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Corporate tax in general is the wrong type of taxation. Corporate tax can be controlled by the company itself. If you run your business economically, you pay m

Corporate tax in general is the wrong type of taxation. Corporate tax can be controlled by the company itself. If you run your business economically, you pay more corporate tax. This is just wrong.

brodouevencode 5y ago
You, the consumer, pay the corporate tax.
- tertius 5y ago
  Nope, the tax is paid on the profit (i.e. post consumer).
- throwaway34241 5y ago
  When people talk about the "corporate tax", they're talking about the tax on corporate profits, which belong to the shareholders. You could theoretically tax the shareholders directly instead when they receive those profits as dividends etc (and there might be some advantage to doing so - it's more clear which country taxes should be paid in, and you can have a lower dividend tax rate for people with low incomes). There's no reason for a company to raise consumer prices in response to a change in the corporate tax rate - if a company can make more profits just by raising prices, they should do so anyway regardless of what the tax rate is.
  - negativez 5y ago
    That's true - but taxes *always* disincentivize the thing being taxed. If investment in a company is less profitable under taxation than it otherwise would be, there will be less investment in that company, no exceptions. Now the size of that effect is quite likely to be negligible for the companies in question here. But it's at least theoretically possible that taxing corporate profits could lead to a change in the marketplace, including market dropout, that might actually lead to consumers paying higher prices to the remaining members of a market with reduced competition. Further, if all companies in an already low-competition marketplace are equally affected by the tax, then it's quite possible for all of them to ~simultaneously raise prices to offset the tax, with or without explicitly illegal coordination, knowing that the others will follow suit.
    - throwaway34241 5y ago
      Sure, there are definitely second and third order effects. Taxing shareholders may reduce the incomes of wealthy people, who have a higher savings rate, leading to a reduced national savings rate, higher interest rates and lower asset prices, which could cause some businesses to decide against doing certain investments that wouldn't have a high enough return (relative to the interest rate on that capital). Since everything is tied together it's hard to reason through all of this. For companies making investment decisions the interest rate will obviously be one factor, but projected consumer demand will be another, and it's easy to imagine in some cases higher middle-class incomes and consumer demand might be more important than a lower interest rate for decisions around building new factories etc. Obviously it's complex and I don't have a strongly-held opinion. But taking a historical perspective interest rates are near record lows and financial asset prices are at record highs. On those grounds policies that might nudge us back a little into where the economy has been operating for the past 50 years (regarding interest rates etc) seem less risky than ones that push us further away from our post-WWII historical experience.
tertius 5y ago
Yes, but increased profits (by running profitably) also increases returns for the shareholders... A good thing.
- dantheman 5y ago
  But you don't increase profits, what you do is spend that money recklessly on R&D that has a lower ROI than if that money was spent outside the company. However, once taxes are factored in the ROI is better than paying taxes due to an increase in the share price. So what you incentivize is the misallocation of funds from their most beneficial use outside the organization to something in the organization.
  - tertius 5y ago
    Profits, if not able to be reallocated for more profit should be return to shareholders. Taxes should be taken into account in calculating where the best ROI would be here. Obviously it changes when you would return profit to shareholders.
- I_am_tiberius 5y ago
  My point is that it's a bad tax because it can be controlled and at the same time corporate tax controls the business decisions. This should not be the case in my opinion. Think about it. I think it would be better to focus on sales tax. Also, it would make tax rules much easier to understand.

Corporate tax in general is the wrong type of taxation. Corporate tax can be controlled by the company itself. If you run your business economically, you pay more corporate tax. This is just wrong.

brodouevencode 5y ago

You, the consumer, pay the corporate tax.

tertius 5y ago
Nope, the tax is paid on the profit (i.e. post consumer).
throwaway34241 5y ago
When people talk about the "corporate tax", they're talking about the tax on corporate profits, which belong to the shareholders. You could theoretically tax the shareholders directly instead when they receive those profits as dividends etc (and there might be some advantage to doing so - it's more clear which country taxes should be paid in, and you can have a lower dividend tax rate for people with low incomes). There's no reason for a company to raise consumer prices in response to a change in the corporate tax rate - if a company can make more profits just by raising prices, they should do so anyway regardless of what the tax rate is.
- negativez 5y ago
  That's true - but taxes *always* disincentivize the thing being taxed. If investment in a company is less profitable under taxation than it otherwise would be, there will be less investment in that company, no exceptions. Now the size of that effect is quite likely to be negligible for the companies in question here. But it's at least theoretically possible that taxing corporate profits could lead to a change in the marketplace, including market dropout, that might actually lead to consumers paying higher prices to the remaining members of a market with reduced competition. Further, if all companies in an already low-competition marketplace are equally affected by the tax, then it's quite possible for all of them to ~simultaneously raise prices to offset the tax, with or without explicitly illegal coordination, knowing that the others will follow suit.
  - throwaway34241 5y ago
    Sure, there are definitely second and third order effects. Taxing shareholders may reduce the incomes of wealthy people, who have a higher savings rate, leading to a reduced national savings rate, higher interest rates and lower asset prices, which could cause some businesses to decide against doing certain investments that wouldn't have a high enough return (relative to the interest rate on that capital). Since everything is tied together it's hard to reason through all of this. For companies making investment decisions the interest rate will obviously be one factor, but projected consumer demand will be another, and it's easy to imagine in some cases higher middle-class incomes and consumer demand might be more important than a lower interest rate for decisions around building new factories etc. Obviously it's complex and I don't have a strongly-held opinion. But taking a historical perspective interest rates are near record lows and financial asset prices are at record highs. On those grounds policies that might nudge us back a little into where the economy has been operating for the past 50 years (regarding interest rates etc) seem less risky than ones that push us further away from our post-WWII historical experience.

tertius 5y ago

Yes, but increased profits (by running profitably) also increases returns for the shareholders... A good thing.

dantheman 5y ago
But you don't increase profits, what you do is spend that money recklessly on R&D that has a lower ROI than if that money was spent outside the company. However, once taxes are factored in the ROI is better than paying taxes due to an increase in the share price. So what you incentivize is the misallocation of funds from their most beneficial use outside the organization to something in the organization.
- tertius 5y ago
  Profits, if not able to be reallocated for more profit should be return to shareholders. Taxes should be taken into account in calculating where the best ROI would be here. Obviously it changes when you would return profit to shareholders.
I_am_tiberius 5y ago
My point is that it's a bad tax because it can be controlled and at the same time corporate tax controls the business decisions. This should not be the case in my opinion. Think about it. I think it would be better to focus on sales tax. Also, it would make tax rules much easier to understand.