Raise those evil Corporate taxes!

[yo mama]

The price of any good must cover the expense that go into producing it or the business is doomed to fail. The businesses might accept lower profits at times when they have to, but the end user is always paying the taxes as a part of their purchase price. It's really as simple as that.

Sure, the price covers costs. Agreed. But taxes are only on profits - the amount earned over and above costs. If it costs me $4 to make a product that I sell for $10, my profit is $6 before taxes. At a 35% rate of corporate tax that's $2.1 to uncle sam ($6 x .35). I keep $3.9 ($6 - $2.1), net of recovering the $4 cost of goods sold, which is not taxed.

 

Let's say the corporate tax rate goes up to 50%. My same $10 of revenue, less the same $4 cost of good sold, is still $6 of net profit before taxes. $6 x 50% rate of tax means uncle sam now gets $3, leaving me a $3 of profit net of costs and taxes.

 

If I try and pass the $0.9 of additional tax on to the customer I have to raise my price to over $11 per unit in order to retain the $3.9 per-unit, after tax profit I was getting before the tax increase. But if my competitor is willing to keep their price at $10 per unit - and accept the lower $3 profit per unit - he'll take my customers, assuming:

- the products are comparable;

- the markets are competitive;

- parties are acting to maximize their benefit; and

- my competition is able to fill all available demand.

 

Nick, I understand your ideology. And I accept that it applies where there are limited supplies of sufficiently differing products. But that logic does not apply to every day goods and services.

Edited July 29, 2011 by yo mama

[yo mama]

So lets see...airlines in the past couple years modified their inventory (i.e reduced flights) to get the ideal blend of full planes and fares which people would pay to travel. The worst case scenario for airlines is half-full planes...waste of wages, wear and tear, and costly gas. Its called "revenue mangement" in the hotel business, and the airlines practice it, too.

 

So if the airlines have their model perfected, and, for example, have determined that the most cost effective price for full planes and happy travellers for a round trip from NYC to LA is $400.....why reduce to fare just because the government tax is missing? They have already determined that customers (leisure and businesses) have the ability to pay that amount, and are comfortable with it based on the full flights. Why not put the difference in their pockets until the consumers tell them otherwise by refusing to buy tickets?

 

No-brainer

I don't have a problem with it - I'm paying the same before and after. But it does poke a hole in the overly-simplistic notion that lowering taxes automatically benefits the end consumer.

Edited July 29, 2011 by yo mama

[tonorator]

If I try and pass the $0.9 of additional tax on to the customer I have to raise my price to over $11 per unit in order to retain the $3.9 per-unit, after tax profit I was getting before the tax increase. But if my competitor is willing to keep their price at $10 per unit - and accept the lower $3 profit per unit - he'll take my customers, assuming:

- the products are comparable;

- the markets are competitive;

- parties are acting to maximize their benefit; and

- my competition is able to fill all available demand.

 

Nick, I understand your ideology. And I accept that it applies where there are limited supplies of sufficiently differing products. But that logic does not apply to every day goods and services.

 

yipee, declining margins! now there's the key to expanding the american dream ...

[tonorator]

I don't have a problem with it - I'm paying the same before and after. But it does poke a hole in the overly-simplistic notion that lowering taxes automatically benefits the end consumer.

 

it benefits the business, which is a good thing. good companies that employ people and make massive profits is awesome!

[The Mucca]

I don't have a problem with it - I'm paying the same before and after. But it does poke a hole in the overly-simplistic notion that lowering taxes automatically benefits the end consumer.

 

 

Lower taxes = more profits

more profits = more investment opportunities

more investment opportunities = more employees

more employees = less unemployment

less unemployment = less welfare recipients

less welfare recipients = less $ Govt needs to operate

less $ Govt needs to operate = lower taxes

[yo mama]

Lower taxes = more profits

more profits = more investment opportunities

more investment opportunities = more employees

more employees = less unemployment

less unemployment = less welfare recipients

less welfare recipients = less $ Govt needs to operate

less $ Govt needs to operate = lower taxes

That's the way its supposed to work. Yet corporate America is flush with cash and still not hiring. That has more to do with a lack of spending than taxes.

 

And you can't just assume that lowering corporate taxes will increase spending ipso facto. The US effective corporate tax rate has more or less fallen since 2000, and spending is nevertheless down. The US has a lower corporate effective tax rate than China, Brazil, India, Italy, France, Germany, and Canada. While I do believe in job solutions that are rooted in tax policy, the corporate income tax rate isn't the primary problem here.

[yo mama]

yipee, declining margins! now there's the key to expanding the american dream ...

That wasn't my point, but I'm fairly sure you know that.

[bushwacked]

The price of any good must cover the expense that go into producing it or the business is doomed to fail. The businesses might accept lower profits at times when they have to, but the end user is always paying the taxes as a part of their purchase price. It's really as simple as that.

 

Nick, are you an engineer by trade? You certainly sound like one.

Edited July 29, 2011 by bushwacked

[Duchess Jack]

Lower taxes = more profits ((coporate welfare - check))

more profits = more investment opportunities ((record profits - check))

more investment opportunities = more employees

more employees = less unemployment

less unemployment = less welfare recipients

less welfare recipients = less $ Govt needs to operate

less $ Govt needs to operate = lower taxes

 

Too much money has clogged the drains up top and prevented the trickle down.

 

If it was about uncertainty, than the people taking their marching orders from the wealthy.... ooops, "Job Creators" ((wealthy is a bad word now as it conjures images of reality and accuracy))....If it was about uncertainty, than the people taking their marching orders from the "Job Creators" would be pushing to go through this debt ceiling fight again in six months.

Edited July 29, 2011 by Duchess Jack

[Big John]

Nick, are you an engineer by trade? You certainly sound like one.

Negative, was in IT.

[The Irish Doggy]

Every time I read yo mama, I get that special tingly feeling of truth inside.

[Yukon Cornelius]

Every time I read yo mama, I get that special tingly feeling of truth inside.

yup, i just wish he was not a lawyer and beat his kids more !

[tonorator]

That wasn't my point, but I'm fairly sure you know that.

 

absolutely. i called it out because it is the point you are missing. it's so common to just point your fingers at our good, upstanding american corporations and try to blame some unnamed, unseen entity for all our woes. it's also easy to look at those who have been successful in a capitalistic society and then want to blame them for our pains because they have more money than we do. take a little more, take a little more ... hey, they'll be alright. what makes america strong is our ability to grow our businesses, both here at home and abroad, to strengthen our economy, boost our standard of living, and fund our government. if we put as much energy into celebrating and encouraging growth in our corporations as we do vilifying them based on the actions of a few, we would ensure the continued greatness of our nation.

 

corruption is everywhere. it is just as prevalent in our government as it is in our corporations. we need to get rid of the bad element on both fronts so we can have the two working in synergy to grow prosperity. the only way to pay down our debt and fund all of our ambitious public policies is an exploding economy and that cannot happen with our government taking over a third of the profits off the top.

Edited July 29, 2011 by tonorator

[TimC]

The US has a lower corporate effective tax rate than China, Brazil, India, Italy, France, Germany, and Canada. While I do believe in job solutions that are rooted in tax policy, the corporate income tax rate isn't the primary problem here.

 

I sure hope so. Next up, could you compare us to countries that aren't communism? Of course their tax rates are higher. Are you sure you're not Pelosi?

[Ursa Majoris]

Too much money has clogged the drains up top and prevented the trickle down.

 

If it was about uncertainty, than the people taking their marching orders from the wealthy.... ooops, "Job Creators" ((wealthy is a bad word now as it conjures images of reality and accuracy))....If it was about uncertainty, than the people taking their marching orders from the "Job Creators" would be pushing to go through this debt ceiling fight again in six months.

There is no trickle down, that's as discredited as communism. It's all demand driven and demand requires funding. If corporations continue to drive down labor costs by firing their employees and giving them pay cuts, they contribute to the squelching of demand.

[Caveman_Nick]

Negative, was in IT.

 

True, and yet Bushwacked is not far off...

 

@Yo mama: saying that the taxes are on the profits is as straw man as it gets. Companies know what the taxes are and adjust prices for goods and services accordingly.

 

Sure, any competitive market will reach a pricing structure that's palatable to both producer and consumer given time, but that is not separate from and doesn't change that the price has to cover the cost and then some. The businesses will make money. Competitive forces are a controlling factor on the amount of money they make, but not taxes if all companies are taxes equitably.

[tonorator]

There is no trickle down, that's as discredited as communism. It's all demand driven and demand requires funding. If corporations continue to drive down labor costs by firing their employees and giving them pay cuts, they contribute to the squelching of demand.

 

this is not true. i've been trickled to ...

[yo mama]

Every time I read yo mama, I get that special tingly feeling of truth inside.

Or you might be having a mild stroke. Either way, I'm still disappointment that you aren't Asian like I imagined.

[Big John]

Or you might be having a mild stroke. Either way, I'm still disappointment that you aren't Asian like I imagined.

That is half-Montster

[westvirginia]

I have been saying this for years. Taxing businesses makes no sense. They just pass the taxes along to the consumer.

 

Actually, I'd love it if we got rid of individual income taxes and placed them ALL on businesses. A defacto national sales tax system. I'd still prefer the fair tax but this would be better than the current social engineering system in place now.

 

Sure, the price covers costs. Agreed. But taxes are only on profits - the amount earned over and above costs. If it costs me $4 to make a product that I sell for $10, my profit is $6 before taxes. At a 35% rate of corporate tax that's $2.1 to uncle sam ($6 x .35). I keep $3.9 ($6 - $2.1), net of recovering the $4 cost of goods sold, which is not taxed.

 

Let's say the corporate tax rate goes up to 50%. My same $10 of revenue, less the same $4 cost of good sold, is still $6 of net profit before taxes. $6 x 50% rate of tax means uncle sam now gets $3, leaving me a $3 of profit net of costs and taxes.

 

If I try and pass the $0.9 of additional tax on to the customer I have to raise my price to over $11 per unit in order to retain the $3.9 per-unit, after tax profit I was getting before the tax increase. But if my competitor is willing to keep their price at $10 per unit - and accept the lower $3 profit per unit - he'll take my customers, assuming:

- the products are comparable;

- the markets are competitive;

- parties are acting to maximize their benefit; and

- my competition is able to fill all available demand.

 

Nick, I understand your ideology. And I accept that it applies where there are limited supplies of sufficiently differing products. But that logic does not apply to every day goods and services.

 

 

This is a fallacious analogy. If the taxes go up on the end-manufacturer they will also go up on the producers of the components/raw materials. You're trying to pull one little kernal and build a fairy tale around it. Kinda like a lawyer might...

[yo mama]

This is a fallacious analogy. If the taxes go up on the end-manufacturer they will also go up on the producers of the components/raw materials. You're trying to pull one little kernal and build a fairy tale around it. Kinda like a lawyer might...

We'll, I can't argue with that kind of fact-based evidence.

[bushwacked]

This is a fallacious analogy. If the taxes go up on the end-manufacturer they will also go up on the producers of the components/raw materials. You're trying to pull one little kernal and build a fairy tale around it. Kinda like a lawyer might...

 

You've made some incredible counter-points. I'll have to go re-think those ones you just debunked.