taxing business profits ?!

[Widdekind]

Government Force "should" protect-and-serve markets, guarding economies against thievery (e.g. via en-Force-ing contracts). Ergo, every economic market-place transaction "should" be guarded by Government, and "should" be sales-Taxed to cover costs ("paying the security guards"). If Government were economically neutral, then Government would apply a single flat-rate sales-Tax (e.g. 10%), on every dollar spent, in the market-place, on every commodity bought-and-sold (e.g. income, the "sale" of Labor).

However, business profits are "what's left over after the trading-day is done"; business profits do not reflect economic trans-activity, but the after-effects of the same. Ergo, Taxes on business profits are not "paying the guards in the market-place"; are "paying the guards back at home whilst counting money". Ipso facto, Taxes on profits economically resemble "muggings", of merchants, "on their ways back home", after-hours.

if business pay Taxes on profits (Revenues - Expenses); then people should pay Taxes on their net-incomes ("how much you got in your account?"); if people recognize the latter as a Taxation-after-Taxes ("double jeopardy"), then they should recognize the former, as precisely the same ("Taxed for standing around with money in your wallet").

 

[DSGE]

If Government were economically neutral, then Government would apply a single flat-rate sales-Tax (e.g. 10%), on every dollar spent, in the market-place, on every commodity bought-and-sold (e.g. income, the "sale" of Labor).

Not true. They'd be using a Ramsey rule for optimal commodity taxation. On on things which aren't commodities, like labour, a progressive tax is optimal. (By optimal here I mean minimising deadweight loss).

However, business profits are "what's left over after the trading-day is done"; business profits do not reflect economic trans-activity, but the after-effects of the same. Ergo, Taxes on business profits are not "paying the guards in the market-place"; are "paying the guards back at home whilst counting money". Ipso facto, Taxes on profits economically resemble "muggings", of merchants, "on their ways back home", after-hours.

Again though, this is assuming the taxes are on the trades. Taxing profits is more effecient than taxing the trades themselves.

if business pay Taxes on profits (Revenues - Expenses); then people should pay Taxes on their net-incomes ("how much you got in your account?"); if people recognize the latter as a Taxation-after-Taxes ("double jeopardy"), then they should recognize the former, as precisely the same ("Taxed for standing around with money in your wallet").

I don't recognise the latter as "taxation-after-taxes". I see it as two different kinds of taxes.

 

[itfitzme]

If Government were economically neutral, then Government would apply a single flat-rate sales-Tax (e.g. 10%), on every dollar spent, in the market-place, on every commodity bought-and-sold (e.g. income, the "sale" of Labor).

Not true. They'd be using a Ramsey rule for optimal commodity taxation. On on things which aren't commodities, like labour, a progressive tax is optimal. (By optimal here I mean minimising deadweight loss).

However, business profits are "what's left over after the trading-day is done"; business profits do not reflect economic trans-activity, but the after-effects of the same. Ergo, Taxes on business profits are not "paying the guards in the market-place"; are "paying the guards back at home whilst counting money". Ipso facto, Taxes on profits economically resemble "muggings", of merchants, "on their ways back home", after-hours.

Again though, this is assuming the taxes are on the trades. Taxing profits is more effecient than taxing the trades themselves.

if business pay Taxes on profits (Revenues - Expenses); then people should pay Taxes on their net-incomes ("how much you got in your account?"); if people recognize the latter as a Taxation-after-Taxes ("double jeopardy"), then they should recognize the former, as precisely the same ("Taxed for standing around with money in your wallet").

I don't recognise the latter as "taxation-after-taxes". I see it as two different kinds of taxes.

Good stuff.

Just to make a minor point to the convo,

As I recall my business and accounting, taxes on businesses are on earnings, ergo EBIT, meaning earnings before interest and taxes, or EBT, earnings before taxes. Just to be picky about it, profits are after interest and taxes. Right?

Earnings are revenues minus costs.

Interst is a deduction, I presume to encourage capital investments. Then the tax is applied as a percentage, and viola, profits.

 

[asterism]

False premise.

The Government sets the currency and the rules.

Those the fund the Government set groups that make the Government. It's a game of inches, but sometimes the governed can score on a "Hail Mary."

 

[itfitzme]

If Government were economically neutral, then Government would apply a single flat-rate sales-Tax (e.g. 10%), on every dollar spent, in the market-place, on every commodity bought-and-sold (e.g. income, the "sale" of Labor).

Not true. They'd be using a Ramsey rule for optimal commodity taxation. On on things which aren't commodities, like labour, a progressive tax is optimal. (By optimal here I mean minimising deadweight loss).

However, business profits are "what's left over after the trading-day is done"; business profits do not reflect economic trans-activity, but the after-effects of the same. Ergo, Taxes on business profits are not "paying the guards in the market-place"; are "paying the guards back at home whilst counting money". Ipso facto, Taxes on profits economically resemble "muggings", of merchants, "on their ways back home", after-hours.

Again though, this is assuming the taxes are on the trades. Taxing profits is more effecient than taxing the trades themselves.

if business pay Taxes on profits (Revenues - Expenses); then people should pay Taxes on their net-incomes ("how much you got in your account?"); if people recognize the latter as a Taxation-after-Taxes ("double jeopardy"), then they should recognize the former, as precisely the same ("Taxed for standing around with money in your wallet").

I don't recognise the latter as "taxation-after-taxes". I see it as two different kinds of taxes.

BTW, thanks for the dead weight loss term. I'm going to have to study it a bit to get it down to the math.

Do you think the term is applicable to inefficiencies caused by between market imbalances?

Does the term apply to monopolies, if they were to be allowed to exist?

Markets with industries with high market leverage, Carnot oligopoly dominated markets in particular?

Does dead weight loss apply to price floors?

I'm not seeing it, given the wiki diagram and description. Is it symmetric in reflecting about a vertical axis through the equilibrium point?

Medical, petroleum, insurance, banking, and the auto mobile industries are a few that seem to run high profits and seem to have substantial market leverage.

What is the overriding concern that leads to "inefficiency"?

------

Seems like a lot of the issue tends to be underpinned by the standardized pricing that increases efficiency. It's all great, but in a true market with bidding, it would seem that the pricing would be on a sliding scale, with those having higher desire or need paying more, thus allowing the last units to actually be sold at a "loss", compared with the actual cost, while the average cost is at the equilibrium price.

A lot of markets actually are close to this, with Raley's commanding a higher price and likely a higher margin while their sister store, Foodmax, in the next city sells at cut rate prices. The net effect is that they unload excess product at lower prices to those that have a lower willingness to pay. The remaining product gets picked up by the local food banks.

In some areas, an extra ten minute drive and you can cut your food bill in half.

I am not sure if all products manage to be so neatly marketed on a sliding scale.

Hmmm....... I'm not sure if that eliminate the problem....

 

[Mr. H.]

Government Force "should" protect-and-serve markets, guarding economies against thievery (e.g. via en-Force-ing contracts). Ergo, every economic market-place transaction "should" be guarded by Government, and "should" be sales-Taxed to cover costs ("paying the security guards"). If Government were economically neutral, then Government would apply a single flat-rate sales-Tax (e.g. 10%), on every dollar spent, in the market-place, on every commodity bought-and-sold (e.g. income, the "sale" of Labor).

However, business profits are "what's left over after the trading-day is done"; business profits do not reflect economic trans-activity, but the after-effects of the same. Ergo, Taxes on business profits are not "paying the guards in the market-place"; are "paying the guards back at home whilst counting money". Ipso facto, Taxes on profits economically resemble "muggings", of merchants, "on their ways back home", after-hours.

if business pay Taxes on profits (Revenues - Expenses); then people should pay Taxes on their net-incomes ("how much you got in your account?"); if people recognize the latter as a Taxation-after-Taxes ("double jeopardy"), then they should recognize the former, as precisely the same ("Taxed for standing around with money in your wallet").

And I thought that I was a hopeless drunk.

 

[DSGE]

BTW, thanks for the dead weight loss term. I'm going to have to study it a bit to get it down to the math.

Do you think the term is applicable to inefficiencies caused by between market imbalances?

Does the term apply to monopolies, if they were to be allowed to exist?

Markets with industries with high market leverage, Carnot oligopoly dominated markets in particular?

Does dead weight loss apply to price floors?

I'm not seeing it, given the wiki diagram and description. Is it symmetric in reflecting about a vertical axis through the equilibrium point?

Medical, petroleum, insurance, banking, and the auto mobile industries are a few that seem to run high profits and seem to have substantial market leverage.

What is the overriding concern that leads to "inefficiency"?

Deadweight loss is generally any allocation that deviates from the competitive equilibrium allocation. Basically when the marginal benefit to a consumer is not equal to the marginal cost of the good. This can happen because of price controls, market power (which lets firms set a price above marginal cost), probably some other stuff (that I can't think of right now).

"I'm not seeing it, given the wiki diagram and description. Is it symmetric in reflecting about a vertical axis through the equilibrium point?"

No, because no matter what the price is, production will always be to the left of the competitive equilibrium. If the market price is set too low, we end up at a point on the supply curve to the left, but off the demand curve. At a low price suppliers aren't willing to supply as much, but there's excess demand (shortage). If the market price is above equilibrium then we're on the demand curve to the left of equilibrium and off the supply curve. At high price consumers don't demand much but suppliers want to supply lots (surplus).
This is looking at things in static equilibrium, so the case where demand changes and the supplier has to liquidate their stock by offering a price below cost isn't considered.

Seems like a lot of the issue tends to be underpinned by the standardized pricing that increases efficiency. It's all great, but in a true market with bidding, it would seem that the pricing would be on a sliding scale, with those having higher desire or need paying more, thus allowing the last units to actually be sold at a "loss", compared with the actual cost, while the average cost is at the equilibrium price.

That's called price discrimination, and it's super hard to do that. Remember that everybody wants to maximise their surplus (difference between the price paid in the market and the maximum price they're willing to pay). But you're right that that's efficient. Actually, in Micro 1 or 2 you normally do an example with that. With a regular monopoly that can't price discriminate there's deadweight loss from setting the market price above marginal cost. But a monopoly that can perfectly price discriminate actually ends up at the competitive equilibrium allocation, although since each consumer is charged the maximum they're willing to pay, all of the surplus is obtained by the monopoly.

A lot of markets actually are close to this, with Raley's commanding a higher price and likely a higher margin while their sister store, Foodmax, in the next city sells at cut rate prices. The net effect is that they unload excess product at lower prices to those that have a lower willingness to pay. The remaining product gets picked up by the local food banks.

In some areas, an extra ten minute drive and you can cut your food bill in half.

I am not sure if all products manage to be so neatly marketed on a sliding scale.

Hmmm....... I'm not sure if that eliminate the problem....

In theory, in absence of other frictions, I'd expect that the value of the difference in price between the two stores would be roughly equal to people's perception of how much a 10 minute drive is worth. A "premium for convenience".

 

[Widdekind]

If Government were economically neutral, then Government would apply a single flat-rate sales-Tax (e.g. 10%), on every dollar spent, in the market-place, on every commodity bought-and-sold (e.g. income, the "sale" of Labor).

Not true. They'd be using a Ramsey rule for optimal commodity taxation. On on things which aren't commodities, like labour, a progressive tax is optimal. (By optimal here I mean minimising deadweight loss).

• Labor is a "commodity", i.e. "a convenient or useful product", de facto
• Government "neutrality" implies complete non-consideration, of "what" is transacted, or "why" it is transacted, only "how much" the transaction was valued, by the market (presumed to fairly value goods & services, i.e. "to know what it's doing")
• libertarian Governments do not seek "increasing revenues", as your Optimal Tax theory demands ("Government Guns looking for more OPM"), for Government "social planners"; libertarians leave "social structurings" to markets ("society optimized for making Money, not (submitting to) paying Taxes")

For example, logically, "commodities" with highly elastic Demands, such that small increases in Price cause large decreases in Quantities, are, ipso facto, "luxuries" (not "necessities"); conversely, "commodities" with highly in-elastic Demands, such that increases in Price cause negligible decreases in Quantities, are, ipso facto, "necessities" (not "luxuries"). Ergo, "neutral" flat-rate Taxes "trim the fat" out of economies, without "trampling" upon "bread & water".

this is assuming the taxes are on the trades. Taxing profits is more effecient than taxing the trades themselves

• libertarian Governments guard markets, they do not inspect wallets
• why is Taxing trades less efficient, than Taxing profits after trades ?

Taxing trade requires consideration, of one amount of Money (on-the-spot Price); Taxing profits requires consideration, of two amounts of Money (Revenues - Expenses).

i am arguing, that Government guards Money-flows, through markets (PQ, [$/time]), for which "Service" Taxes are taken ([$/time]); you are arguing, that Government concerns Money-stocks, outside of markets ([$]). Does Government Tax "fast moving" Money, or "slow stationary" Money ? You would agree, that flat-rate Taxes dis-incentivize "luxuries" (elastic Demand) compared to "necessities" (inelastic Demand) ? Taxes on profits directly target "added surplus values" (Revenues - Expenses) from profit-driven economic activity, the very "heart" of Capitalism.

i want to ponder this point -- according to me, "slow stationary" Money avoids Government Taxation ("the T.Rex can't see you if you don't move"), promoting "frugality", demoting "profligacy" in spending. Yet, "idle" Money is directly targeted, by ideal "Demand-side" Government stimulus

MV + dM x 0 = PQ
--->
(M+dM)V = PQ + d(PQ)​

By demoting "luxuries", relative to "necessities"; and by demoting "spending", relative to "saving"; Money-blind flat-rate Taxes promote hoarding, which stashes can be raided, during "Demand-side" Government interventions, "on rainy days". Prima facie, flat-rate Taxes promote Money responsibility, which can be exploited, when necessary, during downturns.

I don't recognise the latter as "taxation-after-taxes". I see it as two different kinds of taxes.

yes -- two different Taxes, applied in "series", to the same Money-flow:

1. Tax on original transaction (Tax on sales)
2. Tax on profits from transaction (Tax on profits)

if currency must "surmount multiple hurdles", to remain in some merchant's wallet, then that currency has been "multiply Taxed".

 

[Widdekind]

... in a true market with bidding, it would seem that the pricing would be on a sliding scale, with those having higher desire or need paying more...

That's called price discrimination, and it's super hard to do that. Remember that everybody wants to maximise their surplus (difference between the price paid in the market and the maximum price they're willing to pay). But you're right that that's efficient.

"haggling" attempts to capture Consumer / Producer ("the other guy's") surplus:

you make an important point -- the "Demand curve" is actually the "top edge" of the "Demand region", lying below the DC ("yeah, they'd pay price P for quantity Q, but they'd sure pay less"); by implication, the "Supply curve" is actually the "bottom edge" of the "Supply region", lying above the SC ("yeah, they'd ship quantity Q for price P, but they'd sure take more"). Mutually-willing economic transactions will only occur, when both parties consent, symbolized by the "region of overlap", between the DR & SR. In the above figure, that overlapping region is colored (blue & red); any point (P,Q) residing in that region, represents a potentially possible, mutually-agreeable, (level of) economic transaction.

Taxes increase costs, de facto shifting SCs upward:

Note that the above figure depicts a constant "fee" Tax -- a flat-rate Tax would increase, with increasing Price, so that the SC would be "tilted" (not "uplifted"), still threading through the origin (P,Q = 0,0).

in absence of other frictions, I'd expect that the value of the difference in price between the two stores would be roughly equal to people's perception of how much a 10 minute drive is worth. A "premium for convenience".

seen the same in gasoline prices ("truck-stops on main highways charge more")

 

[DSGE]

Labor is a "commodity", i.e. "a convenient or useful product", de facto

.

Oh. That's using the term a bit broadly. In econ a commodity is specifically a good which is fungible.

Government "neutrality" implies complete non-consideration, of "what" is transacted, or "why" it is transacted, only "how much" the transaction was valued, by the market (presumed to fairly value goods & services, i.e. "to know what it's doing")

That's a strange way to define neutrality. I'd define it as acting in such a way as to minimise inefficiencies it causes in markets.

libertarian Governments do not seek "increasing revenues", as your Optimal Tax theory demands ("Government Guns looking for more OPM"), for Government "social planners"; libertarians leave "social structurings" to markets ("society optimized for making Money, not (submitting to) paying Taxes")

That's not what my "optimal tax theory" demands at all. What the hell are you talking about?

I assume you're misinterpreting this:

"optimal taxation is the study and implementation of how best to design a tax to minimize distortion and inefficiency subject to increasing set revenues through distortionary taxation in the market."

When it says "subject to increasing set revenues", it doesn't mean "such that revenues get maximised. It means if currently the government is raising revenue R, but needs to tax in order to raise revenue R+T, how should taxes be designed such that raising T in tax revenue minimises distortions and deadweight loss due to government presence.

For example, logically, "commodities" with highly elastic Demands, such that small increases in Price cause large decreases in Quantities, are, ipso facto, "luxuries" (not "necessities"); conversely, "commodities" with highly in-elastic Demands, such that increases in Price cause negligible decreases in Quantities, are, ipso facto, "necessities" (not "luxuries"). Ergo, "neutral" flat-rate Taxes "trim the fat" out of economies, without "trampling" upon "bread & water".

It means they have to create tons of inefficiency in those markets [with low elasticities of demand] to raise the same amount of revenue (since consumers just substitute away from the good being taxed).

Be clear on what your goal is. We know that for the government to operate in needs to raise revenue R. Don't tell me the mechanism through which you think it should do it (flat tax), tell me the outcome you want from some mechanism. An example might be: "The government must raise revenue R. They should design taxes in such a way that minimises deadweight loss". And then we can figure out which system of taxation achieves that objective.

libertarian Governments guard markets, they do not inspect wallets

So this tax system is motivated by a moral sentiment rather than economic theory?

why is Taxing trades less efficient, than Taxing profits after trades

It's complicated (maybe check out a public economics textbook; I use Hindriks & Myles) but the idea is that when you tax trades it distorts the optimal quantity to produce, but when you tax profits it doesn't.

Taxing trade requires consideration, of one amount of Money (on-the-spot Price); Taxing profits requires consideration, of two amounts of Money (Revenues - Expenses).

But that's not extra work for the government. Companies have to release their balance sheets anyway.

i am arguing, that Government guards Money-flows, through markets (PQ, [$/time]), for which "Service" Taxes are taken ([$/time]); you are arguing, that Government concerns Money-stocks, outside of markets ([$]).

Stock, flow, who cares? Seriously, why does this matter? The government "guards" stocks as well as flows. You can't go and steal someone's profit. The government enforces property rights on stocks as well as flows. I literally don't understand what you're talking about.

Does Government Tax "fast moving" Money, or "slow stationary" Money ?

...Who cares?

You would agree, that flat-rate Taxes dis-incentivize "luxuries" (elastic Demand) compared to "necessities" (inelastic Demand) ? Taxes on profits directly target "added surplus values" (Revenues - Expenses) from profit-driven economic activity, the very "heart" of Capitalism.

Right, so you are trying to make a moral statement. Don't try and dress it up in economics then.

i want to ponder this point -- according to me, "slow stationary" Money avoids Government Taxation ("the T.Rex can't see you if you don't move"), promoting "frugality", demoting "profligacy" in spending. Yet, "idle" Money is directly targeted, by ideal "Demand-side" Government stimulus

MV + dM x 0 = PQ
--->
(M+dM)V = PQ + d(PQ)​

By demoting "luxuries", relative to "necessities"; and by demoting "spending", relative to "saving"; Money-blind flat-rate Taxes promote hoarding, which stashes can be raided, during "Demand-side" Government interventions, "on rainy days". Prima facie, flat-rate Taxes promote Money responsibility, which can be exploited, when necessary, during downturns.

Don't understand what's going on here. Though you mention "which stashes can be raided during 'demand-side' government intervention". No such intervention is ever necessary. There's never any justification for government fiscal stimulus.

I don't recognise the latter as "taxation-after-taxes". I see it as two different kinds of taxes.

yes -- two different Taxes, applied in "series", to the same Money-flow:

1. Tax on original transaction (Tax on sales)
2. Tax on profits from transaction (Tax on profits)

if currency must "surmount multiple hurdles", to remain in some merchant's wallet, then that currency has been "multiply Taxed".

Again, I don't care about "money flows". I care about allocative inefficiency that the government causes by taxing.

 

[Widdekind]

Labor is a "commodity", i.e. "a convenient or useful product", de facto

In econ a commodity is specifically a good which is fungible.

Labor hours are fungible, i.e. substitutable ?

Fungibility is the property of a good or a commodity, whose individual units are capable of mutual substitution, such as crude oil, shares in a company, bonds, precious metals or currencies. For example, if someone lends another person a $10 bill, it does not matter if they are given back the same $10 bill or a different one, since currency is fungible

That's a strange way to define neutrality. I'd define it as acting in such a way as to minimise inefficiencies it causes in markets.

Cp. thousands of shelf-feet of Tax-codes; billions of man-hours of "hassle & headache every April"; opacity in Government & Money ?

That's not what my "optimal tax theory" demands ... I assume you're misinterpreting this...

but also this:

Frank P. Ramsey...wanted to...adjust consumption Tax rates...so that the reduction of utility is at a minimum... it is problematic to constrain social planners to one form of taxation. It is better to enable them to consider all possible tax structures

libertarians do not want Government, i.e. Force, to "plan" society; they want market economics to structure society ("society optimized for making Money, not giving it to Government")

if currently the government is raising revenue R, but needs to tax in order to raise revenue R+T, how should taxes be designed such that raising T in tax revenue minimises distortions and deadweight loss due to government presence.

you would agree, that "minimizing distortions", would "maximize willing cooperation" of citizens, with their Government ? If so, then what better than Government bonds, willingly purchased, by willing citizens, willing-and-able to loan Money, to cover costs ? E.g. the Fed buys T-bills regularly, as do many citizens, who are already willingly one of the principle sources of Government funds:

"Three groups (1, 2, and 3 on the left) provide virtually all of the money flowing into the federal government" (optimist123)​

No need for Labyrinthine Tax-codes; float T-bills; markets will work things out. Perhaps ships could be named after major creditors.

It means they have to create tons of inefficiency in those markets [with low elasticities of demand] to raise the same amount of revenue (since consumers just substitute away from the good being taxed).

i understand, but i'm suggesting a different Tax scheme

• 10% flat-rate sales Tax
• borrow on deficits
• pay off on surpluses

simple, plain, down-to-earth, non-opaque, non-Labyrinthine, transparent

So this Tax system is motivated by a moral sentiment rather than economic theory?

Government un-concerned with "morality" ? i'm concerned for simplicity and transparency.

when you tax trades it distorts the optimal quantity to produce, but when you tax profits it doesn't.... that's not extra work for the government. Companies have to release their balance sheets anyway.

why ?

 

[DSGE]

Labor is a "commodity", i.e. "a convenient or useful product", de facto

In econ a commodity is specifically a good which is fungible.

Labor hours are fungible, i.e. substitutable ?

For the same person, hours are. But one our of labour from me is not the same as one hour of labour from you. This isn't especially important, just a side note anyway.

Cp. thousands of shelf-feet of Tax-codes; billions of man-hours of "hassle & headache every April"; opacity in Government & Money ?

Nobody is saying the current tax code is optimal. Maybe you think it's too much work to have a completely optimal tax code, but that's fine. Obviously we have to operate within transparency constraints. A fully optimal tax code is too complicated, a simple flat tax is too inefficient. Why aren't we attempting to choose something in between?

but also this:

libertarians do not want Government, i.e. Force, to "plan" society; they want market economics to structure society ("society optimized for making Money, not giving it to Government")

Ha. No dude, "social planner" is an economics term. It's not what you're thinking of. The "social planner" in this context is the person/body who sets the tax rate and on what goods; not somebody who micromanages every aspect of the economy.

you would agree, that "minimizing distortions", would "maximize willing cooperation" of citizens, with their Government ? If so, then what better than Government bonds, willingly purchased, by willing citizens, willing-and-able to loan Money, to cover costs ? E.g. the Fed buys T-bills regularly, as do many citizens, who are already willingly one of the principle sources of Government funds:

"Three groups (1, 2, and 3 on the left) provide virtually all of the money flowing into the federal government" (optimist123)​

No need for Labyrinthine Tax-codes; float T-bills; markets will work things out.

You know that T-bills are just taxes in the future right? You have to pay for bonds the government issues.

i understand, but i'm suggesting a different Tax scheme

• 10% flat-rate sales Tax
• borrow on deficits
• pay off on surpluses

simple, plain, down-to-earth, non-opaque, non-Labyrinthine, transparent

No mention of economic efficiency. Also, it's not at all hard to have different tax rates for sales. It's not like you buy groceries and then in tax month (April in the US?) you have to go through all the food you've bought, look at all the tax rates and fill out your tax return with how much tax you owe on lettuce. All that shit is done at point of sale. The only tax which is opaque and confusing is income tax. At least, that's what I hear about the US. Over here it's wicked simple.

So this Tax system is motivated by a moral sentiment rather than economic theory?

Government un-concerned with "morality" ? i'm concerned for simplicity and transparency.

The simplest and most transparent tax is lump-sum (also, the most efficient, by the way). "Everybody owes the government $5000". But then we care about fairness, so we start using distortionary taxes. And when we use distortionary taxes, we have to talk about efficiency. That is, "can we get the same revenue but by creating less deadweight loss".

when you tax trades it distorts the optimal quantity to produce, but when you tax profits it doesn't.... that's not extra work for the government. Companies have to release their balance sheets anyway.

why ?

Dude, you seriously expect me to do several pages of maths for you? Come on, I gave you a textbook reference. Do your own work.

If the why is to why companies have to release their balance sheets, it's because of transparency for the shareholders.

 

[Widdekind]

DSGE is correct -- Taxes on "profits" (Revenues - Expenses) impact markets less than Taxes on "Prices". The Supply-Curve (SC) threads through the (P,Q) plane, representing the Supplier's "break-even" Price (Pmin), at any given Quantity, where "earnings" are zero (0 = R-E = PminQ-E, i.e. Pmin=E/Q "by definition"); any Demand, for any Quantity (Q) at any Price (P), such that (P,Q) resides above the SC, would be economically "profitable" for the Supplier.

If some market transacts some "profitable" amount of some product (PQ > PminQ), then the Supplier "profits" by the amount (P-Pmin)Q = dP Q. Suppliers would willingly supply that market, its desired Q, at that P, being motivated by the prospects of making an amount of Money equal to (dP Q). If "profits" are Taxed (T%), then Suppliers would still willingly supply that market, albeit with "Money motivation" diminished by (T% x dP Q). Taxes on "profits" eliminate no (P,Q) which would otherwise have willingly been transacted; such Taxes merely "diminish Money motivation", but never to zero (unless T=100%).

However, if "Prices" are Taxed, then an entire "swath" of (P,Q)'s residing "just above" the SC are eliminated from marketability; Price-Taxes de facto shift the SC vertically upward, restricting Supplier willingness-and-ability to supply their market, for many combinations of (P,Q):

Price-Taxes restrict markets, typically towards lower Q, higher P.

Taxes on "profits" never restrict markets, merely diminish "Money motivation" by the Tax-rate; any transaction "profitable" without the Tax, remains (almost as) "profitable" afterwards. The simplest "profit Tax" scheme, would Tax all economic entities, by the same fraction (T%), of their "profits" or "earnings":

• corporations: (Revenues - Expenses) x T%
• individuals: (Income - Standard_Deduction) x T%

where the Standard-Deduction represents a reasonable cost-of-living "expense" estimate, for humans to acquire the necessities, via which they supply their Labor.

 

[Supposn]

Widdekind, taxing business profits is synonyms with taxing businesses’’ net incomes. This is justified to the extent that personal net income is being taxed.

If individuals’ tax rates exceed businesses’, individual entrepreneurs and executives will show little incomes “on the books” but they’ll live very well upon their expense accounts. If net incomes remain taxed, we should tax both individuals’ and commercial incomes at similar maximum rates.

Respectfully, Supposn

 

[Widdekind]

taxing business profits is synonyms with taxing businesses’ net incomes. This is justified to the extent that personal net income is being taxed.

taxing "profits" (Revenues - Expenses) does not distort markets; taxing "Prices" does. By focusing on "profits", the former only affect already-money-making transactions; and only require that some of those "profits" be "shared" with the Government. Such resembles Government being a "best friend who asks for some of your spare cash".

Conversely, by focusing on "Prices", the latter de facto add "Taxes" into the costs of manufacturing products -- "widgets used to cost 'parts & labor', now cost 'parts & labor & Taxes'". Such resembles the costs of inputs (parts, labor) suddenly increasing, and have the same economic effects ("supplies cost twice as much, and labor is striking for double wages") -- to wit, previously profitable transactions can be made unprofitable, so distorting markets.

In personal analogy, imagine that supplying labor was Taxed +$1/hour. Anybody who worked has to pay the Government one dollar per hour worked. If you had a long commute & demanded to eat organic lunches (say), so that you were barely breaking even on your labor already, that extra Tax might make you quit your job -- "Price Taxes" can make previously-profitable transactions (your labor for their money) now-unprofitable. But, a "profits Tax" only asks for some of your net positive income, only makes you "share with a friend" (whose Government Guns guarded the market for you), without making what was worthwhile, now not so (unless T=100%).

ipso facto, no "Price Taxes", i.e. sales Taxes, ought to be applied; only "(net) profits Taxes", resembling current personal income Taxes, (Income - Standard_Deduction) x T%. Ten-percent would be nice-round-number, easy to calculate, and everybody could do their Taxes online, for free, in a few minutes (lawyers would need to find another welfare protection-from-Taxes racket, "in which criminals demand money from businesses, in exchange for the service of 'protection' against crimes that the racketeers themselves instigate if unpaid").

 

[Supposn]

taxing business profits is synonyms with taxing businesses’ net incomes. This is justified to the extent that personal net income is being taxed.

taxing "profits" (Revenues - Expenses) does not distort markets; taxing "Prices" does. By focusing on "profits", the former only affect already-money-making transactions; and only require that some of those "profits" be "shared" with the Government. Such resembles Government being a "best friend who asks for some of your spare cash"......................

Widdiekind, to the extent taxes for differing products and enterprises are taxed and those taxes are enforced similarly, there are no comparative advantages or disadvantages to enterprises or entrepreneurs.
Lacking such comparative differences and if prospective purchasers have no alternatives not similarly taxed, market’s are NOT distorted.

A foreseeable problem occurs when a tax’s rate begins to approach an unacceptable rate, (I emphasize the word’s “approaches” which is prior to “reaches”).
The problem’s to the extents of costs for compliance, enforcement, revenue losses or the undermining of our national integrity. (I.e. the entire nation’s integrity includes those more or less honest, tax payers and evaders, government civil servants or appointed or elected officials).

[We experience similar phenomenon’s' when we insist upon enacting and enforcing prohibitions which very significant portions population will not fully support and significant minorities are strongly oppose to (those prohibitions)].

Respectfully, Supposn

 

[Widdekind]

A foreseeable problem occurs when a tax’s rate begins to approach an unacceptable rate

a single flat-rate Tax on "profits" (Rev - Exp) treats everybody's every dollar the same, i.e. is a "blind" even-handed & fair Tax.

 

[Supposn]

A foreseeable problem occurs when a tax’s rate begins to approach an unacceptable rate

a single flat-rate Tax on "profits" (Rev - Exp) treats everybody's every dollar the same, i.e. is a "blind" even-handed & fair Tax.

Widdiekind, I hope that you’re more and I’m less correct.
I doubt that your “single flat-rate tax on profits” could raise sufficient tax revenues.

I’m a proponent of alternatives to progressive tax rates that would grant some tax consideration to lower income families. It’s possible to tax net incomes or gross sales in manners that have some consideration for lower the working poor while gradually decreasing those considerations as incomes increase.
There are limitations to the feasible extent of such considerations for lesser income earners.

I’m a proponent of incrementally and simultaneously shifting our tax revenues from taxing net incomes to a tax base of gross sales. If I’m correct, after some incremental step, an unacceptable rate of sales tax will be approached. At that point the shifting process will cease. If I’m incorrect, federal income taxes will be completely eliminated.

Respectfully, Supposn

 

[Supposn]

Widdekind, a major (if not the primary) common root causes of our income tax’s inequities are due to progressive tax rates.

We have tax loop holes created to remedy inequities caused by enactment of prior tax loop holes which can eventually be traced back to progressive tax rates’ inequities.

Without providing some compensating considerations for lower earning income tax payers, it’s politically and financially unfeasible to discriminately increase lower earners income tax rates or to preferentially decrease rates for higher income earners.

We can reduce upper income earners’ tax rates and maintain tax revenue neutrality we compensate by eliminating tax loop holes favoring specific types of income sources which reduce our tax revenues and do not more favorable (than other sources) contribute to our economy. The tax rate reductions granted to long term capital gains are among such unjustified tax loop holes.
It’s politically unfeasible to eliminate the tax reduction granted to sale of personal residence. We could waive income taxes upon a threshold amount of profits due to the sale of such residences. That threshold amount should be annually cost of living adjusted.

After we’ve picked all of the “low hanging fruit”, it becomes politically and financially increasingly more difficult to eliminate remaining loop holes and maintain revenue neutrality.

We could reprioritize our spending to favor what will better contribute to our economy. Poverty is detrimental to a nation’s economy.

Those who wish to eliminate Social Security retirement benefits and government provided or subsidized healthcare insurance or any daycare for the working poor are proponents of a policy that’s as possibly (if not probably) a greater threat than most other potential enemies our nation is likely to face.

At this time (when our military strength is comparatively greater than any other nation’s global military rank), we should be increasing the spending that contributes to our economic rather than military growth. A nation that produces fewer goods is a nation that is militarily weaker despite the military budget.

Respectfully, Supposn

 

[Widdekind]

I doubt that your “single flat-rate tax on profits” could raise sufficient tax revenues.

how much is Government entitled to ?

I’m a proponent of alternatives to progressive tax rates that would grant some tax consideration to lower income families.

that why "profit Taxes" only Tax (net) profits, e.g. (Income - StandardDeduction) x T%, that deduction would eliminate all Taxes on "poor people" below the poverty line.

Widdekind, a major (if not the primary) common root causes of our income tax’s inequities are due to progressive tax rates.

Government monetary "meddling", treating some dollars differently from others; elsewhere that is called "prejudice & discrimination"

Without providing some compensating considerations for lower earning income tax payers, it’s politically and financially unfeasible to discriminately increase lower earners income tax rates or to preferentially decrease rates for higher income earners.

evidently

Those who wish to eliminate Social Security retirement benefits and government provided or subsidized healthcare insurance or any daycare for the working poor are proponents of a policy that’s as possibly (if not probably) a greater threat than most other potential enemies our nation is likely to face.

Government = Force not "nanny"; Government only funds "nanny" by Forcing some American minorities ("evil wealthy people we are all prejudiced against") to pay, on pain of loss of liberty, limb & life, for non-compliance