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In a letter to AIG's board of directors, Cuomo demanded the company stop ``extravagant'' expenditures and recover millions of dollars in unreasonable payments, or face legal action.
… what we are discussing here is supply-side economics.
This is what happens when the supply side is regulated too strictly. Bad loans are made, money is lost, and the lower class suffers...
Now new data is out and it shows that the states that embraced supply-side tax cuts are not only financially more sound and enjoy stronger economies, but they are draining residents away from the states that opted for high taxes.
In 2005, per capita personal income grew 31% faster in the 15 most economically free states than it did in the 15 states at the bottom of the list. And employment growth was a staggering 216% higher in the most free states. It hasn't been a "jobless recovery" in states that have adopted pro-growth tax and regulatory policies.
Economic freedom is the right of individuals to pursue their interests through voluntary exchange of private property under a rule of law, and this freedom forms the foundation of all market economies.
South Dakota has no corporate income tax, no
personal income tax, no personal property tax,
no business inventory tax, and no inheritance tax.
In 2007, the Small Business Survival Foundation
ranked South Dakota as the best business
climate for entrepreneurs. In 2008, Forbes
magazine ranked Sioux Falls as the best smaller
metro area for business and careers. Rapid City,
South Dakota, was ranked 7. (See chapter 4 for
a discussion of the link between state economic
freedom and city economic performance.)
Socratic Question 1: What purpose does taxing business serve if it cripples their ability to produce what we need?
In the United States, government chartering [of corporations] began to fall out of vogue in the mid-1800s. Corporate law at the time was focused on protection of the public interest, and not on the interests of corporate shareholders. Corporate charters were closely regulated by the states. ...Investors generally had to be given an equal say in corporate governance, and corporations were required to comply with the purposes expressed in their charters. … Eventually, state governments began to realize the greater corporate registration revenues available by providing more permissive corporate laws.
In 1819, the U.S. Supreme Court granted corporations a plethora of rights they had not previously recognized or enjoyed. Corporate charters were deemed "inviolable," and not subject to arbitrary amendment or abolition by state governments. The Corporation as a whole was labeled an "artificial person," possessing both individuality and immortality.
Socratic Question 2: Do you agree that when a business is taxed, part of that tax will be passed down to the consumer (the amount depending on the elasticity of the product they sell)?
Treasury Secretary Andrew Mellon [founder of Gulf Oil and ALCOA] offered this explanation: "seventy percent of nothing is nothing, twenty-four percent of something is something."
No one is going to invest if over seventy percent of a successful investment goes to the government, Folsom contended.
Entrepreneur: Means a person who starts and/or operates a business which includes identifying opportunities in the market, taking risks with a view of being rewarded with profits
2004 - $413 billion
2005 - $318 billion
2006 - $248 billion
2007 - $205 billion
2004 - 3.6%
2005 - 2.6%
2006 - 1.9%
2007 - 1.5%
Not surprisingly, the net migration rate for the 20 freest states was 27.36 people per 1,000, while it was a shockingly low 1.17 people per 1,000 for the 20 most economically oppressed states. People are moving to the freest states and fleeing the least-free states....
Treasury’s dynamic analysis of the President’s tax relief indicates that making the tax relief permanent can be expected to increase the level of annual output (i.e., national income) ultimately by about 0.7 percent.
without enactment of the Economic Growth and Tax Relief
Reconciliation Act of 2001, the Job Creation and Worker Assistance Act of 2002, and the Jobs and Growth Tax Relief Reconciliation Act of 2003: (1) by the second quarter of 2003, the economy would have created as many as 1.5 million fewer jobs and GDP would have been as much as 2 percent lower, and (2) by the end of 2004, the economy would have created as many as 3 million fewer jobs and real GDP would be as much as 3.5 to 4.0 percent lower.
“Economic freedom is the right of individuals to pursue their interests through voluntary exchange of private property under a rule of law.”
Our definition of economic freedom, along with the economics literature, guided our judgment as to which indicators were included in the full data set and how we scored each indicator’s freedom effect.
Well, if we tax them less, the product becomes cheaper. The product is more profitable, making a new supply curve with a lower price equilibrium (remember the S2 curve?). The company is able to produce more of the product and make more money, while supplying the product at a cheaper price.
Investors generally had to be given an equal say in corporate governance, and corporations were required to comply with the purposes expressed in their charters.
Originally Posted by Maxmars
It is independent of the product we are discussing, but the long and short term fluctuations and the impact it has on prices is dependent on a perfect and fair market. This is something we are not even approaching at this time in history.
Originally Posted by Maxmars
In fact, we are each day moving further away from that - and more towards an "Oligopoly" (a market with so few suppliers that they coordinate with each other determine market price - a la automotive industry, beverage industry, and others). Aside from tax-breaks, this is a disincentive to obey the forms of the market as it had been functioning.
Originally Posted by Maxmars
The means to obfuscate and distract from the 'true' profit of corporations was enough beneficial reason to encourage corporate businesses. There are so many tax-avoidance schemes available to corporations. Tax Breaks are an insulting addition - most often specifically targeted to 'preferred' corporate bodies for political or financial gain by those in government. Enough is enough.
Originally Posted by Maxmars]
However I propose a different probability. If we tax them less, the profit increases. The producer can continue to operate without decreasing cost to the end-consumer and thus increase their revenue, and also increasing their potential stock value. It seems that in an environment where significant competition is lacking, it is unlikely that tax-breaks are going to benefit anyone other than the producer.
When marginal revenue equals marginal cost, marginal profit is zero. Since total profit increases when marginal profit is positive and total profit decreases when marginal profit is negative, it must reach a maximum where marginal profit is zero - or where marginal cost equals marginal revenue. This is because the producer has collected positive profit up until the intersection of MR and MC (where zero profit is collected and any further production will result in negative marginal profit, because MC will be larger than MR)
First Socratic Question: In lieu of your comment that corporations avoid taxes, where are they hiding the money?
Second Socratic Question: Do you have any evidence that most companies are illegally hiding money to avoid taxes?
Goodwill is an accounting term used to reflect the portion of the book value of a business entity not directly attributable to its assets and liabilities; it normally arises only in case of an acquisition. It reflects the ability of the entity to make a higher profit than would be derived from selling the tangible assets. Goodwill is also known as an intangible asset.
For me, this debate hinged on the description of the essential 'backbone' of an economy. Sublime managed to make a convincing case that supply-side economics could, in an ideal free-market, result in job creation and lower consumer prices. However, he failed to prove that this was indeed the case in the current American economy, or that such was essential to economic health. Maxmars' offer of limiting of the scope of the debate surprisingly worked to his advantage, as he was able successfully counter Sublime's excellent theoretical explanations with real-world examples showing the difference between theory and practice.
Maxmars' diatribes against the corporation itself were not terribly convincing, as they did not offer any convincing alternatives of how an economy should work, and ignored the fact that, as corporations are the primary creators of jobs and capital flow in the economy, perhaps they should be regulated differently than individuals, with different levels of social responsibility and rights.
Although the economic explanations from both Fighters were excellent in this debate, I was left confused as to where arguments were being applied to corporate taxes, individual capital gains taxes, and graduated income taxes on high-income individuals. Several times, both participants glossed over the distinction, acting as if they're the same thing. They're not.
By focusing on the theory of supply-side economics, Sublime missed several opportunities to broaden the definition of exactly what a 'tax-break' is, or convincingly link practical examples to essential economic health. Maxmars' contentions that targeted tax-breaks bias the economy and create a confusing jumble of tax laws that small business are less well-positioned to take advantage of was not well-countered by Sublime, and undermined many of his arguments.
The distinction between non-taxable gross income and taxable net income was made several times by both Fighters. This could have been a winner for Sublime, as that can certainly be considered a form of 'tax break' essential to the way businesses and corporations operate. However, he focused almost exclusively on hypothetical tax breaks current politicians and economists are arguing about, rather than those that already exist, built-in to the system itself.
Sublime had an uphill battle, with the burden of proof for a strongly-worded topic. Maxmars presented a fairly consistent argument, and was able to effectively stall and counter his opponent, preventing him from making a complete case.
Maxmars wins, by a small margin.
I make Maxmars the clear winner.
Congratulations to both fighters for an exceptional debate.
Sublime620 was assigned the tougher of the two positions, especially in light of the US's current economic situation.
In his opening statement, Sublime620 stated the following:
I ask the judges to simply look at the current crisis we are in. This is what happens when the supply side is regulated too strictly. Bad loans are made, money is lost, and the lower class suffers.
By making this extraordinary statement, which was never really backed up, Sublime620 immediately put his side of the debate in a questionable position from which he never really recovered.
As the debate evolved, Maxmars was able to effectively refute most of Sublime's arguments and the questionable nature of most of his sources.
Maxmars was also able to sever the idea that there is direct and indispensable causality between tax breaks and a strong economy.
I also believe that the attempt to narrow the debate to "supply side" economic theory worked against Sublime620.
As a result many important issues that could have strengthened his argument were ignored.
As an example, Sublime620 never brought up the potential social benefits that can be attached to corporate tax breaks. Such as tax breaks for greener technology development and application which benefit both the corporation and the greater good.
Finally Sublime 620 failed to answer Maxmars's socratic questions in his closing statement.
Maxmars's argument suffered from some melo-dramatisation of the idea of the "big bad corporation" which plays on current sentiment, but other than that, I found his argument to be clearly superior in both style and content.
This was a tough debate to judge, but in the end the win goes to Maxmars.
Sublime620 starts out the gate strong and states he will build his case around supply-side economics, but then sputters when he states:
I ask the judges to simply look at the current crisis we are in. This is what happens when the supply side is regulated too strictly.
I’m no economist and I nearly choked on my coffee when I read that statement.
Maxmars takes the time to break down the various components of the debate topic. He counters Sublime620’s assertion that supply-side economics is but one model that should be considered. Also takes him to task for stating that the current economic crisis was caused by strict regulations, which was not the case.
Opening Statement round goes to Maxmars.
Sublime620 explains the theory of supply-side economics and lays the groundwork for his argument. Presents positive evidence for states that provide supply-side tax cuts that in turn boost local economies.
Maxmars provides historical background on corporations and places it in current perspective to taxation. Raises salient points regarding corporate tax cuts and the effects on the supply-demand model.
First round is a tie.
Sublime620 introduces the Laffer Curve and attempts to demystify tax cuts and the deficit. References the Economic Freedom Index.
Maxmars underscores flaws inherent in the Laffer Curve and applies it to real-world data. Also paints the Economic Freedom Index as self-serving to the those who have developed it.
Round Two is close, but goes to Maxmars.
Sublime620 does a fine job of rebutting Maxmars portrayal of corporations and issues of liability. Points to the off-setting of corporate profits through reinvestment, thus lowering taxable obligations.
Maxmars draws distinction between tax avoidance and “hiding money.” Also points out that the “trickle-down” aspect of supply-demand economics has yet to be proven.
Round Three is a tie.
Sublime620 belatedly touches upon the “trickle-down” theory and the concept of Goodwill. He does not quite pull his argument together that corporate tax breaks are the backbone of a strong and healthy economy. I also noted that he did not answer the two Socratic questions Maxmars submitted in Round Three.
Maxmars effectively brings together his closing argument. He points out that while supply-demand economics look good in theory, they seldom play out in reality.
Closing Statement goes to Maxmars.