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0 pointsFredPret1y ago0 comments

I think the idea is that corporations are the most efficient entities in the economy in terms of allocating capital. They have to be, or they go under. And when they have extra cash, investors tend to demand that it be deployed or paid back to them as dividends. So the natural incentive is for companies to run with the leanest possible capitalization and generate the biggest possible profits.

So when you take cash away from companies and allocate it to the government, you're reducing the overall capital efficiency of the economy a lot.

If you set corporate taxes to 0%, you can still keep the same size government budget if you then tax dividends and executive salaries, except you'll take the money away from less efficient entities (individuals). By the way, this also removes the incentive to deduct all sorts of personal expenses from your business tax, because there isn't any.

And if the government wants to reign in this or that monopoly or incentivize certain activities, it can do so via regulation rather than tax breaks / increases.

Same level of government budget & control, higher economic growth.

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10 comments · 2 top-level

Gud1y ago· 4 in thread

The problem of course is that capital is mostly concentrated to a few, well connected families.

How does that fit into the equation?

benmmurphy1y ago

You are also assuming the tax incidence of corporation tax will fall mostly upon shareholders. For example if the incidence was 70% on workers and 30% on shareholders then this should not be a progressive form of taxation. I think most economists believe the tax incidence is shared between parts of the corporation (workers, consumers, and shareholders) but I don't think there is much consensus on the proportions.

FredPretOP1y ago

Numbers to back that up?

The annual Global Wealth Report from UBS [0] usually shows a very wide base of millionaires in the rich countries (there are 23 million millionaires in the US) and a rapidly rising crop of new rich people all over the world, especially the rapidly growing countries like India and China.

Even for those at the very tip of the pyramid, the 0.01%, there's a ton of turnover. Who was the richest family 0, 10, 25, 50, 100, 150, 200 years ago? The answers are all very different.

[0] https://www.ubs.com/global/en/wealthmanagement/insights/glob...

_DeadFred_1y ago

Don't forget a large amount of US stocks are held by overseas individuals. So the burden is put on American workers in order to protect the capital of overseas millionaire investors.

FredPretOP1y ago

Or overseas investors are sending capital to America, where it enlarges existing businesses and creates new ones, leading to more jobs, more competition for the consumer's dollar, and more tax for the US government when money is paid out to those investors.

If it was so simple to use capital to exploit the rest of society, why would these investors not simply invest where they are? Why go to the trouble and expense of investing their money in a different country?

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LtWorf1y ago· 4 in thread

> I think the idea is that corporations are the most efficient entities in the economy in terms of allocating capital.

Anyone who has had a job knows it's not true.

throw0101c1y ago

>> I think the idea is that corporations are the most efficient entities in the economy in terms of allocating capital.

> Anyone who has had a job knows it's not true.

In an 'absolute' sense they may not be as there is (always) some waste, but is there a more efficient way / entity?

const_cast1y ago

Public entities can, theoretically, be more efficient because they operate at greater economies of scale and with lower barriers. Centrally-controlled systems become unbelievably efficient when the scale is very large. In addition, public entities enjoy the absence of the shackles of profit, which allows them to make longer-term decisions.

Now, if this is really the case in the US today is debatable. But, it was the case in the past, and is still the case in many very functional countries.

LtWorf1y ago

I think the claim is that public administration is always less efficient. I just need to demonstrate it's equally inefficient :)

Gud1y ago

I’m also sceptical of this claim.

It seems to me that the capitalist economics mostly end up in capitalisms favor because it simply ignores a lot of variables.

1) Capital is allocated according to the wishes of the capital owner, generally to gain more capital and buy luxury goods. My question then is what does the people who have no capital get out of this system!

They are of course free to sell their labour, which is different part of the equation all together.

You may trade the few chips you have made from selling your labor for capital, but the chips you will receive will be of extremely low values, compared to the vast fortunes accumulated by wealthy families over generations.

Often these capital owners are descendants from feudal lords and others who gained their capital via dubious means.

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10 comments · 2 top-level

Gud1y ago· 4 in thread

The problem of course is that capital is mostly concentrated to a few, well connected families.

How does that fit into the equation?

benmmurphy1y ago

FredPretOP1y ago

Numbers to back that up?

Even for those at the very tip of the pyramid, the 0.01%, there's a ton of turnover. Who was the richest family 0, 10, 25, 50, 100, 150, 200 years ago? The answers are all very different.

[0] https://www.ubs.com/global/en/wealthmanagement/insights/glob...

_DeadFred_1y ago

Don't forget a large amount of US stocks are held by overseas individuals. So the burden is put on American workers in order to protect the capital of overseas millionaire investors.

FredPretOP1y ago

1 more reply

LtWorf1y ago· 4 in thread

> I think the idea is that corporations are the most efficient entities in the economy in terms of allocating capital.

Anyone who has had a job knows it's not true.

throw0101c1y ago

>> I think the idea is that corporations are the most efficient entities in the economy in terms of allocating capital.

> Anyone who has had a job knows it's not true.

In an 'absolute' sense they may not be as there is (always) some waste, but is there a more efficient way / entity?

const_cast1y ago

Now, if this is really the case in the US today is debatable. But, it was the case in the past, and is still the case in many very functional countries.

LtWorf1y ago

I think the claim is that public administration is always less efficient. I just need to demonstrate it's equally inefficient :)

Gud1y ago

I’m also sceptical of this claim.

It seems to me that the capitalist economics mostly end up in capitalisms favor because it simply ignores a lot of variables.

They are of course free to sell their labour, which is different part of the equation all together.

Often these capital owners are descendants from feudal lords and others who gained their capital via dubious means.

j / k navigate · click thread line to collapse