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.
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.