Corporate taxes suffocate growth.

Discussion in 'Economy' started by BaronVonBigmeat, Jul 10, 2008.

  1. BaronVonBigmeat
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    BaronVonBigmeat Senior Member

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    The historical and current belief is that taxes in America are low, compared to the world in general. America is the model of free markets, low regulation, and economic freedom. Right? This is simply not the case. The United States has high taxes in general and higher corporate taxes in particular.

    The only nations who have a higher corporate tax rate than America are Suriname, Pakistan, Togo, Benin, Republic of Congo, Cameroon, Chad, Libya, and Vietnam. No information was available for The Democratic Republic of Congo, Iraq, North Korea, Montenegro, Serbia, or Sudan. I cannot imagine why.

    .....

    Corporate taxes reduce the profits of business owners. This is true because net income is reduced by the tax rate. For example, Firm X, with a $100 investment, earning a 7% return has an income — before taxes — of $7. With a 10% corporate tax rate, net income — after taxes — is $6.30. Firm X now has earned a 6.3% return. In contrast, a corporate tax rate of 40% reduces net income after taxes by $2.80 to $4.20, or a 4.2% after-tax return. This rise in taxes, on the margin, reduces the profit-seeking incentive to take business risks. Why risk starting a biotech company when inflation-protected T-bill's will give you the same return?

    After theory and logic tell us what is true, empiricism can confirm our result.

    Thankfully, Professors Young Lee (Hanyang University) and Rodger Gordon (UC — San Diego) have done the work for us. In a 2005 journal article they concluded,

    More specifically, they continue, "The estimates suggest that cutting the corporate tax rate by 10 percentage points can increase the annual growth rate by around 1.1%."[3]

    Using these figures, Andrew Chamberlain of the Tax Foundation opines,

    Even better, a cut from the actual corporate tax rate of 35% to a rate of 10% would double our nation's wealth every 30 years.

    ...

    These are examples of what can be seen. As Frédéric Bastiat reminds us, however, it is imperative to also account for what cannot be seen. What would the wealth of our nation be today if the corporate tax rate had always been 10% or less? What creature comforts would have been innovated? What new technologies brought to market? What diseases cured?

    Due to a history of high corporate taxes these answers are not known, and we are worse off because of it.

    http://mises.org/story/3024
     
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  2. waltky
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    waltky Wise ol' monkey Supporting Member

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    Thanks Obama!...
    [​IMG]
    U.S. Has Record 11th Straight Year Without 3% Growth in GDP
    January 27, 2017 | - The United States has now seen a record 11 straight years without 3 percent growth in real Gross Domestic Product, according to the advance estimate published today by the Bureau of Economic Analysis.
     
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  3. EdwardBaiamonte
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    EdwardBaiamonte Platinum Member

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    yes but Marx said corporations are evil so the least we can do is tax the hell out of them until we can take them over!!
     
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  4. oldfart
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    oldfart Older than dirt

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    This and similar comparisons are worthless. Every country has its own corporate exclusions, deductions, and credits, so a comparison of maximum rates is meaningless. A meaningful measure would be the percentage of GDP that corporate income and profits taxes comprise. The OECD data is that among developed nations the US is lower (at 2.3%) than the non-US OECD average (2.7%), ranking 20th of 34 nations.

    U.S. Corporate Taxes Are Below Developed Country Average | CTJReports
     
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  5. oldfart
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    oldfart Older than dirt

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    I've been away a while; good to see you're still here (a lot of my favorite posters seemed to have found real life). Do you subscribe to the view that this is secular slowing, land if so; what causes it?
     
  6. yiostheoy
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    yiostheoy Gold Member

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    Nobody is talking about cutting the US corp tax rate to 10%. You must be dreaming.

    Trump is talking about to 15%.

    The GOP is talking about to 20%.

    The DEM's are talking about to 25%.

    The compromise will probably end up at 22 1/2% effective for 2017.
     
  7. yiostheoy
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    yiostheoy Gold Member

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    What in the fokk does the GDP have to do with anything ???
     
  8. danielpalos
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    danielpalos Gold Member

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    U.S. corporate income taxes have declined sharply as a percentage of GDP since 1945. [2] Part of the reason corporations are paying less in taxes today than they did 70 years ago is due to copious changes in the tax code. Yet there is a growing and vocal movement among well-financed lobbying groups to push federal lawmakers to lower the corporate tax rate. These business-backed groups claim that the U.S. corporate tax rate is too high, citing the 35 percent federal statutory tax rate. But that narrow argument ignores critical facts such as the many large tax breaks, loopholes and other corporate tax exceptions that big businesses have successfully lobbied to embed in the tax code. A 2014 study by Citizens for Tax Justice examined five years of data and found that Fortune 500 companies paid an average federal effective corporate income tax rate of only 19.4 percent, which is just over half of the nominal U.S. statutory rate of 35 percent. That same study found that many profitable, large U.S. corporations such as Boeing, General Electric and Verizon paid no federal corporate income taxes at all. [3]
     
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  9. oldfart
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    oldfart Older than dirt

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    Shares of GDP is the common way economists measure a lot of stock and flow measures like savings, tax burden, size of categories of expenditures, budget deficits, etc. In this case, it's the only accurate way to compare international taxation systems, as noted in my post, every nation allows different exclusions, deductions, and credits in computing corporate tax. For example, 20% of a VAT with no deductions except for the cost of incoming inventory is a lot more than 20% of profit after deducting labor, overhead, and indirect costs.
     
  10. EdwardBaiamonte
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    EdwardBaiamonte Platinum Member

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    corporate tax is passed on to us in higher prices. Corporations are tax collectors not tax payers. We have tax only to pander to pure ignorance of liberals who want to punish evil corporations. Business efficiency, competitiveness, and job creation would be greatly enhanced if business was free to conduct business rather than waste time money energy dodging taxes. 1+1=2

    Most importantly , USA is at very top in terms of pushing corporations, jobs, and investment capital off shore with the highest tax rate in the world that, after off shore deductions, collects little revenue but does provide great incentive to move off shore.
     

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