The only thing it did was increase rent seeking.
There is less need to buy tax favors at 21% than at 35%.
I got you. Kind of going with this Washington Examiner article.
Economists will tell you that hiking corporate tax rates doesn’t help the working class or middle class. Budget wonks will tell you that hiking the
www.washingtonexaminer.com
And all that might fly, if the "free market" system everyone waxes about actually existed. You no, no rent seeking allowed, barriers to entry in many fields eliminated or at least significantly reduced, monopolies broken up like they are supposed to be, oligopolies examined, actual prosecution for collusion on pricing that is absolutely rampant in many product categories, soft drinks sitting at the top of the list. Yeah, all that would be fine in the fantasy world most "free market" supporters live in. But, not so good in the REAL world, where all of us are forced to reside.
I mean we have been through all this, historically. Corporate and income taxes were cut. The capital gains rate was reduced to below the top level marginal tax rate, even the mid quintile tax rate. What did we get? Almost non-existent wage growth. Companies failing to invest. I mean this is a real story. You know those valentine's day hearts with the cute little messages on them. You know they dried up a couple of years ago. The machine that made them was so damn old, so worn down, that it was a toxic nightmare, and yes, the government came in and shut it down. It was only then that the company was forced to invest in improved technology. The candy category is a great example of the failure of all this tax cutting. There are machines out there that, when they break down, no one knows how to fix them and no one knows how to build a replacement. Hamburger patties another example. Most of the machines generating those patties pre-date WWII.
I mean, I will admit it. I buy slightly used cars and drive them in the ground. I have had three in more than forty years. That works well for me. That strategy doesn't work so well in the business world. But that is exactly the strategy you get with low corporate tax rates. And don't even attempt to compare our corporate income tax rate with European countries. They have a VAT. We don't. So until you are willing to adopt a VAT I would advise avoiding the comparisons.
Finally, if you want to look at a real example of the failure of our current low tax rate system, then look at National Defense. WTF--B-52's still flying missions? Are you kidding me? And our jet fighters SUCK. The problem is there is no incentive to innovate. Just keep on riding the horse that worked in the past until he dies. Like I said, it might work for my daily commute, it sure as hell not going to work if you want to be the most powerful military in the world. Do we even have a fifth generation fighter? Russia does. Japan does. Do we? Nope, corporate taxes should be north of 35%, and all income should be taxed the same and should be applicable to the Social Security tax. Until that happens, we are setting ourselves up for failure.
And all that might fly, if the "free market" system everyone waxes about actually existed.
We had the highest rate in the 1st World at 35%.
We need to be competitive, right?
I mean we have been through all this, historically. Corporate and income taxes were cut. The capital gains rate was reduced to below the top level marginal tax rate, even the mid quintile tax rate. What did we get? Almost non-existent wage growth.
When? Be specific.
You know those valentine's day hearts with the cute little messages on them. You know they dried up a couple of years ago. The machine that made them was so damn old, so worn down, that it was a toxic nightmare, and yes, the government came in and shut it down.
Raising the corporate rate from 21% back to 35% would improve that situation?
That strategy doesn't work so well in the business world. But that is exactly the strategy you get with low corporate tax rates.
Why do you feel that?
Finally, if you want to look at a real example of the failure of our current low tax rate system, then look at National Defense. WTF--B-52's still flying missions?
B-52s don't work anymore?
And our jet fighters SUCK. The problem is there is no incentive to innovate.
Higher taxes improve incentives?
I'd rather make $1,000,000 in profits and keep $790,000 than keep $650,000.
Looks like an incentive to me. How does it work under your plan?
corporate taxes should be north of 35%, and all income should be taxed the same and should be applicable to the Social Security tax.
If I pay twice as much in Social Security, I'm going to get twice the benefit? Sweet!
We had the highest rate in the 1st World at 35%.
We need to be competitive, right?
.
Can you establish a link between low corporate tax rates and competitiveness? Because I am not seeing it. Both Brazil and France have rates just a fraction under that 35%. The largest beef packer in the world is based in Brazil, they have 13% of the US market. Hell, there are fifty Brazilian companies operating out of Pompano Beach Florida alone. And there is not a single state in this nation that doesn't have a French company operating within it's borders. In fact, France is the third largest foreign employer in the US, behind Japan and the UK.
When? Be specific.
How about 1969, corporate tax rate was 52.8%, and we landed on the moon. We been back yet? I don't know about you, I can remember back then. We were rocking and rolling when it comes to the economy, double digit GDP growth year after year. Now we celebrate if we hit four percent.
Raising the corporate rate from 21% back to 35% would improve that situation?
We have been over this before. I don't see what is so hard to understand. Like 1969, and the 1950's, GDP growth was higher, wage growth was higher, and we were easily the number one economy in the world. Since 1980, when corporate tax rates were first cut and income taxes were slashed, we have been waiting for that great wave of economic growth, which at this point is like Linus waiting on the Great Pumpkin at Halloween.
Low corporate tax rates give companies an incentive to take money out of the business. They do not encourage risk taking, in fact, it is mathematically demonstrable. Look it up, don't believe me. The WACC, that is the weighted average cost of capital is INVERSELY related to the marginal tax rate. So the lower the rate, the higher the cost of capital. Put another way, the "opportunity cost" of not making an investment declines as tax rates decline. So hell, if companies stand little to lose by not innovating, and if the cost of capital is high, damn skippy equipment is going to be ran till it falls apart.
But to put the icing on the cake, today non-financial corporations are sitting on four TRILLION, that is TRILLION with a T, dollars in cash reserves. If lower corporate tax rates stimulated investment, don't you think they would be parting with some of that money? I mean what the hell are they waiting on, lower rates? The fact of the matter is, with the government all but abandoning the subsidizing of risk, companies have became paralyzed. CEO's have one option to increase their share price, retire company stock. Even great minds, like Elon Musk, are parking cash reserves in Bitcoin. So, instead of innovating companies are putting money into an imaginary currency with no basis whatsoever. You can't make this shit up. Adam Smith is laughing his ass off.
Higher taxes improve incentives?
I'd rather make $1,000,000 in profits and keep $790,000 than keep $650,000.
Looks like an incentive to me. How does it work under your plan?
Yep, you just proved my point. "Keep" the key word there. That is exactly why companies have four trillion dollars in cash reserves. They are "keeping" the money. That is exactly why wages are barely growing despite major improvements in productivity. Companies are "keeping" the money. That is exactly why there is little innovation. Companies are "keeping" the money. And that is precisely what I said, low corporate tax rates encourage corporations to KEEP their damn money. The only want to get more of the pie that is already there, they have stopped making more pie.
If I pay twice as much in Social Security, I'm going to get twice the benefit? Sweet!
And there it is. Another problem. Look, Social Security is not a damn investment. It is a social program. And at this point, well it is just another tax, along with the income tax. If anything, well it is an incentive to individuals to hit the damn cap in order to generate what, a damn tax cut. So, instead of depending on the government to cut your taxes, WORK MORE, and cut them yourself. Or replace earned income with unearned income and only pay a tiny Medicare tax on your earnings. Which makes no damn sense whatsoever. Just another example of a tax system that has been rendered totally useless from an economic standpoint and has became the "fortress" of the wealthy. David would now say, taxes are the fortress of the wealthy, the poverty of the poor is still their destruction.
