved money go? Usually distributed as dividends to shareholders, executive bonuses, or enormous bank accounts where the money does nothing (e.g. Apple). The best way to improve the economy is put more money into the hands of normal people so that they will buy more stuff which in turn helps those businesses. Lowering or eliminating income taxes for non-rich people would help far more than a tax break for the rich which includes companies.
- nodesocket 10y ago
  While some companies indeed return profits back with stock buybacks or increased divvys, lots of companies do expand and grow their hiring and R&D. Here is the problem, without corporations and small/medium businesses this entire world that we live in ceases to exist. Jobs are what make this all possible.
  - maxerickson 10y ago
    The other side of that argument is that you need people for the jobs to exist. The idea that a "job" isn't mutually beneficial is such a preposterous talking point. America!
  - rpedela 10y ago
    Right but just giving more money to companies regardless of size doesn't create jobs. Businesses try to be as efficient as possible with their capital. Hiring people just because is inefficient. However companies will hire more people if they are unable to meet their current demand. What is one way to increase demand? Increase the number of people who can afford the goods and services which can be accomplished far more effectively by reducing tax on the middle class and poor. If you do that businesses will have no choice but to create jobs in order to meet demand.
  - aanm1988 10y ago
    And I can support corporate tax cuts on the idea of helping small/medium businesses because it does just leave them with more money. Where you lose me is all the trickle down voodoo economics ideas about how slashing taxes on big corporations and he wealthy is going to help me.
say_no_to_tde 10y ago
Can you show any proof of this connection? If the goal is to make money then why would they spend more to expand with a lower tax rate than with a higher one? If anything it would have the opposite affect since the R&D and the salary of new employees would be tax deductible.
giarc 10y ago
There was a Planet Money podcast (or similar) recently that talked about tax cuts to small/medium size businesses. They looked at a few anecdotal cases and small cuts in taxes didn't result in enough money to hire someone or spend large amounts. They just simply weren't paying a ton in tax anyways, so a cut here or there wasn't a big change.
- aanm1988 10y ago
  How many businesses fail that could have succeeded with lower taxes?
  - giarc 10y ago
    I could ask a similar question, how many businesses would fail with a 0% tax rate. If we reduced that barrier to entry, more people would open businesses, thus creating a ton of competition, which would lead businesses to fail. Businesses are going to fail no matter what. Sometimes it's the tax rate, sometimes it's the market, the location, the product, the employees, the manager, the owner etc etc etc.
snowpanda 10y ago
Wow looks like you triggered half of HN with basic economics. You'd think people disagreeing with you would love Venezuala. But nobody is moving there. So odd. Economics never lie... https://i.imgsafe.org/e594388497.png https://i.imgsafe.org/e594388497.png
pavlov 10y ago
You're getting downvoted because you pretend that a neoliberalist trope ("lower corporate tax rate helps everyone") which has been beaten to death over the past 40 years is something that "most people fail to realize".
- itstrueok 10y ago
  Im sure you have plenty of 90 year old socialist tropes yourself.
deleted 10y ago
[deleted]
jliptzin 10y ago
I never understood this argument. I am a business owner. I optimize for personal profit, which is the profit from my business, with some percentage cut out for taxes. When I optimize my business profit, the tax rate is not part of the equation. If I find that hiring someone for $100k / year is a good thing to do for the long term profitably of the company, I will do that. If I need to spend $50k on a machine because it will save me $80k a year in costs, I'll do that. The tax rate is never an issue. It's just some fraction of my already optimized business income that I was able to bring in for the year. Whether that fraction is 15%, 25%, 50% etc makes no difference in any business decision I have previously made. (Unless of course the tax rate is 100%, then there would be no reason for me to work).
- nodesocket 10y ago
  I am also a small business owner. Agree, everyday expenses I don't evaluate against how much in taxes I am going to pay. However at public companies scale and the rule of large numbers applies. It makes a significant impact to bottom lines and profits of corporations.
  - jliptzin 10y ago
    I still have yet to hear any concrete ways a corporate tax hike impacts business decisions. I tried doing some research, I found this snippet that attempts to explain it: "Therefore, when a corporation is forced to pay high amounts of income tax, the company may not be able to grow and offer employment to new employees. In fact, one of the most common ways that corporations respond to large corporate tax hikes or new types of corporate taxes is to begin to lay off workers or employees in order to cut costs and maintain profit margins." http://www.finweb.com/taxes/how-does-a-corporate-income-tax-affect-company-decisions.html#ixzz4fDAq5tTH http://www.finweb.com/taxes/how-does-a-corporate-income-tax-... Let's say company ABC makes lawn mowers. Corporate tax rate is 20%. They sell their lawn mowers for $200 each and cost to manufacture each unit is $150 for a $50 profit. They sell 100,000 units in a year, making $5M in profit for the year. At 20% tax, they get to keep $4 million of that. If the tax rate is suddenly bumped to 40%, then they only keep $3 million. But I don't see how that impacts any of their business decisions related to building and selling lawn mowers. Their goal is to maximize profit by building the lawn mowers as efficiently as possible and then selling as many of them at they can at some price point. Expenses and wages to do all of that are all tax deductible. The tax rate does not figure into any of these decisions. That only comes into effect at the end of the year after they've made as much profit as possible from their sales. If they respond by laying off employees, then they should have done so before the tax break, and are probably just using the tax break as an easy excuse to get rid of people they don't want working there anymore. What part of this do I have wrong?
jellicle 10y ago
Money that a corporation spends on hiring, buying new equipment or anything like that is completely tax deductible and always has been. Not a cent of corporate income tax has ever been paid on such things, and reducing the corporate tax rate actively DISCOURAGES such things. It encourages disinvestment in expansion, by rewarding not growing.
dsparkman 10y ago
You really need to watch https://www.youtube.com/watch?v=bBx2Y5HhplI https://www.youtube.com/watch?v=bBx2Y5HhplI if you think that because corporations have to pay less in taxes that they will suddenly spend more on R&D and jobs.

thrillgore 10y ago

How much of the capital would realistically go to those, as opposed to shareholder payouts?

xmj 10y ago
Realistically what do you think shareholders do with payouts?
- frebord 10y ago
  Shareholder's are investors, investors invest.
  - xmj 10y ago
    Then why insist on dividends, and not have companies reinvest?
    - WJW 10y ago
      Because they might want to diversify into areas other than where the company operates in?
    - civilian 10y ago
      Sometimes a company has matured, where it's captured most of it's market and it's been around so long that it's not very innovative. A company can be good at just "doing it's thing", and that's okay. But that means that--- if there is not more of the market that a company can efficiently capture, then it's time for the shareholders to reap their ROI. I'm sure you've seen lots of instances of failed innovation in big companies. This is a way to avoid it, and put money where it'll have better odds.
  - dsparkman 10y ago
    Shareholder's are speculators, speculators speculate. Most US public companies do not pay dividends to shareholders. An "investment" in this scenario is not an investment but speculation. You are speculating that you can convince others to pay more for my shares than I paid for them.
jrmurad 10y ago
Wouldn't many such shareholders be Americans as well? Americans who could do something more productive with these payouts than the government might with taxes? (Non-American shareholders could similarly reinvest these payouts in things which improve the global economy and, by extension, the livelihoods of Americans.)
maxerickson 10y ago
One of the arguments for lower corporate taxes is to move the taxation to the shareholders.
dmix 10y ago
Only a small percentage of companies are public and have CEOs making giant bounces off of tax cuts. This worldview that Bernie Sanders esque people hold, where every business person is a rich multi millionaire, ignores the reality of business... where the vast majority are small and medium sized businesses. The critique of George Bush's temporary tax credit was that it was used as bonuses rather than stimulating the economy. But a long term tax reduction is something you can actually plan for with expenditures like R&D. I've seen many people comparing the two disingenuously like they are the same. They aren't, that's not how business finance works. There have also been a number of examples in history where reducing the tax rate has actually increased tax revenue as companies are much more productive and more capital is available to invest in industry. The more revenue companies generate the more taxable income there is both from the company revenue and the incomes of employees they hire.
- aanm1988 10y ago
  Didn't sanders tax plan involve closing loopholes used by big companies and taxing the wealthy more heavily? Neither of which would hurt your precious small businesses. They would hurt the corporate overlords though.
  - dmix 9y ago
    > Didn't sanders tax plan involve closing loopholes used by big companies and taxing the wealthy more heavily? Steve Mnuchin talked about closing these by simplifying the tax code during his senate hearing. This was Ted Cruz primary pitch for his tax plan... and in general on of the staples of tax reform people on both sides of the party. Bernie Sanders also said he would be comfortable with a 90% top tax bracket too, which completely failed when the socialist party tried to do it in France. Regardless, the goal should be increasing tax revenue, not tax rates. And the US government already takes in a massive amount of money. There's probably a million ways for it to be better spent and still dramatically improve the social safety nets and offer public healthcare. Yet whenever these goals are discussed it's always in the context of adding more and more spending. And re: closing loopholes, the usual result of these efforts such as Obama's various attempts, were to add even more complexity to the tax code. There are many ways to reach a goal. Just because you want lower taxes and a dramatically simplified tax code doesn't mean I'm against social policies.

djtriptych 10y ago

Right because GE builds roads and funds public schools.

jrmurad 10y ago
> Right because GE builds roads and funds public schools. I'm going to assume sarcasm so: http://archive.fortune.com/2008/06/30/news/companies/ge_philanthropy.fortune/index.htm http://archive.fortune.com/2008/06/30/news/companies/ge_phil... https://www.google.com/search?q=general+electric+charitable+contributions https://www.google.com/search?q=general+electric+charitable+...
- djtriptych 10y ago
  Cool. GE paid an average of 5.2% tax over the last 15 years. But they donated millions and that's a lot right? http://www.taxjusticeblog.org/archive/2016/04/just_plain_wrong_ge_and_verizo.php#.WP6Z8lPyvfA http://www.taxjusticeblog.org/archive/2016/04/just_plain_wro...
civilian 10y ago
That's a mischaracterization of his argument. He's saying that a lower corporate tax rate would help grow companies, and the economy as a whole. We would continue to pay income and payroll taxes (which are the main source of tax income anyway), and that the benefits of a larger economy + more income/payroll tax income would offset the lowest revenue in corporate taxes.
- djtriptych 10y ago
  Are you kidding? The idea that companies hire linearly with revenue growth should be dying by now no? Is this not hacker news? We think that will continue for the foreseeable future? Corporate revenue follows a power law distribution, and the top companies are not growing by hiring as many people as they can. Apple earns about $1M/US employee in profit. Federal tax rate (~30%) on that number is say $300k. Payroll tax is 12.5% of salary (~100k) or $12.5k. So Apple would need to hire 12x the employees overnight to make up the tax shortfall if we suddenly halved their tax liability to $150k. That's if they actually paid the nominal tax rate (they dont). This is all besides the fact that an inverse correlation between tax rates and economic growth is purely theoretical.

HaloZero 10y ago

Raising taxes on profits would also incentivize them to spend their cash or they would just lost more of it in taxes.

lutorm 10y ago

You mean https://en.wikipedia.org/wiki/Trickle-down_economics https://en.wikipedia.org/wiki/Trickle-down_economics ?

Eridrus 10y ago

Are most R&D activities not valid tax deductions? If they are, this should not significantly impact that.

apocalyptic0n3 10y ago

Hasn't this sentiment been repeatedly disproven in practical applications since at least Reagan?

b0sk 10y ago

Awesome. Let's cut it down to 0%. Why did you remove "snowflakes" from your post?

nodesocket 10y ago
Because I want to follow HN etiquette and stay civilized even though on HN opposing views are immendiatly squashed and silieneced without proper debate.

rpedela 10y ago

That is the ideal but that isn't reality. The big corporations have large departments devoted to tax avoidance. Where does that saved money go? Usually distributed as dividends to shareholders, executive bonuses, or enormous bank accounts where the money does nothing (e.g. Apple). The best way to improve the economy is put more money into the hands of normal people so that they will buy more stuff which in turn helps those businesses. Lowering or eliminating income taxes for non-rich people would help far more than a tax break for the rich which includes companies.

nodesocket 10y ago
While some companies indeed return profits back with stock buybacks or increased divvys, lots of companies do expand and grow their hiring and R&D. Here is the problem, without corporations and small/medium businesses this entire world that we live in ceases to exist. Jobs are what make this all possible.
- maxerickson 10y ago
  The other side of that argument is that you need people for the jobs to exist. The idea that a "job" isn't mutually beneficial is such a preposterous talking point. America!
- rpedela 10y ago
  Right but just giving more money to companies regardless of size doesn't create jobs. Businesses try to be as efficient as possible with their capital. Hiring people just because is inefficient. However companies will hire more people if they are unable to meet their current demand. What is one way to increase demand? Increase the number of people who can afford the goods and services which can be accomplished far more effectively by reducing tax on the middle class and poor. If you do that businesses will have no choice but to create jobs in order to meet demand.
- aanm1988 10y ago
  And I can support corporate tax cuts on the idea of helping small/medium businesses because it does just leave them with more money. Where you lose me is all the trickle down voodoo economics ideas about how slashing taxes on big corporations and he wealthy is going to help me.

say_no_to_tde 10y ago

Can you show any proof of this connection? If the goal is to make money then why would they spend more to expand with a lower tax rate than with a higher one? If anything it would have the opposite affect since the R&D and the salary of new employees would be tax deductible.

giarc 10y ago

There was a Planet Money podcast (or similar) recently that talked about tax cuts to small/medium size businesses. They looked at a few anecdotal cases and small cuts in taxes didn't result in enough money to hire someone or spend large amounts. They just simply weren't paying a ton in tax anyways, so a cut here or there wasn't a big change.

aanm1988 10y ago
How many businesses fail that could have succeeded with lower taxes?
- giarc 10y ago
  I could ask a similar question, how many businesses would fail with a 0% tax rate. If we reduced that barrier to entry, more people would open businesses, thus creating a ton of competition, which would lead businesses to fail. Businesses are going to fail no matter what. Sometimes it's the tax rate, sometimes it's the market, the location, the product, the employees, the manager, the owner etc etc etc.

snowpanda 10y ago

Wow looks like you triggered half of HN with basic economics. You'd think people disagreeing with you would love Venezuala. But nobody is moving there. So odd. Economics never lie... https://i.imgsafe.org/e594388497.png https://i.imgsafe.org/e594388497.png

pavlov 10y ago

You're getting downvoted because you pretend that a neoliberalist trope ("lower corporate tax rate helps everyone") which has been beaten to death over the past 40 years is something that "most people fail to realize".

itstrueok 10y ago
Im sure you have plenty of 90 year old socialist tropes yourself.

deleted 10y ago

[deleted]

jliptzin 10y ago

I never understood this argument. I am a business owner. I optimize for personal profit, which is the profit from my business, with some percentage cut out for taxes. When I optimize my business profit, the tax rate is not part of the equation. If I find that hiring someone for $100k / year is a good thing to do for the long term profitably of the company, I will do that. If I need to spend $50k on a machine because it will save me $80k a year in costs, I'll do that. The tax rate is never an issue. It's just some fraction of my already optimized business income that I was able to bring in for the year. Whether that fraction is 15%, 25%, 50% etc makes no difference in any business decision I have previously made. (Unless of course the tax rate is 100%, then there would be no reason for me to work).

nodesocket 10y ago
I am also a small business owner. Agree, everyday expenses I don't evaluate against how much in taxes I am going to pay. However at public companies scale and the rule of large numbers applies. It makes a significant impact to bottom lines and profits of corporations.
- jliptzin 10y ago
  I still have yet to hear any concrete ways a corporate tax hike impacts business decisions. I tried doing some research, I found this snippet that attempts to explain it: "Therefore, when a corporation is forced to pay high amounts of income tax, the company may not be able to grow and offer employment to new employees. In fact, one of the most common ways that corporations respond to large corporate tax hikes or new types of corporate taxes is to begin to lay off workers or employees in order to cut costs and maintain profit margins." http://www.finweb.com/taxes/how-does-a-corporate-income-tax-affect-company-decisions.html#ixzz4fDAq5tTH http://www.finweb.com/taxes/how-does-a-corporate-income-tax-... Let's say company ABC makes lawn mowers. Corporate tax rate is 20%. They sell their lawn mowers for $200 each and cost to manufacture each unit is $150 for a $50 profit. They sell 100,000 units in a year, making $5M in profit for the year. At 20% tax, they get to keep $4 million of that. If the tax rate is suddenly bumped to 40%, then they only keep $3 million. But I don't see how that impacts any of their business decisions related to building and selling lawn mowers. Their goal is to maximize profit by building the lawn mowers as efficiently as possible and then selling as many of them at they can at some price point. Expenses and wages to do all of that are all tax deductible. The tax rate does not figure into any of these decisions. That only comes into effect at the end of the year after they've made as much profit as possible from their sales. If they respond by laying off employees, then they should have done so before the tax break, and are probably just using the tax break as an easy excuse to get rid of people they don't want working there anymore. What part of this do I have wrong?

jellicle 10y ago

Money that a corporation spends on hiring, buying new equipment or anything like that is completely tax deductible and always has been. Not a cent of corporate income tax has ever been paid on such things, and reducing the corporate tax rate actively DISCOURAGES such things. It encourages disinvestment in expansion, by rewarding not growing.

dsparkman 10y ago

You really need to watch https://www.youtube.com/watch?v=bBx2Y5HhplI https://www.youtube.com/watch?v=bBx2Y5HhplI if you think that because corporations have to pay less in taxes that they will suddenly spend more on R&D and jobs.