Should we make the corporate tax rate 0%?

[kaz]

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.

The main purpose of how those deals are structured is taxes, not inflating profits. GE is one of the most scrutinized public companies in the world. They don't believe they are fooling investors with shenanigans like that. I spent about half my career before I owned my own business in GE management (including GE Information Services, GE Nuclear, GE Power, GE Capital Corporate and GE Consumer Finance). The other half was in management consulting.

 

[kaz]

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.

If by eliminate individual taxes you mean that we should go to a flat tax on revenue (e.g., the fair tax), then you're absolutely right.

If you mean we stay with corporate taxes on profit, not so much. Then you are punishing the efficient.

 

[bendog]

Kevin,

you know even when corporations don't behave rationally by maximizing yearly profits at the expense of long term benefit, the market will punish them. So, logically, it should even out. However, one criticism of our corporate tax structure, and compensation to CEO's, is that we encourage irrationality.

 

[kaz]

Kevin,

you know even when corporations don't behave rationally by maximizing yearly profits at the expense of long term benefit, the market will punish them. So, logically, it should even out. However, one criticism of our corporate tax structure, and compensation to CEO's, is that we encourage irrationality.

It's not that simple. Corporations are driven by both short term and long term objectives. To say as a whole they are only focused on short term is just wrong.

I don't know what you mean in your reference to "compensation to CEO's," how is that encouraging "irrationality?"

Corporations are very rational, they are very good at doing what they are incented to do.

 

[KevinWestern]

Kevin,

you know even when corporations don't behave rationally by maximizing yearly profits at the expense of long term benefit, the market will punish them. So, logically, it should even out. However, one criticism of our corporate tax structure, and compensation to CEO's, is that we encourage irrationality.

I agree with corporate tax structure (you mean the fact that rates are all over the place?), but not CEO compensation.

Think of it this way, in 1950 there were 5 companies, 5 CEOs for industry x and in 2014 there's only 1 giant company and 1 CEO. Naturally, that CEO is going to make more and I'm fine with that. Companies are simply larger, more complex, global, and therefore the top guy gets more money.

CEO pay is always going to be transparent and competitive. Why would shareholders put up with paying a person $50 million when a better person only commands $5 million?

Also, a lot of people get mad at the fact we're paying a person $16 million to run a company with 800,000 employees, but are perfectly content with their favorite sports star making 3x that doing nothing but throwing a basketball through a hoop. Crazy world.

 

[OnePercenter]

Argentina is a basket-case.

Why would we want to follow their policies as you suggest?

So why not compare and contrast my plan with Argentina, or will that moot your post?

Large arbitrary increases in wages, large increases in pensions, government trying to hold down costs by fiat and capital controls are exactly what basket cases like Argentina and Venezuela have tried today and in the past, and the results are always the same. They are populist failures. In fact, capital controls are usually implemented because of your other policies as a response to the economic incompetence as capital flees the country.

In 1900, Argentina was the seventh largest economy in the world and Canada is the eighth. Both are economies are at the end of the hemisphere, both rely heavily on natural resources, both border large neighbors, and both had large influxes of immigration in the 19th and early 20th centuries. In fact, Argentina was a solid economy until 1930. Then, it slid into populism and autarky, turning inward to populist demagogues who promised "fairness" to "the people." Instead, they destroyed their economies with inflation and capital flight. Compare that to Canada, which is today the 10th largest economy in the world, with a per capita income more than double Argentina. It's fascinating.

Economic populists know neither history nor economics.

So no comparison.

 

[OnePercenter]

If we made the corporate tax rate 0%, imagine all the money that would flow down to employees in additional wages and benefits

Only if it was regulated to do so.

 

[P@triot]

That would be great! It would be an increase! Right now the government GIVES them money.

And why? Because greedy parasites like you support massive, unconstitutional government.

All of our problems will be solved when we return to constitutional government. But that's never going to happen because the greedy, lazy, Dumbocrat parasites prefer government handouts over work.

We worked our asses off in the 90's when there were lots of jobs. No such thing as jobs Americans won't do. Just jobs we won't do for slave wages and unsafe working conditions.

And there are a lot of people looking for work. Are you suggesting they don't want to work? I know people who aren't getting call backs from companies because they've been unemployed for over 6 months. Those people want to work if their unemployment dried up. But you guys sent all the good jobs overseas and now they are coming back but at $10 a hr.

Obama has extended unemployment to over 2 years now. Who in the world can't find a job in two years?!?! Answer: someone who simply refuses to work.

All of our problems will be solved when we take $ out of our politics. The system is so clearly corrupt and the rich have taken over our politicians. Look at Citizens United. Wake up. Stop fighting with other middle class Americans. The slave master is your real problem. You are one of us. Stop letting wedge issues like god, gays and guns twist your common sense. The rich own this country. Are you a Ron Paul fan? Then you know I'm right. Bankers own the Federal Reserve. Private bankers. Unions are not the problem. Labor is not the problem. We just cost too much and the rich in this country want to pay us less or have us allow them to ship jobs to mexico and then ship the shit back here and then you don't even want to tax the corporations? Wake up America!!!

I'm on record here over and over stating I loathe Ron Paul. I think he's a despicable quack who should have been locked up years ago for being mentally unstable.

I'm a constitutional conservative. Libertarians, sovereign citizens, and anarchists make me just as sick as marxists, communists, and socialists.

Now, to answer you misguided point, money is not the problem. Unconstitutional government is. If we returned to constitutional government, do you think bankers would own the federal reserver? I rest my case....

 

[OnePercenter]

YES! And my plan does just that! Plus, it puts billions of dollars into the economy!

-Raise minimum wage to $23.50/hr. Based on where minimum wage should be using 1970-2013 rise in food, shelter, and transportation.

-Eliminate all business subsidies (deductions/write-off’s/write-downs) except for employee expenses which are deducted dollar-for-dollar on all city, state, and Federal taxes and fees.

-Adjust Social Security and private/public retirement and pension payments using 1970-2013 price structure.

-Back down ALL costs, prices, fees, to January 1, 2009 levels and hold them for 10 years.

-Recall ALL off-shore investments tax free, and disallow any further off-shore investments.

Welcome to North Korea

Giving money back to the working class is bad?

 

[OnePercenter]

If we made the corporate tax rate 0%, imagine all the money that would flow down to employees in additional wages and benefits

The money not taken by the government would be spent--either by the corporations to expand or innovate, or by the employees to buy stuff.

The economy would boom like never before, all the pent up capital and demand would be unleashed, the money stored in foreign accounts would come home and be spent in the USA.

The problem you libs have with that is that momma government would not be in control of it. You enjoy being sheep, admit it.

Walmart had an effective tax rate for 2012 is 2%, yet they're the welfare queen of corporate America.

 

[OnePercenter]

If we made the corporate tax rate 0%, imagine all the money that would flow down to employees in additional wages and benefits

Would flow into the pockets of the 1% and China...

Totally wrong, Matt. Even you might get a better higher paying job. there would be lots of corporate investment capital to put into science and infrastructure and education.

WTF do you think the 1% do with their money??? just sit on it? NO, they SPEND it. When they spend it, jobs are created.

This stuff is not complicated.

It's not complicated. Reducing tax rates for corporations goes to the bottom line.

 

[bendog]

Absolutely, the 1% is just a consuming machine. Munch munch munch

 

[RandomVariable]

The corporations would be far more likely to put the money to use - they would have to, because their shareholders would appropriately demand it when the flood of NEW capital hits.

Of course the shareholders would demand it. Shareholders ALWAYS favor expanding the company to meet a nonexistent demand rather than dividends.

How about if Company A now has X more cash thanks (b/c a lower tax rate) and now have the ability to make their product cost 10% less. This lower price obviously makes the product more attractive, and now 400 people want to buy it instead of 100. Get it?

Demand is not static. You can CREATE it.

Yes, Company A (China) can make their product cost 10% less. And now 400 people (Americans) want to buy it. Unfortunately we appear to be trying to reverse that flow. I can name dozens of countries where the champions of industry are free from taxes and regulations, the company leaders are billionaires while the workers enjoy the benefits of "free enterprise". They are called Third World Countries. Anyone want to buy some diamonds?

 

[KevinWestern]

Of course the shareholders would demand it. Shareholders ALWAYS favor expanding the company to meet a nonexistent demand rather than dividends.

How about if Company A now has X more cash thanks (b/c a lower tax rate) and now have the ability to make their product cost 10% less. This lower price obviously makes the product more attractive, and now 400 people want to buy it instead of 100. Get it?

Demand is not static. You can CREATE it.

Yes, Company A (China) can make their product cost 10% less. And now 400 people (Americans) want to buy it. Unfortunately we appear to be trying to reverse that flow. I can name dozens of countries where the champions of industry are free from taxes and regulations, the company leaders are billionaires while the workers enjoy the benefits of "free enterprise". They are called Third World Countries. Anyone want to buy some diamonds?

Hey, it's all very complicated and there's a lot to it, however I'm saying that taxing corporations here at 35% or whatever isn't going to help anyone.

 

[bendog]

Absolutely. I think most progressive economists agree with that too.

 

[sealybobo]

And why? Because greedy parasites like you support massive, unconstitutional government.

All of our problems will be solved when we return to constitutional government. But that's never going to happen because the greedy, lazy, Dumbocrat parasites prefer government handouts over work.

We worked our asses off in the 90's when there were lots of jobs. No such thing as jobs Americans won't do. Just jobs we won't do for slave wages and unsafe working conditions.

And there are a lot of people looking for work. Are you suggesting they don't want to work? I know people who aren't getting call backs from companies because they've been unemployed for over 6 months. Those people want to work if their unemployment dried up. But you guys sent all the good jobs overseas and now they are coming back but at $10 a hr.

Obama has extended unemployment to over 2 years now. Who in the world can't find a job in two years?!?! Answer: someone who simply refuses to work.

All of our problems will be solved when we take $ out of our politics. The system is so clearly corrupt and the rich have taken over our politicians. Look at Citizens United. Wake up. Stop fighting with other middle class Americans. The slave master is your real problem. You are one of us. Stop letting wedge issues like god, gays and guns twist your common sense. The rich own this country. Are you a Ron Paul fan? Then you know I'm right. Bankers own the Federal Reserve. Private bankers. Unions are not the problem. Labor is not the problem. We just cost too much and the rich in this country want to pay us less or have us allow them to ship jobs to mexico and then ship the shit back here and then you don't even want to tax the corporations? Wake up America!!!

I'm on record here over and over stating I loathe Ron Paul. I think he's a despicable quack who should have been locked up years ago for being mentally unstable.

I'm a constitutional conservative. Libertarians, sovereign citizens, and anarchists make me just as sick as marxists, communists, and socialists.

Now, to answer you misguided point, money is not the problem. Unconstitutional government is. If we returned to constitutional government, do you think bankers would own the federal reserver? I rest my case....

I am all for ENDING long term unemployment insurance. I agree. There are lots of people staying on it as long as they can because its better to make $700 every other week for doing nothing than it is to go to work and make about the same for working 80 hours.

 

[RandomVariable]

How about if Company A now has X more cash thanks (b/c a lower tax rate) and now have the ability to make their product cost 10% less. This lower price obviously makes the product more attractive, and now 400 people want to buy it instead of 100. Get it?

Demand is not static. You can CREATE it.

Yes, Company A (China) can make their product cost 10% less. And now 400 people (Americans) want to buy it. Unfortunately we appear to be trying to reverse that flow. I can name dozens of countries where the champions of industry are free from taxes and regulations, the company leaders are billionaires while the workers enjoy the benefits of "free enterprise". They are called Third World Countries. Anyone want to buy some diamonds?

Hey, it's all very complicated and there's a lot to it, however I'm saying that taxing corporations here at 35% or whatever isn't going to help anyone.

Agreed that taxing at 35% is bad. But we are hardly taxing any corporation at 35%. America should be somewhere between a DRC (Democratic Republic of the Congo) and a Republic of Cuba. While the left and the right argue which side we are closer to we slowly, more or less, go over the edge of both sides. In both cases, Congo and Cuba, what is missing is the power of the people. It is the common American who has gotten this country where it is today. When the colonists decided to break from England it was, as Sallow stated, every man with a musket. Through exploring the West, a Civil War, the Industrial Revolution, two World Wars, a Great Depression in between, Vietnam, Information Revolution, Middle East wars, and now the worst recession since the Great Depression the American citizen has bore. If you're an American, you're a veteran. We need to quit talking about business this and corporation that. What is going to get us out of this mess is the American Citizen. He and she has never let us down before and they will not let us down now. They need the ability to work hard but work hard they will. It was a belief in the common man and woman that gave the founding fathers, and mothers, the courage to create a Democracy. That was no small gesture. It was a land full of immense riches. They could have very easily kept it for themselves. George Washington was flat out offered a position as ruler but he had fought will his fellow countrymen., the men who crossed the Delaware beside him. George Washington understood what an American would endure in the name of liberty and country. So when people today speak of the American citizen being unable and unwilling to bring this country back from near certain ruin the Founding Fathers would say, "The fruits of their labor are their own. Do not cheat those upon whose land you reap. Give unto them an unemployment insurance benefits extension."

 

[OnePercenter]

How about if Company A now has X more cash thanks (b/c a lower tax rate) and now have the ability to make their product cost 10% less. This lower price obviously makes the product more attractive, and now 400 people want to buy it instead of 100. Get it?

Demand is not static. You can CREATE it.

Yes, Company A (China) can make their product cost 10% less. And now 400 people (Americans) want to buy it. Unfortunately we appear to be trying to reverse that flow. I can name dozens of countries where the champions of industry are free from taxes and regulations, the company leaders are billionaires while the workers enjoy the benefits of "free enterprise". They are called Third World Countries. Anyone want to buy some diamonds?

Hey, it's all very complicated and there's a lot to it, however I'm saying that taxing corporations here at 35% or whatever isn't going to help anyone.

Tax rates don't matter, what you actually pay matters.

 

[Toro]

So why not compare and contrast my plan with Argentina, or will that moot your post?

Large arbitrary increases in wages, large increases in pensions, government trying to hold down costs by fiat and capital controls are exactly what basket cases like Argentina and Venezuela have tried today and in the past, and the results are always the same. They are populist failures. In fact, capital controls are usually implemented because of your other policies as a response to the economic incompetence as capital flees the country.

In 1900, Argentina was the seventh largest economy in the world and Canada is the eighth. Both are economies are at the end of the hemisphere, both rely heavily on natural resources, both border large neighbors, and both had large influxes of immigration in the 19th and early 20th centuries. In fact, Argentina was a solid economy until 1930. Then, it slid into populism and autarky, turning inward to populist demagogues who promised "fairness" to "the people." Instead, they destroyed their economies with inflation and capital flight. Compare that to Canada, which is today the 10th largest economy in the world, with a per capita income more than double Argentina. It's fascinating.

Economic populists know neither history nor economics.

So no comparison.

"No comparison."

Which is why those countries keep making the same mistake again and again and again.

They think it will be different this time.

 

[Political Junky]

WTF do you think the 1% do with their money??? just sit on it? NO, they SPEND it. When they spend it, jobs are created.

They sit on much of it ... squirelling it away offshore.