You know, when you posted a link to a math-dense NBER working paper, I thought you were a serious guy. I had an idea from undergraduate classes that the substitution effect outweighed the income effect, but I wasn’t married to the idea, and if you had presented a paper that said I was wrong, I would have said “huh, guess the income effect dominates,” and moved on with my life. Since I thought we were in a serious discussion I actually took the time to read the paper you linked to. I thought it was funny that the paper contradicted your claim, but it was a complex paper, and at first reading I wasn’t sure myself how they constructed the price variable.
Now it’s become evident that you didn’t even read the paper, you just linked to it for the pretty pictures, and you don’t even understand those. You’re even flat out ignoring the entire left half of the pretty picture. You’re not in this to understand what the evidence shows; you’ve decided in advance what the result is going to be, and you will only accept a result that’s in line with your political beliefs, facts be damned.
See, this is the kind of cite you should have given in the first place instead of an NBER working paper. It’s complete crap that wouldn’t get a passing grade in a decent undergraduate program, published by a organization that’s pushing political beliefs, written by a couple of individuals with no academic papers to their credit. It makes claims with no evidence to support them, makes egregious data mistakes and performs a clearly stupid analysis. If you had linked to this cite in the first place (instead of the NBER working paper) I wouldn’t have made the mistake of thinking you were a serious guy.
I don’t think he was proposing that. He was using a backhanded way to ask why corporations get deductions where living breathing human beings would not. I tried to answer him but the distinction starts to get metaphysical at some point.
Well, I could just as easily turn around and say that the vast majority of income taxes end up falling on the back sof employers who must increase their labor costs to provide their employees with enough after tax income to justify their continued labor. WTF is the difference between the two?
Ultimately the person paying the tax is burdened with that tax (in this case the shareholder or owner of the business), if they can extract more elsewhere thats fine but the businessmen I know would have extraced that extra money before the tax if they thought they could get it.
Bullshit.
If markets operated perfectly such that only optimally efficient companies existed and they all operated at profit margins that approximated their cost of capital plus a premium for their junior position to debt then sure. A tax would only initially be borne by the shareholder who would suffer a reduction in share price so that their shares now yielded the required yield. And if the markets were in fact as seamlessly efficient as Mankiw posits then sure any new production would come at the expense of lower prices paid to suppliers and labor or higher costs to the consumer… eventually. But those higher costs would lead to higher labor costs, etc and would ultimately be absorbed by inflation. This is bad for people who have wealth but OK for people who earnt heir income.
Its complicated and while many on the left don’t pretend to understand its imlpications the right thinks they can distill this complexity into a few pithy bumper stickers.
Its a distinction without a difference. however they started, they are now an income tax.
I don’t think thats what he was talking about at all. He doesn’t want to tax corporations on gross income, he wants individuals to be able to deduct more of their cost of living.
Yeah, I don’t think his ideas work either. Don’t tax you, don’t tax me, tax that man behind the tree. Ultimately, sure all taxes are paid by people. But which people.
I can go through my logic but ultimately taxes should be borne by everyone but overwhelmingly by those who can most afford it.
I don’t know if this got lost in my disjointed posts but:
"The classic definition of income is consumption plus savings (which can be negative).
A corporation doesn’t have consumption the same way that person does. They don’t need food, clothing and shelter, everything they do is to maximise profits. To the extent that executives have coopted some value in the form of lear jets and country club memberships, that is probably consumption on the part of the executive and therefore their income."
So with a lack of consumption to fill out the equation, corporations are basically left with nothing but net savings to tax.
A lot of the disconnect you see is the tax code giving people a break when they receive in kind compensation from an employer but do not giving the same break when they spend the money themselves (classic example is health care premiums). Why should corporations be able to provide compensation in the form of health insurance without taxing the employee on the received benefit where the same employee would not be able to deduct the health insurance if they bought it for themselves? Is the answer to make health insurance premiums tax deductible for everyone or to make it taxable for everyone?
Same can be said of company cars and all sort of other discrepencies you might see.
I didn’t miss it, I was just trying to figure out what you meant, since every corporation spends a lot on such items. They need a place to conduct business (shelter), they purchase food on behalf of their employees on business trips (food), clothing I guess happens to not really apply in most cases but that’s pointlessly specific.
This “lack of consumption” thing seems completely wrong. Do corporations buy durable goods? Yes. Do they buy services? Yes. Do they buy non-durable goods? Yes.
Sounds a lot like consumption to me.
They shouldn’t.
It’s totally arbitrary which one you choose, but you should choose one or the other.
Why does it need to be consistent? If you don’t care that it’s fair. Governments don’t need to be fair or consistent in their tax policy…they just have to raise enough to keep the lights on.
Why does anything need to be anything? The point of consistency is to avoid special treatments and strong-arming market behavior through tax policy. I don’t mind government intervention, and I’m not afraid of things like carbon tax to guide policy, but special treatment for non-special entities is unsound. 15% rate on dividends—why? Income is income. Compensation is compensation.
“Okay.” I don’t think you understand basic tax incidence, and since I’ve cited a well known Harvard economics professor (who is not known for being right-leaning at all) and you’ve really done nothing but say “nuh-uh” I’ll not really argue that point any further. (This isn’t a blind appeal to authority, but you don’t know my authority and I don’t know yours, so I went to an outside authority of some credibility to use as supporting evidence.) But I’ll say that it is really irrelevant to our discussion.
Presume corporate income taxes mostly just hit shareholders or the wealthy. Don’t you still think the most efficient and effective way to tax shareholders and the wealthy is to tax shareholders and the wealthy? There are direct taxes you can levy on shareholders if that’s where you want your revenue coming from (in various forms you can tax stock appreciation, dividends, stock transactions etc), and a properly constructed income tax can tax the wealthy far more effectively than any other method because it is directly targeted at them. (Things like luxury taxes have proven ill designed at taxing the wealthy.)
And I want to own a castle in France, my own private spaceship, and a mountain of gold. But those things cost money and I don’t have enough for any of them. The government is operating at over a trillion dollar deficit with our current tax system, I pretty much think the last thing we need is more deductions for individuals. I’m not advocating we soak the middle class to close the budget gap, but I’m also not on board with them paying any less at this point, either. I think we’re mostly on the same page now and I understand what erislover is saying, and while it isn’t quite as nonsensical as what I thought he was saying it seems to boil down to:
“I wish individuals could deduct more”, and I think everyone wishes that were true but some of us also wish to keep the lights on and society functioning and I don’t see how we do it with more individual deductions.
Don’t know if anyone has posted this, but it seemed relevant to the discussion. Sorry it’s just a drive by…I’m in-between flights atm and happened to be reading an article that was fact checking Obama’s SotU speech, and there was a link to this and I remembered this thread so figured I’d post it.
What a condescending load of crap. Offering special exemptions for businesses but not for actual people is not some kind of wild “I want to be a pony when I grow up” fantasy. For someone so concerned about the deficit, it’s surprising that adding more exemptions for people is a silly dream but maintaining those exact same exemptions for businesses is just common sense. I know we agree on the 15% capital gains rate being nonsense; it’s absolutely amazing that you cannot even imagine my proposal being anything but a little girl’s dream.
15% on dividends? Last time I checked dividend income is taxed at ordinary income rates unless you are a corporation that is receiving the dividends then you are only taxed on 30% of the amount of the dividends you receive (dividends received deduction).
For someone that’s terribly critical of the US tax code, you seem to not know much about it. Maybe you should brush up on it first before you start parroting back things you think you’ve heard.
Is the 15% rate you are aggravated about possibly the capital gains tax rate? If so, there’s a logical reason for it being lower than the ordinary income tax rate. It’s purpose is to incentivize investment which should spur economic growth. Where do you think the money for new manufacturing plants, industrial plants, office buildings, call-centers, retail centers, etc., etc., that employs most of the people in our country comes from?..Uncle Sam?
Since part of the debate here is about deductions on corporation income tax, Obama’s speech becomes interesting:
[QUOTE=2012 State of Union Address]
… if you’re a business that wants to outsource jobs, you shouldn’t get a tax deduction for doing it. That money should be used to cover moving expenses for companies like Master Lock that decide to bring jobs home.
[/QUOTE]
Can we do an agree/disagree poll on this matter, right here in this thread?
I vote “Agree with Obama.”
(ETA: Yes, the details of the tax code change involved might be a problem, but let’s agree first on big-picture answers.)
Weeell… I’m in the UK, but I get deductions on these things - not a corporate jet, but some of the rest, like a proportion of my rent, gas bills, tech upgrades and some travel costs, excluding normal commuting. That’s because, if I worked for someone else, they’d be paying for the heating and computers and so on that I’d use at work.
If I worked for someone else I wouldn’t have the costs that are counted against tax. So I don’t see anything wrong with a company counting those costs against tax either. They’re not revenue - they’re the costs of providing a business. Not going to work, which is why everyday commuting and a nice suit don’t count, but providing a business.
When a company buys some Ajax to clean the toilets, it is not different than when I buy some Ajax to clean the toilet, except in the tax code. “Cost of doing business” is something the entrepreneur should worry about, not the government.
No, but they do need an excuse to risk being poor.
What is it with people that fail to understand this?! Do they think that investments never fail? That it’s easy to find somewhere safe to invest your money and still get paid? What’s so hard to understand about tax rates lowering reward without lowering risk?