# What Would Happen if We Eliminated Corp Tax **URL:** \ **Category:** Great Debates\ **Created:** [June 20, 2010, 6:13pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887 "2010-06-20T18:13:35Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![IdahoMauleMan](https://avatars.discourse-cdn.com/v4/letter/i/71c47a/32.png) [@IdahoMauleMan](https://boards.straightdope.com/u/IdahoMauleMan)\ **Post date:** [June 22, 2010, 9:48pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/61 "2010-06-22T21:48:27Z")
> [@Damuri\_Ajashi](#): > > You would have a race to the bottom among those countries with 15% tax rates? Whats your point? I have already said that there is an argument to be made for lowering or even eliminating the corporate tax, I’m just pointing out that the Laffer Curve is inapplicable to corporate taxes because now you are comparing our tax rate to other tax rates and not comparing work to leisure. If our tax rate was 15% and the rest of the world was at 1% you would have the same result, wouldn’t you? > > And in any event its not the laffer curve effect and it should also be noted taht the laffer curve doesn’t make a lick of difference until tax rates are far in excess of 50%. That may be true in the narrowest sense of work vs. leisure with all other variables being held constant. I really don’t know. But there are other variables at play here: reporting income vs. sheltering income, law abiding vs fraud, investing vs consumption, investing here vs investing there. That was my point. There are always alternatives to whatever it is you are doing now. Obviously, those other economies that were ‘racing to the bottom’ thought there would be benefit to them towards lowering corp taxes, otherwise they wouldn’t do it. My guess is that they thought it would attract investment and create jobs, which I would argue is exactly what it does. Why wouldn’t we want to do that, too? ---
**Author:** ![IdahoMauleMan](https://avatars.discourse-cdn.com/v4/letter/i/71c47a/32.png) [@IdahoMauleMan](https://boards.straightdope.com/u/IdahoMauleMan)\ **Post date:** [June 22, 2010, 9:50pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/62 "2010-06-22T21:50:20Z")
> [@Voyager](#): > > It was right where a Ponzi scheme was defined as among other things, fraudulent. You can’t miss it. Glad to be of help. I didn’t miss it. I argued that is was _worse_ than fraudulent, because there wasn’t even a pretense of hiding the fact that there are no real assets being secured with contributions from income. It was forced and mandatory. That’s why I called it a Forced Ponzi scheme - or “Fonzi” scheme. Of course, the accounting behind it is fraudulent. So if you wanted to stretch the definition a bit, they are indeed equivalent. ---
**Author:** ![DanBlather](https://avatars.discourse-cdn.com/v4/letter/d/f4b2a3/32.png) [@DanBlather](https://boards.straightdope.com/u/DanBlather)\ **Post date:** [June 22, 2010, 11:04pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/63 "2010-06-22T23:04:57Z")
> [@IdahoMauleMan](#): > > I didn’t miss it. > > I argued that is was _worse_ than fraudulent, because there wasn’t even a pretense of hiding the fact that there are no real assets being secured with contributions from income. It was forced and mandatory. Hey, I have an idea, let’s give me the option of investing that part of my taxes that goes for the military. Then I can pay with the appreciated assets. What’s that you say? The military needs to spend the money now and not 20 years from now? Hmm, a bit like Social Security maybe? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [June 22, 2010, 11:24pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/64 "2010-06-22T23:24:39Z")
> [@IdahoMauleMan](#): > > I didn’t miss it. > > I argued that is was _worse_ than fraudulent, because there wasn’t even a pretense of hiding the fact that there are no real assets being secured with contributions from income. It was forced and mandatory. > > That’s why I called it a Forced Ponzi scheme - or “Fonzi” scheme. > > Of course, the accounting behind it is fraudulent. So if you wanted to stretch the definition a bit, they are indeed equivalent. I see. So, in your view, the fact that the way the system ran was described openly was a clear indicator of fraud. The fact that the assets of the system, its income and expenditures, and the forecast of expected income and payments for the future, along with economic growth and demographic assumptions, are freely available to all is just another indication of the fraud. That it has been running for over 70 years and has paid promised returns, modest as they are, just shows how insidious it is. Gotcha. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [June 23, 2010, 5:37pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/65 "2010-06-23T17:37:22Z")
> [@amarone](#): > > I finally decided to do some research. There are plenty of people who think transfer pricing offers significant tax-saving opportunity: Yes but its not supposed to. Tansfer pricing is supposed to allocate income where income is created. now in practice people try to shift income and source their income to places with low tax rates but there is an agency that is devoted to preventing undue shifting of income. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [June 23, 2010, 5:40pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/66 "2010-06-23T17:40:34Z")
> [@DanBlather](#): > > How nice of Lord Hanson to be concerned with Asian economic policies. I’d have thought his “we” referred to the UK. Sorry, I meant to reply to a different post. that’s why my reply sounded like a non sequitor. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [June 23, 2010, 5:45pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/67 "2010-06-23T17:45:25Z")
> [@IdahoMauleMan](#): > > I didn’t miss it. > > I argued that is was _worse_ than fraudulent, because there wasn’t even a pretense of hiding the fact that there are no real assets being secured with contributions from income. It was forced and mandatory. > > That’s why I called it a Forced Ponzi scheme - or “Fonzi” scheme. > > Of course, the accounting behind it is fraudulent. So if you wanted to stretch the definition a bit, they are indeed equivalent. Well then it isn’t a Ponzi scheme now is it. Its a tax. Not to derail this thread but thats why they call it the social security tax and not the social security investment. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [June 23, 2010, 5:54pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/68 "2010-06-23T17:54:21Z")
> [@IdahoMauleMan](#): > > Why wouldn’t we want to do that, too? Because we are not Ireland or Slovenia. Ireland can exponentially increase the size of its corporate base by cutting taxes, America cannot. America will not collect more corporate tax revenue by lowering corporate tax rates, it is doubtful that lowering corporate tax rates will create enough economic activity in other areas to make up the difference. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [June 23, 2010, 6:38pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/69 "2010-06-23T18:38:26Z")
> [@Damuri\_Ajashi](#): > > Yes but its not supposed to. Tansfer pricing is supposed to allocate income where income is created. now in practice people try to shift income and source their income to places with low tax rates but there is an agency that is devoted to preventing undue shifting of income. Right, but in anything that involves billions of dollars per year, there are going to be expensive lawyers and accountants trying to bend the rules to the max, so in practice transfer pricing is used to funnel profits to low-tax regimes. The IRS can keep fighting this, but if Congress lowered corporate taxes instead, they wouldn’t have to (as much). ---
**Author:** ![erez](https://avatars.discourse-cdn.com/v4/letter/e/e47c2d/32.png) [@erez](https://boards.straightdope.com/u/erez)\ **Post date:** [June 23, 2010, 7:02pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/70 "2010-06-23T19:02:49Z")
> [@Damuri\_Ajashi](#): > > Because we are not Ireland or Slovenia. Ireland can exponentially increase the size of its corporate base by cutting taxes, America cannot. America will not collect more corporate tax revenue by lowering corporate tax rates, it is doubtful that lowering corporate tax rates will create enough economic activity in other areas to make up the difference. How did you come to the conclusion that collecting the most revenue for the government should be what determines a country’s policies? Even if you are a government worker, it’s hard to image how it could happen. ---
**Author:** ![IdahoMauleMan](https://avatars.discourse-cdn.com/v4/letter/i/71c47a/32.png) [@IdahoMauleMan](https://boards.straightdope.com/u/IdahoMauleMan)\ **Post date:** [June 23, 2010, 7:59pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/71 "2010-06-23T19:59:02Z")
> [@Damuri\_Ajashi](#): > > Well then it isn’t a Ponzi scheme now is it. Its a tax. Not to derail this thread but thats why they call it the social security tax and not the social security investment. Let’s drop this debate, because we’ll start the other thread all over again. I’ll just provide this link from the SS website, which purports to convince us that there is interest earned, income generated, and a balance in some sort of “Trust Fund”. [http://www.ssa.gov/history/trustfunds.html](http://www.ssa.gov/history/trustfunds.html) You and I know of course that no such fund exists. Apparently Al Gore also did not when he spoke of a “lockbox”. That link above would not stand up to any sort of scrutiny if a privately held company tried to represent it’s financial dealings that way. They would end up in a cell next to Bernie Madoff. But again…let’s drop it for now. ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [June 23, 2010, 10:16pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/72 "2010-06-23T22:16:59Z")
> [@IdahoMauleMan](#): > > I didn’t miss it. > > I argued that is was _worse_ than fraudulent, because there wasn’t even a pretense of hiding the fact that there are no real assets being secured with contributions from income. It was forced and mandatory. Why would “securing assets” be a requirement for what is, in effect, an annuity insurance program? ---
**Author:** ![IdahoMauleMan](https://avatars.discourse-cdn.com/v4/letter/i/71c47a/32.png) [@IdahoMauleMan](https://boards.straightdope.com/u/IdahoMauleMan)\ **Post date:** [June 23, 2010, 11:42pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/73 "2010-06-23T23:42:49Z")
> [@RickJay](#): > > Why would “securing assets” be a requirement for what is, in effect, an annuity insurance program? The benefits to the annuity holders must arise from wealth (income) generating assets. Customers agree to benefits, which the company promises after it generates a return from those assets, then subtracts it operating costs and any retained earnings (profits) or dividends to shareholders. ---
**Author:** ![DanBlather](https://avatars.discourse-cdn.com/v4/letter/d/f4b2a3/32.png) [@DanBlather](https://boards.straightdope.com/u/DanBlather)\ **Post date:** [June 24, 2010, 2:43am UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/74 "2010-06-24T02:43:39Z")
> [@IdahoMauleMan](#): > > Let’s drop this debate, because we’ll start the other thread all over again. > > I’ll just provide this link from the SS website, which purports to convince us that there is interest earned, income generated, and a balance in some sort of “Trust Fund”. > > [http://www.ssa.gov/history/trustfunds.html](http://www.ssa.gov/history/trustfunds.html) > > You and I know of course that no such fund exists. Apparently Al Gore also did not when he spoke of a “lockbox”. That link above would not stand up to any sort of scrutiny if a privately held company tried to represent it’s financial dealings that way. They would end up in a cell next to Bernie Madoff. > > But again…let’s drop it for now. You are simply wrong. The excess funds of SS are invested and are earning interest. ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [June 24, 2010, 7:34pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/75 "2010-06-24T19:34:15Z")
> [@IdahoMauleMan](#): > > The benefits to the annuity holders must arise from wealth (income) generating assets. > > Customers agree to benefits, which the company promises after it generates a return from those assets, then subtracts it operating costs and any retained earnings (profits) or dividends to shareholders. That is not how insurance policies work, no. When you buy insurance, you buy insurance. Social Security is, in effect, insurance against outliving your savings. What the insurance company does with the money hasn’t go anything to do with you. Do you care where you car insurance payments go? No, you just care that they pay up if you get into an accident. You are, as is so often the case, confusing Social Securty, an **annuity** - an insurance policy - with stocks, mutual funds, and other sorts of investments. ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [June 24, 2010, 8:08pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/76 "2010-06-24T20:08:00Z")
> [@IdahoMauleMan](#): > > The benefits to the annuity holders must arise from wealth (income) generating assets. And SS does - the “income generating assets” are present workers. > [@](#): > > You and I know of course that no such fund exists. Apparently Al Gore also did not when he spoke of a “lockbox”. Of course he did :rolleyes:; his proposal was stop the Treasure from raiding the trust fund like it has in every year since Clinton left office. His use of the term “lockbox” was to help people understand the proposal - obviously not everyone got it. What \*did \*you think he meant? > [@](#): > > But again…let’s drop it for now. Does that mean you’re beginning to understand the basic facts? ---
**Author:** ![Zeriel](https://avatars.discourse-cdn.com/v4/letter/z/58956e/32.png) [@Zeriel](https://boards.straightdope.com/u/Zeriel)\ **Post date:** [June 24, 2010, 8:31pm UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/77 "2010-06-24T20:31:18Z")
> [@IdahoMauleMan](#): > > Let’s take it to an extreme. Suppose all, reasonably developed economies where US multinationals have a presence have a local tax rate of 15%. > > Suppose the US raises it’s corporate tax rate to 70%. > > What do you think would happen next? Serious answer: It depends. Who’s buying the product, and how much does it cost to package and ship it and cover import/export tariffs as a percentage of operating profit? As long as we’re a major market, there will be advantages to making product here and shipping it locally rather than sending it internationally. Taxation differences are not the major reason that we’re locating overseas factories in China/India/SE Asia, it’s labor cost differences. ---
**Author:** ![IdahoMauleMan](https://avatars.discourse-cdn.com/v4/letter/i/71c47a/32.png) [@IdahoMauleMan](https://boards.straightdope.com/u/IdahoMauleMan)\ **Post date:** [June 25, 2010, 2:14am UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/78 "2010-06-25T02:14:51Z")
> [@RickJay](#): > > That is not how insurance policies work, no. When you buy insurance, you buy insurance. Social Security is, in effect, insurance against outliving your savings. What the insurance company does with the money hasn’t go anything to do with you. Do you care where you car insurance payments go? No, you just care that they pay up if you get into an accident. > > You are, as is so often the case, confusing Social Securty, an **annuity** - an insurance policy - with stocks, mutual funds, and other sorts of investments. I would be delighted to take the money that is now being with-held for FICA taxes, and use it to 1. Buy insurance, or 2. Buy assets that will take of me in my old age. I can do that myself. I don’t need the government to do it for me, with my money. But I can’t. My money is being taken from me, by force, and used to pay off somebody else. Who’s money was used to pay off somebody else before them. That’s a Fonzi scheme. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [June 25, 2010, 2:27am UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/79 "2010-06-25T02:27:27Z")
> [@IdahoMauleMan](#): > > That may be true in the narrowest sense of work vs. leisure with all other variables being held constant. I really don’t know. > > But there are other variables at play here: reporting income vs. sheltering income, law abiding vs fraud, investing vs consumption, investing here vs investing there. > > That was my point. There are always alternatives to whatever it is you are doing now. > > Obviously, those other economies that were ‘racing to the bottom’ thought there would be benefit to them towards lowering corp taxes, otherwise they wouldn’t do it. My guess is that they thought it would attract investment and create jobs, which I would argue is exactly what it does. > > Why wouldn’t we want to do that, too? Well, I think its probably true in the economic sense of work/leisure. In any event there is no way that lowering our corporate tax rate will increase corporate tax revenues and it is highly unlikely that any ripple effects would make up the difference. With that being the case, the only argument for lowering the corporate tax rate is to stop hemmorhaging corporate taxes to lower tax jurisdictions as corporations do reverse inversions and other stuff to try and source income outside the US. And That is a race to the bottom. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [June 25, 2010, 2:28am UTC](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887/80 "2010-06-25T02:28:49Z")
> [@amarone](#): > > Right, but in anything that involves billions of dollars per year, there are going to be expensive lawyers and accountants trying to bend the rules to the max, so in practice transfer pricing is used to funnel profits to low-tax regimes. The IRS can keep fighting this, but if Congress lowered corporate taxes instead, they wouldn’t have to (as much). Yeah but you still wouldn’t collect more corporate income taxes by lowering the tax rate. [Previous page](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887.md?page=3) [Next page](https://boards.straightdope.com/t/what-would-happen-if-we-eliminated-corp-tax/543887.md?page=5)