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Why don't we end all this corporate tax stupidity and remove the corporate income tax? It is a very inefficient and complicated tax to levy. >Most economists c

Why don't we end all this corporate tax stupidity and remove the corporate income tax? It is a very inefficient and complicated tax to levy. >Most economists concluded long ago that it is among the least efficient and least defensible taxes. https://www.econlib.org/library/Enc/CorporateTaxation.html https://www.econlib.org/library/Enc/CorporateTaxation.html We can't have nice things because too many people see economics as a moral issue and not a math problem.

andrepd 6y ago
It is both. Corporations benefit from the existence of a well-functioning society that gives them invaluable tools to survive and thrive (they wouldn't exist without it). Why should they not contribute anything back?
- HonestOp001 6y ago
  Because the tax is a stealth tax on the populace. The company needs a profit margin of x. If you place a tax of y on the company, that margin, simplistically, is now x+y. The company can increase the prices on its goods by y, which means everyone now pays y more (so, the government is now making the corporation collect the tax). Or it can absorb the cost of the tax, which would hurt it’s operating margin to survive, a small amount maybe could be done, but after a while they simply raise the price and pass y along to the populace. It is a stealth tax, pure and simple. If you want the more pernicious suggestion, the tax is a poor persons sales tax disguised as populace claptrap to make the electorate like they are sticking it to the big fat cats in corporations.
  - matheusaf 6y ago
    > The company needs a profit margin of x. If you place a tax of y on the company, that margin, simplistically, is now x+y. Not really, this only happens for perfectly inelastic goods. We can use the price elasticity of demand and price elasticity of supply to determine what amount of the tax burden will fall on buyers and sellers [1]. We can even show that for perfectly elastic goods, the tax burden will fall entirely on the sellers. [1] https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence
    - syshum 6y ago
      Kinda of, but investor (especially in private companies) absolutely set the level of margin they require from the corporation the CEO's job is hit that margin with in reason, and if not develop a plan to hit that margin If the company is unable to hit the target long enough that is when companies shut down, so sure you can say "that is only true with perfectly inelastic goods but you fail to understand that moving your capital to other things is always an option If a company sells X goods and can only ever get a investor return of 1% on their capital no investor is going to say in that business, they will sell off the company assets and take their investment to greener pastures. Same is true if the investors demand a 8-10% return and are only ever getting 5% on their investment, the will divest from the company and move on
      - matheusaf 6y ago
        Yes, I agree that there will be pressure on managers from investors, and they will try to recover their margins in several ways, but if they try to recover it from price increases beyond what the tax incidence suggests, their margins should be lower - and not higher, so they are unlikely to do that. Now, the other effect you suggested is interesting, there are firms that exit the market because the margins are unable to give the returns that investors expect. However, this is factored in the supply curve, particularly in the long-run supply curve, so the microeconomic model still stands.
- saxonww 6y ago
  Well the simple answer is that they do contribute something back. Payroll taxes fund social security, medicare, and federal unemployment insurance. And of course they contribute indirectly by paying wages so that people can buy things and we can have an economy. I am on the side of people wanting to see corporate tax avoidance stopped. But my first reaction on seeing this headline and reading the article is that if a bunch of businesses got together and decided to set rates, we'd accuse them of collusion and call them a cartel; if they were in the US, we'd all be yelling about antitrust. IMO, trying to set a global minimum corporate income tax is addressing a symptom. I don't know what the real problem is, but "dang it, they reported their income in Ireland!" is definitely not the whole story.
ObserverNeutral 6y ago
taxes aren't just a way to raise money for federal and local governments, they are also an elegant way which society has to allocate social hatred. You need a corporate tax because people hate corporations, a wealth tax is being discussed and on the horizon because people hate the wealthy...and so forth
- missedthecue 6y ago
  I would use 'destructive' rather than 'elegant'
  - ObserverNeutral 6y ago
    It's either done with taxes using money as a unit of account or let the hatred build up and let the chips fall where it may.
  - InitialLastName 6y ago
    Not as destructive as the alternative -- pitchfork economics.
    - ObserverNeutral 6y ago
      that's what I meant. Before taxes social hatred would brew and brew until finlly it was unleashed violently
- deleted 6y ago
  [deleted]

andrepd 6y ago

It is both. Corporations benefit from the existence of a well-functioning society that gives them invaluable tools to survive and thrive (they wouldn't exist without it). Why should they not contribute anything back?

HonestOp001 6y ago
Because the tax is a stealth tax on the populace. The company needs a profit margin of x. If you place a tax of y on the company, that margin, simplistically, is now x+y. The company can increase the prices on its goods by y, which means everyone now pays y more (so, the government is now making the corporation collect the tax). Or it can absorb the cost of the tax, which would hurt it’s operating margin to survive, a small amount maybe could be done, but after a while they simply raise the price and pass y along to the populace. It is a stealth tax, pure and simple. If you want the more pernicious suggestion, the tax is a poor persons sales tax disguised as populace claptrap to make the electorate like they are sticking it to the big fat cats in corporations.
- matheusaf 6y ago
  > The company needs a profit margin of x. If you place a tax of y on the company, that margin, simplistically, is now x+y. Not really, this only happens for perfectly inelastic goods. We can use the price elasticity of demand and price elasticity of supply to determine what amount of the tax burden will fall on buyers and sellers [1]. We can even show that for perfectly elastic goods, the tax burden will fall entirely on the sellers. [1] https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence
  - syshum 6y ago
    Kinda of, but investor (especially in private companies) absolutely set the level of margin they require from the corporation the CEO's job is hit that margin with in reason, and if not develop a plan to hit that margin If the company is unable to hit the target long enough that is when companies shut down, so sure you can say "that is only true with perfectly inelastic goods but you fail to understand that moving your capital to other things is always an option If a company sells X goods and can only ever get a investor return of 1% on their capital no investor is going to say in that business, they will sell off the company assets and take their investment to greener pastures. Same is true if the investors demand a 8-10% return and are only ever getting 5% on their investment, the will divest from the company and move on
    - matheusaf 6y ago
      Yes, I agree that there will be pressure on managers from investors, and they will try to recover their margins in several ways, but if they try to recover it from price increases beyond what the tax incidence suggests, their margins should be lower - and not higher, so they are unlikely to do that. Now, the other effect you suggested is interesting, there are firms that exit the market because the margins are unable to give the returns that investors expect. However, this is factored in the supply curve, particularly in the long-run supply curve, so the microeconomic model still stands.
saxonww 6y ago
Well the simple answer is that they do contribute something back. Payroll taxes fund social security, medicare, and federal unemployment insurance. And of course they contribute indirectly by paying wages so that people can buy things and we can have an economy. I am on the side of people wanting to see corporate tax avoidance stopped. But my first reaction on seeing this headline and reading the article is that if a bunch of businesses got together and decided to set rates, we'd accuse them of collusion and call them a cartel; if they were in the US, we'd all be yelling about antitrust. IMO, trying to set a global minimum corporate income tax is addressing a symptom. I don't know what the real problem is, but "dang it, they reported their income in Ireland!" is definitely not the whole story.

ObserverNeutral 6y ago

taxes aren't just a way to raise money for federal and local governments, they are also an elegant way which society has to allocate social hatred. You need a corporate tax because people hate corporations, a wealth tax is being discussed and on the horizon because people hate the wealthy...and so forth

missedthecue 6y ago
I would use 'destructive' rather than 'elegant'
- ObserverNeutral 6y ago
  It's either done with taxes using money as a unit of account or let the hatred build up and let the chips fall where it may.
- InitialLastName 6y ago
  Not as destructive as the alternative -- pitchfork economics.
  - ObserverNeutral 6y ago
    that's what I meant. Before taxes social hatred would brew and brew until finlly it was unleashed violently
deleted 6y ago
[deleted]