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Here's some interesting thinking about different kinds of tax: https://economicsobservatory.com/which-taxes-are-best-and-worst-for-growth https://economicsobse

Here's some interesting thinking about different kinds of tax: https://economicsobservatory.com/which-taxes-are-best-and-worst-for-growth https://economicsobservatory.com/which-taxes-are-best-and-wo... > "Raising the income tax rate has by far the least negative effect on GDP. In the long run, the simulation shows that the economy pretty much returns to baseline levels, with a slight increase in potential output. The opposite is true for corporation taxes. A rise in the corporation tax rate leads to a severe and negative initial fall in GDP. Potential output also decreases. This leads to lower productivity, higher inflationary pressures and deteriorating economic circumstances in the long run. A rise in indirect taxes (such as VAT) does not affect GDP quite as badly as a rise in corporation taxes, but it does affect GDP more substantially than a rise in income taxes. Indirect taxes operate largely through the price channel, increasing the prices of goods. By artificially raising prices, demand is curtailed."

jshier 1y ago
I really need a good explanation for the assertion about corporate taxes, as it makes no real sense. Frankly, it sounds like corporate propaganda.
- lesuorac 1y ago
  I don't think the studies account for a 0% tax rate and $0 government subsidy. If you're running a large deficit then adding in a tax rate is like having a fire that you're pouring lighter fluid on. Of course when you take away the lighter fluid the fire gets smaller. However, how are you getting that lighter fluid in the first place? It also doesn't mean that 0% is the correct tax rate. This gives pretty strong evidence that during boom (bull) years you should increase the corporate tax rate to prevent the formation of bubbles and then during bane (bear) years you should decrease it to stimulate growth. I think the easy way to think about this is that individuals tend not to spend all of their income especially at the higher income brackets. While companies are not as severe in that effect. So if you increase taxes on a business in order for the government to pay back debt to an individual who then saves the money instead of consumes it, you're going to decrease overall consumption.
- FredPret 1y ago
  I think the idea is that corporations are the most efficient entities in the economy in terms of allocating capital. They have to be, or they go under. And when they have extra cash, investors tend to demand that it be deployed or paid back to them as dividends. So the natural incentive is for companies to run with the leanest possible capitalization and generate the biggest possible profits. So when you take cash away from companies and allocate it to the government, you're reducing the overall capital efficiency of the economy a lot. If you set corporate taxes to 0%, you can still keep the same size government budget if you then tax dividends and executive salaries, except you'll take the money away from less efficient entities (individuals). By the way, this also removes the incentive to deduct all sorts of personal expenses from your business tax, because there isn't any. And if the government wants to reign in this or that monopoly or incentivize certain activities, it can do so via regulation rather than tax breaks / increases. Same level of government budget & control, higher economic growth.
  - Gud 1y ago
    The problem of course is that capital is mostly concentrated to a few, well connected families. How does that fit into the equation?
    - benmmurphy 1y ago
      You are also assuming the tax incidence of corporation tax will fall mostly upon shareholders. For example if the incidence was 70% on workers and 30% on shareholders then this should not be a progressive form of taxation. I think most economists believe the tax incidence is shared between parts of the corporation (workers, consumers, and shareholders) but I don't think there is much consensus on the proportions.
    - FredPret 1y ago
      Numbers to back that up? The annual Global Wealth Report from UBS [0] usually shows a very wide base of millionaires in the rich countries (there are 23 million millionaires in the US) and a rapidly rising crop of new rich people all over the world, especially the rapidly growing countries like India and China. Even for those at the very tip of the pyramid, the 0.01%, there's a ton of turnover. Who was the richest family 0, 10, 25, 50, 100, 150, 200 years ago? The answers are all very different. [0] https://www.ubs.com/global/en/wealthmanagement/insights/global-wealth-report/_jcr_content/root/contentarea/mainpar/toplevelgrid_5684475/col_1/innergrid/col_2/actionbutton.1872006916.file/PS9jb250ZW50L2RhbS9hc3NldHMvd20vc3RhdGljL25vaW5kZXgvZ3dyLTIwMjUtZGlnaXRhbC11cGRhdGVkLnBkZg==/gwr-2025-digital-updated.pdf https://www.ubs.com/global/en/wealthmanagement/insights/glob...
- disgruntledphd2 1y ago
  > I really need a good explanation for the assertion about corporate taxes, as it makes no real sense. Frankly, it sounds like corporate propaganda. Corporations have many tax avoidance strategies available, and the incentives to activate them based on tax changes, so basically because capital is much freer to move than labour (in most places) one would see the effects suggested in the linked article. That being said I'm sceptical of this research, does anyone have more detailed links to the simulations on which the analysis is based?
msgodel 1y ago
Who cares what the GDP is if the country is unpleasant or impractical to live in? Income tax is extremely retarded and our country was started by shooting people who suggested significantly less extreme taxes.
- Aloisius 1y ago
  It's the effects of a lower GDP that people tend to care about. And those effects are unpleasant and make the country more impractical to live in.
  - msgodel 1y ago
    GDP going up does not absolutely improve people's quality of life (and there's quite a lot that can make GDP go up while making every participant in the economy miserable.) That's why optimizing for it makes no sense.
    - FredPret 1y ago
      More money is strictly better; if you think rich countries are "unpleasant or unpractical" to live in, try living in a poor one. You're right that GDP is far from the only thing that matters. But sacrificing growth for intangible benefits is a tradeoff that should be made very carefully indeed.
      - msgodel 1y ago
        Money is arbitrary. It's like voltage: power is the important part. Same with economics: wealth is the important part. Wealth can be invariant while money fluctuates.
        FredPret 1y ago
        Money is just a token. The valuable thing is the actual output of products and services. Companies are great at this, and taking resources away from them means they have to crank out less of it. The best and simplest thing is to tax the salaries and dividends paid by the companies, and stop taxing consumption (regressive tax that's hardest on the poor) or profits (reduces investment and output).
const_cast 1y ago
Just intuitively, periods of high corporate tax rates in the US were accompanied by significantly greater purchasing power for laborers. Obviously it's a little hard to tell if that is the cause, since post-WWII America was an entirely different beast, but I think high corporate tax is really not the end of the world. Regardless, we got rid of almost all corporate tax, and did that really trickle down to average laborers? Er, no, I think decidedly so.
- deleted 1y ago
  [deleted]

jshier 1y ago

I really need a good explanation for the assertion about corporate taxes, as it makes no real sense. Frankly, it sounds like corporate propaganda.

lesuorac 1y ago
I don't think the studies account for a 0% tax rate and $0 government subsidy. If you're running a large deficit then adding in a tax rate is like having a fire that you're pouring lighter fluid on. Of course when you take away the lighter fluid the fire gets smaller. However, how are you getting that lighter fluid in the first place? It also doesn't mean that 0% is the correct tax rate. This gives pretty strong evidence that during boom (bull) years you should increase the corporate tax rate to prevent the formation of bubbles and then during bane (bear) years you should decrease it to stimulate growth. I think the easy way to think about this is that individuals tend not to spend all of their income especially at the higher income brackets. While companies are not as severe in that effect. So if you increase taxes on a business in order for the government to pay back debt to an individual who then saves the money instead of consumes it, you're going to decrease overall consumption.
FredPret 1y ago
I think the idea is that corporations are the most efficient entities in the economy in terms of allocating capital. They have to be, or they go under. And when they have extra cash, investors tend to demand that it be deployed or paid back to them as dividends. So the natural incentive is for companies to run with the leanest possible capitalization and generate the biggest possible profits. So when you take cash away from companies and allocate it to the government, you're reducing the overall capital efficiency of the economy a lot. If you set corporate taxes to 0%, you can still keep the same size government budget if you then tax dividends and executive salaries, except you'll take the money away from less efficient entities (individuals). By the way, this also removes the incentive to deduct all sorts of personal expenses from your business tax, because there isn't any. And if the government wants to reign in this or that monopoly or incentivize certain activities, it can do so via regulation rather than tax breaks / increases. Same level of government budget & control, higher economic growth.
- Gud 1y ago
  The problem of course is that capital is mostly concentrated to a few, well connected families. How does that fit into the equation?
  - benmmurphy 1y ago
    You are also assuming the tax incidence of corporation tax will fall mostly upon shareholders. For example if the incidence was 70% on workers and 30% on shareholders then this should not be a progressive form of taxation. I think most economists believe the tax incidence is shared between parts of the corporation (workers, consumers, and shareholders) but I don't think there is much consensus on the proportions.
  - FredPret 1y ago
    Numbers to back that up? The annual Global Wealth Report from UBS [0] usually shows a very wide base of millionaires in the rich countries (there are 23 million millionaires in the US) and a rapidly rising crop of new rich people all over the world, especially the rapidly growing countries like India and China. Even for those at the very tip of the pyramid, the 0.01%, there's a ton of turnover. Who was the richest family 0, 10, 25, 50, 100, 150, 200 years ago? The answers are all very different. [0] https://www.ubs.com/global/en/wealthmanagement/insights/global-wealth-report/_jcr_content/root/contentarea/mainpar/toplevelgrid_5684475/col_1/innergrid/col_2/actionbutton.1872006916.file/PS9jb250ZW50L2RhbS9hc3NldHMvd20vc3RhdGljL25vaW5kZXgvZ3dyLTIwMjUtZGlnaXRhbC11cGRhdGVkLnBkZg==/gwr-2025-digital-updated.pdf https://www.ubs.com/global/en/wealthmanagement/insights/glob...
disgruntledphd2 1y ago
> I really need a good explanation for the assertion about corporate taxes, as it makes no real sense. Frankly, it sounds like corporate propaganda. Corporations have many tax avoidance strategies available, and the incentives to activate them based on tax changes, so basically because capital is much freer to move than labour (in most places) one would see the effects suggested in the linked article. That being said I'm sceptical of this research, does anyone have more detailed links to the simulations on which the analysis is based?

msgodel 1y ago

Who cares what the GDP is if the country is unpleasant or impractical to live in? Income tax is extremely retarded and our country was started by shooting people who suggested significantly less extreme taxes.

Aloisius 1y ago
It's the effects of a lower GDP that people tend to care about. And those effects are unpleasant and make the country more impractical to live in.
- msgodel 1y ago
  GDP going up does not absolutely improve people's quality of life (and there's quite a lot that can make GDP go up while making every participant in the economy miserable.) That's why optimizing for it makes no sense.
  - FredPret 1y ago
    More money is strictly better; if you think rich countries are "unpleasant or unpractical" to live in, try living in a poor one. You're right that GDP is far from the only thing that matters. But sacrificing growth for intangible benefits is a tradeoff that should be made very carefully indeed.
    - msgodel 1y ago
      Money is arbitrary. It's like voltage: power is the important part. Same with economics: wealth is the important part. Wealth can be invariant while money fluctuates.
      - FredPret 1y ago
        Money is just a token. The valuable thing is the actual output of products and services. Companies are great at this, and taking resources away from them means they have to crank out less of it. The best and simplest thing is to tax the salaries and dividends paid by the companies, and stop taxing consumption (regressive tax that's hardest on the poor) or profits (reduces investment and output).

const_cast 1y ago

Just intuitively, periods of high corporate tax rates in the US were accompanied by significantly greater purchasing power for laborers. Obviously it's a little hard to tell if that is the cause, since post-WWII America was an entirely different beast, but I think high corporate tax is really not the end of the world. Regardless, we got rid of almost all corporate tax, and did that really trickle down to average laborers? Er, no, I think decidedly so.

deleted 1y ago
[deleted]