I think you should assume at least minimal levels of competency and try to see what they COULD be trying to say rather than looking for the most nonsensical way of readin someone’s post. He wasn’t complaining about corporations being taxed on net income, he was complaining on people (allegedly) being taxed on gross income.
I understand the distinction that we have made between personal consumption and business expense but we do allow businesses more deductions to businesses than we allow wage-earners.
Perhaps you shouldn’t use Fox as a filter for the liberal point of view.
For the record, my actual position on taxation goes something like this: there is no corporate tax, and all individuals are taxed the same way, under a progressively-structured negative income tax scheme (“income” is not just cash, any compensation is income). Value-added taxes are not out of the question but sales tax needs to go, too. (Sorry states!) My reasons are relatively simple
Taxing savings encourages spending. If your savings are going to be taxed away anyway, might as well get something for it and spend instead of save. That is not a sensible tax policy. Ideally we’d adopt a non-distortive head tax but this is just wildly impractical so I think a revenue tax is the next best thing, so long as it is applied consistently.
Corporations are not people and their primary responsibility is to help promote free trade. Taxes have a well-known effect on discouraging trade and I’d rather the rate be zero or almost zero. This goes doubly for sales taxes. The research I’ve read on VATs is more promising, though.
Negative income tax schemes avoid welfare traps very well.
Well, lets say I also make the widgets and have pretty much the same cost structure you have. I decide to lower the price by $.30, and keep my margin the same. What do you do?
The price is whatever the market will bear, assuming someone can make it for that price. Sure, some items will sell for below cost, but you can’t have an entire economy run that way.
It’s also makes our products more competitive for export to countries with lower corporate tax rates.
If you believe in the theory of costs being passed on, the corporate rate should have no net effect. The government is getting its tax money from somewhere. If it is people, then they’ll demand higher salaries to cover their taxes, which will raise prices. If it is corporate taxes, then that will raise prices, too. Unless you think there are costs which can’t be passed on for some reason, then it doesn’t really matter who is taxed what; it matters how efficient your government is with the money it collects.
I don’t mind a company expencsing out COGS or payroll when calculating the taxable profit. I do mind them expensing out Lear Jets, stadium naming rights, retreats to Burmuda, etc. The problem is that there is a lot of grey area. What do you do with the expenses associated with a new factory or an advertising campaign.
The real problem is the differences associated with what individuals can expense out and companies. For example, I need a doctorate to teach in a university. As an individual, I cannot expense it out as a a work expense BUT if a private (to keep it simple) university hired me and paid for my doctorate, they get to expense it out of their profits. Can I expense out the cost to drive to work? No, but I believe a company can if they provide a car to an exec.
Then change the capital gains rate for individuals. What’s that have to do with how corporations are taxed?
So which is it? People and corporations should be taxed the same way, or not?
You’re pretending that it’s the percentage that’s important instead of the absolute dollars being paid. That’s how you maintain the fantasy that poor people are getting screwed on taxes like the rich are making out like bandits.
I said it wouldn’t be practical to tax gross revenue in the same way as wages. Gross revenue, at least on a financial statement, refers to total revenue over a certain period of time.
Yes, if you want to tax the revenue stream directly you could make corporations pay corporate income tax at the point of sale. What would happen is a $1 apple would cost 1.35. .05 for sales tax passed on to the consumer (and collected by the business to be given to the state assuming 5% sales tax) and $0.30 for corporate income tax, passed on to the consumer.
This is actually a good example, because it shows what a corporate income tax really is: an excise tax that will be paid for by the consumer. (Not all consumers are individuals, some companies don’t even sell to individuals, but all corporations ultimately are doing something that at some point provides either a product or a service that has value to some individual somewhere and corporate excise tax just increases the costs for that individual to receive the service or good.)
You’re confusing issues here, the corporate income tax rate has nothing to do with Mitt Romney or Warren Buffet paying sub-20% effective Federal income tax.
Taxes are used both to generate revenue and to incentivize and disincentivize behavior. Excise taxes on cigarettes are both good revenue and part of disincentivizing smoking. Some wonder if it really is that, and complain it’s just away to milk more money out of smokers, but that intent is clear.
An excise tax on corporations (which is all that an income tax on corporations is) simply results in fewer transactions being made. It isn’t “just” passed on to the consumer, it is passed on to the consumer because a corporation won’t operate at a loss and each industry has a profit margin that will make it worthwhile to operate in the industry, and while there will be differences of opinion based on business strategy about what profit margin is acceptable (meaning some businesses will accept a lesser margin than their competitors, see Costco vs. other warehouse stores) in general costs that would dramatically alter the profit margin will simply be passed on to consumers by most companies. However, an excise tax can still be (and is) bad for the corporation even though they aren’t eating the direct costs. Their product is now more expensive, which means they will sell fewer amounts of the product (the $1.35 apple will not sell as well as the $1.00 apple) and their total revenue will decrease.
So a corporate excise tax isn’t putting it to the man and getting rid of Wal-Mart’s “evil” profit margin. Instead, it is reducing Wal-Mart’s total gross revenue which means less money for expansion, less money to pay employees and etc. Or, cynically if you think companies just lie and deflate their profit margin, it means less total money to lie about and write off as fraudulent expenses (and thus less money to give out as golden parachutes and etc.) But the money isn’t going to go towards the workers, the money just doesn’t “go” that’s why excises taxes cause a deadweight loss.
In the most idealistic scenario, corporate tax deductions are designed to incentivize things other than just giving the money back to investors as dividends. Not necessarily because dividends are bad, but because maximizing profit is the natural goal of a corporation it is seen (by some) as desirable to try and “force” corporations to invest money in training, to invest money in benefits packages and etc…and by making it to their financial benefit you can “short circuit” the native profit motive of corporations and cause them to do things that are good for society (have employees with good benefits packages and training opportunities.) Whether or not such tax incentives are appropriate government policy, and whether tax incentives even really are used that way (versus that just being the “excuse” and the real use of tax incentives being some evil capitalist corruption inserted into the tax code by Demonpublicans) are matters of opinion mostly influenced by your political bent.
The thing people are missing is corporations aren’t real people. I don’t want to open a debate on corporate person hood. I’ll settle it, though: corporate person hood is right, it is necessary, it is universal in almost all of the world, and it is not injurious to society.
But, the legal doctrine of corporate person hood doesn’t mean corporations are real people. At the end of the day, all the money that moves through a corporation is ultimately going to end up as some form of personal income. Every dollar that Wal-Mart collects ultimately becomes income for someone. When it goes back out as wages, that’s a direct form of it becoming income. When it goes back out as Wal-Mart buying things, then it becomes revenue for the company/person that is selling that thing and eventually becomes income to people. Even when Wal-Mart basically keeps it as liquid assets or cash or saves it, it eventually becomes some sort of income (although savings is the closest money can get to being put to sleep). The only exceptions would be money that Wal-Mart takes as cash and buries in the earth, or something.
So realistically this idea that you can tax Wal-Mart corporation and “stick it to them” without taxing people is fallacious. Generally speaking I think the people that feel the effects of a corporate income tax are more likely to be lower and middle income than high income. The best way to tax high income people is by taxing high income people.
And if you tax consumers, they demand higher salaries and that’s passed on to corporations. So so so.
I don’t agree. The reason the wealthy don’t pay high taxes and the reason big corporations don’t pay high taxes are the same. But it’s not in the tax code. As far as the tax code goes, of course, you are right.
This is true, and this is why taxes on savings (net revenue, profit, whatever you wish to call it) has its own problems. The problem with taxes that aren’t head taxes is that they can be avoided. “Clever” policy wonks then turn around and say that we can use this expectation of avoidance to encourage and discourage behavior. But I think this is tangential.
All avoidable taxes have this effect, full stop. There’s nothing magical about taxing corporations in lieu of people, or vice versa.
You read a specificity that is non-existent. Everything but a head tax has this deadweight loss. (As does monopoly pricing, for what I think are interestingly similar reasons.)
To a degree, yes. But either way you’re raising taxes on individuals, and you won’t ultimately just create more wealth by raising taxes higher and higher.
Right, but you have to question whether you want more deadweight loss or less.
All taxes eventually are paid for by individuals. If you want to raise taxes on corporations because you think individuals pay too much, then it won’t do you much good. If you feel corporate tax is unfairly generous and personal taxes are unfairly harsh, I ask how you would rectify it? Taxing corporations just like people just means the accounting looks different, but if you keep the overall tax burden for society the same, it means each individual has a certain tax burden. It doesn’t really matter if they are paying that burden through withholding or at the cash register, they are paying that burden.
If you want to raise taxes on corporations because you think it will close budget gaps, it can do that in some limited sense, but in the larger sense the more taxes corporations pay the less people who work for corporations earn so the less income tax receipts so you can only close budget gaps so much through corporate taxation alone.
But ultimately taxation comes down to this:
Society has to pay taxes to maintain certain government services. If you don’t pay enough, you run deficits and public debt is created. If too much deficit spending occurs it can cause serious problems for the economy as a whole.
Everything else is all water under the bridge. If you want 300 million Americans to pay $3 trillion in taxes then it really doesn’t matter if you get it from them through capital gains, income, corporate excise, sales, tariffs or etc.
If your goal is for the wealthy to pay more relative to the poor, the best single way to do that is to tax the wealthy on their income directly.
Figure 3, page 51. Note the charitable giving at all levels going up starting around 2000. As the tax rates went down. Also note that the giving is measured as percent of income, not in absolute terms, so the relative boom or depression at the time does not explain it directly.
Not so much a question of whether or not corporations are people so much as a question of whether or not they are citizens. I’ve no doubt their executives all proudly wear their flag lapel pins, but when I read about corporations who have massive profits and yet manage to pay but niggling taxes, and in some cases actually receive bonuses and subsidies, one has to wonder.
But they are multi-national now, aren’t they, unburdened by parochial loyalties to any particular nation, they are free to worship at the altar of the Free Market, blessings and peace be upon it. Haliburton leaps to mind, or slithers.
Certainly they have the rights of citizens, they can petition for a redress of grievances. My understanding is that they are quite vigorous in their pursuit of that particular civic duty, fostering warm and friendly relationships with our nation’s lawmakers. Perhaps it is regrettable that they cannot actually vote. I certainly don’t regret that, but perhaps…
This is some phantom of a cartoon liberal you’re arguing with because I don’t know anyone at the dope who thinks you can create wealth through taxation.
I don’t have to question that. I would like to question distortions brought about by creating classes out of whole cloth from tax legislation. If we can rectify that, then we can discuss how much deadweight loss we’re willing to live with.
I gave my sketchy proposal above. Mysteriously, it looks a lot like one you mentioned in a different thread.
Absolutely! Which is why it is bad enough to argue over corporate versus individual tax rates without even mentioning the ridiculous level of distortion in behavior due to current regulation. Corps are encouraged to spend, because they’re going to lose their profits to taxes anyway. Poor and middle class are already overspending, even giving them tax shelters amounts to nothing. And the investment class is living an extremely charmed life.
So long as you are consistent in how you get it, I absolutely agree, see my response to John Mace above. But things are different under our current system, driven by endless wonkism in favor of the very wealthy—wealthy individuals, and wealthy corporations.
Unfortunately the people in charge have also decided what “income” really is, which is the barrel we’re currently pickled in, and what started this whole conversation.
Seriously? Your argument is that the paperwork wouldn’t be worth it so we shouldn’t give it to them?
Eris is arguing that stuff like RENT and GROCERIES should be deductible. I don’t necessarily agree but these can be significant amounts.
And a sizable population pays a lot.
I call bullshit. That is not how the economy works.
Companies don’t pass through tax savings unless they have to nor do they pass on tax costs unless they can. Taxing corporations taxes shareholders.
If you want to extrapolate beyond that, you might as well say taht atxes on wages is actually a tax on employers because the employees pass on the cost of the income tax onto their employers (who then pass it on to consumers who then pass it on to their employers, ad nauseum).
You can make an argument for reducing corporate taxes and I am not entirely averse to the idea (although I can tell you for a fact that many corporations are) but I don’t think that increasing taxes on net income is going to make corporations make things more expensive. They will maximize profits considering taxes are paid on net profits, it doesn’t affect prices the same way as a increase in a cost of production.
However, I do agree that if you want to tax high income, we should tax high income. But, I don’t think that is what eris is saying.
A lot of this is metaphysical tax talk but:
I think some people have been trying to tell you that the standard deduction is a proxy for all the things you are talking about, of course this is not entirely satisfying because those who itemize are not able to deduct the sort of things you are talking about and frankly we do not have a standard deduction that approximates the level of overhead and that we think a corporations should be able to deduct. We let them deduct million dollar a year rent on madison avenue without regard to whether we think these lavish accomodations are necessary to the production of income, they spend it on a permissible category of expense so it is therefore deductible.
However, we have long distinguished between personal consumption and business expense. A college education is arguably amortizable over a career and my commuting expenses are inarguably a necessary cost of earning my income but we do not allow ordinary and necessary expenses to individuals where we do permit it to businesses.
Theoretically I could create Damuri LLC (put my parents on teh baord of directors) and mow lawns before I go to college, borrow money from my parents to pay my tuition, provide education to sole employee (approved by the board of directors), pay for housing and food and all sorts of other stuff away from home (deductible if sufficiently far enough away from home and as a condition of employment), buy clothes and pay for rent away from my home base (parent’s basement) collect the salary (assuming I can get an employer who is willing to hire my LLC rather than me personally), pay my expenses and pay taxes on the amount that I distribute to myself.
But somehow I think the IRS might not be happy about this. And there is also the issue of getting an employer to go along with this risky tax strategy.
I don’t believe the sedond buyer pays a sales tax in Virginia. They pay a transfer and recordation tax but maybe thats the same thing in your book.
To be fair, with all the deductions and credits and exemptions, we have effectively given everyone a 30K or so exemption (WAG). Of course someone who makes 500K and spends 120K on rent might not think a 30K effective exemption is very fair but that’s what we have.
Of course there are distinctions between people and corporations. Citizens United might have elimianted some of those distinctions but a corporations is jsut segregating off that peice of your tax return that in engaged in a business onto a different tax return, (with different rules).
So how do you feel about Citizens United?
Corporations try to maximize profit and it is not clear which direction production would move in the face of increased taxes, if it would move at all.
An excise tax on "“net income” Umm thats called an income tax.
Look, man, I’m not going to recap the thread for you. eris is clearly comparing corporations to poor people. CEOs don’t even enter the discussion, since CEOs are not corporations.