Corporate Taxation vs Taxing the Rich

[WarGamer]

After reading the Bernie thread, I thought this deserved it's own thread.

I think that some people are a bit confused about Corporations and Rich People.

To put it simply, a Corporation is a business whose ownership is split into millions (billions) of tiny bits called "shares".

These shares are owned by individuals, by State and private pension funds, by ETF's, Mutual Funds, Hedge Funds and more.

There is no such thing as Mr. Apple, Mr. ExxonMobil or Mr. Google.

So is Corporate Taxation the way to "get money" from a Corporation?

No, it's not.

Let me explain. Corporate Taxation is a business expense for the Corporation, just like payroll, infrastructure, maintenance, etc.

***Fiduciary Duty of Loyalty

***Officers and directors owe a duty of loyalty to a corporation and its shareholders.

The Corporation exists to make a profit for the shareholders, the OWNERS. the Corporation will compensate and adjust expenses and seek to increase revenue to make the business profitable. And it's very competitive. In the world of the Stock Market, merely "decent" companies go out of business.

When you increase the cost of doing business for the Corporation, when the cost of raw materials, payroll or taxation increases the business will cut payroll, reduce overhead AND/OR increase the price of the product.

So WHO pays for increased Corporate Taxes?

Everyone does. The VALUE of every one of those pieces of a business called SHARES drops. State pension funds, like CALPRS depend HEAVILY on income generated by the Stock Market. When the market is in a lull, the State of California is forced to kick in BILLIONS of dollars into the pension fund.

Consumers will pay higher prices. Don't listen to people who say "the free market will adjust". It won't. They will ALL increase the price of goods to take advantage of the higher tax rate.

Corporations will fire people to maintain their profit in the face of increased taxation.

Victims:

Investors
Consumers
Employees

Remember:

***Fiduciary Duty of Loyalty

***Officers and directors owe a duty of loyalty to a corporation and its shareholders.

Back to the effect of Corporate Tax increases.

So who pays?

Answer: The retired librarian pays. Jeff Bezos pays. Mark Fuckerberg pays. Your neighbor the retired fireman pays... hell your buddy at work with a Robinhood account pays.

"So yeah, WarGamer... you're onto something. Bezos and the Billionaires WILL pay more?"

Yes, but the amount they pay is reduced because a large pool of people are also "paying the price" for the Taxes.



So, now my personal editorial:

Politicians, ALL OF THEM (possible exception Elizabeth Warren) are scared shitless of billionaires because billionaires donate to campaigns and the politicians like their companies.

We NEED vastly increased taxation to fund this nation properly. It's in Bezos pocket, fucking take it.

TAX the wealthy directly. There are options:

1) The UK Commission on Wealth Tax recommends a one-time 5% Tax on all net worth above 500k GBP. Follow it up with an annual 1% tax.

2) Tax Capital Gains as Regular Income. Why should a plumber working 50 hrs a week making 100k a year pay 40% more taxes than a guy who makes 100k in a morning while riding on his golf cart?

3) A per transaction, per share Wall Street trading fee. It's progressive. If you buy ONE share, maybe it's 10 cents, 100 shares, maybe 10 bucks. Buy 500k shares and it's 50k in fees.

Example: 69 million shares of AAPL moved today. A 10 cent per share fee would have raised $6.9M towards making the country a better place. That's just today. Just one stock.

4) Raise the top Income Tax rates. Don't go from 37.0% to 39.6%... they are laughing at you. Make it 50%.

5) Estate Taxes



Now the apologists for the filthy rich will run right along and say "The Rich will just leave the country."

Well then we confiscate property. We charge their "now offshore" companies huge tariffs. We drain their accounts. We arrest their asses for tax evasion.

The free ride is OVER.

Now it's up to our politicians. And I think nothing will ever happen.

EDIT TO ADD: Don't forget, foreign individuals and countries use the US market as a Golden Egg laying Goose. A guy from Whateveristan pays NO TAXES for profiting off of American markets. Thus... the per share Wall Street fee.

Sorry for the rant... think about it, ok?

[Hoyt]

1. Kind of winding down after a few bourbons, but one thing is sure

when shareholders sell stock of companies whose value has run up, they pay taxes. The Amazon’s, etc., with increased share values produce a lot of wealth that does get taxed as capital gains when stock is sold.

If we raise capital gains tax rates back to former levels, it’s probably as good as taxing corporations. And, it’s difficult to escape taxes on stock sales.

Corporations avoid taxes by accelerated depreciation from expansion, research, etc. Democrats and GOPers have embraced this to juice the economy and produce good jobs.

I’m for increasing capital gains rates, corporate rates, and a robust estate tax. But, I don’t agree that just because some rapidly expanding corporations don’t pay taxes CURRENTLY, that we are necessarily losing tax revenue.

[WarGamer]

2. thanks for reading, I appreciate it.

One of my hobbies... is watching the current market for luxury cars and homes.

I've noticed... right now there ARE NO Rolls Royce cars in the dealerships. And look at Zillow, the luxury home inventory is wiped out.

Last year you could find MANY cream of the crop estates in the LA area, all gone now.

Typical RR dealer had a half dozen RR Cullinans and Phantoms on the lot... all gone now.

The RICH are getting richer DURING a global pandemic.

Corporations aren't buying those cars and houses, people are. Tax the rich. Straight from their own pockets

[Midnight Writer]

8. Capital gains tax should be graduated so folks aren't hit too hard when the cash in their retirement

There's no reason someone making occasional small transactions should pay the same tax as a billionaire trader.

[WarGamer]

12. Agreed

[Make7]

3. Corporate taxes used to be much higher, but greater deductions allowed.

Many of those deductions were for investing capital back into the business.

The U.S. Government collected a larger percentage of income from those corporate taxes than it does now. Yet somehow the economy grew and workers received a higher share of the national income.

How do we tell if the corporate tax rate is too high or too low? What should the rate be?

(Many corporations are not publicly traded businesses with large numbers of outstanding shares.)

[Enter stage left]

4. It's long past time to tax income...

Tax wealth!

If your wealth is 1 million dollars, tax it at 20%.

1 billion dollars...40%.

Over 10 billion dollars... 75%.

I can hear the screams now...they'll leave the US, and hide their wealth out of the country.

Let them leave, and tax every single dollar they make in the US at 95%.

It's long past time to take the country away from the assholes that take advantage of our infrastructure, education, and good will to pay their taxes like the poorest of our citizens, and refugees do.

TAX THE RICH...like the wise man said when asked, "Why do you rob the banks?" He responded, "Because that's where the money is".

[WarGamer]

13. exactly...

[TreasonousBastard]

5. Basically, right on. A few small points, though...

When writing and administering tax law, the big taxpayers always spend more on accountants and lawyers than the people writing or administering those laws. They also spend on "consultants" and lobbyists to "help" write the laws. The net result, of course, is that tax collection is always less than expected. The costs of collection can be astronomical, too.

The wealthy have a lot more options-- not the least of which is to simply sit back and not do what you expect. Back in the '80s an excise tax was put on yacht sales to get some painless money. Well, yachts are not necessary, or at least new ones aren't, so the market dried up and boat builders were going broke, workers were laid off, and all hell broke loose. The tax was dropped, and everything went back to normal. Lesson learned-- 5% on a new Bertram 50 is peanuts compared to the navigation and fishing gear on it and the dock fees and fuel to get out to the fishing grounds, but call it a tax and the hyperventilation starts.

Eliminating capital gains taxes is probably one of the better ideas. Just call it income and be done with it. The idea was to encourage investment capital, but that's a crappy way to do it, and most of the supposed capital gains isn't from capital investment, but from funny money.

I've always thought that estate taxes were backwards. Unless your kids actually worked in the business and built equity in it, whatever they get when you die should be taxed as income or gifts. Can Paris Hilton's wealth be in any way justified? And, ummm... there's also his thing about sports and entertainment stars... We may hate Bezos, Gates, and such, But they did build huge businesses, employed a lot of people and created vast amounts of wealth overall. So what makes Lady Gaga worth around 350 million? What's her economic contribution? (No, I wouldn't want to take it away, and she brings joy and delight to a lot of people, but, really-- why so much?) Same with Tiger Woods, and a whole bunch of others.

A nickel a share transfer tax, or even a penny, would generate enough money to pay for everyone's health care and a bag of pot a week without being noticed by actual investors. And it would sure as hell slow down program traders, short sellers, and others who affect the markets without actually doing anything positive. Does anyone actually care if day traders and hedge funds disappear and all those people actually have to work for a living?

[WarGamer]

11. thanks for reading, I appreciate it.

[Mary in S. Carolina]

6. Tax Corporations vs Estate Taxes

1. I agree with not taxing corporations, it is very easy to get to $0 profits through deductions.

2. I do not advocate a 20% tax on $1,000,000 - people spend their life to get to $1,000,000 to retire. If you have $1,000,000 and retire for 25 years that is $40,000 per year + Social Security.

3. I do advocate a limit on tax free lifetime gifts up to $1,000,000 to each parent, children and grandchildren. Erase Family Living Partnership, etc loop holes. Get rid of stepped up basis - except for spouses. Enact a 75% Estate Tax on estates valued at $10,000,000 or greater - wealth should not be transferred from generation to generation - wealth should be earned (thy shall not reap what thy have not sewn). Inheritance breeds laziness and ignorance which is "un- American.

[Redleg]

7. Just look at who benefitted the most from reduced corporate taxes

It wasn't the employees, as Trump and his advisors promised. The shareholders didn't benefit that much. The largest beneficiaries of reduced corporate taxes were the executives of the corporation. Corporations didn't use their tax savings to invest in R&D. They used them to buy-back their stock and to give lavish bonuses to top managers.

[muriel_volestrangler]

9. One thing you say that doesn't fit with the rest, or make sense:

"They will ALL increase the price of goods to take advantage of the higher tax rate"

As you also point out, there is also, already, the "Fiduciary Duty of Loyalty", ie "Officers and directors owe a duty of loyalty to a corporation and its shareholders". Corporations already increase the price of goods to get the most profit. That's a matter of charging what the market will bear. There is no "advantage" to be taken of a higher rate (that would imply that consumers think "I'm willing to pay this price, because I know these companies pay corporate taxes, and I'll make an allowance for that". That's not how any of us thinks.)

If corporate taxes went up, the available profits for the amount of capital deployed/borrowed by the owners would decrease. That might mean that some capital gets diverted to something else - eg production in another country - because investors see a better return there. That might mean there's less available for sale in the US, and that might increase prices a bit, as scarcity makes those with a bit of excess money willing to pay it to get the goods. But this is all "x may have a certain knock-on effect on y, which may have a knock-on effect on z". The effect on prices ends up small.

It's not just a simple matter of "corporations will fire people to maintain their profit in the face of increased taxation". It's not a question of "this is the profit we should make, now how do we do it?", it's "how can we maximize profit under current conditions?". If employing the same number of people still gives them a marginal increase in profit, they'll do it.

[WarGamer]

10. thanks for reading, I appreciate it.

Good points.

I have great confidence that Corporate America would use the "tax increase" to raise prices.

[ProfessorGAC]

16. The Risk Needing To Be Balanced...

...by a corporation raising prices is a drop in demand.
It doesn't take a lot of consumer belt tightening to offset the loss of post tax profitability.
If they could raise prices any time they wanted, for any profit reason, they would.
But, they don't.
History of consumer business (at least since WW2) doesn't support there's a magic "knob" companies can turn to increase profit.
I'm less certain than you about the ease of simply increasing prices.

[crickets]

14. K&R for the post and the discussion.

[WarGamer]

15. thanks for reading, I appreciate it!