4 ms·

"The point of the tax law was to lower the cost of employment and investment in the US. [...] The hope being that lower costs cause companies to value US labor

"The point of the tax law was to lower the cost of employment and investment in the US. [...] The hope being that lower costs cause companies to value US labor more, which tightens the labor market." The point of the tax cut was to get more money in the hands of owners of corporations. And, so far, it's working quite well. We won't see much wage growth for one big reason, the Fed has and will continue to raise interest rates at the slightest sign of inflation.

darawk 8y ago
Actually the point of the tax cut was to harmonize our corporate tax rates with the rest of the world, and take steps to eliminate the domicile arbitrage and general loopholing that creates an enormous amount of deadweight loss in our economy.
- s73v3r_ 8y ago
  No, it wasn't. Corporate tax rates were fine, and absolutely nothing in the bill put an end to any of the other stuff.
  - darawk 8y ago
    'fine' is subjective. What they were definitely not though is harmonized with the rest of the world.
    - s73v3r_ 8y ago
      I don't see that as an issue, especially not one that justified adding a trillion dollars to the deficit for barely any benefit to most people.
      - darawk 8y ago
        It's an issue because it does two things: 1. Favors certain types of businesses that can more readily arbitrage their domicile (e.g. Apple, Google). 2. Creates an incentive for companies to pay accountants and lawyers a large amount of money to find ways to engage in #1. All of this money is, in economic terms, deadweight loss. If you look at the effective tax rates companies were paying before this change, they were more or less harmonized with the rest of the world[1]. What was not harmonized was the statutory rate. What this meant in practice is that big companies with the resources to exploit the loophole paid the low rates, and companies without those resources paid the high rates. And the resources that were expended by the companies to accomplish this were 100% unproductive. Harmonizing the statutory rate makes things fair, and eliminates the need to waste money on those types of accountants. [1] https://www.cbo.gov/publication/52419 https://www.cbo.gov/publication/52419
        s73v3r_ 8y ago
        "2. Creates an incentive for companies to pay accountants and lawyers a large amount of money to find ways to engage in #1. All of this money is, in economic terms, deadweight loss." I would argue that is not an issue because that happens anyway. There is not, nor will there ever be a tax point where these huge companies don't attempt to get out of paying taxes.
        darawk 8y ago
        Not true. Complexity in the tax code incentivizes gaming expenditures. Companies invest in things that generate return. When the gain from investing in accountants exceeds the cost of those accountants and their sheltering strategies, they invest in it. A good tax code makes the gain to be had from loopholes smaller than the cost of implementing those loopholes. This corporate tax rate harmonization was one step among many more that ought to be taken along the path to doing that.
asdfman123 8y ago
I thought this too, but it does appear that most economists believe that you should have no/very low corporate taxes. You should tax things you want to discourage, and you don't want to discourage business investment. However, like everything else in our country -- what's superficially a good idea gets cut to pieces by private interests and it ends up benefiting them. In a perfect world a corporate tax cut would be offset by hefty consumption taxes for the rich, and estate taxes. But that of course did not happen, and will not happen in a republican-controlled government.

darawk 8y ago

Actually the point of the tax cut was to harmonize our corporate tax rates with the rest of the world, and take steps to eliminate the domicile arbitrage and general loopholing that creates an enormous amount of deadweight loss in our economy.

s73v3r_ 8y ago
No, it wasn't. Corporate tax rates were fine, and absolutely nothing in the bill put an end to any of the other stuff.
- darawk 8y ago
  'fine' is subjective. What they were definitely not though is harmonized with the rest of the world.
  - s73v3r_ 8y ago
    I don't see that as an issue, especially not one that justified adding a trillion dollars to the deficit for barely any benefit to most people.
    - darawk 8y ago
      It's an issue because it does two things: 1. Favors certain types of businesses that can more readily arbitrage their domicile (e.g. Apple, Google). 2. Creates an incentive for companies to pay accountants and lawyers a large amount of money to find ways to engage in #1. All of this money is, in economic terms, deadweight loss. If you look at the effective tax rates companies were paying before this change, they were more or less harmonized with the rest of the world[1]. What was not harmonized was the statutory rate. What this meant in practice is that big companies with the resources to exploit the loophole paid the low rates, and companies without those resources paid the high rates. And the resources that were expended by the companies to accomplish this were 100% unproductive. Harmonizing the statutory rate makes things fair, and eliminates the need to waste money on those types of accountants. [1] https://www.cbo.gov/publication/52419 https://www.cbo.gov/publication/52419
      - s73v3r_ 8y ago
        "2. Creates an incentive for companies to pay accountants and lawyers a large amount of money to find ways to engage in #1. All of this money is, in economic terms, deadweight loss." I would argue that is not an issue because that happens anyway. There is not, nor will there ever be a tax point where these huge companies don't attempt to get out of paying taxes.
        darawk 8y ago
        Not true. Complexity in the tax code incentivizes gaming expenditures. Companies invest in things that generate return. When the gain from investing in accountants exceeds the cost of those accountants and their sheltering strategies, they invest in it. A good tax code makes the gain to be had from loopholes smaller than the cost of implementing those loopholes. This corporate tax rate harmonization was one step among many more that ought to be taken along the path to doing that.

asdfman123 8y ago

I thought this too, but it does appear that most economists believe that you should have no/very low corporate taxes. You should tax things you want to discourage, and you don't want to discourage business investment. However, like everything else in our country -- what's superficially a good idea gets cut to pieces by private interests and it ends up benefiting them. In a perfect world a corporate tax cut would be offset by hefty consumption taxes for the rich, and estate taxes. But that of course did not happen, and will not happen in a republican-controlled government.