Challenge Match: Sublime620 vs Maxmars : “Give All of Us a Break, Will Ya?”

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posted on Oct, 15 2008 @ 10:09 PM
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The topic for this debate is “Corporate Tax Breaks are the Backbone of a Strong and Healthy Economy”.

Sublime620 will be arguing the pro position and will open the debate.
Maxmars will argue the con position.

Each debater will have one opening statement each. This will be followed by 3 alternating replies each. There will then be one closing statement each and no rebuttal.

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posted on Oct, 15 2008 @ 11:05 PM
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Thanks semperfortis for setting this debate up. This is the type of topic that makes me keep coming back here.

Thanks also to my opponent Maxmars for accepting this debate.

Last, thanks to the judges. Hopefully we’ll make this debate interesting enough that you don’t struggle to read through it.

The Issue

“Corporate Tax Breaks are the Backbone of a Strong and Healthy Economy”.

Great issue. Simply put, what we are discussing here is supply-side economics, Reaganomics, or the trickle-down effect. When wealthy America and corporations are given tax breaks, it frees up more money for them to do the things they want. This should help them produce more jobs, lower prices, and produce more goods. All great things for an economy.

I plan to dive deep into the world of economics. I will show how taxes effect the supply and demand curves. I will show if a corporation is taxed more, the business and its consumers share that added expenditure. If the corporation is taxed less, the business and its consumers share the savings. This is an important aspect of supply-side economics.

I plan to show statistics that validate supply-side economics. A multitude of studies have been released that show the freer the market, the more beneficial it is for everyone. Most criticizers of supply-side economics believe that giving tax breaks to the wealthy is only so that rich get richer. I will show that opinion to be uneducated – a basic misunderstanding of the market.

Here’s a great way to look at the whole situation, the more tax breaks you give to a business the more:

  • Jobs are created
  • Pay is increased
  • Prices are decreased
  • Production goes up
  • Business, in general, flourishes

Now, all of the first four can occur, or some variation thereof. It isn’t really important how the money reaches the consumers and workers. The important point is that it does. They’ll get more jobs, more money, cheaper goods, more goods to choose from, or all of the above! Depends on the situation and what is necessary.

Most criticizers of supply-side economics believe that the money takes too long to reach the lower class (if it does at all). I will show that this is simply untrue. If anything, the money goes to the consumers and working class long before the corporation reaps the benefits.

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. It is not always about corporate greed. Also note, that whether times are good or bad, corporate greed can still occur.

Look at AIG. 1 Even during an economic crisis, they still managed to give million dollar bonuses and take lofty corporate retreats.

Turns out, not only was it unethical, it was illegal.


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.


I am not afraid to bring these kinds of topics up. This is the opposite of conservatism. It is not what supply-side economics are about. That is greed in its purest form at a time when no one could afford it.

Sometimes it is hard to see through the fog of partisan politics. It is hard to vote for a conservative and believe in their policies when their spending policies are the most reckless. I agree. So, let’s leave the politics out of this.

We’ll discuss economics and why things work the way they do. Nothing else. My opponent may try to side track this debate with partisan banter. I will pay it no attention. This debate will not be about George HW Bush, George W Bush, Dick Chaney, Bill Clinton, or Monica Lewinsky.

It is important for us to stay focused on the real topic and prove to you that:

Corporate Tax Breaks are the Backbone of a Strong and Healthy Economy”.

 


Maxmars, the floor is yours. Looking forward to it.



posted on Oct, 16 2008 @ 11:02 AM
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My thanks to you all. Special thanks to my opponent Sublime620 for reviving this topic which was sadly interrupted by external events; and a special shout out to titorite who was unavoidably unable to carry this debate to its fruition, hoping all is well with you and yours, warm regards.

“Corporate Tax Breaks are the Backbone of a Strong and Healthy Economy”.

I will exercise my preference is to digest the title of the topic at hand, to be certain that the debate remains undeterred by misconstrued definitions and obfuscated premises within the arguments. Accordingly, I would like to point out that Sublime620 and I may already be at odds, since I infer Sublime intention to focus the issue rather more narrowly considering the early use of the following statement:


… what we are discussing here is supply-side economics.


I cannot simply accept that starting point, or foundation, as valid. I contend what we are discussing here is ”… a strong and healthy economy”. If we cannot agree that there is a distinct difference in ‘supply-side economics’ and a ‘strong and healthy economy.’ This will be a severe debate.

Supply-side economics is but one of dozens of economic models which validate manipulating the levying of taxes to preferred entities, in an attempt to affect the larger economic landscape.

----------------------------------------------------------

The measures of robustness and resilience (or ‘health’) of the economy are results of the general mutually beneficial practice of fair trade in a state. It is not dependent on a particular economic model, and most certainly not one as dogmatic as supply-side economics and its myriad disguises; namely, Reaganomics, Voo-doo Economics, Trickle Down Theory, et.al.

I contend that understanding the essentials of supply-side economics is, in and of itself, not crucial to this debate since the notion of preferential tax burden-relief to influence economic growth is not particular to the supply-side economic model.

----------------------------------------------------------

The remainder of the topic ““Corporate Tax Breaks are the Backbone of a Strong and Healthy Economy”, must also be examined, as it is a qualifier of major significance.

Firstly, I would note that describing something as the ‘backbone’ of anything else is a strong implication that without it, the object in question would collapse, or cease to be functional.

It will likely be impossible to describe anything, let alone “tax breaks” as the backbone of anything that isn’t restricted in scope. Tax breaks have some relevance to the economy, but it is certainly not by any stretch of the imagination ‘the backbone’ of anything beyond increased profit for the preferred beneficiary.

----------------------------------------------------------

And finally, we come to the ‘corporation’.

The corporation is a legal contrivance of exploitative mercantilism. One that was foisted upon the common markets of the world by those who stood to gain from the vagaries of the definition provided by those ‘corporate’ scholars empowered to define them, like the people who publish books with definitions, or those who pen the law. In fact, the disambiguation of the term corporate could fill volumes; because the contrivance has become more and more abused over time and its definition is a matter of convenience for those who manipulate the law.

But the first point of understanding should be this:
Corporations are persons, yet they are immortal,
Corporations have no real liability since they cannot be ‘punished’ as a person,
Corporations are a way to eliminate liability from the actions of those directing its operation,
Corporations are not required to be loyal, or commit allegiance, to the nation or state that charters them.

In essence, corporate structure is a way ‘around’ the laws that protect individuals and oblige them to maintain civil and social responsibilities to the citizens of the state.

----------------------------------------------------------

Sublime620 wants us to embrace the notion that the corporate entity is somehow compelled to act in deference to the economic well being of the market on which it feeds. Such a precept is counter intuitive, especially where sustained growth of profit is the ultimate goal.

I understand that Sublime620 intends to get ‘down and dirty’ with the specifics of economic theory and I am hopeful that it will be highly educational for us all.

However, I must advise you, despite the assumption that my counter will somehow be rife with partisan perspectives and other transient political minutiae; I am not that kind of debater.

Keynesian economics, micro versus macro economics, neoclassical concept of long-run equilibrium, and other such concepts are not my field. Nevertheless I will respond with reality checks as he proceeds down this blind alley. The study of economics is replete with disagreements, and much dogma regarding the human element.

I will remain focused on the potential application of this thing that always works in theory, but never in practice. Reality is the best measure of theory.

Economic health is not dependent on preferential tax treatment for one side of the market equation. And the "proof in the pudding" is where we are today, not as my opponent has stated:


This is what happens when the supply side is regulated too strictly. Bad loans are made, money is lost, and the lower class suffers...


It is instead, the opposite. Regulations were modified or removed, constraints were eliminated, and policy was implemented to bolster the economy through corporate tax breaks, and THAT is a major reason why we are in today's economic 'crisis'. Contrary to the assertion in the debate topic, preferential tax treatment of corporations virtually encouraged abuse by corporate profiteers by making available to them avenues of conduct that utterly abandoned any degree of social/civic responsibility - as could be expected in the corporate enterprises that exist today. I believe the new buzz word (which isn't really new) is "Moral Hazard".

[[ Post Script ]]

Socratic Question:

Q1 - Is it safe to say that we agree this debate will be carried out in the context of the United Sates?



I return the floor to Sublime620, thank you for your patience.



posted on Oct, 16 2008 @ 02:11 PM
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It put a smile on my face to see that you had posted already by the time I got home. I was already planning things out on my way home from class. I love fast moving debates.

Response to Socratic Question

Socratic Question: Is it safe to say that we agree this debate will be carried out in the context of the United Sates?

Absolutely. I had no intentions of diving into world markets or other economic systems throughout the world. Thanks for bringing that up.

I also wanted to concede that, while I am correct that the topic is supply side economics, the important part of the debate is that this particular theory drives our economy and makes it more efficient. So, I think we do agree on the issue of the topic, I just shortened it up and did not put the “strong and healthy economy” part on there.

 

What is the Theory of Supply-Side Economics?

1 Picture taken from first source


Now, this is a simple enough drawing of the supply and demand curve. It shows the supply curve sloping upward and its intersection with the downward sloping demand curve. The intersection point is called equilibrium. Supply and demand are equal. There are no shortages or surpluses of supply.

The market is always trying to work itself to equilibrium. That's why you pay $600 for a ps3 when it comes out, $5 for the normally $30 shirt at the Gap.

For those with little to no understanding of economics, the simplest way to view the supply and demand curve is in relation to price.

When price goes up, two things happen:
  1. Demand goes down (would you want that ps3 when it’s $100 or $400?)

  2. Supply goes up (would you be willing to make more ps3’s at $100 per sale or $400?)

    Pretty simple. Obviously, the opposite happens if you lower price. Demand goes up, supply goes down.

    The reason I am focusing on this topic so much is due to its implications. When we, the consumer, see a cheaper price, we buy more of it. When a company is taxed less, they make more profit, and produce more of the item (making an entirely new supply curve with a lower price equilibrium).
    Picture also taken from first source


    What you are looking at here is the direct effect of raising taxes on a business. The supply curve shifts upwards. Notice the new equilibrium? You should notice less demand and higher prices. Unfortunately, this professor assumed we all could visualize this, so I made an example in paint with prices and demand listed in units.



    Here’s what you are looking at. Normal operations are at the intersection of S1 and the Demand. However, the business was given additional taxes. Those taxes were, as almost always is the case, passed onto the consumer. So even though the business was taxed, the consumer actually pays half of the tax directly (at this level of elasticity).

    The old equilibrium was at the point 100 units sold for $50.00 each. The new equilibrium is at 75 units for $55.00. What’s the effect?

    Well, the business loses $875.00 worth of revenue and fewer consumers can afford the product. Who is helped out by that?

    Also, many might be tricked into thinking this was a $5.00 tax hike. It was actually a $10.00 rise in taxes. Look at the units sold 75. It hits the old supply curve at $45.00, and it hits the new on at $55.00. That means the business has eaten $5.00 of the tax hike and the consumer has also.

    With unitarily elastic demand, when a business is taxed, the consumer will pay half of the tax directly. Unitarily elastic is when demand isn’t quite elastic or inelastic. Right in between.

    Gas, for instance, is an example of an inelastic good. When gas prices go up, you may conserve a bit, but you can only conserve so much. What happens when an inelastic product, like gas, is taxed?



    I must make clear that these are theoretical numbers, but it is a representation of what happens when an inelastic product is taxed.

    We, the consumers, pay the brunt of it when a company is forced to pay more taxes. In this example, we the consumer ended up paying $1.50 more while the company only paid out 25 cents. The company was taxed $1.75 extra, and we paid $1.50 of that tax.

    I’ve gone through all of this in my first supportive argument so that I can show the readers that even when we tax companies more, we still pay those taxes indirectly. Got a tax break this year? Guess what, you’ll pay for that through jobs lost in the economy and higher prices in the market place.

     

    The Proof is in the Pudding

    Low taxes on business provide a prosperous economy. There are more jobs, the jobs pay better, products are cheaper, better produced, and more widely available.

    2

    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.


    New statistics showed that states that follow supply-side economics are drawing in more people and living better.


    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.


    I don't need to say much here. It speaks for itself. The states that regulated and taxed less had more income per capita and massive job growth.

    More money, more jobs.

    Here is Pacific Research's definition of what a free state is:

    3

    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.


    Here is this years Economic Freedom Index.4

    Top of this list this year? South Dakota.


    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.)


    Wipe off your glasses if you need to. That is right. No corporate income tax, no personal income tax, no personal property tax, no business inventory tax, and no inheritance tax. Wow. I never thought I'd say this, but I think I am going to move to South Dakota.

    Granted, they make up for taxes in other areas, but obviously have far less of a stranglehold over their citizens money.

    Socratic Questions

    Socratic Question 1: What purpose does taxing business serve if it cripples their ability to produce what we need?

    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)?

     

    With that, I leave the floor to my esteemed opponent, Maxmars.



posted on Oct, 17 2008 @ 01:49 PM
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__________________________________________________
Socratic Questions


Socratic Question 1: What purpose does taxing business serve if it cripples their ability to produce what we need?


Corporations get taxed because they are considered equal ‘citizens’ in terms of rights, privileges, with fewer responsibilities and diminished accountability to the State. This imbalance is important to note, I will address it further. There is no denying that corporations lobbied and invested strongly to secure the protections that citizens enjoyed. This was not always so.

From Mercantilism within the Wiki en.wikipedia.org...


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.


What a corporation ‘produces’ and its price point is not ‘calculated,’ it is ‘assigned’ based on 'expectations and unbalanced bias. Whether done realistically or not, this is an aspect of economics that cannot be ignored. Price point is not a ‘set in stone’ dogmatic mandate. Profit-levels are driven by human desire at both sides of the equation. Companies exist to make as much profit as possible.

What is reasonable or not in terms of profit is a value judgment, not a mechanical process, UNLESS it is directly driven by demand – which Keynesian (supply-side) economics denies. It is because of that fact that they should be taxed. Profit is taking ‘excess’ from a fair trade of goods or services. It is the fundamental reason why ‘profit’ should be taxed while ‘income’ should not – income is NOT profit. (Sorry to digress, but the perspective is relevant.)

If a company fails by not accounting for taxation as a component of their operation, it is their own failure, not the tax. Tax cost the companies ‘share’ with the consumer is a scam, in and of itself. It is the company that is being taxed, not the item, or service, or consumer. Companies were not always allowed to ‘offset’ their tax obligation to others, as they do now. I propose that’s a fallacy in the economic model – based on the dogmatic acceptance of the monetary policy in place.

Essentially, the purpose of tax is to ‘earn’ the exceptional protections and privileges afforded to the legal recognition of the corporations’ 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)?


I must agree that it is a practice which is taken for granted today. I maintain however, that this is essentially an evil practice that belies the corporations’ 'equality' in a State of so-called ‘equal’ citizens.

What point does it serve to pretend that this ‘sharing’ of the tax burden is nothing more than a way to secure greater ‘profit’ in my business? Bearing in mind that profit is gain above and beyond my actual ‘costs.’
__________________________________________________

Wow, tough questions for me; a non-economist.

I have misgivings about your graphs. I believe they are quite correct and applicable to the supply-side business model. But I cannot simply accept that this model relates directly to taxation -

Taxation relates directly to the model, not the other way around. Assuming the ONLY way to do business was to accept the Keynesian principle's upon which it is founded, I would have little argument. But that would be an incorrect assumption.

The curves in your diagram are overly simplified (understandably so) but there are many factors which make the curve much more 'wiggly' in its detail. In reference to elasticity and equilibrium; I understand that the relationship between supply and demand is dimensionless. 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.

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.

Essentially granting relief of tax-burdens is an indirect tax on the consumer; NOT because this is its intent, but because the corporations have been unduly empowered to shirk it onto the demand side of the equation. This imbalance is a reflection of greed. It could, over time, allowing for increased corporate governance, lead to the 'captive' market that is the producers ideal.

I do not rebuke the 'lesson' you have shared with us. Instead I feel it is a distraction from the point of demonstrating in what way it is the 'backbone' of a strong economy.

Taxes are intended as a social economic construct. It's acceptability is based on the premise of fairness and equality. Its foundation must be one of sustainability and resistance to abuse.

The foundation of the economy was, and will be (at least until Start Trek's cashless society arises) based on the monetary policy. Is there enough cash? What can it purchase? By dropping the gold standard and abandoning the mandate to virtually eliminate speculative gambling in the market, and replacing our currency with a credit monopoly, corporations have become tax-avoidance havens.

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.

An interesting and ironic development in recent times highlights the inequity of tax-breaks. Recently, a certain multi-billion dollar bailout bill was passed, illegally, but not until it was rejected first. It failed to pass until many 'riders' were attached to it.

One such rider was a certain tax-break. This particular break gave tax relief to companies who shifted their workforce to India. The more jobs they opened there, the greater the break. - Good for America? Let's see. Less tax revenue for the national economy. More tax burden on local states to cover the unemployment of 'displaced job opportunities', more profit for the corporation with less labor costs and a diminished tax-burden to boot! Somehow I find this contrary to the notion that tax-breaks are good for us.

Despite the supply side mechanism, which some still argue is 'wrong-minded' the beneficial 'tax-break' effect on the curve was suddenly shifted to the benefit of the 'supply' side and to enhanced detriment to the 'demand side. Go figure.

__________________________________________________

A brief comment regarding your source:

The Pacific Research Institute is a reputable and noteworthy source. However, their pro-corporate bias is evident and especially in light of their ownership and political lobbying history. Amidst the patriotic and emotional propaganda content you will find little substance. There studies reflect what they want to say. Of course they would never reveal the results of studies if they didn't reflect that message. The message is "Our opinion about economy is more important because more important people listen to us." Shades of E.F. Hutton.

PRI is a group funded by companies such as Exxon, Altria, Microsoft, Pfizer, PhRMA, the McKenna Foundation, and many others. They assist in a major role in the public relations effort to resist universal health care, among other things. Their bias towards maintaining the status-quo, if not the further spread of 'tax-breaks' is evidenced in their corporations charter:

The PRI claims the following goals:
Education – to provide all students with access to a quality education
((because student loans are good for the economy))
Business and Economics – to strike down barriers to economic growth and innovation
((because troublesome barriers like 'regulations' and 'laws' impede profit))
Health Care – to provide better quality and access to health-care while lowering costs
((Working hard to maintain and promote Health Care as for-profit-business))
Technology – to identify and limit harmful government regulation in the technology sector
((Regulations to be 'limited' because they are harmful? To what?))
Environment – to sustain the trend toward a cleaner environment
((Trends are not results. As long as we 'trend this way, we can say we are doing something))

This is a powerful lobbying source, or think-tank. It serves a purpose. It has an agenda, embraced by its supporters. Their agenda is more business, and more profit.






Thank you for your patience.

MM



posted on Oct, 18 2008 @ 01:01 PM
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The Laffer Curve

Here we talk more theoretics. The Laffer Curve is an upside-down parabola. It's purpose is to show the relationship between taxes and tax revenue. What it shows is at some level of taxation, tax revenue will be highest.

The general principle behind the theory is that more taxation does not mean more tax revenue. To back it up is one of the all time great quotes:

1

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.


It's equivalent to the early days in the US. Our economy did not start off as strong as many of us were led to believe. Finding new investors was difficult. To fight this, Alexander Hamilton created bonds at par value.

This stimulated the system and encouraged investing because people knew they would get their moneys worth. Why invest in a bond when, chances are, it will shortly be worth half of your investment? Well, the answer is simple, because Hamilton guaranteed the return of investment with par bonds.

Par bonds relate with supply-side economics. Why would people invest knowing that 70% of their possible revenues, remember investing is a risk and they could lose also, are going to go straight to the government.

This is the basis of the quote 80% of nothing is nothing. The more you raise taxes, the less reward for investment.

2
This means less entrepreneurs for our nation. Why? Let's examine the definition of entrepreneurship first (emphasis is mine):


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


Look at the bold parts. Risks and reward.

The more we tax, the less reward. Unfortunately, the risk remains the same. What we end up with is far less people willing to take the risk for less reward. Less entrepreneurs means less small business. Less small businesses means less jobs. Less jobs means a weaker economy.

Again, we come back to the conclusion that:

Corporate Tax Breaks are the Backbone of a Strong and Healthy Economy

 

Cutting Taxes Deepens the Deficit - Myth

2
In 2003, President Bush cut taxes. Predictably, his opponents claimed the deficit would wind out of control and the budget would be too bloated for the lack of tax income. They were wrong.


2004 - $413 billion
2005 - $318 billion
2006 - $248 billion
2007 - $205 billion


I'd say it shrunk a bit. And when compared to a GDP:


2004 - 3.6%
2005 - 2.6%
2006 - 1.9%
2007 - 1.5%


According to this article, the 40-year average for this percentage is 2.4%. That puts the 2007 figure almost a full percentage point below our expectations. All this during the recent slow decline in recession.

3
Four years after the tax bill was signed, here are some of the results (all statistics come from whitehouse.gov):

  • Real GDP grew at a strong 3.9 percent in the third quarter of 2007.

  • Real after-tax per capita personal income has risen by 12.7 percent – an average of over $3,800 per person – since President Bush took office.

  • Real wages rose 1.2 percent over the 12 months that ended in September.

  • Since the first quarter of 2001, productivity growth has averaged 2.6 percent per year.

  • The deficit today is at 1.2 percent of GDP, well below the 40-year average.

    In fact, the only reason the economy is haltering is directly correlated to the popping of the housing market bubble. This is why John McCain said the fundamentals of the economy remain strong. He is correct, and it is the reason that the US economy will persist even through this crisis.

     


    I must go back to the Economic Freedom Index. It is the best judge of how the economy responds to demand v. supply economics.

    4

    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....


    To me, this is the dagger through the heart of demand-side economics. Follow the money and follow the people. I've shown that economically, the freest states are producing the best numbers in the country.

    Now I've shown that people are following that money and moving to the states that restrict business the least.

    5
    This report is from the United States Department of Treasury. What does it state?


    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.


    Remember the Laffer Curve? This is a perfect example of it. It defies explanation to many. Tax less, get more money.

    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.

    This means more product for the consumer, and more revenue for the company. More revenue, means more taxable income. So while the tax rates may decrease, the amount to be taxed increases. Make sense? Here's an example:

    Say the government is taxing your income at 25%. They cut it back to 18%, which gives you a few extra thousand a year. You take that few thousand and invest it. You make more money which will be taxed at 18%. The tax rate may be lower, but the pool becomes bigger.

    Well what else did the Dept of Treasury find?


    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.


    Can you imagine how bad the economy would right now had this act not been passed? Less jobs and GDP each year. You think the economy is bad now? It could have been much worse.

     


    I've laid out my case for supply-side economics. We may dive a little deeper into it later, but I will reserve my next post for full rebuttal of my opponents arguments.

    For now, the floor is yours, Maxmars.



posted on Oct, 19 2008 @ 01:09 PM
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It is with a sincere apology that I hereby invoke a 24-hour extension.

No extraordinary excuses other than I'm particularly distracted today. I will respond Monday as early as possible. Thank you for your patience.



posted on Oct, 20 2008 @ 01:01 PM
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Thank you for patiently awaiting my response. I have reviewed the myriad materials and data, expecting to find strong proof of the assertion, but still remain dissuaded from the possibility that ” Corporate Tax Breaks are the Backbone of a Strong and Healthy Economy”. I will explain why this data has yet to move my opinion, and what weaknesses I have found. Some may be a tad surprising.

I will begin by commenting in regards to the economic tools my opponent has selected to demonstrate the importance of tax relief to corporations as an overall economic ‘booster shot’. Also I would like to address some considerations regarding the neoclassical economic “supply-side” model and its proponents, as well as some historic relevancy that I would not wish our readers to overlook. I will draw attention to one very important notion that fails to surface in many such discussions: “Assumptions and Ideological Dogma”. This is the most important point that all citizens should strive to uncover, as academicians and technocrats rarely address them is such a manner as to reveal how deeply embedded they are in their plans; and it is a factor that history has shown, citizens of any representative democracy can ill-afford to ignore.

The Laffer Curve
In an issue of the Harvard International Review, Nobel Prize laureate James Tobin said of the 'Laffer Curve' that “[The] idea that tax cuts would actually increase revenues turned out to deserve the ridicule with which sober economists had greeted it in 1981.” His rationale for such a statement was based on an understanding of the underlying assumptions upon which it relies. Laffer, (the namesake of “Leisure Suit Larry”) inspired the Kemp-Roth Tax Cut (ERSA) of 1981. Supply-side advocates of tax cuts claimed that lower tax rates would generate more tax revenue, citing the curve as being unduly influenced (on the demand side) by marginal income tax rates, which could be countered through direct manipulation of the tax policy. This leads to the market manipulation to the benefit of the producer, who is in place to implement policy.

I offer this illustration to show how ‘different’ the Laffer curve is when applied to realistic data, as opposed to the ‘perfect’ fair-and-free market model upon which it is based.



Andrew Mellon (incidentally, connected to a lot of conspiracy theories, and among the most salient examples of the derogatory term “Robber Baron”) is not among those individuals whose opinion should weigh heavily regarding national economic affairs. His shameless pro-business (pro-personal gain) activities while in and out of office are a negative factor to accepting supply-side economics. While his quoted position led to the tax rate cut attributed to personal income-tax receipts growth from $719 million in 1921 to over $1 billion in 1929; it was also a precursory component of the following economic downturn which slammed the US economy. In 1943, George Seldes, (according to some, America's greatest press critic) noted the American press’ failure to disseminate that several Congressional investigations produced incontrovertible evidence that some of our biggest monopolies entered into secret agreements with the Nazi cartels and divided the world up among them. “Most notorious of all was Alcoa, the Mellon-Davis-Duke monopoly, largely responsible for the fact America did not have the aluminum with which to build airplanes before and after Pearl Harbor, while Germany had an unlimited supply.” And it was Alcoa that supplied them. I cannot afford the space or time to elaborate on the depth of the disingenuous nature of the Mellon strategies employed during his time; but I will say this – if Andrew Mellon was ‘all for it’ you can safely bet that it was about increasing wealth and power for his enterprises – NOT this country, or our people.

The Honorable Alexander Hamilton is another founding father who doesn’t exactly fit the pattern of those whose contemporary wisdom translates into today’s economy with much ease. He is credited with replacing the chaotic financial system of the confederation era with an apparatus which gave the new government financial stability, and gave investors sufficient confidence to invest in government bonds. However, this ignores extremely important key-factors such as: 1) His intention was to deal with the debt the states had incurred during the revolution, removing them as a state liability, and making them federal; 2) There was no internationally controlled central bank regulating currency supply and credit rates (in fact Hamilton helped found out first mint); and 3) his primary and most significant choice of revenue was via an excise tax on whiskey (thoroughly anti-business, form today’s perspective) which led to American’s first internal rebellion. As with Mellon, the backdrop to Hamilton’s affairs is much more robust than I can fully explore herein. But I think it is a safe position to state that his ‘bond’ promotion had more to do with patriotic belief in the future of the United States of America as a sound investment, than as a financial tool for potential capital gain. It was about ‘saving’ not ‘earning.’

Entrepreneurship is a cornerstone of the Capitalist economic society, this cannot be refuted. However, the magnitude of “Corporate Tax Breaks” applying to the myriad small businesses pales in comparison to those of the ‘near’ monopolies that generally composes and applies them to our government’s policy structure. There would be little point to it applying to lesser businesses, except the all-too-real benefit for those huge businesses that tend to purchase and conglomerate small successful businesses into their larger operation (Microsoft, for example, comes to mind).

My opponent’s analysis of the information regarding the tax/deficit numbers is somewhat difficult for me to accept for two significant reasons. 1) Lacking a background in economics, I am out of my ‘comfort zone’, and 2) According to the published information by the Office of Management and Budget, Budget of the US Government FY 2009, Historical Tables, Table 1.3; we see that it took tax receipts almost 5 years to rise back to 1999 levels and the federal budget deficit went from a surplus of over $200B to negative $400B in that time. (see www.taxpolicycenter.org... ). Also we have a current deficit of over $400B this year (not including Iraq and Afghanistan dollars in the mix). This latter, seems to affect the interpretation of the information my opponent presented; and I will not deny that I am a bit confused as to whether I should believe the White House opinion publication or that of the OMB. I am inclined to give more weight to the OMB.

For many years it has been a conservative goal to bolster and reinforce the reliance on ‘indexing’ as a means to evaluate the economy. The pinnacle of the articles of dogma can be assigned to the Pacific Research Institute’s “Economic Freedom Index” in which member-scholars have developed a set of somewhat subjective criteria to promote their axiomatic view of economic theory. Coupling government direct manipulation of tax incentives to economies where the money supply and credit rates are controlled by an unpredictable monopoly, they marry patriotic rhetoric with such notions as:


“Economic freedom is the right of individuals to pursue their interests through voluntary exchange of private property under a rule of law.”


They identify this RIGHT as central to their economic freedom index, although in practice, it fails to account for the enormous economic growth of nations like China, who are indexed much lower than the U.S. in Economic freedom”


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.


These scholars of the neoconservative economic ‘trickle down’ theory have not volunteered the specifics of what exactly differentiates economic freedom in their definition as opposed to another. I have seen the logic which is applied to the theory, namely;

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.


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. Especially since the nature of the corporate entity is one that outlives the individual over the long term.

As I am running out of space so I must be brief. "Corporate Tax Breaks' have been engineered and marketed to 'appear' as a benefit to the economy, while simultaneously affecting it negatively. Corporate friendly tax code is responsible for anything BUT the success in American economy; which is not to say there haven't been any winners.., but it's not the people of the nation and certainly NOT their economy.

I close with a note of thanks to Sublime621 for patience, and of course to you, dear readers.

MM



posted on Oct, 21 2008 @ 12:37 PM
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Full Rebuttal

Mercantilism v. Protection of Shareholders Interests

My opponent has taken great exception to the idea of corporations. He holds contempt at the idea that corporations act in best interest of the shareholders. He quotes Wikipedia here:


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.


While the rules may have changed a bit, there is good reasoning behind it. Let's examine the structure of corporations a bit, and then respond to my opponent's critiques.

1
  • separate legal personality of the corporation (the right to sue and be sued in its own name)

  • limited liability of the shareholders (so that when the company is insolvent, they only owe the money that they subscribed for in shares)

  • transferrable shares (usually on a listed exchange, such as the London Stock Exchange, New York Stock Exchange or Euronext in Paris)

  • delegated management, in other words, control of the company placed in the hands of a board of directors

  • investor ownership, which Hansmann and Kraakman take to mean, ownership by shareholders.

My opponent seems to take issue with the first two. He feels it is dangerous to give corporations as a sole entity, and he takes great exception to limited liability.

This is understandable, but also completely necessary. First, I must point out that any business that faces a potential liability will or should become a limited liability company. One does not have to incorporate to become limited liability. There are LLC's (limited liability companies), C-corporations, and S-corporations (small corps).

It is a fundamentally necessity due to the risks that companies take, especially in such a hostile environment as the American market. If entrepreneurs are forced to put up their own assets for every law suit, this country would be jobless. No one would be willing to risk doing business in America where frivolous lawsuits rule.

Second, the whole idea of a separate entity is extremely beneficial to the every day citizen. It lowers our taxes. Companies get double-taxed. The owners (share holders) get taxed and the company itself (since it is an entity) pays a tax.

As far as looking out for best interest of the share holders, this is also a necessary law. It came about for good reason. Companies must work to follow the charter they have set and do what is in best interest for the share holders or the directors will be fired. Share holders own the company. They decide who is on the board of directors. So in essence, companies are like a Republic, where the citizens (investors) vote in a Congress (board) who manages the company itself.

Also, the owners of the company (the share holders) are essentially completely liable. If the company gets sued, it's their money that will be lost. It is wrong to believe that when a company falls or is sued that only the entity is effected. The shareholders take the fall. They run the company, their money is invested, and if something goes wrong, they pay the price.

That's why it is called limited liability, not no liability. Someone pays.


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.


Granted. It is just a model that explains price equilibrium and the market's constant push towards it. Also, the tax model shows, in a simplified form, how taxes are divvied up in relation to an elastic, inelastic, or unitary demand curve.


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.


This is a great point that I have been meaning to address. Supply-side economics does not require that all the rules be thrown out the _ It is my contention that extremely inelastic products (such as oil) should be government mandated.

However, these major corporations are not price setting. Coca-cola and Pepsi are not calling each other up and asking each other what price they want to set today. Economics just isn't that simple.

I will spare the readers more graphs, but it gets more complicated than what I've shown. If Coke and Pepsi decided they wanted to raise the price to $2.50 a bottle, it simply wouldn't work for them. They are not only fighting each other, but they are fighting the market in general.

Substitutes

Key term in economics. Substitutes and compliments drive economics in a way that can be difficult to grasp. If Coke and Pepsi raise their prices, people will drink out of the faucet. They will buy orange juice.

It will change the consumer's budget line, it will change the price equilibrium, it will effect demand, and it will effectively lower the amount of consumers that they have. Would you pay $2.50 for a bottle of soda when you could fill up an empty bottle of water in the fountain?

Some would, but many would not. This loss of customers would cause a surplus in Coke and Pepsi, which by economic law, would cause the price to drop.

That is why, for prices to be set, a government agency has to come in and mandate a floor or ceiling. If it isn't regulated, the price will continue back to equilibrium.


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.


I have to go ahead and disagree. Let's just examine one company:

2
This link is to Walmart's financial statements. The statement in particular that I am viewing is the Income Statement. In just one quarter, Walmart paid out 3,515,000,000.

That's right, 3 billion dollars in taxes in one quarter. That's roughly 3% of their total revenue for the quarter, not total profit. Total revenue.

So I must ask these question:

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?

 

In regards to the Laffer Curve. The curve, much like my supply and demand curves, are simply a model. They are not expected to be compared to perfect. I would like to make this observation, however:



The stats do display a slight curve. The point of the Laffer Curve is not to be 100% accurate, but only to show that more taxation does not necessarily mean more revenue. If nothing else, ignore the curve on my opponents graph, just look at the positioning of each countries revenue in relation to taxation.

The theory is proven. There are countries with far less taxation that provide much more revenue, and there are countries with far less revenue that tax far more. It would be too indepth to get into why each country is where it is on the curve, but it is important to note that the revenue a country gets is not necessarily dependent on how much it taxes.


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.


I understand how you could think that. It makes sense. Why reinvest the money when the cash can be pocketed? Well, there's a few reasons:

  • Businesses do not like to keep a lot of cash on hand. They get taxed for it and it is just sitting there. They'll use it to either reinvest in the company (build new machines, buy more land, get more capital), or to pay off long-term debt.

  • With the previous in mind, Business 101 is that you continue to produce until marginal profit and marginal cost are equal. If you lower taxes, then marginal profit has a little more wiggle room and production can increase. That means more supply, which again, lowers the market equilibrium.

3

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)


It doesn't matter which way you dissect business in America, when you help business out, it is beneficial to the country.

 


I'm out of time and room. The floor is yours, Maxmars.



posted on Oct, 21 2008 @ 04:04 PM
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I must thank my opponent for noting some of my comments and responding to them. It will allow me to expand and clarify accordingly. I too will have some questions regarding Sublime620’s assertions or opinions, as I feel there is much material remaining which is worthy of exploration. Also, I must congratulate him on an excellent rebuttal.

We do disagree about accepting as ‘common sense’ the benign nature of the corporation in the real world.

But first, I must obey the forms of the debate:


First Socratic Question: In lieu of your comment that corporations avoid taxes, where are they hiding the money?


Tax avoidance is not the same as hiding money. Tax codes are constructed, and amended, to allow for certain ‘allowances’ above and beyond those available to ‘common’ citizens. They reduce the ‘recognizable’ income amount to effectively reduce or eliminate the tax liability. Some examples would be income offset for off-shore investments, credits for depreciation of goods and equipment, incentives for certain operational parameters, regional/state tax breaks for local economies, development of ‘foreign’ economies, and many (MANY) more. Each can be given the guise as some kind of beneficial or charitable concession made by the corporation in lieu of surrendering profit to the tax levy. Then there is the practice of ‘value added’/consumer taxing (sharing the burden) and ‘like kind exchanges’, tax-shelters, transfers of revenues to holding corporations, and mitigation of assessments. I would rather not get into a lengthy list of specifics here, but I mentioned one such ‘break’ for employing people in India, rather than here in the USA.


Second Socratic Question: Do you have any evidence that most companies are illegally hiding money to avoid taxes?


No. If I had such evidence I would be compelled by law to report it. If you ‘suspected’ that your company was doing so, would YOU report it? [/rhetorical question] Given the newly installed legislation regarding corporate ‘cooperation’, you would face legal liability for even coming forward with the suspicion to request an investigation [as you would be operating against the interests of your corporate employer]. This legislatorial gem is quite telling of the corporate influence in legislation.

Pulling the string..”The Corporate Entity says…

Corporations would have the consumers believe that they are ‘out on a limb’ whenever they engage in a business activity. In some cases this is true. In most, it is not. The risk is shared by investors equally, thus it is minimized by dilution. Investors are rarely risking their ‘lifestyle’ money in a venture. The viability of profit is the key factor in the ‘investment of resources (time, money, etc.)’ to a business venture. The hazards, or risks, of attempting to capitalize on a product, service, or resource, are generally self-evident. Proper operational planning and preparation can mitigate most risk, if it couldn’t no one would go into business at all.

When an entrepreneur creates a plan to operate a business, he or she must conscientiously determine and maximize the planned return on the initial investment, to ensure that the profit suffices, to make it ‘more attractive ’ than other opportunities available to potential investors ; this is not risk, this is competition. Ironically, this competition is not related to the resource or product or service, simply the competition to ‘out-profiteer’ the next venture, or the last.

Whether or not a community is litigious is a known factor in business operations. It is applicable to all ventures, and much less of a burden to the business that expressly avoids operating on the fringes of moral or ethical hazard.

--------------------------------------------------------------------------------
This is in stark contrast to the ‘small business’ entrepreneur who banks on the success of their business to keep a roof over their head and food on the table. It is the small businesses who are the risk takers, not the mega-monstrosities towards which the vast majority of corporate tax-breaks are targeted.
--------------------------------------------------------------------------------

Whenever the producer of a good must ‘prepare’ to produce, he or she must ‘estimate’ and ‘intelligently forecast’ how much to invest in that part of the process. This is risk. Unknown behavior in the market, or by suppliers, can completely undermine plans, or directly challenge the anticipated profit. This is risk.

Being sued for malfeasance is not a risk. Being subject to laws and regulations is not a risk. Competition is not a risk. Pressing the boundaries of greed is not a risk. These elements are products of a conscious decision, or human error (and human error can be offset by insurance). It is at this point, where the liability issues begin to chafe the rational mind. For these ‘conditions’ of business are what is mitigated by the ‘corporate tax break’. Tax breaks promote limitations on liability for violations of law, undermining competition, mishandling of human resources, waste materials, even dangerous products.

The tax break which is said to reduce pressure on the left ‘supply-side’ of the infamous Laffer Curve is also supposed to have a beneficial impact on the right side. I have some questions that may seem trite and simplistic, if so I apologize:

Socratic Question 1:

We have seen in recent history, scores (if not hundreds) of tax-incentives granted to the automotive industry. Yet automotive costs keep rising. The same can be said for ALL modes of public transportation services and companies, including trans/inter-continental shipping, yet prices continue to increase. We see continuous tax incentives granted to business in energy, agriculture, research, even educational institutions – yet costs remain climbing. At what point, if ever, does the ‘trickle-down’ (i.e the boost to the demand side of the equation) actually become measurable?

It seems to me that the infiltration of corporate entities into the government has expressed itself as an abuse to the common citizen. The common citizen (the state) is the ‘host’ to these corporations, as we allow their operation under extraordinary rules to enable their functioning within our market. Our assurance of trust in the entity so empowered is its charter; now rendered as legally significant as the public servants’ “Oath of office” or the “Hippocratic Oath”. Corporations are not held to the standards of their host any longer. In fact, since the ‘rule change’ regarding the ability of the ‘delegated’ management of the corporation to ignore the desires of the ‘owners’ (shareholders) except in very restricted terms – corporations have become destructive forces; infiltrating legislation, judicial, and executive processes the citizens established for their own common protection.

The notion that somehow an immortal citizen empowered to play shell games with its revenue, forgo standardized accounting practices, skirting oversight and liability somehow lowers our taxes nearly defies reason. If the corporate entities that enacted legislation for their own benefit did that – they would be reducing their profit. Isn’t that against the whole point of being in business? It is unclear at what point the corporation would say, “let’s lower prices”, unless it meant increased profit. It seems they don’t believe in the Laffer curve as much as neokeynesian economists do.

Socratic Question 2:
Have you ever seen Coke and Pepsi on a shelf, side by side, and both on sale at the same time?

I am cautious about claiming they are ‘price-fixing’, and I wouldn’t make the accusation lightly. But it seems to me awfully convenient that they are never directly competing via ‘sale’ pricing at the same time. It seems odd. Also, we HAVE seen price fixing in action. Our esteemed mega-drug companies have paid hundreds of millions of dollars in fines all around the world for the practice; as well as others such as suppliers of raw materials and some commodities.

Price fixing occurs, in defiance of the principles of economic my opponent espouses. I suspect that when you remove the comforting blanket of the theory applied in a ‘perfect’ world, we see that the market is, in fact, not free, and that corporate tax breaks are another egregious affront to the naïve trust of the citizens of the State. I use the term trust because it is imposed upon the citizens, despite their suspicions, by way of the ‘representatives’ that pretend to serve them in public office. And trust is the key to abuse.

In any case; the essence of the proposition that Corporate Tax-Breaks are a requirement towards securing a prosperous and sustainable economy fails the test of applicability to anything other than an ideal circumstance which is not attainable within the confines of our monetary policy and corporate landscape.

As space and time are rapidly forcing me to finish, I want to point out that Corporations, like any institution are morally neutral. Our deficiencies in corporate behavior are functions of human failings.

I am essentially a capitalist, and don't believe the problem is the corporation itself, the problem is allowing the corporation to have a direct hand in forging the economic landscape solely to it's own benefit, as should have been expected by any realist in government. Tax concessions were meant to be exceptions applied for exceptional circumstances; instead they are routine and abusively employed to obfuscate the responsibilities of any chartered organization within the state that allows it to exist.

Thank you kindly Sublime620.

Practice freedom

[edit on 10/21/2008 by semperfortis]



posted on Oct, 22 2008 @ 07:16 PM
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24-hour extension por favor. Day moved faster than I expected. Should have it up by midday tomorrow.



posted on Oct, 23 2008 @ 01:35 PM
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Conclusions, Final Thoughts, and Closing Statements

We have examined the very principles of basic economics. These principles hold so true, that they are the first things ever taught to a student who walks into the classroom. In fact, these principles are the foundation of economic theory.

To call these principles incorrect, is to call our countries economic foundation incorrect. It is to call Capitalism a fundamentally flawed theory. In fact, Capitalism is flawed, but it is the best system we have to date.

I have shown the Laffer Curve. While some may mock its idea, the basic premise seems simple and justified. Increased taxing could result in loss of revenue.

Again, I offer up this example:

Say you make $300,000 a year (we can all dream), and you are currently being taxed 60%. It gets dropped to 58% when Congress passes a tax break bill, and you save $6,000.

That $30,000 can be put in the bank, it can be invested, it can be used to buy more equipment and lower you factors of production. Whatever it is used for, it can be used to increase your total revenue, and increase the total pool that the 30% tax rate can be applied to.

 

But the numbers are irrelevant, when you are able to come to the conclusion that more taxation does not necessarily equal more revenue, you are able to open yourself up to a whole new world of financial accounting. A world where when a company is given more money, that money is used for investment or additional capital.

When a company invests, the money earned can be taxed. When a company buys capital, it will reduce that company's factors of production. This is a very important economic model that all companies follow.

If a company uses the money to buy more capital, which in turn makes producing the product cheaper, the company's marginal cost gets cheaper. Why is this important?

Again, we come back to the universal rule that a company should continue production until marginal cost is just below marginal profit. The company will be forced to continue production until it reaches this point, creating surplus and creating lower prices.

 

I've shown multiple different ways money "trickles down" when corporations are given tax breaks. Let's examine:

  • Higher pay

  • More taxes due to increased profit

  • Cheaper product (again, due to increased production and surplus)

  • Goodwill

Also, as companies grow and become more integral in communities, they want to improve their Goodwill. Goodwill is how much the company is worth over their tangible assets. Say you want to buy Walmart and they have 600 Billion in tangible assets. You will not pay 600 Billion. No, you will pay far more. That extra inflation is due to goodwill. What is good will?

1

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.


Goodwill is even shown on a company's financial statements.

If a company has a good reputation, the result will be positive goodwill. However, if a company is viewed by the public in a negative way, the company's goodwill will be a negative number.

When companies donate to charity, fund raisers, develop social community programs, and other things you may have wondered why they bothered doing, it is to develop this goodwill.

Besides accountability to shareholders, companies also are held accountable to the communities as a whole by goodwill. If a company acts fraudulently or in some way viewed as not helping the community as a whole, this will cause the company to actually become worth less. I don't need to state that it is bad to the shareholders when a company is worth less.

My point in all this? Companies pay back the communities by trying to accumulate goodwill, while also being directly accountable to community in the same respect. We, the people of this country, determine a companies value just by our opinion of that company.

Think a company is acting irresponsibly? Put it on a blog, write to your paper, and do everything you can to get that action out in the open. If you can change public opinion of that company, you will affect both its value and the way it is ran due to accountability to shareholders.

Companies are not this big, bad machine that are accountable to no one like my opponent would love you to believe. Companies answer to everyone.

Last, let us not forget the list of the freest states and the statistics that were accumulated in respect to them. More people moved there, business thrived, and life is generally better (proven by people wanting to live there).

 

Capitalism is far from perfect. There are rules and regulations that are in place that have no business being there. At the same time, there are laws we need to implement to help avoid monopolies, oligarchies, and other unethical methods of business that help drive prices to inflated levels.

I want the judges to keep this in mind:

The only time that helping business out is bad for you is in these exact situations. When companies have too much control over the consumer.

This is rare. Most of your local companies and even most of the major corporations are still fighting with other companies for your loyalty. Most companies are not able to set prices in anyway without government intervention.

In fact, it is quite more popular to have to subsidize business to make it profitable due to low prices than it is to create a price floor so that businesses cannot overcharge you.

Unless the product being sold is near perfectly inelastic (meaning the product is a necessity and you don't have other choices: i.e. Oil), companies know that offending the consumer means less people will buy their product. They are constantly walking a fine line of making profit and losing customers by raising prices.

As of now, big business is our friend. It helps lower the factors of production making the product overall cheaper for us to buy. It helps provide America with the millions of jobs that we will lose if we raise taxes and force them to ship jobs overseas.

Unfortunately we can't all have white-collar jobs and some of us need to get our hands dirty. As long as blue-collar workers exist, we must treat business fairly but with firm regulation, so that these companies can afford to pay decent wages to all of their employees.

All that being said: Down with golden parachutes and inflated CEO salaries!

 

Thanks Maxmars for the educational debate.

Thanks semperfortis for setting this up.

And thanks to the judges for taking the time out of your day to read and give your opinions on our performance.


[edit on 10/23/2008 by semperfortis]



posted on Oct, 24 2008 @ 11:07 AM
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As the opportunity to close this debate falls upon me I wish to renew our focus on the premise.

“Give All of Us a Break, Will Ya?”
“Corporate Tax Breaks are the Backbone of a Strong and Healthy Economy”.


------------------------------------------------------

My opponent’s position was a difficult one. Not only because he has to debate a verbose cynic like myself
, but also because the operative concept behind the assertion that strong and healthy economies are directly dependent on what we have come to call “Corporate Tax-Breaks”. Reality paints a much different picture.

Economic ideology notwithstanding, economic principles and models aside, it has been my contention that tax avoidance by corporations belies the principle of equity in taxation, and has become a haven for corporate abuse in the system. In a more perfect environment, all things being equal, the economic model Sublime620 has so diligently explained to us would present a potential for the intended benefits of the stratagem.

It is unfortunate for us that all things are not equal. The market is not free from manipulation at its most vulnerable point; reliance on a fiat monetary policy and arbitrary credit rate controls. These controls are wielded by those whose very successes are dependent on corporate profit. Tax-breaks in the guise of corporate interests have the effect of a weapon against the ‘fairness’ of the market. The justification given for the manipulation is expressed as a function of the ideological adherence to the need for more direct control.

Except, in this theory it is the government (bound by a legal responsibility for the stewardship of the economy) that is expected to execute and moderate this ‘control’, not the usurping corporate regime that has become the policy-maker within the government itself. It has left us with tangible proof that contrary to the Keynesian theory, corporate tax breaks can (and have) become expressions and harbingers of the abuse of America’s economy; and the diminishing ‘fairness’ of the market.

My learned opponent appears to contend that I challenge the economic principles he espoused are incorrect or unsound. I submit that this is a misunderstanding. I accept their theoretical significance and their mathematical eloquence. I do not believe the theory is unsound (or incorrect); I contend that in execution it is unsound. This is either by design, to increase the consolidation of wealth, or by incompetence. The flaw is human. I never stated that Supply-side Economics was not a respectable model. Nor are its corollaries unreasonable. There is no question that the theory of the Laffer curve has demonstrable merit. That concession is self-evident. However, it must be acknowledged that such economic constructs are tools, and as with the tools of any trade, there is a time and a place for each. The supply-side stratagem for economic prosperity lacks applicability at this time (It’s the screwdriver, as opposed to the monkey wrench we need now.)

Those corporate think-tanks and ‘intelligencia’ who implemented the ‘trickle-down’ economic theory at the government level proved it inadequate to fulfill their stated purposes. Instead of prosperity we have concentrated wealth and corporate power controlling the principals. The application of the theory lacks appropriate stewardship; and leaving the control of limitations and regulatory statutes to corporations is exemplary of the adage “Letting the fox guard the hen house.”

The accepted intent of tax-breaks was to attract economic production within our society. It was not intended to present targets of economic opportunity at the cost of human and or ecologic exploitation, nor was it intended to politically empower those who most effectively capitalize on the control of the governing system.

Currently, through political appointees, and other such ‘privatization,’ the corporate beneficiaries of tax-breaks are the authors of the tax-breaks. This was, and is, a failure of policy; “Corporate Tax Breaks” are a glaring example the exploitation of engineered economic vulnerability. The vulnerability exists because it is the inevitable effect of corporate control of the government. Self aggrandizement and enhanced entitlements are their typical signatures. I thought we would have all noticed that by now.

Corporate tax breaks often exemplify the active failure of those principals to “Obey the forms of Kanlee”, if you will. Corporations fought to attain standing in our government as 'persons;' ironically they abused the privilege while simultaneously demonstrating that they, for all their elite and learned leadership, cannot be relied upon to act in their own best interest. They will exhaust the economy by demanding profit growth instead of sustainability. Some call it greed. Trust is something that corporations must earn, and they cannot decry the lack of it, when it’s their own abuse that expended it.

Good Will, as my opponent has mentioned, is another factor which can, if ‘true’ and ‘tangible,’ offset the potential offense of targeted corporate tax-breaks. Such would be the quid pro quo we as citizens might seek. But I believe that most good will is little more than show, or lip service; and when compared with tax-incentive benefits, they pale.

It is important to mention that these generalizations hold true throughout the community of corporate conglomerates and private ventures that have been promoted as ‘critical’ industries. The exceptions are notable, and many good, socially conscious and civic-minded corporate operations exist. But they are exceptions.

We have a fiat monetary policy, and a controlled credit rate. Those intimately empowered to dole out capital have maneuvered their influence into government, and we see many embarrassing examples of ‘special’ tax breaks that to the common citizen defy justification. This brazen practice of ‘special’ interest catering was something the people could at one point affect directly, via their representatives. But the governmental structure and regulatory landscape was entrusted to those who value corporate successes over the long-term welfare of the economy, and correspondingly, the citizens.

The need for corporate tax breaks is now ‘peddled’ to our cash-crazed celebrity politicians. The nature of the ‘breaks’ often layer one upon another to create a concealing shroud of ambiguous ways to redefine ‘revenue’ and thus avoid liability for taxes. The IRS tax-code is replete with examples of how to obfuscate earnings, as its monstrous bulk and impenetrability lends itself readily to corporate abuse.

-----------------------------------------
In Summary;

The entire point of the creation of the corporate body as a business entity was a capitulation to the reality that group ownership of an enterprise should not necessarily include group responsibility for results, unplanned or otherwise. The extension of that relief from liability to the liability for state taxation was a mistakenly applied incentive to get those with the most amassed wealth to enter the market. These are the architects of the problem. For they want little to no risk in their profit ventures. Hence they manipulate our collective government to 'offset' their risk of tax liability.

A healthy and strong economy is evidenced in equal opportunity to trade with suitably abundant currency in a market free from bias. All other imposed structures and ideologies are meant to prop up a system engineered so a certain few can exploit it, while others become confined to perpetual consumerist activities. This is the stifling status quo representative of targeted 'tax breaks' for corporations.

-----------------------------------------

I think the horse is dead. I should no longer beat it. While the best that can said of the assertion:

Corporate Tax Breaks are the Backbone of a Strong and Healthy Economy

is that it could be true in theory; but in current practice, it most certainly isn't.

-----------------------------------------

Thanks Semper, for patiently indulging this boomerang topic.
Thanks MS, just for being there.

Thank you Sublime620; you have earned great respect in my book. I suspect you and I might enjoy continuing this exploration, and I know there is much you can teach me.

Thank you patient readers and judges.

As we may be opening this thread for commentary after the debate is called 'closed' I welcome any and all questions and corrections. Be gentile.

Practice Freedom!



posted on Oct, 25 2008 @ 01:08 AM
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Now it's all up to the Judges

Stay Tuned

Semper



posted on Oct, 26 2008 @ 10:48 PM
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And the Winner is....................

Maxmars by Unanimous Decision


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.

Opening Statement:

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.

First Round:

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.

Second Round:

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.

Round Three:

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.

Closing Statement:

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.


Congratulations to both Fighters. This was truly a hard fought debate on both sides.

Now open for comments!!!!

Semper




[edit on 10/26/2008 by semperfortis]



posted on Oct, 27 2008 @ 10:26 AM
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Thank you everyone, especially Sublime620.

I am hopeful that the fighter's will add their comments below, I know it had been stated that some debates would remain open for 'after action' comments, once completed.

Have at it, if you can spare a moment. I know I have much to learn and I respect that many may disagree with my manner or content - let's hear it!



posted on Oct, 27 2008 @ 05:28 PM
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First, I want to agree with Maxmars in the hopes that other fighters will come and give critiques on our performances.

Second, congrats to Maxmars on the excellent win and a well fought battle.

Third, thanks to semperfortis and the judges for volunteering their services.

 

Being an arguer by nature, I have to defend myself on a couple of the statements by the judges. I in no way disagree with their decisions, but I feel compelled to explain two things.

1) The comment about a lack of regulation causing the current crisis was not a misstatement by any means. Perhaps this is what I get for trying to be non-partisan and listening to Rush Limbaugh and other conservative radio hosts.

There are two sides to this story. One side says not enough regulation caused it (liberal's view). The other side says that these companies were forced to dish out these mortgages by liberals (conservative's view). It's almost like regulated deregulation in their opinion.

So while, yes, deregulation is responsible, some believe over-regulation caused the deregulation.

2) Maxmars, I apologize for missing your Socratic Questions at the end there. I was working on a new approach to debates, and in doing so, learned a valuable lesson.


My method was a more traditional style of arguing (Introduce topic and claim, then support claim, support claim some more, support claim even more if you can, then rebut opponent's views, and then support more and close).

I intentionally did not read your fourth post because I didn't want it to interfere with my post and make me get off topic of my preset plan. However, if I do continue using this, I will make sure I scan for Socratic Questions first. Not responding was not intentional.

Also, I as soon as the debate was over, I read your final responses and realized my faux pas.

Anyway, that's all I felt compelled to defend myself over. Again, I don't disagree with the decision - Maxmars did one hell of a job rebutting and supporting.


*Edit to add:

Forgot to mention that in no way to a really subscribe to the supply-side economics theory. I think it is correct in it's assumptions about how business works, but until big business is effectively regulated, it's more theory than anything else (i.e. I agree with most of what Maxmars came at me with).


[edit on 27-10-2008 by Sublime620]



posted on Oct, 27 2008 @ 05:53 PM
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Thank you for your kind words Sublime620.

I have to confess. I wasn't exactly anyway confident that I was going to take the day on this. I knew that of the two sides I got the easier. I had emotional content behind me (after all, I don't expect the judges could have been shielded from the daily barrage of bad financial news - mostly, or at least, in great part, due to what few can justify outside of the 'corporate.'

I did notice the shift in your presentation and frankly, it scared me. I figured 'the other shoe is going to drop' and you would display the upside of corporate mechanics in the economy, beyond the theory. I couldn't really contend that we can exist without the corporation as an institution in our society.

Someone pointed out that I failed to offer an alternative. I had none that would have carried positive emotional weight. I have become very cautious about 'socialization' and 'privatization' solutions, and other more 'radical' approaches; but I was being sincere when I said "I am essentially a capitalist."

I apologize to you all who seem to feel my diatribes get too verbose. It is something I do struggle against. These exercises are good practice for me.

Thanks for listening.



posted on Oct, 27 2008 @ 07:23 PM
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For my part, I did not really see a Faux pas other than the Socratic Question..

What I saw was a debate that was argued in the finest Fighter fashion, complete and thoroughly explored...

Alas someone must win and someone must lose, but there is really no loss here at all...

I consider this a classic for ATS and should be required reading for all new fighters...

Semper



posted on Oct, 27 2008 @ 07:51 PM
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Obviously, it goes without saying that it is a great honor when a former champ, and arguably still the top Fighter on the forum, says your debate should be used as an example.

I appreciate the compliment and the ego booster. It's hard to remain confident when having a official 1-5 debate record (and that's without the scoring of me and Budski's practice debate on tasers - it could be 1-6
).

[edit on 27-10-2008 by Sublime620]





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