Bush wants to cut taxes again -- on corporations

[Voyager]

@John Mace

That’s a good idea, because the more comprehensive the tax is, the lower it can be and still raise the same amount of revenue.

I head a discussion of this idea on Forum once, and the representative of the retail industry thought it was a terrible idea. Senator John Breaux (my former Congresscritter) cut the legs out from under the fair tax guy on the subject of how the tax rate would be. Most numerate performance by a Senator ever!

It seems to me that anyone arguing that a tax cut would decrease prices and expand sales must admit that a tax hike on products would decrease sales, and cause contraction. I don’t know about anyone else, but high gas prices are no less painful after I get a raise than before. Don’t you think people would do without products suddenly 20 - 30% more expensive - even if they theoretically have 20 - 30% more money? It might do wonders for the savings rate, but not be too good for the retail industry…

[BrainGlutton]

@John Mace

Higher. The top rate was 91% in 1964. But not many people fell into the top brackets during that time.

And fewer still paid it, I’m sure – that’s why tax law is so damned complicated and baroque.

[amarone]

@Mosier

Cons - The US government might have less tax money to distribute.

Not necessarily. I work for the US subsidiary of a UK company. US corporate tax rates are higher than in the UK. Guess where we make most of our profits (and therefore where we pay the most taxes)? If the US had lower corporate taxes we would make more profit in the US and end up paying more US taxes. And we are just a little 100-person company - just think how the big boys will be able to manipulate profits to minimize taxes.

[Czarcasm]

Which “U.S.” corporations are we looking to help out here? The ones that have off-shore banking? The ones that have a post office box in a foreign country as their headquarters? The ones that take whatever advantages our government gives them, shuts down plants in the U.S., and reopens them overseas?

[smiling_bandit]

@Voyager

That’s assuming an elastic demand. For an inelastic demand, like for oil, outside of California at least, decreasing prices might not increase sales, so the tax cut will go into profitability. Can you show real numbers about how the tax cuts in the past 6 years have improved competitiveness? I’ll grant you that you can show how they have helped improve profits.

Unfortunately, it’s not really possible to quanitfy competitiveness, although I might dig up some information on a specific industry.

I didn’t bring up executive pay, for fear I’d be accused of hating business. But I have managed R&D.

[snip]

Now, if a company is starved for cash, then I’ll agree that there are probably a bunch of high ROI projects which don’t get funded. That’s not where we are today.

Of course not every company will make this choice. But it will be a choice they can take. They can also plow the money into expansion, debt repurchasing, whatever.

That’s something said by people whose projects which are unlikely to be rewarding say when these projects get shot down. A little scarcity is good for the soul. When I started working for the Bell System, most of the time we were limited only by how fast we could hire. That’s not a recipe for competitiveness.

As another counterexample, did the plethora of capital available during the bubble really help our competitiveness?

Sure. The tech “bubble” (and it wasn’t really a full-on bubble as there was a lot of real potential behind the hysteria) created lots of jobs and attracted lots of good investments along with the bad. Some of those companies are now global enterprises.

True with and without a tax cut.

It’s an accelerating factor. It’s not just the size of the economy in a fight, it’s the size of the fight in the economy.

Government spending decisions are not made solely for the benefit of corporations, but should be made for the benefit of the country as a whole. (I’m not surprised we’ve forgotten that over the past 6 years.) That is not anti-business, since often pro-business strategies do help lots of people. And even if you think feeding starving children is a bad idea if it means higher corporate taxes, consider the impact of a reduced deficit on the business climate as a whole.

That’s my point. I’m saying this is honestly a no-brainer. In terms of tax revenue, you’re not really losing anything. Anything which increases economic gains is a huge win for anyone in the nation. And as I pointed out, if you’re worried about your tax income, it’s the tax system which needs overhauling. Corporate taxes are a loss to everyone.

[/quote]
Well, that contention is what we’re discussing, isn’t it? Say we have a business headquartered in New Jersey, but all the manufacturing and most of the jobs have migrated off shore. Let’s say they’ve done that for sound business reasons, so I’m not objecting. What advantage does lowering their taxes have for the region? They might hire a few more CPAs and marketers, but most of the expansion will take place overseas - even assuming lower taxes causes an expansion. The government gets no return, since the corporate taxes are reduced. They might make a few bucks on taxes on CEO salaries and options. The region doesn’t benefit. Would lower taxes mean that Mfg and R&D would come back to the US? Hell no, the ROI for moving them still holds.
[/quote]

Now you’re getting into some complicated issues, but the same holds true. First off, your already assuming a loss. The jobs are all moved overseas, which is rarely true except in the case of a holding company. So you’re not losing anything there. Second, the corporate taxes are going to be nil. They’ll hold them in foreign banks by the foreign companies just to avoid double taxation. Why transfer money to the US when you can just move it around your subsidiaries? In this case, any new jobs are a win for the US of A. Worst case scenario, they haven’t lost anything. They’re not AFAIK liable for anything they earn overseas as long as it stays overseas.

Why not? Even if marketshare doesn’t change, fewer taxes means better earnings, so stock prices would go up to maintain a constant P/E. I forget the name of the earnings after taxes metric - that wouldn’t change much it’s true.

My argument here is that long-term stock prices will tend to be driven by the overall health and vitality of the company. In the short term stock prices will boom. In the long run, the gains will be competed away. Stronger companies will win (see the comments about competition, above), so there will be some gain. But I suspect it won’t be tremendous and certainly won’t change people’s lives.

The American automakers complain that they’re at a competitive disadvantage due to Japan’s health care system. Low wage manufacturing we’ve already lost. I don’t know the health care systems in China and India - they might be government run, or the workers might be SOL.

Well, right there note that the carmakers are also much more efficient in their American operations, too. The former Big Three (now the shrinking three) aren’t exactly the most uninterested parties. China and India do have mass coverage but terrible systems generally. And given that most companies want to go to even less healthy countries…

[Voyager]

@smiling bandit

Unfortunately, it’s not really possible to quanitfy competitiveness, although I might dig up some information on a specific industry.

That would be good. Considering just about everyone who is in favor of tax cuts uses the competitiveness argument, it will be nice to have some evidence for it.

[quote]

Now you’re getting into some complicated issues, but the same holds true. First off, your already assuming a loss. The jobs are all moved overseas, which is rarely true except in the case of a holding company. So you’re not losing anything there. Second, the corporate taxes are going to be nil. They’ll hold them in foreign banks by the foreign companies just to avoid double taxation. Why transfer money to the US when you can just move it around your subsidiaries? In this case, any new jobs are a win for the US of A. Worst case scenario, they haven’t lost anything. They’re not AFAIK liable for anything they earn overseas as long as it stays overseas.

Well, I specifically said what jobs would remain. I know pretty much all the manufacturing jobs in my company went to contract manufacturers, mostly offshore or in Mexico. Most of the designers are still here. There are big advantages to being a US company, and manufacturing offshore does not imply offshore subsidiaries. When they outsource CEO jobs to India, then we’ll see.

Tax law I don’t know, but I don’t think we want a race to the bottom for taxation - though companies would love it, no doubt.

Well, right there note that the carmakers are also much more efficient in their American operations, too. The former Big Three (now the shrinking three) aren’t exactly the most uninterested parties. China and India do have mass coverage but terrible systems generally. And given that most companies want to go to even less healthy countries…

I agree that American car companies screwed up - and are still screwing up - in lots of ways. But spreading the insurance load would help competitiveness far more than reducing taxes - and they just started making money anyway.

[smiling_bandit]

@Voyager

That would be good. Considering just about everyone who is in favor of tax cuts uses the competitiveness argument, it will be nice to have some evidence for it.

I’ll look into it, but it’s gonna be a while, unless you’re willing to let me use counter-examples. Take a look at yachts, for instance. In the olden days, America had a big yacht industry; all the New York set of millionaires and all had them. Unfortunately, people started tossing consumption taxes out, and the industry was unable to keep up. They lost business to foreign competitors or wound up moving to Bermuda themselves.

and manufacturing offshore does not imply offshore subsidiaries.

Wy not? I believe that most nations require a local presence in some form, even though ownership may be in foreign hands.

Tax law I don’t know, but I don’t think we want a race to the bottom for taxation - though companies would love it, no doubt.

Why not? If, as I believe, America would actually be stronger for less taxation (probably more revenue for the government in the long run, too) and we can gain a competitive advantage out of it, why shouldn’t we?

I agree that American car companies screwed up - and are still screwing up - in lots of ways. But spreading the insurance load would help competitiveness far more than reducing taxes - and they just started making money anyway.

They’d love that. Look, they wen out an accepted a hugely bad deal when times were flush and now would love to dump it on the public at large. The government’s partly at fault in the deal, too. Sure, for them it would help more than reduce taxes. That’s what’s sticking them.

But (a) I don’t want to the government to have almost anything to do with my healthcare. I dont’ want anyone else to pay for mine coverage. And (b) there are compelling reasons not to have universal healthcare. It’s an entirely seperate issue, and trying to pretend that it’s part of this debate is disingenuous.

[Ludovic]

Corporations are owned by people. People who might own substantial parts of the company, enough to direct the actions of that corporation. Perhaps to direct that corporation to save up money without making capital investments or dividend distributions.

Why should that money, which is growing tax-free and could be distributed to them at any time, be treated differently than money which is in that person’s bank account?

OTOH, if there were no personal income tax either, that would be a different story, if corporations pay sales taxes on stuff that they are the end user of rather than raw goods or reselling.