Thread: US to have highest corporate tax rate in the world in 30 days

Originally Posted by Hoosier8

Maybe not immediately but it will eventually as all costs are passed on. At some point the market is saturated and all costs will go up as business as a whole tries to regain it's margin.

So you reject supply and demand and the market? You believe that prices are driven entirely by cost plus? Certainly true for small businesses, less so for larger ones. Cost plus has problems for traditional capitalist interpretation however. Especially as it relates to labor.

Originally Posted by BobL

I respectfully disagree. All business costs, including taxes, are passed along to consumers. Sales taxes are very visible. Other costs such as rent, property taxes, unempolyment insurance, labor and material costs (and income taxes), are all part of the price of the product of service sold. Just because a cost is not itemized on the invoice does not mean it was not built inot the price.

I stand by my original statement.

You are wrong on this point. The ‘land value’ portion of property taxes cannot be passed onto consumers. The supply of land is fixed, so the only effect a land value tax has is to reduce the exchange value of land…it makes land cheaper to purchase.

This has been known for over 200 years.

After implementation the land value tax is considered a burdenless tax. You can learn about it here: http://en.wikipedia.org/wiki/Land_value_tax


"Economists are almost unanimous in conceding that the land tax has no adverse side effects."— William Vickrey, Nobel laureate in Economics (1996)

Originally Posted by Hoosier8

Maybe not immediately but it will eventually as all costs are passed on. At some point the market is saturated and all costs will go up as business as a whole tries to regain it's margin.

Land value taxes cannot be passed to consumers, producers, renters or anyone else.

Land value taxes only reduce land prices. If land value taxes are raised to 100% of the lands value, then the land will lose all exchange value, while the commodities coming off the land won’t increase even a penny in price.

Land value taxation was to be the sole source of government revenue under the original U.S. constitution ... that is before the special interests got involved.

Originally Posted by geofree

Land value taxes cannot be passed to consumers, producers, renters or anyone else.

Land value taxes only reduce land prices. If land value taxes are raised to 100% of the lands value, then the land will lose all exchange value, while the commodities coming off the land won’t increase even a penny in price.

Land value taxation was to be the sole source of government revenue under the original U.S. constitution ... that is before the special interests got involved.

LVT was the sole source? It certainly cannot be now (and that has been the case for yonks, despite what internet Georgists blag). The neutrality argument is also deliberately exaggerated. Previous analysis, for example, has shown that we can reject that view once we model uncertainty within a framework of with risk averse individuals.

Originally Posted by Someone

So you reject supply and demand and the market? You believe that prices are driven entirely by cost plus? Certainly true for small businesses, less so for larger ones. Cost plus has problems for traditional capitalist interpretation however. Especially as it relates to labor.

They will be passed on to the consumer if possible as a price increase, which does happen in some cases where business hopes competition follows suit, or the business may just drop out of the market, affecting supply and raising prices that way for all competitors.

Since business has a mandate to maximize profit, other things will be done to make this happen, from reducing manpower to reducing future growth, both of which are affects that are passed on to the public as something other than a price increase. On the other hand, business may try to purchase other businesses to maximize profits, but again, this usually means that manpower is reduced. This all affects demand but in this case, demand reduces as people are laid off and unable to purchase more.

Another affect is that to increase profit to acceptable levels if taxes are increased, business will move to friendlier countries and leaving behind the worker here.

So yes, higher business taxes are passed on to the consumer, but not always as a price increase.

Originally Posted by Hoosier8

Since business has a mandate to maximize profit, other things will be done to make this happen, from reducing manpower to reducing future growth, both of which are affects that are passed on to the public as something other than a price increase.

You'd have to assume that labour demand isn't determined by the marginal revenue productivity of labour and that 'future growth' reflects a reduction in the investment hurdle (typically because of managerial preferences generating inefficient behaviour). Go ahead and try!

Originally Posted by geofree

You are wrong on this point. The ‘land value’ portion of property taxes cannot be passed onto consumers. The supply of land is fixed, so the only effect a land value tax has is to reduce the exchange value of land…it makes land cheaper to purchase.

This has been known for over 200 years.

After implementation the land value tax is considered a burdenless tax. You can learn about it here: http://en.wikipedia.org/wiki/Land_value_tax


"Economists are almost unanimous in conceding that the land tax has no adverse side effects."— William Vickrey, Nobel laureate in Economics (1996)

So out of my list of sales taxes, rent, property taxes, unemployment insurance, labor and material costs (and income taxes), you agree that all are passed on to consumers except the portion of property taxes attributable to land value. I don't necessarily agree, but that's close enough for this forum.

Originally Posted by BobL

I don't necessarily agree, but that's close enough for this forum.

Read up on some economics and you'll realise your error. At the moment you're on a par with "in my opinion 2 plus 2 equals 5"

Originally Posted by Reiver

LVT was the sole source? It certainly cannot be now (and that has been the case for yonks, despite what internet Georgists blag).

There is no particular reason that it couldn't be. I have no doubt the US government could collect $2-3 trillion a year from a land value tax--the same as they do from income and payroll taxes. It would need to be a rather high tax, but it would be doable.

Originally Posted by Hoosier8

They will be passed on to the consumer if possible as a price increase,

You're not explaining the mechanism by which this happens. How does an increase in taxes change the price elasticity of the product? In what way does the tax burden on my profits increase a customer's willingness to pay higher prices? It doesn't make sense. There will always be a competitor willing to pay the additional taxes out of his profit margin in order to take my business. Competition will still keep me from being able to pass on those costs to the customer. It doesn't even make theoretical sense. The only scenario where increased taxation could actually be passed onto customers directly is a monopoly or cartel situation--which the government is supposed to try to prevent.

I understand that you feel that it would happen, but you're not explaining a proposed mechanism that would override competition. The only potential explanation is that you feel that all businesses set prices according to a cost plus model--which itself has significant problems for traditional market-based economic analysis. If most pricing occurs by cost-plus pricing, we can throw most of what we know about economics out the window. Markets don't work, supply and demand are figments of our imagination, every government policy that we've pursued for the last 150 years is a waste of time, and the entire conservative political movement ought to just go back to the drawing board when it comes to their economic policy.

Among other things if cost-plus is the normal mode of pricing there is no calculation problem and command economies would work just fine.

which does happen in some cases where business hopes competition follows suit, or the business may just drop out of the market, affecting supply and raising prices that way for all competitors.

That makes absolutely no sense. Why on earth would I drop out of a profitable business just because the government raises taxes on my profits from 27% to, say, 33%? That's a case of some seriously sour grapes there--because I'd be giving up 67% of the profit over a 5% difference in the tax rate. What's the incentive there for me to get out? I'm still making money, albeit not as much as I was before. I've pretty much got no choice but to eat that cost, or collude with my competitors and hope they abide by the agreement.

That might happen for very marginal businesses, but any business that close to the edge of "something worth pursuing" probably isn't going to survive anyway.

Since business has a mandate to maximize profit, other things will be done to make this happen, from reducing manpower to reducing future growth, both of which are affects that are passed on to the public as something other than a price increase.

That doesn't make any sense either. If the goal is to make more money in an absolute sense, the correct response to an increase in taxes on profits is to increase production, not decrease production. It would especially make sense to divert additional capital into business expenses and wages, since those are tax deductible. Divesting capital as profits would be the last thing you'd want to do when taxes on profits are high.

That's something I think that conservatives don't really understand--if taxes on profits are high, you want to keep investing in the company and expanding, not contract the business and divest profits.

Another affect is that to increase profit to acceptable levels if taxes are increased, business will move to friendlier countries and leaving behind the worker here.

Which a sane country would prevent through protectionist trade policy (free trade only with countries who adhere to US labor, wage, and environmental standards) and the criminalization of capital flight. You know, like most countries do.

So yes, higher business taxes are passed on to the consumer, but not always as a price increase.

Only if you ignore the obvious and take conservative pundits at their word.