Liberals and Conservatives Agree: Abolish the Corporate Income Tax

So you don't know how it works? No shame on that. Most dudes on the Internet don't know how that works...you've never owned a business.. Fine by me.

 

I don't see what any of this has to do with what I'm saying. I don't know anywhere near as much as you do about the specifics of the tax code, but I do understand how the cost of doing business influences production and investment.

1. 11% of federal revenues come from the corporate income tax--this is not an estimate, it is the actual amount of money received. The effective rate is irrelevant to the larger point. Some pay more, and some pay less, but someone is paying that 11%.
2. 16.5% of federal revenue comes from the employer's portion of the payroll tax.
3. Between these two sources, the government is getting 27.5% of its revenue from corporations and other businesses.
4. The total, between those two forms of taxation, is $858 billion.

I am suggesting that removing this tax burden would have a positive effect on employment in the United States. I am arguing that it would incentivize more domestic production and FDI.

Are you arguing that shifting this tax burden wouldn't have an effect on employment in the United States?

 

Are you claiming general taxes would be more intrusive than our current regime?

 

I am sure that one could find a couple economists that agree the moon is made of green cheese if one looked hard enough.

The idea that decreasing corp income tax to zero is a magical fix for the economic issues facing this nation is a false illusion. You could give money to corporations (never mind tax them) and they still would not be able to compete with companies using slave or next to slave labor in other counties = no jobs here.

 

There has to be a quid pro quo. As a hard-core leftist (not a liberal) I would have no problem eliminating the corporate tax, with the following provisos:

* End all corporate involvement in politics, including direct donations, PACs, foundations, think tanks, and the like. No exceptions whatsoever.
* Stronger regulation of monopoly practice. This problem is endemic in the media and telecommunications.
* Stronger regulation of systemic risks involved in financial speculation and shadow banking.

The problem is not that corporations make a lot of money. The problem is our system that allows corporations to buy political influence as a means to enhance economic dominance.

 

Yes. It would not.

For starters, how would the $858 billion be recuperated? We currently have four sources of tax revenue: personal, corporate, excise, and estate/gift. If you eliminate the $858 billion from corporate income tax, very little would be made up in personal income, excise, and estate/gift tax schemes. With personal income, assuming that everything remains the same for the tax scheme for personal income tax, wages might go up slightly, with more people able to afford certain items, like tires for instance, where an excise tax is charged. This would cause huge deficits and that is problem #1 assuming if government expenditures remain the same.

But the main problem that you have is how to pay for SS and Medicare, which is primarily paid for by the payroll tax. That money would have to be made up somewhere. Even if you eliminate SS and Medicare as we know it, you still have to pay, in upwards of 40 years or so, Medicare and SS (Retirement and SSDI) to the payees. That is problem #2.

Corporations, especially large, Fortune 500 companies, are huge institutional investors to the stock market. Although there is no capital gain tax rate that is lower than ordinary income tax rate for corporations, there is that specialized deduction for dividend received. This is a huge incentive for corporations to invest in other corporations while receiving a dividend from the subsidiary or joint venture. Eliminating the special dividend receive deduction would have disastrous effects on corporations wanting to invest because there is no incentive. It would actually cost the corporations more to invest in those stocks in Section 404 compliance costs than anything else. That is problem #3

Prices, as a result of corporate tax elimination, would actually increase because of marginal effect of wage increase from the corporation. This in turn would have very little net positive effect on the economy while inflation would increase slightly and wage increases would marginally improve. Not the type of effect I think you would be hoping for.

 

Why do you think wages and prices would go up?

 

Wages would go up because of prices. Prices would go up because of the increased disposable income and the market would charge the highest price the market would bear.

 

Wages increase for only one reason, business has to bid for labor. Extra money has nothing to do with it. Prices increase for only one reason, there's more profit to be had.

 

Using the corporate tax to fund unemployment compensation is much simpler than our current regime.

 

Wages can go up for a variety of reasons, but prices go up because the market shows that the consumer has the ability to pay for the increased price.

 

We were talking about wages. Wages go up for one reason, they have to due to bidding. As for increased price, you're wrong on that one too.

 

Back to the OP.
The last time the US gave companies a tax holiday for repatriated overseas earnings they repatriated about $1Trillion which produced a net total of -20,000 jobs.

So, the idea that giving corporations even more tax breaks, and that will result in them creating more jobs does not conform to the present reality that we live in.
It is a mythological construct, born in the mysticism of hysterical Devonian Economics (Devonian as in devoid of fact) with a complete disregard of how economies actually function.

 

No, that is not the case. It really depends on who or what is pulling or pushing for the wage increase. Wages can increase by law, by industry standard, by stock options exercised, etc.

But for prices, it goes up because of the market. For instance, most people do not realize that prices actually go up on the "no sales tax holidays." Most people do not realize because of those discounts, which are less than when the sales tax was required, but don't realize they are actually paying more for the shirt or other items than they realize. the reason is because the market knows the consumer will bear the cost. Hence, why the prices always increase when more disposable income is realized.

 

Lot's of people realize these things and if you want to conflate the cost of doing business with the market feel free.

 

Already has been done. Here you go.

 

Nonsense.

 

I told you where I would get it and exactly how much it would generate. I also never said anything about a specific tax break that corps were getting on dividend interest.

High wages seem to work well for professionals, and I don't see anything wrong with wages increasing for the little guy, so I reject this argument from the outset. If our economic system cannot thrive without keeping people at the bottom broke, then perhaps we should consider communism. I don't beleive that, but it certainly isn't aceptable.

I don't think cost of living adjustements go up at the same rate wages do, in terms of their effect on relative purchasing power. I think that if everyone's wage went up $3 per hour, at the bottom at least, the cost of living for those people would go up by less and would not make up the difference.

 

I still want to know who these 'liberals" are you mention in the OP.

 

I think you are not understanding that your proposal would not make up for the lost revenue from corporate and payroll taxes. Wage increases are not going to be significant enough where the tax revenues received would match the revenues lost. In addition, higher wages means higher prices, which means higher cost of living. The net result would eventually be a net negative.

For minimum wage, I do agree that the "little guy" needs assistance. But my philosophy is not increasing the minimum wage per se, but to improve job skills of those who are on minimum wage. Those improved job skills would mean a higher wage for that person regardless of what the minimum wage is.

 

I told you exactly how much it would cost and exactly where the money could come from. It's in the original OP and in numerous responses to other posters. $300 billion would need to be cut, in addition to the taxes I suggested, to make it revenue neutral.

Higher wages means higher prices, but it doesn't mean that the higher prices are more than the wage increases--this simply isn't true. If a person is making an extra $400 a month, the amount that he spends on the basics is not going to go up by the same amount because other people got raises. It's also heavily variable, depending on the industry in question. If waiters started making $15 an hour, the cost of eating out would go up dramatically, no doubt. Industries where labor costs are a large percentage of the cost of production would charge higher prices, though not necessarily enough to offset the wage increase. Additionally, a good percentage of spending is discretionary, so people wouldn't be forced to keep the same spending patterns as before. This idea that we need to keep wages down is horribly unfair to those who aren't making a killing. Why aren't we trying to lower their wages? It's costing me too much, isn't it?

I'm not advocating for a minimum wage, but I am saying that we have a responsiblity to our people to make sure there are good jobs available for those who want them. Right now, that is not the case.

Improving job skills only works assuming there is a shortage; otherwise, it would only lower wages for those already there.

 

Still nothing

 

Nice response poseur.

 

Have you considered how much social assistance programs could be reduced when fewer people are availing themselves of government assistance programs because they now make enough to actually live on if the minimum wage is raised to $15 an hour?

Perhaps you should because government spending could be reduced by a few hundred $Billions, maybe as much as the $300Billion in cuts you propose.

The idea that raising the minimum wage to $15 an hour over a few years will result in rampant inflation is just ridiculous Devonian economics. What will happen is that competition will force businesses to keep their prices as low as possible regardless of changes in their expenses. Inefficient operators will be squeezed out as their competitors strive to increase the efficiency of their operations. Entrenched operators who kept competition at bay only through their low labour costs will be challenged by new competitors as higher wages erode the barrier to entry and entice operators who feel they can make a profit on their investment at the new wage rates. Prices will rise a little, but not nearly as much as if the price of oil goes back to $100.

Higher wages do not create price inflation. Wages are a reflection of productivity. From the 1840s to the 1970s real wages tracked closely with productivity increases but since the 1970s real wages have declined while productivity has increased by about 50%. This decline was created by the minimum wage failing to increase with productivity growth, which has depressed the entire wage curve for generations, generations that have experienced a massive increase government spending on social welfare programs to help "the working poor".

This is really just a program to foist as many business expenses as possible on to the people through their government in order increase the profits to business owners. It is no wonder to me why all of the income from productivity increases over the last 30 years have gone to the top 10%.

I resent this. I do not agree with the proposition that my taxes should be spent to guarantee the profits of any business. If a business can only profit by paying wages that require its workers to seek government assistance it does not deserve to be in business. The entire concept of incorporation was predicated on the proposition that corporations "operate in the public good". I believe that businesses and corporations should be held to this quite minimal requirement and those which do not be liquidated at no benefit to their shareholders.

Personally, I would gladly pay a few dollars more for my meal in a fancy restaurant or even a dollar more for a happy meal if I knew the person serving me was not getting any government assistance.

How is that not fair?

 

I believe the corporate income tax should fund unemployment compensation on an at-will basis in our at-will employment States; that way, if the right wants fewer Persons to be moochers, they can blame Corporations for not creating enough jobs.