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Yes, but... Decades and decades ago, corporations paid most of the tax. People paid very little. Then things shifted. Instead of taxing corporations, people

Yes, but... Decades and decades ago, corporations paid most of the tax. People paid very little. Then things shifted. Instead of taxing corporations, people were taxed. Said people, with less money in their pocket, required raises. And so, over time, tax shifted from corporate to personal, but with people in the end taking home approximately as much as they had before. For example, you have $60k pretax, $50k take home. Tax rate goes up. You have less, demand a raise. You now make $65k pretax, yet have $50k take home. Of course, the numbers are merely there for example. Why all of this? Why a reduction on corporate taxes? Well, because now corporations can exist anywhere on the planet. If you tax a corporation too high, it can move, and you have nothing to tax. It used to be that this thing called 'tariffs' and 'duties' were an equalizing factor. If a car manufacturer moved off short to save corporate tax, why then you'd add import tariffs. The point being, the tariff was there to replace the lost corporate tax. Of course, tariffs are 'bad', and the goal of international trade now, seems to be to lift the third world out of poverty. Which is a laudable goal, however, with no import taxes on many things, and with corporations able to move at whim? You must keep corporate tax low, or you lose out to competing regions. This is doubly troublesome in a new economy, in which many goods are entirely virtual, and fly across borders on the Internet. Thus, taxes remain at the personal level -- for people cannot easily move. Right or wrong? Well, you have to get tax somewhere. And under the current model, it is hard to get it from corporations, squeeze too much, and they're gone. And this model is enabled by most 1st world governments world wide, which have decided that import tax, tariffs, are a bad thing. The only alternative to more corporate tax, and less personal tax, is to re-enact import taxes, duty, that sort of thing. Else, how do you prevent corporations from moving? Of course, it's not entirely as simple as all of this, but nothing at a 10000 foot view is. It's just an overview.

tomrod 6y ago
Flaw in argumemt: real wages not improving for several decades. Can you please provide sources where corporations were the primary tax vehicle?
- bbarnett 6y ago
  See my reply to my original post. Tax rate changes are well known, but here's an example. Click on 'max' for a decades long look. https://tradingeconomics.com/canada/corporate-tax-rate https://tradingeconomics.com/canada/corporate-tax-rate In terms of 'real world' wages not improving, that's a somewhat arbitrary term. If you mean 'pre-tax', wages HAVE improved over time pre-tax. We're talking over 50+ years here. 'post-tax', they did improve, but that was before the great exodus of manufacturing overseas. Since that time, since 'free trade' was a 'good thing', they have fallen steadily.
  - bbarnett 6y ago
    Further to this ; in Canada, we have to constantly, and directly, worry about the US corporate tax rate. If it drops too low, compared to our tax rate? Companies can VERY easily flee to the US, and with the FTA/NAFTA/whatever it's called now? No issues with product across the border. So even though many Canadians are in favour of a higher corporate tax rate, it would literally be deadly. We must compete, we must race to the bottom, else corporations will move South.
    - refurb 6y ago
      Canada has a lower corporate tax rate than the US, at least prior to the Trump tax cuts.
  - Tarsul 6y ago
    Why is your link about Canada?
  - tomrod 6y ago
    Hey, I sell the biggest pigs you can buy at a bovine stockyards. Also the best wheat forward contracts you'll find in the metals futures market. Facetciousness aside, the Canadian experience is not comparable to the US experience, which is the subject of the article.
  - imtringued 6y ago
    > Since that time, since 'free trade' was a 'good thing', they have fallen steadily. There is a savings glut and free trade definitively did contribute to it but it's not the only factor. There are dozens of other factors that play a role as well. Here is how the loop works. China buys dollars with yuan to maintain a certain rate. China ends up with excess dollars. The dollar gets stronger and people stop buying from USA. The Yuan gets weaker and people buy more from China. China buys US treasury bonds with the USD, which is equivalent to saying that the US government can manage the money better than China (China is probably saving for pensions). The only way the US government can access the money is by issuing debt. If the US government doesn't issue debt then there are excess savings. Savings are deferred consumption and since consumption is paying the wage of a worker it is also deferred employment. If the US government refuses to spend the money then you get unemployment. The truth is that this isn't where it ends. If the US government does issue debt, then it can invest it into infrastructure, education, housing and so on. The US ends up both with infrastructure and low unemployment. It could be worse, Americans would otherwise have to spend their days working in factories and there wouldn't be any time left to build infrastructure.
bbarnett 6y ago
I'll add this as a reply, so as to not edit the original. The downside of all of this, is that workers in regions with abysmal workers rights, win. No health care? No paid holidays? No sick leave? Work 6 or 7 days a week, 12 hour days? Yay! Your region gets more jobs (China), because your workers cost less. Government doesn't tax corporations OR workers much? Well, then the worker's wages are even cheaper. The Government can't afford schools, police, etc, etc, but.. yay! You now took jobs from regions which have these things. Which is what 'fair trade', and 'child labour' campaigns work against, but of course have limited success sadly. Point is, I really think tariffs and a reduction in free trade, is the only way to prevent a race to the bottom. People wonder why wages have continuously slipped in the US for the average Joe? Well, how can you compete with places that have workers working in such conditions. Who have abysmal human rights? Have no schools, or infrastructure. Of course products are cheaper! And thus, with no tariffs, you lose in the end.
laGrenouille 6y ago
I think this is a good overview of some of the challenges in taxing corporations. Personally, I don't mind keeping taxes on corporate profits low given their ability to be gained (not just by shifting across borders, but through many other accounting tricks). The problem right now, in the U.S. at least, is two-fold: (1) smaller companies are still taxed at a relatively high-rate and (2) individuals pay a significantly lower tax on "capital gains" because it is assumed that investment income has already been taxes at the corporate level. I would like to see an across the board lowering of the corporate tax rate, remove the capital gains exception counting all income as income, and making up any losses through a VAT. This would go a long way to decreasing the ability to gain the current system.
hnnameblah365 6y ago
Does this argument imply that there is a race to the bottom for all metrics a corporation might care about? For example, wages moving to countries with less worker protections. Couldn't the same argument advocate for lowering worker protections in the US, so that the jobs don't move to China? Which many of the jobs have done anyway, despite low corporate taxes?
II2II 6y ago
With corporations paying more for labour, they start looking for cheaper labour costs. They look for jurisdictions where there is a greater supply of labour and lower labour standards. This reduces the negotiating power of labour in regions with higher taxation, resulting in the stagnation or reduction of wages. In turn, this results in lower tax revenues which results in higher taxation or cuts to government spending. Whether this is good or bad is a matter of perspective. Some people are all for lower government spending (sometimes for justifiable reasons) and labour in the lower tax jurisdictions may benefit. What doesn't change is the balance of power: the wealthy will virtually always benefit it. The people at the bottom have very little autonomy since they have to roll with the punches to simply survive.
- mistrial9 6y ago
  Slavery (in many forms) continues to be very attractive for business purposes
NopeNotToday 6y ago
National Sales Tax - tax the purchase of goods at services. Then it doesn't matter where the corporation has their HQ. No import tax needed.
- relaxing 6y ago
  The problem with sales tax/VAT is they’re regressive - the lower your income the proportionally more you pay.
astrostl 6y ago
> Decades and decades ago, corporations paid most of the tax. People paid very little. Regarding corporations paying most of the tax, according to the data at FRED (b. 1947) there has never been a point at which corporate tax receipts have exceeded individual income tax receipts: https://fred.stlouisfed.org/graph/?g=CTxn https://fred.stlouisfed.org/graph/?g=CTxn Regarding people paying very little, all taxes (the main federal types are income, payroll, corporate, excise, and "other") are ultimately paid by people: customers, employees, shareholders, etc.
asdff 6y ago
>And under the current model, it is hard to get it from corporations, squeeze too much, and they're gone How can that possibly be? All corporations cannot just move elsewhere. There is not infinite space or talent or customers in this magical 'elsewhere' that everyone fears the corporations will move to. There are simply not enough trained people while, on the other hand, there are people right here right now currently working the very job in question at these corporations. Sure, out of 1000 companies, maybe 10 would find enough skilled workers to fully staff an office in Germany or Singapore or Australia, but the other ones will have just shot themselves in the foot and they know it. That's why they currently pay the premium to have an American office and not one in Bangladesh today, because if cost was end all be all these companies would have left for Bangladesh in the 1980s. Twitter would be a Bangladeshi company. We would be posting on news.ycombinator.bd right now. It's not cost, it's talent. It's also access to the American market of 400 million people at a higher standard of living than the median person on Earth. If we are worried Ford is going to take their manufacturing jobs to Bangladesh and make us buy Bangladeshi Fords, we could just sanction these industries such that the only legal Ford is an American one, like how we make Honda assemble Civics domestically. We already do this with domestic auto markets to an extent, having certain regulations means certain companies do not bother selling cars here, and vis versa, despite the car being an in demand product world wide.

tomrod 6y ago

Flaw in argumemt: real wages not improving for several decades. Can you please provide sources where corporations were the primary tax vehicle?

bbarnett 6y ago
See my reply to my original post. Tax rate changes are well known, but here's an example. Click on 'max' for a decades long look. https://tradingeconomics.com/canada/corporate-tax-rate https://tradingeconomics.com/canada/corporate-tax-rate In terms of 'real world' wages not improving, that's a somewhat arbitrary term. If you mean 'pre-tax', wages HAVE improved over time pre-tax. We're talking over 50+ years here. 'post-tax', they did improve, but that was before the great exodus of manufacturing overseas. Since that time, since 'free trade' was a 'good thing', they have fallen steadily.
- bbarnett 6y ago
  Further to this ; in Canada, we have to constantly, and directly, worry about the US corporate tax rate. If it drops too low, compared to our tax rate? Companies can VERY easily flee to the US, and with the FTA/NAFTA/whatever it's called now? No issues with product across the border. So even though many Canadians are in favour of a higher corporate tax rate, it would literally be deadly. We must compete, we must race to the bottom, else corporations will move South.
  - refurb 6y ago
    Canada has a lower corporate tax rate than the US, at least prior to the Trump tax cuts.
- Tarsul 6y ago
  Why is your link about Canada?
- tomrod 6y ago
  Hey, I sell the biggest pigs you can buy at a bovine stockyards. Also the best wheat forward contracts you'll find in the metals futures market. Facetciousness aside, the Canadian experience is not comparable to the US experience, which is the subject of the article.
- imtringued 6y ago
  > Since that time, since 'free trade' was a 'good thing', they have fallen steadily. There is a savings glut and free trade definitively did contribute to it but it's not the only factor. There are dozens of other factors that play a role as well. Here is how the loop works. China buys dollars with yuan to maintain a certain rate. China ends up with excess dollars. The dollar gets stronger and people stop buying from USA. The Yuan gets weaker and people buy more from China. China buys US treasury bonds with the USD, which is equivalent to saying that the US government can manage the money better than China (China is probably saving for pensions). The only way the US government can access the money is by issuing debt. If the US government doesn't issue debt then there are excess savings. Savings are deferred consumption and since consumption is paying the wage of a worker it is also deferred employment. If the US government refuses to spend the money then you get unemployment. The truth is that this isn't where it ends. If the US government does issue debt, then it can invest it into infrastructure, education, housing and so on. The US ends up both with infrastructure and low unemployment. It could be worse, Americans would otherwise have to spend their days working in factories and there wouldn't be any time left to build infrastructure.

bbarnett 6y ago

I'll add this as a reply, so as to not edit the original. The downside of all of this, is that workers in regions with abysmal workers rights, win. No health care? No paid holidays? No sick leave? Work 6 or 7 days a week, 12 hour days? Yay! Your region gets more jobs (China), because your workers cost less. Government doesn't tax corporations OR workers much? Well, then the worker's wages are even cheaper. The Government can't afford schools, police, etc, etc, but.. yay! You now took jobs from regions which have these things. Which is what 'fair trade', and 'child labour' campaigns work against, but of course have limited success sadly. Point is, I really think tariffs and a reduction in free trade, is the only way to prevent a race to the bottom. People wonder why wages have continuously slipped in the US for the average Joe? Well, how can you compete with places that have workers working in such conditions. Who have abysmal human rights? Have no schools, or infrastructure. Of course products are cheaper! And thus, with no tariffs, you lose in the end.

laGrenouille 6y ago

I think this is a good overview of some of the challenges in taxing corporations. Personally, I don't mind keeping taxes on corporate profits low given their ability to be gained (not just by shifting across borders, but through many other accounting tricks). The problem right now, in the U.S. at least, is two-fold: (1) smaller companies are still taxed at a relatively high-rate and (2) individuals pay a significantly lower tax on "capital gains" because it is assumed that investment income has already been taxes at the corporate level. I would like to see an across the board lowering of the corporate tax rate, remove the capital gains exception counting all income as income, and making up any losses through a VAT. This would go a long way to decreasing the ability to gain the current system.

hnnameblah365 6y ago

Does this argument imply that there is a race to the bottom for all metrics a corporation might care about? For example, wages moving to countries with less worker protections. Couldn't the same argument advocate for lowering worker protections in the US, so that the jobs don't move to China? Which many of the jobs have done anyway, despite low corporate taxes?

II2II 6y ago

With corporations paying more for labour, they start looking for cheaper labour costs. They look for jurisdictions where there is a greater supply of labour and lower labour standards. This reduces the negotiating power of labour in regions with higher taxation, resulting in the stagnation or reduction of wages. In turn, this results in lower tax revenues which results in higher taxation or cuts to government spending. Whether this is good or bad is a matter of perspective. Some people are all for lower government spending (sometimes for justifiable reasons) and labour in the lower tax jurisdictions may benefit. What doesn't change is the balance of power: the wealthy will virtually always benefit it. The people at the bottom have very little autonomy since they have to roll with the punches to simply survive.

mistrial9 6y ago
Slavery (in many forms) continues to be very attractive for business purposes

NopeNotToday 6y ago

National Sales Tax - tax the purchase of goods at services. Then it doesn't matter where the corporation has their HQ. No import tax needed.

relaxing 6y ago
The problem with sales tax/VAT is they’re regressive - the lower your income the proportionally more you pay.

astrostl 6y ago

> Decades and decades ago, corporations paid most of the tax. People paid very little. Regarding corporations paying most of the tax, according to the data at FRED (b. 1947) there has never been a point at which corporate tax receipts have exceeded individual income tax receipts: https://fred.stlouisfed.org/graph/?g=CTxn https://fred.stlouisfed.org/graph/?g=CTxn Regarding people paying very little, all taxes (the main federal types are income, payroll, corporate, excise, and "other") are ultimately paid by people: customers, employees, shareholders, etc.

asdff 6y ago

>And under the current model, it is hard to get it from corporations, squeeze too much, and they're gone How can that possibly be? All corporations cannot just move elsewhere. There is not infinite space or talent or customers in this magical 'elsewhere' that everyone fears the corporations will move to. There are simply not enough trained people while, on the other hand, there are people right here right now currently working the very job in question at these corporations. Sure, out of 1000 companies, maybe 10 would find enough skilled workers to fully staff an office in Germany or Singapore or Australia, but the other ones will have just shot themselves in the foot and they know it. That's why they currently pay the premium to have an American office and not one in Bangladesh today, because if cost was end all be all these companies would have left for Bangladesh in the 1980s. Twitter would be a Bangladeshi company. We would be posting on news.ycombinator.bd right now. It's not cost, it's talent. It's also access to the American market of 400 million people at a higher standard of living than the median person on Earth. If we are worried Ford is going to take their manufacturing jobs to Bangladesh and make us buy Bangladeshi Fords, we could just sanction these industries such that the only legal Ford is an American one, like how we make Honda assemble Civics domestically. We already do this with domestic auto markets to an extent, having certain regulations means certain companies do not bother selling cars here, and vis versa, despite the car being an in demand product world wide.