Clearly this is his way of positioning himself to "win" something from Harper in exchange for supporting the Throne speech. But I am dumbfounded - does he really want to leave the NDP a huge wedge issue?

quote:

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Originally posted by Sara Mayo:
does he really want to leave the NDP a huge wedge issue?

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[ 12 October 2007: Message edited by: Albireo ]

The Libs have never intended to go for winning the next election. Dion is perfectly sincere when he says he wants to be Prime Minister. He just doesn't say when.

'When' = when the voters see the light and put the Natural Governing Party back in its rightful place.

The strategy- such as it was- was to expect Harper to win another election; to tread water in relation to the Conservatives; and to spend the interregnum keeping the NDP away from the turf on the left side.

But there was a tacit assumption that treading water would be easy- Harper would do the heavy lifting by scaring people and the LPC can expect maintenace mode to work.

And the ship has listed badly, so it's going to require a certain amount of taking of initiative to keep from slipping and listing yet more.

Campaigning from the left while in opposition is not a rote absolute. Posturing to the left is a rote absolute in the Liberal playbook.

But they always have to position to the right side as well. And they have so far been heedlessly ignoring the steady inroads the Cons continue to make in the 905 belt and similar connurbations across Canada.

The Libs need to regain a lot of the lost ground in those ridings to win an election. That just isn't feasible for the next election, be it 2 months or 2 years away. But they'll never get back to power if they don't in the meantime at least slow the Cons steady laying of a big feast for themselves.

quote:

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it would be monumentally stupid strategy for Dion to go after business-friendly conservative voters.

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Its not about them. Its about centrist swing voters in Mississauga semi-detacheds.. people who subscribe to the dictum that "what's good for business is good for my economic security."

[ 12 October 2007: Message edited by: KenS ]

Greens against progressive taxation, Libs for huge corp tax cuts as companies report record profit after record profit.

quote:

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"But it's true that we will come [to the next election] with a platform and a team that will be much more pro-business than Mr. Harper."

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Unless the NDP can propose alternative credible ideas for how government can help manufacturing survive at present in Canada that don't involve tax cuts, I doubt the NDP would gain a lot of votes from the Liberals based on Dion's proposal.

I'm not sure how this tax cut is structured given that corporate income taxes only tax profits, and if there are no profits corporations don't pay any income taxes. If Dion is referring to cutting payroll taxes on both corporations and employees, I would personally strongly support that.

Australia 30.0
Austria 25.0
Belgium 33.99
Canada 36.1
Czech Republic 24.0
Denmark 28.0
Finland 26.0
France 34.4
Germany 38.9
Greece 29.0
Hungary 16.0
Iceland 18.0
Ireland 12.5
Italy 33.0
Japan 39.54
Korea 27.5
Luxembourg 30.4
Mexico 29.0
Netherlands 29.6
New Zealand 33.0
Norway 28.0
Poland 19.0
Portugal 27.5
Slovak Republic 19.0
Spain 35.0
Sweden 28.0
Switzerland 21.3
Turkey 30.0
United Kingdom 30.0
United States 39.3

(The Canadian rate includes both the federal and provincial rates.)

So here's my idea:

1. Abolish all corporate taxes.

2. Replace them in their entirety by proportional increases in progressive income taxes and capital gains taxes - including on all income or capital gains which flow out of Canada.

This way, we fiscally encourage the plowing of profits back into the business, thus helping the economy while also narrowing the rich-poor gap.

Don't laugh too hard, Stephen, it's just an idea. I was encouraged to spew it forth by your table of corporate tax rates. If countries can be more socially progressive by having lower corporate tax rates than Canada and the U.S., why not abolish them altogether?

I would add that consumption taxes should be part of the mix. Income taxes penalise savings [eta: because the interest income generated by savings would be taxed], but consumption taxes don't. They're also regressive, but that can be corrected by putting more money into the GST rebate program.

If you're *really* interested, here's a link to the slides of a presentation I gave last summer on how to finance social spending:

Doing it by the (text)book: The Nordic approach to financing the welfare state

[ 12 October 2007: Message edited by: Stephen Gordon ]

quote:

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Originally posted by kropotkin1951:

As for us losing our manufacturing base the answer is syndicalism. Pass laws that allow our workers to take over factories that capitalists abandon and see the productive capablities of our workers.

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quote:

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Originally posted by unionist:
[QB]I'm obviously no economist, but I never understand the logic behind taxing corporate profits.

So here's my idea:

1. Abolish all corporate taxes.

2. Replace them in their entirety by proportional increases in progressive income taxes and capital gains taxes - including on all income or capital gains which flow out of Canada.

[QB]

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quote:

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Originally posted by Stephen Gordon:

Doing it by the (text)book: The Nordic approach to financing the welfare state

[ 12 October 2007: Message edited by: Stephen Gordon ]

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Yyyup, and I like Swedish models too. But, Stephen, Sweden doesn't have Alberta's oil and gas and total greenhouse gas-producing fossil fuels being siphoned off to the States 24-7.

quote:

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Originally posted by Will Hiscock:
I think this will make for a NDP field day when it comes to continuing to steal left liberals.

Greens against progressive taxation, Libs for huge corp tax cuts as companies report record profit after record profit.

Who is going to pay for services? The poor?

---

quote:

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Originally posted by kropotkin1951:
As for us losing our manufacturing base the answer is syndicalism. Pass laws that allow our workers to take over factories that capitalists abandon and see the productive capablities of our workers. We have spent years subsidizing the Big Three and they laugh and take the money and run. I say any corporation that wants a handout needs to know that if they subsequently abandon Canada the physical plant is confiscated.

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Great idea. Hear Hear!

We need this and other laws that limit the ability of the capitalists to wage capital strike.

[ 12 October 2007: Message edited by: Left Turn ]

One of the essential strategies or neo-conservative dialectics is to replace mandatory taxation and rules with more "discretionary" ones, on the as yet unfulfilled promise (and its been nearly thirty years now folks) that it'll all come back to the rest of us with interest. Why we should still believe that has never been made clear. Profit by definition means taking in more than you give out, and demands for profits from the only group managers are liable for, shareholders, don't go down. Like everything else, real wealth, present tense, is subject to entropy, while relying on projections of "growth" is not the answer either when that growth is coming mostly at the expense of others (tax cuts anyone?) and may just reflect more dollars being "invested" not earned. (and certainly not reinvested in labour, where most consumers still recieve most our incomes) Time does not change those eternal equations.

[ 12 October 2007: Message edited by: EriKtheHalfaRed ]

quote:

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Right now, Canada has the fourth-highest rate. A nine-point reduction would situate it in the middle of the range of rates that the Nordic countries have.

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All it took for Dion to eject his "social justice" pillar was to start taking advice from John Rae and Garth "out-Reforming the Reform Party" Turner.

This has to be Dion's plan to save face when he and the Liberal MPs vote in favour of the Throne Speech next week: "Mr Harper stole the Liberal plan to decrease corporate taxes on profitable corporations. We couldn't vote against the Conservatives for doing what we told them to. Bravo, M. Harper! Bravo."

This graphic on the NDP's website says it best . . .

First off, our comparative corporate tax rates as posted above. Without knowing the complicated intricacies of each nation's corporate tax laws, those rates are undoubtedly misleading. I wonder how it all stacks up when we look at effective tax rates?

Anywho, trying to attract business or fix social problems using the tax laws or rates is, undoubtedly, the stupidest thing the government could ever do-- if governments were concerned with basic things like, you know, justice, liberty etc.

Taxes are for running the country. If the democratic expression of the people decide they want government to do this or that, then it's costed out to "x" and we all ante up in a graduated way.

Anything more complicated is complicated on purpose to give someone a free ride.

And corporations should pay tax as long as they are considered "persons". Maybe if they want to surrender that distinction, the issue might be revisited.

In the specific examples of our endangered manufacturing sector, I will let you in on a dirty little secret no one in the biz wants you to know right now. And it's because of this secret that all the misguided tax benefits and corporate welfare won't fix. At least not to most people's benefit.

The high dollar isn't killing our manufacturing base, no more than taxes or worker's wages are. The low dollar hid some very basic underlying problems.

Before we get to that, (oh, cripes this is going to turn into a long post, and I hate writing them as much as you are about to hate reading it, but please bear down and grunt this one out with me) let me say that a lot of people, maybe even some here, have a misconception about manufacturing plants. They are not stamping plants anymore where workers stand in front of a pierce press and feed stuff in and pull it out as fast as they can. Yes, there are remnants of this, but for the most part they are gone, or soon to be gone.

Today, we have automation. It requires a different skill set. Much different.

And, for the most part, where the automation hits the plant floor, we have those skill sets. Almost by accident, I think. But we have guys that can keep robots going, that can learn to clear faults, and all the mysterious things that go wrong with this automation.

What is killing manufacturing is the lack of speed when it comes to problem solving. We have no problem solvers.

Lots of e-mail, lots of teams, lots of words but no methodical and organized empirical attack on problems.

Because, and this gets back to the taxation issue, we have killed empiricism in this country.

Gentlemen and Ladies, we are not losing manufacturing because of high over head, high taxes or high wages.

We are losing because we are being out-thunk.

All tax breaks and corporate welfare will do is see the wrong new equipment bought, and poorly operated at that.

Where we need to spend money is on our education system, at all levels. Particularly in South Western and South Central Ontario, no one should be graduating high school without a working knowledge of statistical process control and how to read a vernier scale, for example, and other bits of base line knowledge that employers can rely on.

Above all, we need an education system that purges it's post modernists, and University business schools have to lose the dogma and concentrate on what demonstrably works.

What we don't need are more spiffy dressed graduates that think, for example, that if all your ISO paperwork is done right, it translates to a high quality product on the shipping dock.

We need people to go out to the shipping dock and look at the fucking product.

That's were we need to spend the tax dollars.

quote:

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Originally posted by Will Hiscock:
I think this will make for a NDP field day when it comes to continuing to steal left liberals.

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quote:

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Originally posted by Tommy_Paine:
And corporations should pay tax as long as they are considered "persons". Maybe if they want to surrender that distinction, the issue might be revisited.
.

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quote:

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Originally posted by Stephen Gordon:
The OECD includes deductions/credits and state-level taxes.

And if someone could explain to me how increasing corporate taxes would reduce poverty and inequality, I'd support raising them. But as far as I can tell, no-one has yet figured out how a country can be rich, have high levels of social spending and also have high corporate tax rates. There's certainly no example of any country that has pulled off this trick.

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quote:

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Originally posted by Stephen Gordon:
I'm willing to go along with the OECD definition of social spending. The data are here.

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[ 13 October 2007: Message edited by: Stephen Gordon ]

quote:

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Originally posted by kropotkin1951:
Those programs generally result in poor people bleeding taxes everyday and then once a year they get a bandaid that is washed away within days. Then they go back to paying higher taxes until the next yearly bandaid.

As for us losing our manufacturing base the answer is syndicalism. Pass laws that allow our workers to take over factories that capitalists abandon and see the productive capablities of our workers. We have spent years subsidizing the Big Three and they laugh and take the money and run. I say any corporation that wants a handout needs to know that if they subsequently abandon Canada the physical plant is confiscated.

---

Cutting corporate taxes would raise the value of stocks, as we tend to compute equity prices on the issue's ability to generate after-tax income. If there is no tax to pay, there is more money available for dividends, expansion, finance, etc.

Higher stock prices would also increase a company's ability to borrow money to expand facilities, hire more workers, etc.

quote:

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Originally posted by Doug:

I doubt corporate legal personhood is going anywhere, it's too useful for them. When considering corporate taxes, it's important to consider who really pays for them. If we were to increase taxes on a corporation by $1 million, for example, what's going to happen? The money can come out of profits, or it can come out of the corporation's customers by higher prices or out of workers from reduced salaries, benefits, and employment. If you were to run this corporation, which would you choose? Not profits, or the board of directors will get rid of you.

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Though you doubt that coroporate legal personhood is going anywhere, you have made the perfect argument as to why it should dissapear. Corporations shouldn't exist as legal entities for the very reason that they are required to put the interests of their shareholders ahead of any other interests with the wider community. When a privately owned corporation increases its revenues, the owner can legally choose not to take any of that extra money as profit if he/she is generous and figures that others need the money more than he/she does. The CEO of a publicly traded corporation cannot legally do likewise.

[ 13 October 2007: Message edited by: Left Turn ]

quote:

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Originally posted by Stephen Gordon:
It doesn't matter what the corporate tax rate is; corporations never pay taxes. People do. And not necessarily the people you think, either. CEOs don't pay corporate taxes out of their own pockets; they get paid before the corporate tax is applied.

- To the extent that firms can pass on the tax increase as higher prices, consumers pay corporate taxes.
- To the extent that firms decide to reduce investment and employment in the face of a lower rate of return, workers pay corporate taxes.

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Typical trickle-down economics. And cut corporate taxes while imposing, or raising, sales taxes. Any more regressive taxation you're in favor of?

And you've yet to respond to the example of France blowing a hole in your "textbook" theory.

[ 14 October 2007: Message edited by: josh ]

quote:

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It doesn't matter what the corporate tax rate is; corporations never pay taxes. People do. And not necessarily the people you think, either. CEOs don't pay corporate taxes out of their own pockets; they get paid before the corporate tax is applied.

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Either that, or let them continue to pay a price to be sheltered from the basic ethical standards of society.

[ 14 October 2007: Message edited by: Lard Tunderin' Jeezus ]

quote:

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Originally posted by josh:
Typical trickle-down economics. And cut corporate taxes while imposing, or raising, sales taxes. Any more regressive taxation you're in favor of?

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quote:

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And you've yet to respond to the example of France blowing a hole in your "textbook" theory.

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And here come's Stephen Gordon like Lucy Van Pelt extorting us to kick the football once again.

Economists would have you believe that these ideas are like Kepler's heavenly observations. We can enact an economic idea, and a generation later, the proof, like Hailey's Comet will come to verify the exactitude of it.

But economic hypothesis can be used to justify things like child labour ( and still are ) and even slavery. In this, economics is much more akin to religion than it is science.

quote:

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Originally posted by Stephen Gordon:
Because higher corporate taxes mean lower investment, employment and income.

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quote:

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And you've yet to respond to the example of France blowing a hole in your "textbook" theory.

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quote:

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Originally posted by BitWhys:
I have yet to see any study that establishes the Laffer Curve as credible so I would appreciate one of those arguing in favour of its acceptance to provide a reference.

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quote:

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Originally posted by Stephen Gordon:
It doesn't matter what the corporate tax rate is; corporations never pay taxes.

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And majority foreign-owned energy companies don't pay any green taxes on oil extracted from tar sands. And they are getting away with murder on oil royalties in Alberta.

quote:

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Originally posted by Tommy_Paine:
But it does not follow that lower corporate taxes means higher investment, less unemployment or higher wages.

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[ 14 October 2007: Message edited by: Will Hiscock ]

The level of corporate taxes have very specific and fairly immediate effects beyond the corporation. The Laffer Curve argument is a very general one about relatively long range mediated economic effects of lowering taxes in general.

Raising corporate taxes leads to increases in prices. Either consumers in Canada are paying that, or end users abroad are paying it. If prices cannot increase sufficiently, then that adds to the kinds of pressure against investment, or of continuing production at all where corporate taxes have increased.

Raising corporate taxes is going to lead to harmfull effects. But that doesn't mean lowering them will lead to any broad benefits.

My own skeptical suspicion is that unless lowered corporate taxes are part of a larger scheme for encouraging investment, corporations will just absorb the benefits and there will be no discernable effect on investment choices.

For that reason I think it is appropriate, as well as politically useful, for the NDP to denounce corporate tax cuts as a giveaway.

quote:

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Originally posted by Albireo:
Aren't Royalties just a tax by another name?

(Not baiting here; I'm genuinely curious about what the difference is.)

---

quote:

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Australia 30.0
Austria 25.0
Belgium 33.99
Canada 36.1
Czech Republic 24.0
Denmark 28.0
Finland 26.0
France 34.4
Germany 38.9
Greece 29.0
Hungary 16.0
Iceland 18.0
Ireland 12.5
Italy 33.0
Japan 39.54
Korea 27.5
Luxembourg 30.4
Mexico 29.0
Netherlands 29.6
New Zealand 33.0
Norway 28.0
Poland 19.0
Portugal 27.5
Slovak Republic 19.0
Spain 35.0
Sweden 28.0
Switzerland 21.3
Turkey 30.0
United Kingdom 30.0
United States 39.3

(The Canadian rate includes both the federal and provincial rates.)

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It doesnt make a shit ounce of sense: USA known for corporate rule and handouts to big business has 39.3% Sweden is known for high corporatre tax, has 28%.

quote:

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Originally posted by Stephen Gordon:
Because corporate taxes don't come out of their pockets: they'd much prefer lower personal income taxes. And they got them.

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Yeah, I'm inclined to agree, until I hear a contrary argument.

I've seen other sources (which I will try to find again, yes Stephen) say that the average corporation actually pays nomore than 10-13% of revenues now, but maybe the measures are accounted for differently in each country cited. Last I looked corprations still paid a lower amount to the federal government of Canada than the EI fund did, but that's taxes actually collected as opposed to theoretical taxation. Not unlike the difference between how much more mega-millionaires are Supposed to pay than their average employee and how much Less they actually do. (per dollar that is, flat figures are generally prefered when accounting for how much rich guys pay in, percentages for how much "we" get in tax "breaks" or raises) OTOH perhaps the "corporate taxation" included is only one part of the total they pay, but again, does anyone really have a firm consistent bottomline that is comparible to another in one set figure? I doubt it. I also doubt any subsidies they recieve, even more direct ones, are written against the amounts "paid" on these supposedly accurate ledgers. Subsidies too may be defined in different ways by different government departments. I do admire the way that Stephen turned this whole issue around though.

The fact remains that corporate taxation where-ever we look has gone down since the rise of neo-liberalism, right alongside the funding available for our essential public services. That IMO is no coincidence. How much of our GDP goes towards the public sector now Stephen? I've heard less than at any time since the thirties, when services offered were few and far between.

[ 14 October 2007: Message edited by: EriKtheHalfaRed ]

quote:

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Originally posted by Stephen Gordon:
Because corporate taxes don't come out of their pockets: they'd much prefer lower personal income taxes. And they got them.

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quote:

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Originally posted by BetterRed:

It doesnt make a shit ounce of sense: USA known for corporate rule and handouts to big business has 39.3% Sweden is known for high corporatre tax, has 28%.

Can someone make sense of this?

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quote:

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Originally posted by Stephen Gordon:
The OECD includes deductions/credits and state-level taxes.

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So sez the OECD.

quote:

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And if someone could explain to me how increasing corporate taxes would reduce poverty and inequality, I'd support raising them.

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Simple, by raising more revenue for our thread worn and still shrinking social safety net, allowing the average worker more security to choose better emplyment amongst other benefits, using revenues that mostly benefits the wealthier shareholder and managerial class. Side benefits, less corporate playmoney to waste on expensive and competition destroying mergers and aquisitions, allowing businesses less complex, cumbersome and expensive management structures.

quote:

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But as far as I can tell, no-one has yet figured out how a country can be rich, have high levels of social spending and also have high corporate tax rates. There's certainly no example of any country that has pulled off this trick.

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Really? I thought almost every Western nation had higher corporate taxation back when there was a more robust public sector, higher annual growth rates, lower levels of personal debt, lower bankruptcy rates, lower housing prices by income, yet more equitable wage distribution, more job security, and easier to find work. Tariffs were higher then too but another story deleted from history apparently.

[ 14 October 2007: Message edited by: EriKtheHalfaRed ]

I disagree that there's any hope for manufacturing whatsoever, even if we teach high school kids to do statistical process control.

Anyhow, here's a sampling of sources which point in rather different directions than suggested.

Just a few illustrations:

http://www.cbpp.org/2-13-07sfp.htm

“The share of tax revenue supplied by this tax in the 45 states that levy it fell from more than 10 percent in the late 1970s, to less than 9 percent in the late 1980s, to less than 7 percent today. The effective rate at which states tax corporate profits fell from 6.9 percent in the 1981-85 period, to 5.4 percent in 1991-95, to 4.8 percent in 2001-05. Also, many state-specific studies have found that most corporations filing income tax returns paid the minimum corporate tax — often $0 — even in years in which the economy was growing strongly.
A vigorous debate is occurring about the meaning of these data. The business community generally argues that firms are simply taking advantage of provisions of corporate income tax laws that state policymakers quite deliberately enacted, such as tax incentives for businesses that make major investments in the state. And they argue that such incentives are an effective and wise use of state funds.
Policymakers and advocates concerned about the decline of the state corporate income tax disagree. They say that businesses downplay the scope of the aggressive tax-sheltering strategies they employ. And they argue that a large body of research suggests that corporate tax incentives are not very cost-effective at stimulating economic development.”

And:

http://www.ctj.org/pdf/energy0405.pdf

Closer to home:

“Saskatchewan's corporate income tax is levied as a percentage of the share of a corporation's taxable income that is allocated to the Province. Saskatchewan's general tax rate on corporate taxable income was reduced from 17 per cent to 14 per cent effective July 1, 2006, and will be further reduced to 13 per cent on July 1, 2007 and to 12 per cent effective July 1, 2008.
Saskatchewan small businesses, defined as Canadian-controlled private corporations, pay a reduced rate of 4.5 per cent (commonly known as the small business rate) on eligible business income. The eligible income threshold for the small business tax rate was increased from $300,000 to $400,000 on July 1, 2006, and will be further increased to $450,000 on July 1, 2007 and to $500,000 effective July 1, 2008.
In addition to the tax reduction for small businesses, Saskatchewan provides corporations involved in manufacturing and processing a reduction in the general tax rate to as low as 10 per cent on M&P profits, depending on the extent of the company's presence in the province.
Saskatchewan also provides resource companies with compensation in lieu of full deductibility of provincial royalties and similar taxes for the purposes of provincial income taxation, under the Saskatchewan Royalty Tax Rebate Program. However, as a consequence of the federal government's initiative to re-introduce full deductibility of provincial resource royalties for federal and provincial income taxation, the Saskatchewan Royalty Tax Rebate is no longer necessary and will be allowed to wind down. Commencing January 1, 2007, the carry forward period for any outstanding Royalty Tax Rebate balances will be limited to seven years.”

http://www.finance.gov.sk.ca/taxes/cit/

Good old NDP! Betcha the corps repaid them in full out of pure gratitude.

Their friends at the Cato institute would be proud of them too:

http://www.cato.org/pubs/tbb/tbb-0511-28.pdf

More fans of “flat” taxes!

Not everyone is so worried about the “high” cost of doing business in the States though:

http://www.ctj.org/corpfed04pr.pdf

(note the variation between taxes owed and taxes paid, thanks to such unheard of things like tax shelters and deductions -unheard of that is for front line workers)

http://www.gao.gov/new.items/d06851t.pdf

The allure of less revenues for balancing budgets isn’t just confined to the US and Canada though:

http://news.bbc.co.uk/2/hi/business/7037445.stm

http://www.tax-news.com/asp/story/story_open.asp?storyname=26552

Will this "race to the bottom" only end when we all arrive at ground zero?

Back to the question:

Corporate Tax Rates

“Looking over the post-World War II period (starting in 1950), the corporate income tax has been an important — but shrinking — source of federal revenue (see Figure 1).[6] It was the second largest source of revenue, behind the individual income tax, until 1968, when payroll taxes grew to be a larger share. In fact, there has been a virtually complete role-reversal between payroll taxes and corporate income taxes in terms of their contribution to federal receipts. Corporate income taxes reached a peak of 32 percent of federal tax receipts in 1952. In 2003, they equaled just over 7 percent of federal revenues. ”

“The corporate income tax rate is typically thought to be 35 percent. The reality is more complicated. The 35 percent rate is the highest statutory corporate rate; lower levels of corporate income are taxed at lower rates. The first $50,000 of taxable corporate income faces a 15 percent tax rate, and the next $25,000 is subject to a 25 percent rate. From $75,000 to $10 million of taxable profits, corporations pay a 34 percent rate. For taxable income above $10 million, the rate is 35 percent. These lower graduated rates phase out for corporations with larger incomes.[8]
In general, however, the share of corporate profits that is ultimately taxed is much lower than the maximum statutory rate of 35 percent. According to a new Congressional Research Service report, since 1993 (when the top statutory rate was set at 35 percent), the effective corporate tax rate — that is, the share of total corporate profits that is paid to the federal government in corporate income taxes — has averaged 26.3 percent for non-financial corporations, or about one-quarter lower than the 35 percent statutory rate.[9] CRS notes that the effective tax rate is “a better measure of the true burden of the [corporate income] tax.” ”

“Part of the reason for the decline in the effective corporate tax rate has been the decline in the corporate tax rate set in statute. The statutory corporate income tax rate exceeded 50 percent for much of the 1950s and 1960s, and was set at 48 percent for most of the 1970s and 46 percent for the 1980s up until enactment of the Tax Reform Act of 1986. But the effective corporate tax rate declined faster than the statutory rate for most of this period, indicating that the tax breaks available to corporations were expanding. ”

“In recent years, there has been considerable concern about the increasingly aggressive use of tax shelters by corporations to avoid paying taxes. The impact of these tax shelters — which, by definition, are designed to hide income — are not captured in the Congressional Research Service data on effective tax rates, because those data rely on corporate income that has been reported to the IRS. If the income hidden through tax shelters could be estimated and a more accurate estimate of total corporate income derived as a result, the effective corporate tax rate would be shown to be lower — possibly substantially lower — than is depicted here. ”

http://www.cbpp.org/10-16-03tax.htm

Looks like most haven’t quite reached that thirteen percent average yet though, not on reported profits anyhow, so I guess there’s still hope.

And yes, corporate taxation can be raised without taking it away from the average worker or consumer, as for example choosing not to buy from corps which raise prices significantly (choice not available with taxes, as corps themselves like to remind us when thumping that "freedom" note) or bringing collective bargaining to more work places etc, but that would require more faith in democracy and less faith in abstractions like globalized capital. I also like Kropotkin's idea of allowing workers to take over abandoned factories --with a few qualifiers perhaps. Radical times sometimes need radical solutions. Or at least the threat of them.

[ 15 October 2007: Message edited by: EriKtheHalfaRed ]

quote:

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Originally posted by Stephen Gordon:
Could you translate that into one of the official languages? I don't speak bafflegab.

---

It means exactly what it says. You've managed argue all the elements of the Laffer dynamic but deny its application because you are talking about Corporate rates specifically and not taxes in general.

That doesn't change the colour of the horse.

It says that if you lower tax collections, there will be enough increase in business activity that net tax revenues collected will rise.

That is alleged to be a very aggrgate scale effect- no immediate mechanisms are outlined.

The argument being made about the effect of corporate tax changes is totally different. Nothing is said about how much net tax renue will be as a consequence.

What HAS been argued is that if you raise corporate taxes it will have a DIRECT effect on what prices of products [if firms can pass that on] or on investment decisions [in the majority of cases where they cannot get away with price increases].

quote:

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Originally posted by KenS:
It says that if you lower tax collections, there will be enough increase in business activity that net tax revenues collected will rise.

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quote:

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Originally posted by Albireo:
...That is only true if taxation levels are above the optimal level. If you lower taxes when they are already below the optimal level, revenues will decline...

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as in being to the right of the apex.

His pitch for yet more taxes cuts is similar to the last gasps emanating from another much-loved politician caught in the midst of a very public and well deserved political meltdown .

[ 15 October 2007: Message edited by: JimmyRiddle ]

quote:

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Originally posted by KenS:
I'm not at all supprting or defending the Laffer argument. I think it's bunk, but that's beside the point.

I'm saying what the argument is, and that it has nothing to do with the discussion here about the effects on investment of corporate tax rates.

---

and I'm saying the bunk that goes into rationalizing the Laffer curve is the same bunk that's going into justifying any preference for corporate taxcuts. its just one page short on the glossy.

Some people- despite having read all the material. stubbornly cling to what the notion that the headset across their ears is a thinking cap.

Maybe making the following differentiation would help.

People make the argument that lowering the corporate tax rate will encourage real investment in businesses. That is made from a lot of perspectives. It is heard in its most unvarnished form from neo-cons. They are the most likely to just make it as an unqualified statement. In part because they tend to think that tax cuts are good in their own right… and they don’t really care whether or not cutting the corporate tax rate in and of itself leads to increased investment.

Progressive governments have also used corporate tax rate cuts as ONE public policy tool in conjunction with others.

And there liberal supporters of the tax cuts who will qualify when they support the them- the language being that they will ‘help’. So they back away from sweeping claims, but they tend to share with straight up neo-cons the belief that they are good in their own right.

But all of these are general claims about what cutting corporate taxes will achieve.

Saying that corporate tax increases [or corporate taxes being too high for their context]negatively impact investment decisions is a much more limited statement about how firms behave when rates go up: it DOES become an important factor in investment decisions- including whether they stay in the jurisdiction at all, or decide to not make further investment knowing where that will lead.

Whether or not there is an aggregate effect of investment going down is a different question. There are other variables that may mitigate the effects of the tax increase. Conversely, things like the sharp spike in the value of our currency could well be the tipping point agianst re-investment for firms that previously tolerated the tax rate, but now find it a deciding factor.

[ 15 October 2007: Message edited by: KenS ]

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its all rhertorical bullshit espoused by the indoctrinated.

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Right on!

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encouraging investment -> jobs -> prosperity for all. Its all there. If anyone could prove that then they can prove the Laffer curve. but they can't.

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Originally posted by KenS:
...But Stephen and I were talking about about the effects corporate taxes have on investment...

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and YOU are telling ME to get up to speed on Laffer curve theory?

I realized full well "Stephen" was conceding it was an off-the-peak handout as soon as he distanced himself from the curve.

Its why he's sticking the supply side I'm curious about now.

btw, the other right side of the apex. I should have said left. I'd go back and edit it but it'll be more fun to leave it for the trolls. I've been gratuitiously insulted in this thread twice already. No point trying to avoid it.

[ 15 October 2007: Message edited by: BitWhys ]

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I realized full well "Stephen" was conceding it was an off-the-peak handout as soon as he distanced himself from the curve.

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What are you talking about? What "concesion"? All he said was that the Laffer argument has nothing to do with corporate tax policy. Period.

I gave a crack at explaining why they have nothing to do with each other. It was like I didn't say anything.

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Its why he's sticking the supply side I'm curious about now.

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Originally posted by Stephen Gordon:

It is possible to have high levels of tax revenue without tanking the economy, if you use the right mix of taxes. And that mix includes low corporate income tax rates.

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Originally posted by KenS:

All he said was that the Laffer argument has nothing to do with corporate tax policy. Period.

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Originally posted by Stephen Gordon:
Because higher corporate taxes mean lower investment, employment and income.

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Well that's interesting considering that from the 1940s to the 1980s in the U.S, the top income tax rate was 70% to 90%, the top corporate tax rate was 50% and there was no consumption tax, yet the economy, for the most part, hummed along quite nicely.

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There are two fundamental problems with your "evidence".

In the first place, it's not an answer to the point that raising corporate taxes, unlike many other taxes that are more effective in skimming the well to do and wealthy, directly impacts investment decisions... at the street level 'micro' level. You can't counter that with straight up aggregate data.

I'm sure one can work that aggregate data so that it is relevant. I'm not an economist, so I can't do that, or likely comment usefully on it if someone else provides it.

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Originally posted by josh:
And he'll say so regardless of the historical evidence. After all, if reality conflicts with the textbook, ignore reality.

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Originally posted by josh:

Really? Well that's interesting considering that from the 1940s to the 1980s in the U.S, the top income tax rate was 70% to 90%, the top corporate tax rate was 50% and there was no consumption tax, yet the economy, for the most part, hummed along quite nicely.

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All of the countries the US mainly traded with were like this too. There were barriers and controls on international currency and capital markets. That couldn't be said today.

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Originally posted by josh:

Really? Well that's interesting considering that from the 1940s to the 1980s in the U.S, the top income tax rate was 70% to 90%, the top corporate tax rate was 50% and there was no consumption tax, yet the economy, for the most part, hummed along quite nicely.

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That's because spending on social programs was (as a percent of GDP) a third of what it is in the Nordic countries. Remember what I said?

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But as far as I can tell, no-one has yet figured out how a country can be rich, have high levels of social spending and also have high corporate tax rates.

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Originally posted by BitWhys:
bird's eye view...

tax-to-GDP ratios OECD 2005

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Mel Hurtig said in 2003 that if Ottawa was to collect taxes at the average OECD rate as a percentage of GDP, Ottawa would be hauling in another $29 billion a year.