the alleged evidence for corporate taxation

[CJoy]

I ran across this comment in a Canadian news source: "There is no evidence that lower corporate tax rates do anything for the economy other than pad corporate profits. This trickle down thinking of Conservatives in general is about following party lines and has absolutely nothing to do with the well being of the people of this country." I see this kind of statement often in political conversations. What is the counter argument, besides just the assertion "Capitalism works"?

[Johnny12]

I ran across this comment in a Canadian news source: "There is no evidence that lower corporate tax rates do anything for the economy other than pad corporate profits. This trickle down thinking of Conservatives in general is about following party lines and has absolutely nothing to do with the well being of the people of this country." I see this kind of statement often in political conversations. What is the counter argument, besides just the assertion "Capitalism works"?

I would say that whether or not tax cuts "work" to stimulate the economy is a secondary concern. The fact is that the money a company or individual is theirs and they should get to keep as much of the fruit of their labor as possible. I don't think America's ready for a voluntarily funded government yet but right now we should (in my humble opinion) be focusing on our energy on cutting taxes and cutting spending big time.

[Mike11]

.

Edited April 22, 2011 by Joel Mac Donald

[Selene]

Carrie:

I would love to see the link to that source to see how they arrived at the statement in that quote.

As Travis points out, the "benefit" to the society should be a secondary consideration when discussing the issue of control of the products of the individual's productive effort, or the business' productive efforts.

I think we instinctively fall into an argumentative trap by attempting to secure agreement by demonstrating the positive outcomes of our profit to the society, the taxpayers[collective] or the individual we are seeking to convince.

In the movie, when Rearden states that he is in business to "make money," and a ridiculously bespectacled Paul Larkin, smirks knowingly and says, "Yes, but you shouldn't say it!"

We get hung up on our social argument rather than stick to the moral argument that the productive individual has an absolute moral right to his profit.

Interesting issue.

Adam

[CJoy]

Good point, in both posts - the moral argument is primary, and the benefit is a product.

The post came from here:Harper Challenged on Corporate Tax Cut (in the comments) but there isn't any development. It's just a claim. As such, it deserves no response. However, this argument is bandied about freely enough by anti-capitalists that it is worth understanding the root of the idea. I'm sure if I just keep my eyes open I'll come across someone attempting to justify the idea.

Of course, already one comes to mind... there's this: 9 Reasons The Rick Get Richer - A Tax Expert's Story on Tax Myths That's a little different idea, but it relates - the underlying premise is that what the government does is good and a producer who doesn't pay in is cheating.

But the basic question I'm trying to understand is why some people think that lower tax rates only serve to "pad corporate profits." There seems to be an implication that the lower taxes do not represent increased productivity, but just go straight to the "corporate" pockets, without anyone else benefiting. Why would anyone think that? What kind of alleged evidence could anyone put forward for that? It seems so obvious that if the corporation is profiting more it means that they are doing more business, and that should be *good* for the economy, yes?

Edited April 23, 2011 by CJoy

[Selene]

Carrie:

Let me put my "devil's advocate" hat on, and ask, what if my corporation's profit is not *good* for the economy?

Adam

[caroljane]

Carrie:

Let me put my "devil's advocate" hat on, and ask, what if my corporation's profit is not *good* for the economy?

Adam

Adam and Cjoy, the original quote comes from a specific context - in a debate on our upcoming national election. In fact corporate taxes have been cut in our country and the economy has not improved thereafter. Of course, post hoc propter hoc is no argument. Our current prime minister who made the cuts is an economist by trade.

[Selene]

Carrie:

Let me put my "devil's advocate" hat on, and ask, what if my corporation's profit is not *good* for the economy?

Adam

Adam and Cjoy, the original quote comes from a specific context - in a debate on our upcoming national election. In fact corporate taxes have been cut in our country and the economy has not improved thereafter. Of course, post hoc propter hoc is no argument. Our current prime minister who made the cuts is an economist by trade.

Well that disqualifies him automatically...sorry could not resist, but our "economists" down here are constantly shocked, surprised and perplexed when their asinine little fantasy ideas fail to work in the real world.

[caroljane]

Carrie:

Let me put my "devil's advocate" hat on, and ask, what if my corporation's profit is not *good* for the economy?

Adam

Adam and Cjoy, the original quote comes from a specific context - in a debate on our upcoming national election. In fact corporate taxes have been cut in our country and the economy has not improved thereafter. Of course, post hoc propter hoc is no argument. Our current prime minister who made the cuts is an economist by trade.

Well that disqualifies him automatically...sorry could not resist, but our "economists" down here are constantly shocked, surprised and perplexed when their asinine little fantasy ideas fail to work in the real world.

Adam, I totally agree, economics is the most hindsight nonscience there is. That being said, do you think that five years in which corporate taxes have been lowered, yet the economic activity in the sectors have also lowered, has any significance?

[Selene]

Carrie:

Let me put my "devil's advocate" hat on, and ask, what if my corporation's profit is not *good* for the economy?

Adam

Adam and Cjoy, the original quote comes from a specific context - in a debate on our upcoming national election. In fact corporate taxes have been cut in our country and the economy has not improved thereafter. Of course, post hoc propter hoc is no argument. Our current prime minister who made the cuts is an economist by trade.

Well that disqualifies him automatically...sorry could not resist, but our "economists" down here are constantly shocked, surprised and perplexed when their asinine little fantasy ideas fail to work in the real world.

Adam, I totally agree, economics is the most hindsight nonscience there is. That being said, do you think that five years in which corporate taxes have been lowered, yet the economic activity in the sectors have also lowered, has any significance?

Are we talking about the last five (5) years?

[CJoy]

Okay, so I am going to try to role play an argument I don't understand: "well, those corporate taxes were lowered and (as per Daunce's comment) that provided no benefit to the economy. Somebody must have benefited though, so it must be just the executives of the corporation. How immoral for those executives to take money they didn't earn, and at a time when so many other people are struggling!"

[peterdjones]

[quote name='Johnny12' timestamp='1303504138' post='133701'

I would say that whether or not tax cuts "work" to stimulate the economy is a secondary concern. The fact is that the money a company or individual is theirs and they should get to keep as much of the fruit of their labor as possible

We have seen the government has a right to take what is is owed. But what *is* it owed?

Libertarians and objectivists like to argue that the government has no right to steal the wealth

an individual has created.

Now: wealth is profit, and profit is the difference between what you sell something

for and what you make it for. If you have to use raw materials to make something, you have to

pay your supplier, and section of the price of the finished product is not "wealth" you have created,

it is just money you owe. It is very difficult to think of a way of making money that doesn't leave you

owing money -- gathering materials, such as firewood, form land no-one has laid a claim to perhaps.

That sort of thing is of course particularly difficult in the modern world. Other, more sophisticated,

types of enterprise require some input of materials, all about and so on, for which payment can properly

be demanded. And governments of course typically do provide useful services to business, ranging from

infrastructure to security. So where does the stealing come in? Objectivists and Libertarians would rather

buy such services privately, but are there any services only a government could provide?

Objectivists have particular respect for "men of the mind". At first, coming up with

a novel idea is indeed creating something from nothing. But making money out of ideas

is exquisitely dependent on government "interference". The profits of, for instance,

a pharmaceutical company would be wiped out entirely if it was not for the ability

to enforce patents. And intellectual property rights are not something like transport

or communications infrastructue that could be supplied by a number of competing consortia,

they require the monopolistic power of governments (supplemented by international co-operation).

[caroljane]

I ran across this comment in a Canadian news source: "There is no evidence that lower corporate tax rates do anything for the economy other than pad corporate profits. This trickle down thinking of Conservatives in general is about following party lines and has absolutely nothing to do with the well being of the people of this country." I see this kind of statement often in political conversations. What is the counter argument, besides just the assertion "Capitalism works"?

I would say that whether or not tax cuts "work" to stimulate the economy is a secondary concern. The fact is that the money a company or individual is theirs and they should get to keep as much of the fruit of their labor as possible. I don't think America's ready for a voluntarily funded government yet but right now we should (in my humble opinion) be focusing on our energy on cutting taxes and cutting spending big time.

This is the standpoint our Conservative PM Harper actually comes from, very libertarian. Before he went into politics he was head of the Canadian Taxpayers Federation. But like Rearden he "shouldn't say it" except in private, so he needs to show that it was tax-cutting that brought us out of recession. His opponents of course are saying that it wasn't.

If he has to quit after the election, maybe he can go down to the US and give you guys a hand. David Frum and Mark Steyn will give him good references.

[CJoy]

And intellectual property rights are not something like transport or communications infrastructue that could be supplied by a number of competing consortia,they require the monopolistic power of governments (supplemented by international co-operation).

Playing devil's advocate here - why? Why could not a private company protect intellectual property rights and patents?

so he needs to show that it was tax-cutting that brought us out of recession.

What do you think he should say? What facts show that it WAS tax-cutting that brought you out of recession?

[caroljane]

And intellectual property rights are not something like transport or communications infrastructue that could be supplied by a number of competing consortia,they require the monopolistic power of governments (supplemented by international co-operation).

Playing devil's advocate here - why? Why could not a private company protect intellectual property rights and patents?

so he needs to show that it was tax-cutting that brought us out of recession.

What do you think he should say? What facts show that it WAS tax-cutting that brought you out of recession?

What can he say? The fact that our economy is out of recession and doing better than other G8 countries, doesn't prove that the single factor of corporate tax cuts caused the whole effect. He doesn't try to say so; just that the cuts are one factor. His argument is the usual one, that raising the taxes again would derail the recovery - trying to prove a hypothetical negative.

This was discussed in the leaders' debates last week (the French debate was rescheduled due to the hockey game).

I was startled to find that in our socialist country corporate tax is less than half the rate paid in the US, and going lower (M. Sheikh in the Globe and Mail, April 20).

My impression was that we paid way more taxes than Americans, though we go to jail way less for not paying them.

[CJoy]

The fact that our economy is out of recession and doing better than other G8 countries, doesn't prove that the single factor of corporate tax cuts caused the whole effect. He doesn't try to say so; just that the cuts are one factor. His argument is the usual one, that raising the taxes again would derail the recovery - trying to prove a hypothetical negative.

It dawns on me that my question is not really about the morality of keeping what one has earned; it's actually about how the interests of rational men do not conflict. The popular image of the corporate executive is of a fiscal rapist, willing to take whatever he can get away with, or in other words, thinking only in the short term. I assume the idea is he should pay more taxes to keep him from cheating too much, or something like that. Can't let people like that on the loose, or they will consume every resource they can and leave nothing for anyone else (like the Once-ler in The Lorax).

"What can he say?"

Well that's the point, isn't it? I mean, he lowered taxes and (I'm assuming) wants it to be understood that the result was improvement in the economy. Meanwhile, his opponents say no, there's no evidence there was any connection. If the interests of rational men do not conflict, there ought to be some evidence. Both sides of the argument can't back off into "You're the one who has to prove it" postures. It isn't a legal case, with a judge who is making a single decision. It's about persuasion. To persuade one has to present facts. That's what I'm trying to understand.

[Selene]

Why should the standard for the profit of a business be whether it is "good" for society?

What determines what is "good" for society?

Heck, Henry Ford was not "good" for society by certain standards of that time.

It was argued that he drove the horse and buggy economy out of business.

Created pollution.

Enslaved the worker into being a cog in a machine.

If we choose to use the good of society as the standard to evaluate profit and taxes, we are doomed from the get go.

At least that is the way I see it.

Adam

[caroljane]

The fact that our economy is out of recession and doing better than other G8 countries, doesn't prove that the single factor of corporate tax cuts caused the whole effect. He doesn't try to say so; just that the cuts are one factor. His argument is the usual one, that raising the taxes again would derail the recovery - trying to prove a hypothetical negative.

It dawns on me that my question is not really about the morality of keeping what one has earned; it's actually about how the interests of rational men do not conflict. The popular image of the corporate executive is of a fiscal rapist, willing to take whatever he can get away with, or in other words, thinking only in the short term. I assume the idea is he should pay more taxes to keep him from cheating too much, or something like that. Can't let people like that on the loose, or they will consume every resource they can and leave nothing for anyone else (like the Once-ler in The Lorax).

"What can he say?"

Well that's the point, isn't it? I mean, he lowered taxes and (I'm assuming) wants it to be understood that the result was improvement in the economy. Meanwhile, his opponents say no, there's no evidence there was any connection. If the interests of rational men do not conflict, there ought to be some evidence. Both sides of the argument can't back off into "You're the one who has to prove it" postures. It isn't a legal case, with a judge who is making a single decision. It's about persuasion. To persuade one has to present facts. That's what I'm trying to understand.

"The interests of rational men do not conflict." Exactly. The interests of each of our election contenders are identical, and they try only to show that slightly different methods will best advance these interests.

Being rational, they know that no presentation of facts will persuade voters that a certain course of action will improve the life of everybody. Few of the voters expect an improvement of life because of government change. What we expect of our leaders is the upholding and enhancement of the status quo: Canadianness.

[wilicyote]

Key in this discussion is what happens to the money that the corporation is allowed to keep. Why is it better, for the growth of the economy, that this money go to the corporation rather than to government?

It seems that most people who begrudge the successful their rightfully earned profits, are willfully ignorant of how the successful individuals earned the money, and what they will do with it.

The usual error is to assume that they stole the profit (however cleverly they may disguise it). The second error is that they then take the profit and stuff it under a mattress somewhere and sit around feeling smug that they have loads of cash hidden away.

Niether of these assumptions are correct (barring the exception - the Orrin Boyles of the world, of which there seem to be more and more every day.) The successful earned their profit by creating wealth (read value) out of otherwise useless resources, by combining these resources with both intellectual and physical effort. When they are allowed to keep that which they have earned they spend it, either directly in the economy, or as an investment in the stock market.

In a nutshell, the profit that remains in the hands of the corporation is either divided among the shareholders as dividends, or (and this is the case for most corporate profit) it is reinvested in the growth of the corporation. This growth is the engine of all economic progress. Without this reinvestment the economy as a whole stalls.

Of the funds that are payed out to the shareholders, a significant portion of them are also reinvested in some growth opportunity, often in the stock market, or in a more indirect route, in a retirement fund (which is invested in the stock market).

While some may argue that government can invest in growth too, almost no one thinks that they can do so with anything close to the effectiveness as a business can.

When it comes to spurring economic growth in a nation the same rule of morality applies (or rather is applied by the force of reality, which is why it is a rule of objective morality), one must produce more than one consumes. This moral rule is simply an acknowledgement of the facts of reality. Anyone, whether it be an individual or a nation, must produce more than it consumes. If it does not, it dies. Sadly most governments consume massive amounts of wealth, and produce very little.

Edited April 24, 2011 by HughA

[Selene]

Precisely Paul:

Welcome to OL.

"Married not owned" - nicely put.

How did you become acquainted to Ayn?

Have you seen the movie?

As Carol will point out, I ask folks whether they are a worker slave, student slave etc. to the state.

Adam

[CJoy]

do you think that five years in which corporate taxes have been lowered, yet the economic activity in the sectors have also lowered, has any significance?

The fact that our economy is out of recession and doing better than other G8 countries, doesn't prove that . . .

Either this is a contradiction, or I'm not understanding what you're saying. Corporate taxes have been lowered, leading to 1. lower activity in "the sectors" or 2. your economy is out of recession and doing better than other G8 countries. Which is it?

Why should the standard for the profit of a business be whether it is "good" for society?

It shouldn't. You're answering the question "Is it moral to keep what you've earned?" But that's not the question I'm asking. I'm asking the question, "What's the evidence that the interests of rational men do not conflict?" If, in fact they do not conflict, then taxing corporations less should lead to benefit to them, which in turn results in benefits to the economy. That benefit should be traceable. I am asking about that.

Key in this discussion is what happens to the money that the corporation is allowed to keep. . . . .In a nutshell, the profit that remains in the hands of the corporation is either divided among the shareholders as dividends, or (and this is the case for most corporate profit) it is reinvested in the growth of the corporation.

Yes. What happened to the money that the corporations were allowed to keep? Not that they have any moral obligation to say what they did with it. But they did do something with it, and whatever it was, it had an effect on somebody. That something is a physical reality, and there are some kind of records somewhere that show it. I don't understand finance well enough to ask specific questions about where, but I know that such things are kept. And, looking at those records, does the evidence actually demonstrate that what was good for the corporation was also good for someone else? That their interests did not conflict?

Or to restate my initial question, what is the evidence that lower corporate tax rates do anything for the economy?

[Selene]

"What's the evidence that the interests of rational men do not conflict?"

Essentially, that we conduct commerce by contract wherein these elements exist:

A "Meeting of the Minds" (Mutual Consent)

Offer and Acceptance

Mutual Consideration (The mutual exchange of something of value)

Performance or Delivery

Good Faith

No Violation of Public Policy

[peterdjones]

And intellectual property rights are not something like transport or communications infrastructue that could be supplied by a number of competing consortia,they require the monopolistic power of governments (supplemented by international co-operation).

Playing devil's advocate here - why? Why could not a private company protect intellectual property rights and patents?

What's a private right? What happens if multiple companies protect different rights? What happens if they decide

it is more profitable to rip off the intellectual property they are supposed to be protecting?

[Selene]

And intellectual property rights are not something like transport or communications infrastructue that could be supplied by a number of competing consortia,they require the monopolistic power of governments (supplemented by international co-operation).

Playing devil's advocate here - why? Why could not a private company protect intellectual property rights and patents?

What's a private right? What happens if multiple companies protect different rights? What happens if they decide

it is more profitable to rip off the intellectual property they are supposed to be protecting?

What would happen if you could make a coherent post that a reader could understand?

[caroljane]

]

Either this is a contradiction, or I'm not understanding what you're saying. Corporate taxes have been lowered, leading to 1. lower activity in "the sectors" or 2. your economy is out of recession and doing better than other G8 countries. Which is it?

It is a contradiction; it is both. As far as I can make out, across sectors, economic activity was lower in some, higher in others, and stable in others, in the same time period. It is impossible to prove causation.

Or to restate my initial question, what is the evidence that lower corporate tax rates do anything for the economy?

As per the above, I have not found any such direct evidence in our particular national economy over the last few years. As a non-economist the most I can say is, it didn't help, it didn't hurt.