Toddsterpatriot
Diamond Member
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.
The real reason Biden and the swamp want higher corporate tax rates - Washington Examiner
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 corporate rate won't raise very much revenue. People who understand business and taxation will explain higher corporate tax rates mostly increase...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.
Can you establish a link between low corporate tax rates and competitiveness? Because I am not seeing it.
You're kidding, right?
If I can choose between between a jurisdiction with a 21% rate and a 35% rate, I'll pick 21%.
Which one will you pick?
Both Brazil and France have rates just a fraction under that 35%.
France just cut their rate to 28%, going down to 25% next year.
How about 1969, corporate tax rate was 52.8%, and we landed on the moon.
So cutting the corporate tax rate caused wage growth to stop?
Stopped us from returning to the moon?
Since 1980, when corporate tax rates were first cut
First cut? Carter cut rates to 46%
we have been waiting for that great wave of economic growth,
Reagan had great growth.
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Low corporate tax rates give companies an incentive to take money out of the business.
When I'm thinking about starting a new business, I definitely don't want to take money out, ever.
Wait, WTF?
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.
I LOVE that claim!!!
Post an example and I'll show your error. Here's a free calculator.
Weighted Average Cost of Capital (WACC) Calculator - Good Calculators
Put another way, the "opportunity cost" of not making an investment declines as tax rates decline.
And the cost of a missed opportunity is higher as tax rates decline.
Sorry, but your simplistic statement concerning which marginal tax rate you would pick is meaningless. Besides, there are a handful of countries that have no corporate income tax, Bahrain is at the top of the list. Why do all companies not incorporate there, or the Bahamas for that matter. Throw aside your bias and ask yourself this, what has happened to competition in the last fifty years? Has it increased? Think about groceries, cars, soft drinks, even beer. From my perspective, those industries have consolidated, competition has decreased. Especially among the major players. Sure, with beer you have the microbrews, but those are quickly being snapped up.
I grew up in the grocery business. It was highly competitive and cut throat to say the least. Typical margins ranged between a half percent and three percent. Today, not much competition, where I live, the market has pretty much been carved up and divided between the major players. And margins, they are double, triple, what they were when I was growing up. Lots of rent seeking going own, and none of it has anything to do with government intervention. While these actions might be good for those companies, it is catastrophic to consumers, and for the overall economy it results in misallocation of resources that contracts the frontier curve.
I will agree that Reagan saw good GDP growth, but he came in during a recession, Volcker gets most of the credit, and he borrowed his way to that increase in GDP. Really wondering what is different about Biden's plan to do the same. Well, except for the cost of that borrowing is about a third of what it was under Reagan. I mean I have to admire my son. He has refinanced his mortgage to an insane low rate and cut the term to 15 years. But the housing market has expanded so much that he got a cash offer for his home that would net him over a hundred grand. Using that as a down payment he could step up from a quarter million dollar home to a half million dollar home, finance for thirty years, and have the same payment. Oh, and he is 25 years old. He is disciplined, but the government, they should be borrowing hand over fist, especially if you want to parade the Reagan expansion.
France is joining the race to the bottom. Unfortunate really. We will see how it turns out. But to your WACC calculator. Sure, no problem creating an example. Eliminate equity and the cost of equity, and boom, my contention holds up. And I got to tell you, the cost of equity is a hell of a lot like Bitcoin. It is kind of an imaginary number, rather you use the Capital growth model or dividend cost, it really measures nothing. I have made that argument in some of the finest business schools in the country, and from past dissent and the results, I have to believe I am right.
Finally, I got to talk about that whole opportunity cost of a missed opportunity. I manage millions of dollars of assets for my clients. They don't make tons of money, I mean I really wish they did. But I target a specific market, kind of true to my nature, land holders. I mean large land holders in some of the most valuable real estate in the country. If they want to cash out, then they can find someone else to manage their assets. If they want to hold on to their legacy, some with King's grants that have been in the family for centuries, then I am their man.
But here is the thing. Almost all corporations, like my clients, don't worry about the return on their investments, they worry about the return OF their investment. I mean hell, if all you were worried about was the return on your investments then why the hell are you buying stocks, you should sign up for Top Shots, and throw your money at legacy packs. The reality is higher corporate tax rates subsidize risk. And I will admit, there are times when you don't want companies to take on more risk, and there are times when you want them to take on more risk. Are we really in a time when we want them to take on less risk? I don't think so, and Biden's plan to increase the corporate tax rate should result in more risk taking.
Sorry, but your simplistic statement concerning which marginal tax rate you would pick is meaningless.
All the whining about corporations moving their HQ to lower tax jurisdictions was meaningless?
What about corporations and individuals moving from high tax to low tax states?
Volcker gets most of the credit,
For all that +5% growth? What did he do that Fed Chairmen after him couldn't do?
But to your WACC calculator. Sure, no problem creating an example. Eliminate equity and the cost of equity, and boom, my contention holds up.
Do it. I'll show why your contention is meaningless. With or without equity.
And I got to tell you, the cost of equity is a hell of a lot like Bitcoin. It is kind of an imaginary number
So this imaginary number no longer helps your claim?
Almost all corporations, like my clients, don't worry about the return on their investments, they worry about the return OF their investment.
And that means a higher tax rate is better?