[net.taxes] Corporate income tax

dave@lsuc.UUCP (David Sherman) (03/01/85)

In article <683@whuxlm.UUCP> mag@whuxlm.UUCP (Mike Gray) writes:
||By the way, there's been a lot of criticism of corporate tax rates
||in this group.  What good does taxing corporations do?  They pay
||their taxes out of income, you know, which comes from the consumers
||who buy their products.  Individuals pay all the taxes in the end.

It's not that simple. "Corporations" include many businesses which
might or might not be incorporated - small businesses. If you
don't tax at the corporate level, you provide a large deferral
incentive to small businesses to incorporate to save tax. Less tax is
collected and unnecessary incorporations themselves cause wastage.

Dave Sherman
-- 
{utzoo pesnta nrcaero utcs hcr}!lsuc!dave
{allegra decvax ihnp4 linus}!utcsri!lsuc!dave

ems@amdahl.UUCP (ems) (03/05/85)

> By the way, there's been a lot of criticism of corporate tax rates
> in this group.  What good does taxing corporations do?  They pay
> their taxes out of income, you know, which comes from the consumers
> who buy their products.  Individuals pay all the taxes in the end.
> 
Not quite so.  Lets say that a coporation from a foreign country
comes here and mines silver.  They then sell some of the silver
to fund the operation and take the rest back to their home land
as 'profit'.  They are a socialist country and these funds go
into the national account.  Should they not pay a tax for the
privilege of taking our natural resource for their own use?
In this case a foreign government is the tax payer.

This argument can be generalized in several ways.  The first is to
say that the socialist government is in fact a set of stock holders.
In that case, the 'individuals' paying the tax are not citizens of
our country.  The next is to say that yes, the stock holders can
be anywhere in the world, even here.  This still shows the tax comming
from a (supposedly) more powerful group for the right to
exploit the national heratage or minerals.

The final generalization is to say that it is not silver, but
instead is a resource of some other kind.  Beach front property
in California, wharehouse space in New York.  Still, you are
taxing the entity (company == stockholders) for the use of their
share of public resources and facilities (police, fire, dirtying
the water and air) etc.

At this point you can see why many third world countries do not
greet the corporate world with open arms.  In we come to
monopolize the sources of wealth and export the gain to our
own shores. (In some of their eyes...)  While we talk of making
jobs and building industry.  In an international economy there is
a need for corporate taxation.  Even within our own borders, tax
on coporations can communicate to them the true costs to society
of their actions.  (You make the polution, you pay to clean it
up and figure the cost into your profit equations...)

E. Michael Smith  ...!{hplabs,ihnp4,amd,nsc}!amdahl!ems

Computo ergo sum

The opinions expressed by me are not representative of those of any
other person - natural, unnatural, or fictional - and only marginally
reflect my opinions as strained by the language.

mcb@styx.UUCP (Michael C. Berch) (06/16/85)

The faction that has been clamoring for increased corporate taxes is going
to be rather surprised by the intermediate- and long-term effects of a blanket
increase in corporate tax rates. The fact is that an across the board 
corporate tax increase (that is not easily avoidable through use of income
sheltering and special credits) will ultimately have a REGRESSIVE effect on
the tax structure. (I'm not against this, by the way; I think it will have
the beneficial effect of "flattening" the progressivity of the individual
rate structure.)

Most experts agree that the proposed changes will affect all
firms in the same industry in the same way. (Unlike other tax changes 
which would favor cash-rich firms over cash-poor firms, etc.) This means
that (say) the taxes for all the firms in the general retail business
would go up X%. Since all the firms are operating on essentially the same
profit margin, there is no incentive to do anything other than pass the
entire cost on by way of price increases. (There are exceptions to this,
but they are short-term and not economically meaningful.)
Analyzed in a macroeconomic sense, this means that every
household's purchasing power is diminished approximately the same
amount, which is a regressive outcome.

What the people who want to raise corporate taxes REALLY want to
do is exact a greater amount of taxes from the owners of the
corporations. There are a number of ways of doing this, ranging
from the obvious (eliminating the preference on capital gains
income) to the ridiculous (a special tax on corporate dividends),
but raising the corporate income tax isn't one of them.

Michael C. Berch
mcb@lll-tis-b.ARPA
{akgua,allegra,cbosgd,decwrl,dual,ihnp4,sun}!idi!styx!mcb

ems@amdahl.UUCP (ems) (06/19/85)

> The faction that has been clamoring for increased corporate taxes is going
> to be rather surprised by the intermediate- and long-term effects of a blanket
> increase in corporate tax rates. The fact is that an across the board 
> corporate tax increase (that is not easily avoidable through use of income
> sheltering and special credits) will ultimately have a REGRESSIVE effect on
> the tax structure. (I'm not against this, by the way; I think it will have
> the beneficial effect of "flattening" the progressivity of the individual
> rate structure.)

There are a great many assumptions that must be made for the tax
effect to be REGRESSIVE.  You have not demonstrated that these are, in
fact, proven assumptions.  1)  That all firms in an industry have the
same margin.  2)  That the elasticity of all markets is such that
a price increase can be passed on to the consumers.  3)  That the
market is not an international market and is free of
international competitors.  4)  That all competitors in the market
will pass the cost to consumers, rather than to stockholders or
supliers, or creditors, or ...

I am sure there are other hidden assumptions, but these are the
ones that I can see from a moments observation.

> 
> Most experts agree that the proposed changes will affect all
> firms in the same industry in the same way. (Unlike other tax changes 
> which would favor cash-rich firms over cash-poor firms, etc.) This means
> that (say) the taxes for all the firms in the general retail business
> would go up X%. Since all the firms are operating on essentially the same
> profit margin, there is no incentive to do anything other than pass the
> entire cost on by way of price increases. (There are exceptions to this,
> but they are short-term and not economically meaningful.)

Ahem, are you sure you mean this?  *ALL* firms on the same margin?  IBM,
AT&T, Amdahl, HP, Compaq, Tandy, ONYX, Joes Computer Startup, ... all
on the same margin?  Macys, Pennys, Gemco, K Mart, Mom&Pop shop, all
the same margin??  On what do you base the *ASSUMPTION* that they are
short term or not economically meaningful?

> Analyzed in a macroeconomic sense, this means that every
> household's purchasing power is diminished approximately the same
> amount, which is a regressive outcome.
>
ASSUMING that the effect was to pass on the increased cost in
higher prices (An UNPROVEN assumption) then the effect would still
be progressive as the increase would be born in proportion to the
quantity of goods bought; ie in proportion to disposable income.
(I know the rich spend a lower percent on consumption, but the
absolute dollar amount is more, not 'the same amount' at all).

> What the people who want to raise corporate taxes REALLY want to
> do is exact a greater amount of taxes from the owners of the
> corporations. There are a number of ways of doing this, ranging
> from the obvious (eliminating the preference on capital gains
> income) to the ridiculous (a special tax on corporate dividends),
> but raising the corporate income tax isn't one of them.

If the goal is to communicate the cost of the social goods consumed
to the company consuming them, the best thing to do is to tax the
company directly.  For instance, a severence tax on mining minerals
to pay for the costs to the society of a damaged land ...

-- 

E. Michael Smith  ...!{hplabs,ihnp4,amd,nsc}!amdahl!ems

This is the obligatory disclaimer of everything. (Including but
not limited to: typos, spelling, diction, logic, and nuclear war)