Cutting corporate taxes would raise inflation. No brainer.
Raising corporate taxes would cut inflation. No brainer.
It is a line of crap that we should cut corporate taxes.
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Seems cutting corporate taxes, again, more, would increase the deficit. So pressure would increase to defund health care, or education, or general assistance.
Steve
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Defund all welfare for the wealthy. Problem solved.
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Beaten before you start, by the well established narrative: welfare for the wealthy is “pro-growth” and “job creation”. Welfare for the non-wealthy is “COMMUNISM”.
Steve
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“Wealth” is a matter of definition. If someone has too much money, they can not be smart or capable. Thus, they do not have “wealth”. Tax that excess money at 80%–less than the historically high 91% tax rate.
Mathematically, cutting corporate taxes would reduce corporate costs, allowing lower prices. And raising those taxes increases costs, causing prices to rise.
Perhaps it’s not the taxes that are the problem, but the all the other complicated stuff.
Do you honestly believe that?
JimA
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OMG, you actually believe companies would reduce prices rather than pocket profits.
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Of course not. Cut corporate taxes and management will just keep the difference as profit but equally, raising corporate taxes will give them a plausible reason to raise prices.
Looks like we get increased prices in both cases.
So maybe it’s not the taxes that are the problem but lack of enforced regulation or competition or some other complication.
There are no simple solutions here if corporate management is not regulated.
Lack of competition seems to be a likely cause, but simple corruption is part of it.
But mathematically, the principle of lower costs = lower price and higher cost = higher price is what capitalism is based on.
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We have thread fusion!
If “JCs” cut prices when their costs went down, then why do companies like Apple use their big stack of profits to buy back stock, benefiting the few, rather than cutting prices, to benefit the many? Seems that Apple spent $621B on buybacks from 2013 to 2023. How much of a price cut could they have offered their customers with that sort of loot?
Steve
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Apple had total gross profits of over $1.3 trillion over that period. The buyback is irrelevant to where the profit margin is set. The price of the phone is set at a price the consumer is willing to pay. I suspect they might even be able to go higher.
Why should a company intentionally give up margin, it doesn’t need to?
I have done this before.
I invent some software. I spend $100,000 developing it and sell it for $100 per user in each of the following scenarios.
I sell 10 units. Total revenue: 1,000. Loss: $99,000. I am out of business. Corporate taxes paid: $0.
I sell 10,000 units. Total revenue: $100,000. Break even. Corporate taxes paid: $0
I sell 100,000 units. Total revenue $10,000,000. I am wildly profitable. Corporate taxes paid: ~20% of $9,900,000.
The corporate tax does not affect the customer price. It is a cost which appears only after a company has made a profit, taking into account all other costs including development, manufacture, advertising, sales commissions, kickbacks, bribes, loans, chocolate milk for the break room, my wife’s brother’s ghost job, the marketing trips to the Bahamas for my family, and so on.
“Taxes” are irrelevant to “customer prices”.
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Of course there is also competition. If there is a company in China that is selling similar software at a lower price then lower taxes would allow your company to survive and meet the lower price point.
DB2
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By that logic then why not tax profits at 100%
Once software is finalized, the only thing that matters is sales volume. If the volume is too low, it can’t survive. As software is typically sold and delivered online, each sale has a minimal marginal cost. Country of origin is irrelevant for comparable programs/systems. It is all in the opinion of the customer.
I agree with your overall assessment, except for a small math change: in the middle scenario I believe you mean 1,000 units v. 10,000 to make the multiplication work correctly.
Pete
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Why would you do that? Who would advocate that? The owners are entitled to some compensation for their direction and capital formation, surely. My point is simply that there is no connection between “product price” and taxes. I worked for Westinghouse for 17 years. I ran my own business(es). There was never a single time when we priced things because of the corporate tax rate. Not once, ever.
(I used “software” as an example just because it’s easy to envision and doesn’t come with a lot of obvious encumbrances and distractions. But it still holds true for manufacturing cars or washing machines, selling advertising, producing steel, or giving haircuts. It’s competition that sets the prices; if you have none you can dictate the price. If you have lots, the market decides.)
That’s the kind of sloppy work that kept me from making partner at KPMG. Also Deloitte. Also Liberty Taxes down on North Broadway.
[channeling BobNewhart: “I figured if you get within a couple bucks… {laughter}]
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So, you agree that cutting taxes to zero, or to any non-zero point lower than they are now, will not save consumers one cent, rather, the “JCs” will use the extra loot to enrich themselves.
Steve
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In economics taxes work exactly the opposite. Meaning the collective wallet goes into something that is taxed less raising the price of that good or service. If you take the taxes off something that is inflationary.
When you add taxes that ups the cost of something preemptively and keeps the underlying price down.
With higher taxes and expensing factories are built bring down costs. then you have the best of both worlds more factories lowering costs while taxes are collected. Both of these things bring down costs.
The current policies are bringing down costs.
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I do agree that small changes in the tax rate may have a negligible or no impact on the price to the consumer or margins but Large increases or decreases may work their way in.
What you ignore is the extra money earned is either reinvested in new ventures or spent on consumption, which would add to and help grow the pie and create opportunities. Lower rates would also tend to attract more businesses to relocate to lower tax base regions.
If tax rates are set too high, it means more money is used less efficiently by government. At too high of a rate, businesses that can will seek out more favorable tax haven or not re home capital because of tax concerns.
My point is that there are far more considerations than simply the impact to profit margin or whether the needle moves on the price of the product to consumers.