Should we make the corporate tax rate 0%?

[KevinWestern]

You are making some enormous jumps. You say that without this extra income that these companies are going to fail in two or three years?

If company B is on the verge of going out of business, why would you invest in them in the first place?

Let me restate this in a simple way. If we have three companies of equal health in the same industry, and they now each have 25% more money, it’s a fair statement to say that it’s likely the company who reinvests that money back into the business (ie replacing old machines, hiring new employees, developing new innovation) will be in much better shape in 2 to 3 years than the company that decides to “cash out” the savings on a pay day. It’s a simple, logical assumption.

Right?

Your claim is that all these companies will "cash out"; I'm refuting that claim and saying that's silly to assume because the companies that DON'T cash out are going to be in much better shape overall and the smart people running those companies know this.

 

[bendog]

You are making some enormous jumps. You say that without this extra income that these companies are going to fail in two or three years?

If company B is on the verge of going out of business, why would you invest in them in the first place?

Let me restate this in a simple way. If we have three companies of equal health in the same industry, and they now each have 25% more money, it’s a fair statement to say that it’s likely the company who reinvests that money back into the business (ie replacing old machines, hiring new employees, developing new innovation) will be in much better shape in 2 to 3 years than the company that decides to “cash out” the savings on a pay day. It’s a simple, logical assumption.

Right?

Your claim is that all these companies will "cash out"; I'm refuting that claim and saying that's silly to assume because the companies that DON'T cash out are going to be in much better shape overall and the smart people running those companies know this.

But aren't you opining that investors behave rationally and will reward the company that foregoes instant profits to position for the future? I'd submit that stock values and investor behavior don't comport. In fact, didn't Stiglitz prove just that?

 

[Wry Catcher]

This shall be paid for eliminating useless leftist government programs.

The good things from this?

Many MANY Jobs will be created in America, since companies will return to their homeland.

Sure. And if we eliminate all regulatory agencies how soon until acid rain falls, rivers catch fire and children are born with web feet?

 

[nodoginnafight]

You are making some enormous jumps. You say that without this extra income that these companies are going to fail in two or three years?

If company B is on the verge of going out of business, why would you invest in them in the first place?

Let me restate this in a simple way. If we have three companies of equal health in the same industry, and they now each have 25% more money, it’s a fair statement to say that it’s likely the company who reinvests that money back into the business (ie replacing old machines, hiring new employees, developing new innovation) will be in much better shape in 2 to 3 years than the company that decides to “cash out” the savings on a pay day. It’s a simple, logical assumption.

Right?

Replacing old machines .... what if your machines are not old? What if they are working just fine? You gonna replace them just because you need to find something to do with that money other than paying investors a dividend? I don't think so.

Hiring new employees? Only if you need more employees. You are going to hire the number of employees you need to meet the demand - no more. Hiring employees or buying new machines is not going to increase the demand for your product or service.

Developing new innovations - yes. I'll agree with that (Unless your pissing it away on outdated solar technology - as in Solyndra).

Bottom line is that all these things you mention may or may not be the "solid investment in future growth" for a business. It depends on a lot of other factors.

You cannot deny that a percentage will just cash out. What is your estimate of that percentage?

I believe that percentage will be the vast majority. I've seen the choke points in Trickle Down economics myself.

 

[KevinWestern]

You are making some enormous jumps. You say that without this extra income that these companies are going to fail in two or three years?

If company B is on the verge of going out of business, why would you invest in them in the first place?

Let me restate this in a simple way. If we have three companies of equal health in the same industry, and they now each have 25% more money, it’s a fair statement to say that it’s likely the company who reinvests that money back into the business (ie replacing old machines, hiring new employees, developing new innovation) will be in much better shape in 2 to 3 years than the company that decides to “cash out” the savings on a pay day. It’s a simple, logical assumption.

Right?

Your claim is that all these companies will "cash out"; I'm refuting that claim and saying that's silly to assume because the companies that DON'T cash out are going to be in much better shape overall and the smart people running those companies know this.

But aren't you opining that investors behave rationally and will reward the company that foregoes instant profits to position for the future? I'd submit that stock values and investor behavior don't comport. In fact, didn't Stiglitz prove just that?

One thing is that of course - you are going to have your companies that behave greedily and cash out. That's unavoidable.

But when we're talking our staple companies that provide hundreds of thousands of jobs, and do business with tens of thousands of smaller company, and are the largest supplier to Kroger or Wal-Mart - for example - they're going to behave rationally. I assure you.

And going back to the original point is that this is all irrelevant anyways because I don't think the government is going to be spending those funds any more efficiently! Congress has like a 5% approval rating, and we spend money on things like $600 million websites that don't work!

Why is is ABSOLUTELY NECESSARY that the government receives taxes from corporations?

 

[kaz]

Think of it this way; if every beer company now had a 0% tax rate, and you saw Company A pull all that extra money out and pocket it and Company B reinvest into new machines, new trucks, etc… which one would you like to support as an investor?

The one that sent me the biggest check.

And if you think more than 4% or 5% of investors think differently, I believe you are fooling yourself.

Then you'd pick company B because that will return you the most profit. It's the one that's setting itself up to thrive over the next 2, 3 years! You can triple your money vs getting some cheap quick check right now.

You think shareholders are out to bankrupt their company? You think shareholders are out to make their companies less competitive? You think shareholders want their companies to fail in 2 years? I mean, come on man.

Actually, the correct answer is that it depends on whether or not there were positive NPV projects available for the beer company to invest the money in.

If yes, then Kevin is right, the investors will invest in company B.

If no, then Dawg is right. I don't know what "pocketing" the money means, corporations don't pocket money. But they do distribute them to investors. If there are no positive NPV uses of the money, then it's Company A that would be more valuable.

 

[KevinWestern]

You are making some enormous jumps. You say that without this extra income that these companies are going to fail in two or three years?

If company B is on the verge of going out of business, why would you invest in them in the first place?

Let me restate this in a simple way. If we have three companies of equal health in the same industry, and they now each have 25% more money, it’s a fair statement to say that it’s likely the company who reinvests that money back into the business (ie replacing old machines, hiring new employees, developing new innovation) will be in much better shape in 2 to 3 years than the company that decides to “cash out” the savings on a pay day. It’s a simple, logical assumption.

Right?

Replacing old machines .... what if your machines are not old? What if they are working just fine? You gonna replace them just because you need to find something to do with that money other than paying investors a dividend? I don't think so.

Hiring new employees? Only if you need more employees. You are going to hire the number of employees you need to meet the demand - no more. Hiring employees or buying new machines is not going to increase the demand for your product or service.

Developing new innovations - yes. I'll agree with that (Unless your pissing it away on outdated solar technology - as in Solyndra).

Bottom line is that all these things you mention may or may not be the "solid investment in future growth" for a business. It depends on a lot of other factors.

You cannot deny that a percentage will just cash out. What is your estimate of that percentage?

I believe that percentage will be the vast majority. I've seen the choke points in Trickle Down economics myself.

Hey, obviously I'm speaking in general terms but are speaking from a position of experience. I work in corporate finance, I view the shareholder meetings (webcast), I see how the money gets spent and how waste is scrutinized and how people try to figure out the best way to spend money. I deal with this stuff every single day of my life.

Companies have surpluses in cash all the time! Maybe a promotion runs well, or a new product takes off, etc. If you're theory is true, then why do we (generally) see companies reinvest surpluses into innovation, A&M, etc and not cash out every time? A tax break isn't the only form of surplus you know - right?

 

[KevinWestern]

The one that sent me the biggest check.

And if you think more than 4% or 5% of investors think differently, I believe you are fooling yourself.

Then you'd pick company B because that will return you the most profit. It's the one that's setting itself up to thrive over the next 2, 3 years! You can triple your money vs getting some cheap quick check right now.

You think shareholders are out to bankrupt their company? You think shareholders are out to make their companies less competitive? You think shareholders want their companies to fail in 2 years? I mean, come on man.

Actually, the correct answer is that it depends on whether or not there were positive NPV projects available for the beer company to invest the money in.

If yes, then Kevin is right, the investors will invest in company B.

If no, then Dawg is right. I don't know what "pocketing" the money means, corporations don't pocket money. But they do distribute them to investors. If there are no positive NPV uses of the money, then it's Company A that would be more valuable.

"Pocketing" means distributing to investors, owners, like you said.

And I'd like to say that in most cases there's generally places a business can find to reinvest their money. If they have no places they're not trying hard enough.

 

[nodoginnafight]

Let me restate this in a simple way. If we have three companies of equal health in the same industry, and they now each have 25% more money, it’s a fair statement to say that it’s likely the company who reinvests that money back into the business (ie replacing old machines, hiring new employees, developing new innovation) will be in much better shape in 2 to 3 years than the company that decides to “cash out” the savings on a pay day. It’s a simple, logical assumption.

Right?

Your claim is that all these companies will "cash out"; I'm refuting that claim and saying that's silly to assume because the companies that DON'T cash out are going to be in much better shape overall and the smart people running those companies know this.

But aren't you opining that investors behave rationally and will reward the company that foregoes instant profits to position for the future? I'd submit that stock values and investor behavior don't comport. In fact, didn't Stiglitz prove just that?

One thing is that of course - you are going to have your companies that behave greedily and cash out. That's unavoidable.

But when we're talking our staple companies that provide hundreds of thousands of jobs, and do business with tens of thousands of smaller company, and are the largest supplier to Kroger or Wal-Mart - for example - they're going to behave rationally. I assure you.

And going back to the original point is that this is all irrelevant anyways because I don't think the government is going to be spending those funds any more efficiently! Congress has like a 5% approval rating, and we spend money on things like $600 million websites that don't work!

Why is is ABSOLUTELY NECESSARY that the government receives taxes from corporations?

You are right - the government is doing a horrible job allocating tax money - really. $1.8 billion to oil companies to help them re-tool their refineries to handle the sludge from a pipeline that may or may not be built????

So why not eliminate the individual income tax? One thing is for certain - if you put extra money into the hands of the average person, they are going to dump it into the economy quickly. And with their purchases they will choose which businesses thrive and which go belly up (free market principles, right?)

 

[Wry Catcher]

Let me restate this in a simple way. If we have three companies of equal health in the same industry, and they now each have 25% more money, it’s a fair statement to say that it’s likely the company who reinvests that money back into the business (ie replacing old machines, hiring new employees, developing new innovation) will be in much better shape in 2 to 3 years than the company that decides to “cash out” the savings on a pay day. It’s a simple, logical assumption.

Right?

Your claim is that all these companies will "cash out"; I'm refuting that claim and saying that's silly to assume because the companies that DON'T cash out are going to be in much better shape overall and the smart people running those companies know this.

But aren't you opining that investors behave rationally and will reward the company that foregoes instant profits to position for the future? I'd submit that stock values and investor behavior don't comport. In fact, didn't Stiglitz prove just that?

One thing is that of course - you are going to have your companies that behave greedily and cash out. That's unavoidable.

But when we're talking our staple companies that provide hundreds of thousands of jobs, and do business with tens of thousands of smaller company, and are the largest supplier to Kroger or Wal-Mart - for example - they're going to behave rationally. I assure you.

And going back to the original point is that this is all irrelevant anyways because I don't think the government is going to be spending those funds any more efficiently! Congress has like a 5% approval rating, and we spend money on things like $600 million websites that don't work!

Why is is ABSOLUTELY NECESSARY that the government receives taxes from corporations?

I suppose it's not necessary for government to receive taxes from corporations. Imagine how much more they could pay CEO's, CFO's, and of course members of Congress to write the rules which benefit the corporate world. Wouldn't that be grand?

 

[kaz]

You are making some enormous jumps. You say that without this extra income that these companies are going to fail in two or three years?

If company B is on the verge of going out of business, why would you invest in them in the first place?

Let me restate this in a simple way. If we have three companies of equal health in the same industry, and they now each have 25% more money, it’s a fair statement to say that it’s likely the company who reinvests that money back into the business (ie replacing old machines, hiring new employees, developing new innovation) will be in much better shape in 2 to 3 years than the company that decides to “cash out” the savings on a pay day. It’s a simple, logical assumption.

Right?

Your claim is that all these companies will "cash out"; I'm refuting that claim and saying that's silly to assume because the companies that DON'T cash out are going to be in much better shape overall and the smart people running those companies know this.

But aren't you opining that investors behave rationally and will reward the company that foregoes instant profits to position for the future? I'd submit that stock values and investor behavior don't comport. In fact, didn't Stiglitz prove just that?

Prove? LOL, I wouldn't call it that.

But what you're confusing is long term and short term. Long term, the large money using fundamental analysis drive the stock price. In the short term, there are ups and downs that don't always reflect any rational analysis.

The term "drunk man's walk" is often used in finance. Suppose a drunk at night sees a lighted doorway and tries to walk towards it. He'll inexplicably go left and right, but he will in general keep moving towards the doorway. The doorway is the fundamental value of the stock. The market does not do fundamental analysis perfectly of course. But across the market and time, they do it better than anyone else, which is why beat the market systems ultimately always fail in the long run.

 

[kaz]

Then you'd pick company B because that will return you the most profit. It's the one that's setting itself up to thrive over the next 2, 3 years! You can triple your money vs getting some cheap quick check right now.

You think shareholders are out to bankrupt their company? You think shareholders are out to make their companies less competitive? You think shareholders want their companies to fail in 2 years? I mean, come on man.

Actually, the correct answer is that it depends on whether or not there were positive NPV projects available for the beer company to invest the money in.

If yes, then Kevin is right, the investors will invest in company B.

If no, then Dawg is right. I don't know what "pocketing" the money means, corporations don't pocket money. But they do distribute them to investors. If there are no positive NPV uses of the money, then it's Company A that would be more valuable.

"Pocketing" means distributing to investors, owners, like you said.

And I'd like to say that in most cases there's generally places a business can find to reinvest their money. If they have no places they're not trying hard enough.

I agree, they generally do. Where they don't are typically mature companies in mature markets with little growth. In those cases it's better to distribute the money to the owners and let them invest it in their other holdings. That's also a big reason that older companies tend to have higher dividends and newer companies little or no dividends.

In the end, a stock is valued like every other security, it's the NPV of all expected future payouts, which means for stocks, dividends. You only forgo payout for positive NPV projects that increase the expected payout in the future even more.

 

[KevinWestern]

You are right - the government is doing a horrible job allocating tax money - really. $1.8 billion to oil companies to help them re-tool their refineries to handle the sludge from a pipeline that may or may not be built????

So why not eliminate the individual income tax. One thing is for certain - if you put extra money into the hands of the average person, they are going to dump it into the economy quickly. And with their purchases they will choose which businesses thrive and which go belly up (free market principles, right?)

I like some taxes. Like I said the government certainly has vital functions. You can't eliminate everything, of course.

I just think when it comes to businesses we're going to get more value if they keep their money vs give it to the most corrupt place on planet earth.

 

[nodoginnafight]

You are right - the government is doing a horrible job allocating tax money - really. $1.8 billion to oil companies to help them re-tool their refineries to handle the sludge from a pipeline that may or may not be built????

So why not eliminate the individual income tax. One thing is for certain - if you put extra money into the hands of the average person, they are going to dump it into the economy quickly. And with their purchases they will choose which businesses thrive and which go belly up (free market principles, right?)

I like some taxes. Like I said the government certainly has vital functions. You can't eliminate everything, of course.

I just think when it comes to businesses we're going to get more value if they keep their money vs give it to the most corrupt place on planet earth.

Fundamentally, I think we are in agreement. I just think that if you are going to eliminate business OR individual taxes, the more efficient way to grow the economy is to eliminate the individual taxes.

 

[KevinWestern]

Actually, the correct answer is that it depends on whether or not there were positive NPV projects available for the beer company to invest the money in.

If yes, then Kevin is right, the investors will invest in company B.

If no, then Dawg is right. I don't know what "pocketing" the money means, corporations don't pocket money. But they do distribute them to investors. If there are no positive NPV uses of the money, then it's Company A that would be more valuable.

"Pocketing" means distributing to investors, owners, like you said.

And I'd like to say that in most cases there's generally places a business can find to reinvest their money. If they have no places they're not trying hard enough.

I agree, they generally do. Where they don't are typically mature companies in mature markets with little growth. In those cases it's better to distribute the money to the owners and let them invest it in their other holdings. That's also a big reason that older companies tend to have higher dividends and newer companies little or no dividends.

In the end, a stock is valued like every other security, it's the NPV of all expected future payouts, which means for stocks, dividends. You only forgo payout for positive NPV projects that increase the expected payout in the future even more.

One thing to note though is that many of the huge, large, mature companies tend to be the ones with a lot of machinery, a lot of factories, etc, and ALWAYS can somewhere to put the money. The bigger your network grows, the more shit you're going to need to take care of.

 

[bendog]

Let me restate this in a simple way. If we have three companies of equal health in the same industry, and they now each have 25% more money, it’s a fair statement to say that it’s likely the company who reinvests that money back into the business (ie replacing old machines, hiring new employees, developing new innovation) will be in much better shape in 2 to 3 years than the company that decides to “cash out” the savings on a pay day. It’s a simple, logical assumption.

Right?

Your claim is that all these companies will "cash out"; I'm refuting that claim and saying that's silly to assume because the companies that DON'T cash out are going to be in much better shape overall and the smart people running those companies know this.

But aren't you opining that investors behave rationally and will reward the company that foregoes instant profits to position for the future? I'd submit that stock values and investor behavior don't comport. In fact, didn't Stiglitz prove just that?

One thing is that of course - you are going to have your companies that behave greedily and cash out. That's unavoidable.

But when we're talking our staple companies that provide hundreds of thousands of jobs, and do business with tens of thousands of smaller company, and are the largest supplier to Kroger or Wal-Mart - for example - they're going to behave rationally. I assure you.

And going back to the original point is that this is all irrelevant anyways because I don't think the government is going to be spending those funds any more efficiently! Congress has like a 5% approval rating, and we spend money on things like $600 million websites that don't work!

Why is is ABSOLUTELY NECESSARY that the government receives taxes from corporations?

Well they don't behave rationally. GE, for example. GE had to show profits to increase stock value to continue upward stock price. To do this they would sell something (say a generator for $100) to Corp A, and in exchange FINANCE the sale to that Corp A pays for the generator over a period of time (say 10 years) at a rate of interest (say 1%).

As a consequence, their balance sheet: showed an outstanding balance of $99 and yearly income of $11. BUT, GE could sell that outstanding balance. Say, sell the right to collect $99 over nine years, for ... $50 in cold hard cash.

As a consequence they show a year end profit of .... wait for it ... $66. Shareholders reward $66 more that $11 by PAYING MORE PER GE SHARE. And the irony was GE was actually selling these defeasements to it's OWN credit corporate arm.

This worked quite well throughout the 90s and into the 2000s. But unfortunately it's sort of the economic equivalent of crack. There came a day when the money markets broke the buck.

Or, when a right to $X went into a money market only to find no one wanted to buy that right, so it was only worth $1lessthanX.

 

[Mojo2]

This shall be paid for eliminating useless leftist government programs.

The good things from this?

Many MANY Jobs will be created in America, since companies will return to their homeland.

Good idea in theory. But I've become a fan of the Laffer Curve and the Romer findings.

33% is the optimal rate in order to maximize tax revenues to the government and a livable compromise for the wealthy and still expect they will provide for this country what they do and what they can.

“Well first of all, tell me: Is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed?

You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy.

The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way.

In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it’s exactly in the kinds of societies that depart from that.

So that the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.”

― Milton Friedman

Christina Romer Knows Tax Hikes Will Kill the Recovery

A powerful analysis by President Barack Obama’s first Chair of his Council of Economic Advisers (CEA) indicates the President’s proposed tax increases would kill the economic recovery and throw nearly 1 million Americans out of work. Those are the extraordinary implications of academic research by Christina D. Romer, who chaired the CEA from January 28, 2009 – September 3, 2010.

In a paper entitled: “The Macrcoeconomic Effects of Tax Changes” published by the prestigious American Economic Review in June 2010 (during her tenure at the White House), she stated: “In short, tax increases appear to have a very large, sustained, and highly significant negative impact on output.”

Although Dr. Romer’s analysis is full of equations and econometric jargon, the clarity of her conclusions are a fatal indictment of the Obama Administration’s demand for tax increases. In what may be the first time since David Stockman’s “Trojan Horse” comment regarding the Reagan tax rate cuts, a high White House Official has completely undermined her own Administration’s policy while serving. Had this happened during a Republican administration, a la Stockman’s Atlantic interview, it would have been Page One news. “Obama To America: Drop Dead.”

Christina Romer Knows Tax Hikes Will Kill the Recovery - Forbes

 

[Uncensored2008]

Yes.

Why?

 

[Uncensored2008]

Would this make leftists happy?

End corporate taxes - make America competitive again.

Raise the capital gains tax to 50% - but make the first million exempt in constant 2014 dollars. This would have George Soros, Andy Grove, Warren Buffet, Al Gore, Nancy Pelosi, and the rest of our aristocracy actually paying some taxes, without destroying small investors.

Would leftists go for that?

 

[bendog]

Sigh.

Of course Obama didn't propose such a tax hike. BUT WHY LET FACTS GET IN THE WAY OF A PERFECTLY GOOD RANT.

In Section IV we present baseline estimates of these effects derived from three progressively
more complicated specifications. Our estimates suggest that a tax increase of 1 percent
of GDP reduces output over the next three years by nearly three percent. The effect is highly
statistically significant.