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Corporate Taxes

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Many companies such as Amazon, Netflix, Chevron, Eli Lilly and many others paid ZERO federal taxes on billions of dollars of  income...

What are the long term consequences of such a TAX policy?

Hi Mehul. Honestly, I think the tax code is a mess. I prefer zero corporate taxes. The reason why is because taxes mostly just show up in consumer prices. I am an advocate of higher taxes on investors in the form of dividends and cap gains. That way the end investor (usually the wealthy who can afford it) pay the taxes as opposed to corporate taxes which I view as a regressive form of taxation that hits all consumers.

Of course, it's all messed up now because we've cut taxes for the rich AND on corporations. None of it makes a lot of sense IMO and the result is widening inequality which is going to eventually lead to some Socialist nutcase becoming the President at some point....Then there's gonna be a real mess in the economy.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

Do you think zero corporate rates will ever be politically viable? I think most people see corporations as something other than groups of people, and collectively guilty of using government resources etc. I totally agree with the line of thought about corporate taxes being fairly regressive, but that argument only works with a left that dislikes corporations to begin with.

Any thoughts on taxing buybacks? It seemed like Rubio's proposal was really flawed, since it would raise basis and net out capital gains later. I also largely buy the argument that some capital gets redeployed elsewhere during buybacks.  I guess my thinking is that getting corporate rates to zero requires taxing some part of their activities to placate the upset haha. Maybe carbon impact taxes would sell well to that crew.

A lot of people are lining up with wealth taxes as the solution in inequality. Wow what a nasty question, taxing unrealized gains is problematic... and good luck valuing private equity in a fair manner.

"Do you think zero corporate rates will ever be politically viable?"

Probably not. I don't think most people realize that corporate taxes just get passed along to them and politicians like playing on the emotional bias of people and pitting corporations against the poor.

"Any thoughts on taxing buybacks?"

Seems flawed to me. How would it work? You can't just tax a firm for doing a buyback or they won't do the buyback. And so you end up taxing the gains on the end investor which is precisely how it should be....As you noted, taxing unrealized gains is very stupid. What are we going to do? Run a mark to market accounting analysis on every illiquid asset in the world and then tax people on that illiquid asset? Seems pretty colossally silly to me....

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

Higher taxes won't solve inequality.  It's not simply a wealth redistribution problem, but far more complicated and multi-disciplinary than that.  Giving more money to dysfunctional culture will only produce more of the same.   No one wants that except those evil doers that get empowered by it.

Yet, it's always easy to armchair quarterback or wax philosophical about tweaking the downstream effects of our corrupt political system because thats not the hard stuff that needs to be accomplished to actually bring common sense and objective reality into the policy equation.  (I would like to say "back" to that, but if you knew how politically corrupt the 1800's were, it makes today look like a walk in the park.)

 

(Machine Ghost ) (Cullen)

What are the 2-3 things that will be most effective in reducing wealth inequality assuming that society is interested in tackling this problem?

What is the logic behind this? Corporate taxes get passed on to the consumer but dividend taxes do not?

@Mehul-Gandhi ,

Sorry I missed this. In my opinion, the best way to reduce inequality is estate taxes, progressive income taxes and capital gains taxes. You don’t need all three, but those are the largest contributors to inequality in my view.

 

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

@rolexian ,

Dividends are not a corporate expense. They are a distribution of retained profits so a company doesn’t need to offset dividends to main profits like it does if its taxes change. That’s why consumer basically end up paying corporate taxes anyhow - companies embed the added cost into their margins.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche
Quote from Cullen Roche on 04/25/2019, 8:55 AM

@rolexian ,

Dividends are not a corporate expense. They are a distribution of retained profits so a company doesn’t need to offset dividends to main profits like it does if its taxes change. That’s why consumer basically end up paying corporate taxes anyhow - companies embed the added cost into their margins.

 

With higher CG taxes, you have lower returns to investors. Wouldn't businesses have to increase profits in order to return the same pre-tax-increase profits to investors? Why would investors accept lower returns but companies wouldn't accept lower profits?

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