Future Tax Increase

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  • Tue, Jul 26, 2011 - 04:56am

    #91

    rhare

    Status Silver Member (Offline)

    Joined: Mar 29 2009

    Posts: 401

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    There is at least one leader…

[quote=ao]

We have no leaders in Washington.  True leaders would express some solidarity with their people by taking at least a symbolic cut in salaries, benefits, and pensions.  None of them have and most likely, none of them will.  They are despiccable. 

[/quote]

Actually there is one, maybe two now that Rand Paul is in office (emphasis mine):

[quote=Who Is Ron Paul]

Brief Overview of Congressman Paul’s Record:

  • He has never voted to raise taxes.
  • He has never voted for an unbalanced budget.
  • He has never voted for a federal restriction on gun ownership.
  • He has never voted to raise congressional pay.
  • He has never taken a government-paid junket.
  • He has never voted to increase the power of the executive branch.
  • He voted against the Patriot Act.
  • He voted against regulating the Internet.
  • He voted against the Iraq war.
  • He does not participate in the lucrative congressional pension program.
  • He returns a portion of his annual congressional office budget to the U.S. treasury every year.

[/quote]

 

[quote=ao]

There is no mention of cutting Cabinet and other executive branch salaries and benefits …

[/quote]

You seem to ahve left off golf vacations for the president.

  • Tue, Jul 26, 2011 - 07:43am

    #92
    Grover

    Grover

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    Round and Square

[quote=darbikrash]

I can’t really disagree with any of this, it’s all standard free market stuff. However, we are not arguing the same points. You are advocating a scenario where corporations are no longer required to pay tax (at the corporate level) at all- you are advocating  0% tax.

[/quote]

darbikrash,

Yes, I am advocating a 0% tax. At the same time, I’m advocating a new law that makes a corporation become only a shell for conducting business. Corporations have no personhood and therefore have no rights. They cannot vote. They have no voice. They cannot persuade congress to vote a certain way. They should not pay taxes that they cannot vote for or against. They should still pay fees to support their business enterprise – fees for water, sewer, land use, transportation access, etc. These costs should be charged based on usage. A business with a smaller footprint will incur smaller fees.

Profits generated through the business can be used to invest in the business. The other option is to distribute these profits to shareholders as dividends. Once the profits are distributed, they should be taxed as ordinary income. At this point, the profits will have been taxed. If shareholders feel that corporate management is doing the best thing to keep all those profits for investment, so be it. Eventually, the shareholders will start complaining, or they’ll invest their money where it delivers more.

[quote=darbikrash]

This is not the argument that I am engaged in, I am saying that if you take the existing tax rate, whatever it is, lets use 20.1%, and raise it, within reason, that this additional tax revenue will not, in fact cannot,  be passed on to consumers. This is not the same set of conditions as you lay out, as the argument is an asymmetrical argument. It’s not the same going up as it is going down. 

The reason this is so is because there is no limit to how low a price a consumer will pay, but there is a limit as to how much he will pay. So to argue that if you reduce taxes to zero and lower the floor, yes, the cost to consumers will likely drop if in fact free market forces can convince actors to give up margin, but the inverse is not necessarily true, for reasons already well covered. There is most certainly a upper ceiling for which consumers will stop buying, and this exists for every product. There is no lower floor, consumers will happily look for zero cost.

 

And yes, one possible outcome is that the product can no longer be sold, if the manufacturer cannot absorb the extra tax, and the consumer won’t either, then you have a stalemate and commerce stop-which I thought was the point.. This is a decidedly different set of outcomes when taxes are raised rather than lowered..

 

To the larger point about how much tax is too much, well I don’t know either. But for the record I am incredulous with the ratios of untaxed income to total revenue- it’s simply not believable.

[/quote] 

I said that business sets the price floor, not consumers. If consumers will not pay the minimum price that a business needs to continue operating, then the business will cease to exist. Raising the tax rate incrementally will cause businesses to absorb the additional cost – until they can’t. Then, they will pass the price on to consumers or they will cease to exist.

 

We’re talking about fixing a big federal debt problem. Raising taxes a wee bit won’t solve the problem. They will need to raise taxes substantially to fill a portion of the hole. Do you think big corporations will just sit idly and allow this to happen? They will use whatever means available to keep their loopholes and keep the taxes as minimal as possible. Any congress member who is likely to vote for such a measure will guarantee a massive attack ad campaign when the campaign cycle begins anew. If congress is successful in raising corporate taxes significantly, individual consumers will bear the brunt of it – either with higher prices across the board, or decreased product availability.

[quote=darbikrash]

To the $228 billion in corporate tax revenue in FY 2008, this may indeed be a small percentage of total US expenditures, but is a large number in relation to the annual budget deficit, which runs about $1 trillion or so in the same (2008) FY- nearly a quarter which is a significant figure. I’m not suggesting that corporations carry all of the water, certainly cuts are needed, as well as an adjustment to social policy, but rather than me playing Monday morning quarterback, why not look at the budget outline in post # 37 in this very thread which covers the specifics, chapter and verse. Note the budget surplus forecast for 2021. Why couldn’t something like this work?

[/quote] 

Do you remember the (false) budget surplus at the end of the Clinton Administration? At that time, they were projecting the budget surplus to continue to grow and by now, we would have no federal debt. How well did that projection work out? 

[quote=darbikrash]

Back to your premise of zero taxation on corporations.  You know, I like the idea of “politically neutering” corporations from interfering with governance- just not sure how reducing taxation eliminates this. Intuitively, you would think this excess surplus value would be re-applied to buy yet more favoritism- a point already made by another poster,  how, exactly, is this prevented? I’d also point out the already existing mountains of cash that the big corporations are sitting on, represents surplus capital that is not being deployed, which is a very serious issue and goes directly to the crux of the problem- a fundamental failure of capitalism. Typically, corporations do not want massive reserves of capital as this means they are not optimizing growth and consequently increasing shareholder value. Put that money to work is the mantra. Well then, why is it not being put to work, and what makes you think giving them more money would incentivize them to “make additional investments” when the enormous amounts of capital they have now is sitting on the sidelines? Clearly, this would simply be used to increase margins with no reciprocal benefit.

[/quote] 

Any corporate profits that are taxed become taxed again when distributed to shareholders. This would be a "carrot and stick" approach to the issue: The carrot portion is no taxes. The stick portion is that a corporation is only a vehicle for business. The CEO would be responsible for the actions of the corporation. If corporate policy is violated by workers, the workers would be culpable for those actions. If a CEO made the policy that shareholders would be assessed charges in case of wrong doing, the shareholders would have to accept that or divest themselves.

[quote=darbikrash]

Beyond these issues, we have to address the massive inequalities of wealth. How, exactly, is this addressed? Eliminating taxation on corporations would exacerbate this effect, as well as stifle public investment in infrastructure which corporations famously exploit. While interesting and arguably healthy to consider zero tax scenarios, in my opinion, they just do not work when the details are fleshed out.

[/quote]

I wish I had an answer to that. History has shown that revolutions occur when too much wealth becomes concentrated in too few hands. The chaos that results breeds all manner of despots with the ability to articulate a believable message in order to establish themselves at the pinnacle of the new order. (They certainly will redistribute the wealth as they see fit.)

If you advocate for government distributing the wealth, you’ll end up with more people dependent upon government handouts. That is hardly a recipe for long term success. The big boyz already buy enough influence to pay little in taxes or get subsidies that are far more than the pittance they pay. Zeroing taxes and reducing corporate "rights" will level the playing field. Raising taxes (significantly) on them won’t help either.

Grover

  • Tue, Jul 26, 2011 - 06:06pm

    #93

    darbikrash

    Status Gold Member (Offline)

    Joined: Aug 25 2009

    Posts: 297

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    Grover wrote:Yes, I

[quote=Grover]

Yes, I am advocating a 0% tax. At the same time, I’m advocating a new law that makes a corporation become only a shell for conducting business. Corporations have no personhood and therefore have no rights. They cannot vote. They have no voice. They cannot persuade congress to vote a certain way. They should not pay taxes that they cannot vote for or against. They should still pay fees to support their business enterprise – fees for water, sewer, land use, transportation access, etc. These costs should be charged based on usage. A business with a smaller footprint will incur smaller fees.

Profits generated through the business can be used to invest in the business. The other option is to distribute these profits to shareholders as dividends. Once the profits are distributed, they should be taxed as ordinary income. At this point, the profits will have been taxed. If shareholders feel that corporate management is doing the best thing to keep all those profits for investment, so be it. Eventually, the shareholders will start complaining, or they’ll invest their money where it delivers more.

[/quote]

Once again, I don’t have any real issues with the notion of your premise for corporations being de-featured to remove voting rights and claims to personhood. I’d note however that this flies in the face of the recent Citizens Untied Supreme Court case, of which you are no doubt aware. I would point to this and other similar recent occurrences as to yet another example of ongoing capture of government due entirely to consolidation of capital and the resulting conversion of capital to social power- a reality which in and of itself tells us what we are up against, irrespective of tax structure and how corporate entities are structured. Perhaps this tendency is the more serious issue than the type of entity from which a corporation is taxed and structured?

Are we solving the right problem here?

Regarding the “fees” charged for infrastructure utilization that you mention, how exactly is this different than the corporate tax it is intended to replace? Is this not the same thing as a progressive tax policy that charges more tax if you earn more under the theory that revenue maps to infrastructure footprint? A tax is a tax is a tax, not seeing any difference here.

One of the more severe problems in our current situation is the corporations are not making investments, and the dividends they pay are usually quite low, nearly equal to or slightly above the rate of inflation- hardly a bonanza to the shareholder. But what are the shareholders options- not many to be sure, leastwise with better returns. These factors indicated a liquidity trap, a serious problem endemic to end stage capitalism.

[quote=Grover]

I said that business sets the price floor, not consumers. If consumers will not pay the minimum price that a business needs to continue operating, then the business will cease to exist. Raising the tax rate incrementally will cause businesses to absorb the additional cost – until they can’t. Then, they will pass the price on to consumers or they will cease to exist.

[/quote]

We are saying the same thing. I am more emphatic than you on the issue of the consumers absorbing the price- I maintain they will not. This is because the process of price discovery finds the maximum rate the consumer will pay, and tends to push the price as close to, or in many cases, coincident to the maximum price that the market will bear- a fact which you do not seem to want to recognize. Once the price is so positioned, there is zero price elasticity in the upward direction, the consumer will simply not pay any more regardless of why the price rises, (or if they do they do so at markedly lower consumption rates) whether that be due to taxation or any other factor.

To the point of a competitor coming in and exploiting an excessive margin (which is what this usually means) in theory yes, this is possible, but in practice, it can be problematic as poster Johnny Oxygen pointed out. There are other factors as well, namely barrier to entry, which for many , if not most mature products will require excessive investment to enable effective competitors to try and displace existing actors, and will need to do so in a declining margin environment- not a recipe which is attractive to most investors. But in theory sure, it’s possible.

Usually these types of competitive forces are limited to technology leaps. I would not expect to see any start ups challenging General Motors (alternative energy vehicles aside- which are heavily and I mean heavily, government subsidized) anytime soon, the investment crossover of the billions it would take to stand up an organization to compete at this scale would be dismal (if not impossible).

[quote=Grover]

We’re talking about fixing a big federal debt problem. Raising taxes a wee bit won’t solve the problem. They will need to raise taxes substantially to fill a portion of the hole. Do you think big corporations will just sit idly and allow this to happen? They will use whatever means available to keep their loopholes and keep the taxes as minimal as possible. Any congress member who is likely to vote for such a measure will guarantee a massive attack ad campaign when the campaign cycle begins anew. If congress is successful in raising corporate taxes significantly, individual consumers will bear the brunt of it – either with higher prices across the board, or decreased product availability.

[/quote]

Agreed.

[quote=Grover]

Do you remember the (false) budget surplus at the end of the Clinton Administration? At that time, they were projecting the budget surplus to continue to grow and by now, we would have no federal debt. How well did that projection work out? 

[/quote]

Uhmmm… OK, well I was hoping for a little more substantive commentary on the so called “Peoples’ Budget” which was listed in post # 37. Is that it? This proposal seems fairly well thought out, and it purports to solve the immediate, and to some extent, long term problems that are supposedly impossible to solve, yet not a single person on this thread has commented? It seems like you had challenged the notion of exactly how much taxation would solve the problem, and now an answer (and a detailed one at that) was provided, what say you?

[quote=Grover]

Any corporate profits that are taxed become taxed again when distributed to shareholders. This would be a "carrot and stick" approach to the issue: The carrot portion is no taxes. The stick portion is that a corporation is only a vehicle for business. The CEO would be responsible for the actions of the corporation. If corporate policy is violated by workers, the workers would be culpable for those actions. If a CEO made the policy that shareholders would be assessed charges in case of wrong doing, the shareholders would have to accept that or divest themselves.

[/quote]

While I admire the sentiment, it seems punitive, which I assume is the point. So who is going to work as an employee in such an arrangement? Are shareholders really going to audit the typical 1000+ page policy manuals to determine if they are acceptable or if unusual risks are buried inside?  I can see endless litigation, a culture of fear and paranoia among the workers who are just trying to eat, and now need to be concerned (and it would seem to me to be experts in ) corporate law as associated with criminal behavior? Seems interesting but hugely impractical. How does this reconcile with the notion of risk/reward ratio? It would seem the employee has taken on additional risk, what is his reward? Does he have additional financial participation by way of recompense for his newfound exposure? If not, who would sign up for this?

[quote=Grover]

I wish I had an answer to that. History has shown that revolutions occur when too much wealth becomes concentrated in too few hands. The chaos that results breeds all manner of despots with the ability to articulate a believable message in order to establish themselves at the pinnacle of the new order. (They certainly will redistribute the wealth as they see fit.)

 

If you advocate for government distributing the wealth, you’ll end up with more people dependent upon government handouts. That is hardly a recipe for long term success. The big boyz already buy enough influence to pay little in taxes or get subsidies that are far more than the pittance they pay. Zeroing taxes and reducing corporate "rights" will level the playing field. Raising taxes (significantly) on them won’t help either.

[/quote]

Agree 100% with your first paragraph, With regard to the second paragraph it would seem that the wealth has already been re-distributed. This discussion is not an abstract what –if scenario, the wealth is already unequally distributed, and grotesquely so. So I guess I become confused when comments are made that suggest a hypothetical suggesting government might influence wealth distribution, when in fact capitalism already has, and well, completed the mission so to speak.  Given that reality it would seem that we are left with few choices.

  • Tue, Jul 26, 2011 - 06:15pm

    #94
    Grover

    Grover

    Status Gold Member (Offline)

    Joined: Feb 15 2011

    Posts: 1027

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    Are there any perfect systems?

[quote=xraymike79]

‘Free market’ blowhards don’t know what Oligarchy means. They also don’t understand that unregulated markets are self-eliminating. But going a step further, capitalism will eventually and invariably lead to monopolies, regardless of whether there were safeguards put in place to prevent such a thing. The accumulation of capital buys power which corrupts all governing/regulatory bodies.

[/quote]

xraymike79,

I’m curious as to which system of government or market you consider worthy? To paraphrase Winston Churchill, the free market is the worst form of commerce, except for all the others.

Grover

  • Tue, Jul 26, 2011 - 06:24pm

    #95
    Grover

    Grover

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    Joined: Feb 15 2011

    Posts: 1027

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    Freedom of Speech

[quote=Poet]

[quote=Grover]

I’d like to see businesses pay 0% tax in exchange for being politically neutered

[/quote]

Doesn’t work that way. The profits pass-through to the shareholders – especially majority shareholders – who then use the money to vote and buy influence on behalf of, and to favor, the corporations they control.

Poet

[/quote]

Poet,

If an individual chooses to spend their already taxed money to lobby congress, that is their choice. Isn’t that one of the tenets that made this country great? I object when the same individuals use corporate funds to lobby congress and deduct it as a cost of business.

Grover

  • Tue, Jul 26, 2011 - 06:29pm

    #96

    Poet

    Status Platinum Member (Offline)

    Joined: Jan 20 2009

    Posts: 983

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    Neutering Won’t Work

[quote=Grover]

If an individual chooses to spend their already taxed money to lobby congress, that is their choice. Isn’t that one of the tenets that made this country great? I object when the same individuals use corporate funds to lobby congress and deduct it as a cost of business.

Grover

[/quote]

I’m merely stating that politically neutering corporations won’t prevent them from getting what they want.

Poet

  • Tue, Jul 26, 2011 - 08:25pm

    #97
    xraymike79

    xraymike79

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    Joined: Aug 25 2008

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    Grover wrote: xraymike79

[quote=Grover]

[quote=xraymike79]

‘Free market’ blowhards don’t know what Oligarchy means. They also don’t understand that unregulated markets are self-eliminating. But going a step further, capitalism will eventually and invariably lead to monopolies, regardless of whether there were safeguards put in place to prevent such a thing. The accumulation of capital buys power which corrupts all governing/regulatory bodies.

[/quote]

xraymike79,

I’m curious as to which system of government or market you consider worthy? To paraphrase Winston Churchill, the free market is the worst form of commerce, except for all the others.

Grover

[/quote]

The ‘alternative system’ is something we all have to figure out because it’s apparent to anyone looking at the present state of affairs that digging deeper and faster into the same hole is not a solution. I’ll do some research on alternative systems.

  • Wed, Jul 27, 2011 - 01:27am

    #98

    dshields

    Status Gold Member (Offline)

    Joined: Oct 25 2009

    Posts: 385

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    xraymike79 wrote:Grover

[quote=xraymike79]

[quote=Grover]

[quote=xraymike79]

‘Free market’ blowhards don’t know what Oligarchy means. They also don’t understand that unregulated markets are self-eliminating. But going a step further, capitalism will eventually and invariably lead to monopolies, regardless of whether there were safeguards put in place to prevent such a thing. The accumulation of capital buys power which corrupts all governing/regulatory bodies.

[/quote]

xraymike79,

I’m curious as to which system of government or market you consider worthy? To paraphrase Winston Churchill, the free market is the worst form of commerce, except for all the others.

Grover

[/quote]

The ‘alternative system’ is something we all have to figure out because it’s apparent to anyone looking at the present state of affairs that digging deeper and faster into the same hole is not a solution. I’ll do some research on alternative systems.

[/quote]

I am also interested in hearing xraymike’s views on alternative systems that could actually replace the current system without undue hardship on the people.  I have given this some thought over the last few months and I find it a very tough question.

 

  • Wed, Jul 27, 2011 - 01:51am

    #99
    MarkM

    MarkM

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    Posts: 559

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    hardship

dshields,

I believe "undue hardships" and tough questions will be the order of the day. Tough questions, it seems, involve hardships in their answers. It is my opinion that we must change our expectations and learn that a life with less (hardship) will be part of the alternative system.

  • Wed, Jul 27, 2011 - 02:26am

    #100
    xraymike79

    xraymike79

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    MarkM wrote:dshields, I

[quote=MarkM]

dshields,

I believe "undue hardships" and tough questions will be the order of the day. Tough questions, it seems, involve hardships in their answers. It is my opinion that we must change our expectations and learn that a life with less (hardship) will be part of the alternative system.

[/quote]

+++Great one. And combined with humility for starters.

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