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'markup growth”—the increase in the ratio between the price a firm charges and its cost of production—was a far more important factor driving inflation in 2021
by ClumsyPilot 4y ago
'markup growth”—the increase in the ratio between the price a firm charges and its cost of production—was a far more important factor driving inflation in 2021 than it has been throughout economic history.'
So the government tracks wages and unemployment, and sharply reacts when wages grow too fast.
But when it comes to profits, they can't even tax them correctly, let alone react to profits driving inflation.
Wouldn't agressive taxation be an alternative to raising interest rates in tackling inflation? Both reduce avaliability of capital.
Is there any reason why raising interest rate is 'fair' but a temporary 'inflation tax' is unfair?
- gumballindie 4y ago> they can't even tax them correctly They can, but corruption is getting in the way of doing so.
- uncfrj 4y ago[flagged]
- _9vpl 4y agoTaxes don’t decrease the availability of capital, it simply re-distributes it to the politically-connected.
- eternalban 4y agoAha. So it's not the politically-connected who manage to keep IRS at arms-length. No. It is 'something but not political connections' that manages to frustrate the unjust greed of the "plitically connected" to tax rightfully earned profits of these corporations. Must be the "hand of God" ..
- amrocha 4y agoAvailability of capital is not a problem that needs to be fixed
- HPsquared 4y agoHousing shortage is an example of poor capital availability.
- _9vpl 4y agoHousing shortage, at least in the US, isn’t really a problem of capital availability. It’s mostly due to local zoning regulations that make it very difficult to actually create housing, regardless of capital availability.
- HPsquared 4y agoI was thinking in terms of "housing is a form of capital"
- amrocha 4y agoHmm, I don't feel like that's what the original comment was getting at since it was talking about taxation.
- bko 4y agoIt also results in dead weight loss. For instance suppose the marginal buyer would spend $20 for a product and the producer can produce for $18 and the market price is $19, resulting in $1surplus to each party. If a $3 tax was put on the product, the transaction wouldn't take place. So you went from $2 social surplus to nothing and no tax benefit. Any arbitrary price distortions will result in dead weight loss or the overall social surplus to go down compared to no distortion
- 411111111111111 4y agoThat's too one-dimensional, as the transaction would still take place later once the market price increased to offset the tax increase.
- bko 4y agoI don't understand what you mean. The market price would be floored at $21 as it costs the producer $18 to produce and a $3 tax. The prior margin was $1 so realistically the producer would eat some of the increase and charge $21.50 For the person who values the good only at $20, no transaction would take place. If eventually the producer cost went down to something like $16, maybe the price would come down to $20 or below but then there's the marginal consumer that values it at $19. Price distortions almost always result in a dead weight loss. Only in perfectly inelastic products does it not exist
- 411111111111111 4y ago> Price distortions almost always result in a dead weight loss. Yes, some trades will not take place take after the distortion, but the the person valuing the good at 20 and still be unwilling to pay 23 after an extended time period in which they're unable to buy it is extremely rare.
- ClumsyPilot 4y agoNot if you use it to pay off national debt
- Scea91 4y agoMarkup is not profit. Markup can increase while profit can decrease… I am not sure why we should care much about markup in this context.
- geraldhh 4y agoyou are right. thou imho the point is that this increase in markup has to go somewhere it didn't before, which in turn suggests a decrease in efficiency.
- pg_1234 4y agoActually the profit margin might be worth looking at. Corporations typically are charged a flat percentage tax rate. One could charge corporations a progressive tax rate, just like people. You continue to tax corporations just on profits, but the higher the margin (profit/revenue) the higher tax rate. It disincentivises gouging and could even bring in more revenue for the state (less need to over tax people). It would also make it harder for the wealthy to dodge tax by billing what should be personal income via corporate shell structures as in most cases that revenue would appear as > 90% profit, attracting a very high tax.
- kgwgk 4y agoAnd it incentivises vertical integration and conglomerates to dilute the high margins and reduce the overall tax rate. Not necessarily a good outcome - even if it’s funny to see the companies of the future in Upload or Idiocracy.
- pg_1234 4y agoConglomerates are already incentivised to minimise profit to reduce overall tax rate. They do so to the limit the law allows. The only extra control they have here is the "revenue" part of profit/revenue. And the only way they can change that is by charging their customers less. Which is the objective of this entire article/thread.
- 4y ago
- fzvqq 4y ago[flagged]
- amrocha 4y agoYou'd rather see people die of starvation than curtail frivolous spending?
- yibers 4y agoI have a feeling there is a /s hidden somewhere in the comment
- ClumsyPilot 4y agoPae's law went into overdrive recently: "Any parody of extreme views can be mistaken by some readers for a sincere expression of the views being parodied."
- amrocha 4y agoIt's hard to tell sometimes
- deleted 4y ago[deleted]
- seanp2k2 4y ago> Is there any reason why raising interest rate is 'fair' but a temporary 'inflation tax' is unfair? Because the former puts more burden on average citizens and the latter would hurt the ruling class.
- xracy 4y agoI don't think it's about being fair or unfair... I just think it's the only pedal the Fed has. And the Fed is the only body that is able to make actions right now. Taxes would be a great vehicle for this, because they would probably do a much better job of filling the fed's dual-mandate. But because the fed can't raise taxes, and congress can't do literally anything, we're stuck with the response that we have where a non-elected body is leaning on the only lever it has to run our economy.