Today on Blogcritics
Home » Culture and Society » The Conservative Big Lie about Corporate Taxes

The Conservative Big Lie about Corporate Taxes

Whenever a BC liberal has brought up the matter of corporate taxes, the BC conservatives almost always point out that corporate taxes do no good at all because the corporations will only pass the cost on to the consumer. Now if taken at face value, that is surely a sensible statement. After all, don’t all goods and services have costs that comprise part of the retail price to the consumer? Of course they do! It is for this reason that I didn’t argue more strongly for corporate taxes.

But it dawned on me the other day that the conservatives’ claim may well be a false argument. Why? Because all well-run businesses charge what the market will bear, and any business that charges more than what the market will bear will soon face significant losses and, if the prices are not soon lowered to the market price acceptable to the consumer, will go out of business. When a business has difficulty pricing its goods or services at the acceptable market value, that business will make cuts in other areas. The first cuts will almost always be in personnel: those employees who are less essential will be laid off or fired, but the business will not cut off its nose to spite its face, as the saying goes, by making personnel cuts so deeply that it will damage its ability to do business. Furthermore, even in the best of times well-run businesses strive to cut fat, as it were, from the company rolls, so mass layoffs due to higher corporate taxes is not a great concern. After all, if high corporate tax rates were indeed a path to economic meltdown, we would have seen this happen across the first-world democracies long before now! If history is any guide, then moderately-higher taxes would not adversely affect America’s economy as a whole. Nor can it be honestly stated that American businesses face the sixth-highest business tax rate in the world (as this Bloomberg.com article claims. Why? Because as Professor Linda Beale, a tax law expert, states:

[T]he US is actually a corporate tax haven, with the lowest effective corporate tax rates of almost all the countries that participate in the OECD. That’s a little fact that the Tax Foundation apparently doesn’t want the American public to understand, since all its hype is in terms of statutory rates and not in terms of effective tax rates.

The article makes clear that while America’s statutory tax rate is indeed among the highest in the world, our effective tax rate, after deductions and tax breaks are taken into account ,is, as Professor Beale states, among the lowest in the OECD.

And this brings us back to the conservative Big Lie about the evils of corporate taxation. A well-run business will not charge more than what the market will bear, nor will that business cut its payrolls to such a point that it will harm that business’ ability to operate profitably. When corporations are making record profits year after year, it should be expected that those businesses should be sufficiently taxed in order to pay for the taxpayer-funded infrastructure that they use including roads, regulatory enforcement, crime and fire prevention, and public education. If a corporation cannot operate profitably while paying such taxes, then instead of simply wanting to avoid paying the taxes that businesses are expected to pay in any other developed nation in the world, the major shareholders need to take a hard look at how that company is being run. There is nothing wrong with charging corporations a moderate tax rate, and there’s everything wrong with forcing the middle-class taxpayer to shoulder an ever-increasing share of the tax burden.

A corporation that pays taxes may not reap profits as obscenely high as some are doing now, but if that corporation is already charging what the market will bear, which is what corporations aim to do anyway, then the cost of those taxes will NOT be “passed on to the consumer” but will instead force the corporation to operate more efficiently. The side benefit is that as time goes on, because of those taxes they hate so much, the corporations will be able to do so with the support of a better physical and societal infrastructure.

About Glenn Contrarian

White. Male. Raised in the deepest of the Deep South. Retired Navy. Strong Christian. Proud Liberal. Thus, Contrarian!
  • troll

    …you’re a mac person?

    no wonder we disagree about everything

    there’s a ‘full view’ copy in google books

  • zingzing

    “no wonder we disagree about everything”

    mac’s music programs are cheaper and more intuitive. also, when i did have a pc, i couldn’t for the life of me find a crack for protools. besides, i’ve got a firm handle on the parts of logic (the music software, before you get started) i need, and i can figure my way around just about any problem within logic (please don’t start) that i come across.

    so that’s why i’m a mac person. it’s all about logic… (please, no…)

    also, the amount of music downloading that i do would be incredibly dangerous on a pc. long live mac!

    (and i looked up the version on google books… it looks like the left side of the page is cut off. very annoying. the first word of each line is gone. if you change it to view two pages at a time, there’s still the same problem. it’s a bad transfer.)

  • zingzing

    but i did find a copy at pitzer college’s website. i’ll bookmark it.

  • troll

    zingzing – 101 was meant as a stale joke

    I’ve heard of mac’s strengths – but have never appreciated them for myself

    I’ll get back to you in the indefinite internet future with something on expropriation

  • Clavos

    Glenn, I never suggested we get rid of welfare, just that we improve it to where it does some good for the millions mired in lifelong poverty. Both zing and troll pointed out that there are some training programs in some areas such as NYC and NM (likely not in MS, AR, AL and other enlightened states — probably not FL, either, we make sex offenders live under bridges, like trolls), but obviously, they aren’t enough.

  • zingzing

    actually, clavos, look in your arts weekly or other relatively cheap spaces for classified advertising (maybe even the main daily newspaper, given the state of print advertising today). there will be a section for “job training” or something like that. all those vocational schools will have something that says something like “financial aid available to those who qualify,” which may refer to a lot of things, but will also refer to the ATB grants i referenced earlier. check to see if there are any such ads in the miami papers. it’s a federal program, so it doesn’t matter where you are, and i’d bet such training programs are available with those grants to those that qualify (as in, pass the test). several of the schools i’ve looked at make money hand over fist (what a strange phrase…) getting students who never graduated or got their ged.

  • Glenn Contrarian

    Clavos – I’d love to improve welfare et al – but are you willing to pay the extra taxes to pay for it? I am, of course, but then i’m a liberal.

  • Clavos

    but are you willing to pay the extra taxes to pay for it?

    No, but I’m willing to cut many government departments substantially – we could do away with the surface navy totally — there’ll be more than enough money to pay for it and still cut taxes.

  • zingzing

    clavos: “I’m willing to cut many government departments substantially – we could do away with the surface navy totally…”

    why can’t this kind of shit come up in congress? a reasonable senator or congressman could present this idea to both his colleagues and the public in such a manner that the receive the general wisdom of it. and it would save so much goddamn money. (and it’s the fucking military, so the gov’t could do what it wants without worrying about the private sector, to a degree.)

    but will it happen? nah. prolly not…

    that would make too much sense.

    normal people: “but, when we can fly, why do we need boats?”

    navy admiral: “sailers sail. what else can they do? to war!”

  • zingzing

    “that the receive”

    fuck. “that they would receive”

    i dunno.

  • Clavos

    I’d keep the nuke subs, because each of them has more firepower than the entire WW II USN, and they’re a good deterrent force, but warfare has bypassed surface ship operations for the most part, and what little remains (Somali pirates, etc.) could be covered by the Coast Guard — I’d transfer the most modern USN ships (the missile frigates, e.g.) to the CG and scrap the rest.

    All those laid off sailors would add to the unemployment problem, at least temporarily, however.

  • Boeke

    The republicans have controlled the House for over 100 days and not introduced a single jobs bill. I conclude that they are anti-worker. That being the case, I expect nothing but more deprivations from American working people by the Republican party, the Tea party, and various rightist mouthpieces.

    As near as I can see those rightists would just as soon American workers lose their homes and die of illness and starvation by millions in American streets. They are utterly selfish.

    So why would any serious person take them seriously? Especially reflexive liars like Nalle and Clavos?

    The only way to solve our unemployment problems with a longterm solution is to cut the workweek. The only way to get this solution considered, even put on any political table is with a strong union.

    We need strong union presence to push forward decreases in the workweek and create balance in the corporate power structure.

    In fact, we have been doing the opposite, so the situation is getting worse. Hard-pressed workers, with weak or non-existent collective bargaining power (in contrast to corporate management and ownership , who have almost limitless bargaining power) are driven to compete with each other by putting in unpaid hours, so the workweek has crept up over 46 hours.

    Every year that goes by the productivity of US workers goes up, partly due to new technology and partly due to voluntary (and usually self-paid) up-training by workers. This increase in productivity is inexorable, apparently. We used to be able to absorb excess productivity with increased consumption, but several factors are cutting that.

    Corporate management is generally against cutting the workweek because their huge unearned incomes come from the large margin between cost and price. Wage pressure will affect them disproportionately, in the same way that excess margin benefited them disproportionately.

    Other plans for increasing employment are proven failures. Giving money to capital is hopeless: we have a huge capital oversupply, not the least of which is $2trillion in business retained earnings and $2trillion in banked savings, so that it’s like pushing a rope. Re-training and industrial education are hopeless because there is no shortage of trained people. Besides, with their huge loan failure rates it’s becoming obvious that the commercial education operations are basically scams to defraud the taxpayer.

    Cutting deficits, Tea Party style, is counter productive because it cuts total cash flow and cash velocity in the economy, starving markets even further, discouraging investment, etc., the whole Death Spiral.

  • Glenn Contrarian

    Clavos –

    (my question) but are you willing to pay the extra taxes to pay for it?

    (your answer) No, but I’m willing to cut many government departments substantially – we could do away with the surface navy totally — there’ll be more than enough money to pay for it and still cut taxes.

    And I point you back to Oscar Wilde’s quip that cynics know the price of everything and the VALUE of nothing.

    Do you not know, Clavos, that taxes are lower now than they’ve been in many a year? And while we’re watching our national infrastructure – and the businesses that directly benefit from said infrastructure – go down the toilet due to lack of funding, your people are crying for still more tax cuts? By cutting taxes too low, you’re not starving the beast – you’re starving the business community by the gradual deterioration of the infrastructure that supports them.

    And btw – when it comes to the Navy, there’s an old saying – “amateurs talk firepower, while professionals discuss logistics”. Have you ever tried to land a battalion of Marines by submarine? It doesn’t work too well. And submarines by themselves cannot control and safeguard sea lanes and choke points, much less conduct rescue operations of more than a few people at a time.

    So no, it would be a grave mistake to get rid of the surface fleet as a whole. The carrier fleet gives America a flexibility enjoyed by no other nation – each one comprising 4.5 acres of sovereign American territory, mobile air bases able to project power for a thousand miles in any direction – but IMO the cost is too great. But to get rid of the entire surface fleet would be tantamount to resigning America’s single greatest visible claim to primacy in wartime and peacetime. Check out Alfred Thayer Mahan’s landmark “The Influence of Sea Power Upon History, 1660 – 1783″. Times have changed, but the principles described therein have not.

  • Clavos

    Landing marines (and other troops — I landed in Vietnam from an Army LST) is already being handled by the other services and has been for decades.

    And submarines by themselves cannot control and safeguard sea lanes and choke points, much less conduct rescue operations of more than a few people at a time

    The Coast Guard is more than adequate for both jobs; rescue is their primary mission (or was, until they were given the Augean task of drug interdiction).

    Times have changed, but the principles described therein have not.

    Yes, indeed, the times (and warfare) have changed — substantially. From Vietnam forward, the surface Navy’s role (and usefulness in fighting the wars) has steadily declined, not because the Navy is any less prepared than it historically has been, but because the nature of warfare (particularly as waged by America) has changed substantially, with much of modern wars being fought at a distance and with missiles and drones, which is why I said upthread that we should keep the missile frigates active.

  • Glenn Contrarian

    Clavos –

    Landing marines (and other troops — I landed in Vietnam from an Army LST) is already being handled by the other services and has been for decades.

    And who protected the LST on its way there? And can submarines conduct defense against anti-ship cruise missiles? Can submarines conduct anti-air operations? And you flatly ignored what I posted about control of sea lanes and choke points and conduct of rescue ops. What would happen to Big Oil’s supertankers proceeding through the Strait of Hormuz if we didn’t have Aegis-equipped destroyers on station to protect them from cruise missiles if, say, Iran decided to close down the Strait to all surface traffic? And what would happen to the worldwide economy as a result? Look at what happened to our gas prices right now because of the Libyan civil war…and then think about what would happen if Iran closed down the most valuable naval choke point on the planet?

    A retired Marine once rightly told me that ground can’t be controlled without boots on the ground…but outside of North America, American boots cannot be brought there in sufficient strength safely and (more importantly) supported reliably without a strong surface Navy. You might point out Afghanistan…but were we opposing an organized nation that could field a significant standing army? No…and that’s why the Navy was crucial in our (quite illegal) invasion of Iraq.

    Clavos, despite my lifetime of (admittedly amateur) study of military history, I would be somewhat hesitant to be an armchair general in a discussion with you due to your real-world experience…and by the same token, I would suggest that being an armchair admiral is not your forte.

  • Glenn Contrarian

    And Clavos –

    Don’t feel bad – it’s pretty common for those who served in one service to underestimate the importance of the other services.

    But in my experience, such underestimations are made much more often by those who did not decide to make it a full career in the military.

  • Glenn Contrarian

    And Clavos – the Coast Guard doesn’t operate in choke points like the Strait of Hormuz. The also don’t operate in the Malacca Strait (through which passes more cargo ships than any other sea lane in the world), or one either end of the Suez Canal, or in the strait between Taiwan and China (thereby providing a visible barrier whenever China gets a little too belligerent).

  • Clavos

    And who protected the LST on its way there?

    We were alone — all the way around the horizon.

    And you flatly ignored what I posted about control of sea lanes and choke points and conduct of rescue ops.

    No, I didn’t. You don’t read well.

    What would happen to Big Oil’s supertankers proceeding through the Strait of Hormuz if we didn’t have Aegis-equipped destroyers on station to protect them from cruise missiles if, say, Iran decided to close down the Strait to all surface traffic?

    One of the reasons I exempted the missile frigates and nuke boats.

    American boots cannot be brought there in sufficient strength safely…

    Bull. In Vietnam, and ever since the, we have moved our troops by air, which is way faster and infinitely more efficient. When LBJ escalated American presence in VN to unit level (as opposed to the advisers only up to that point, we sent three or four troopship loads over (I was on the first), but then sent (and returned) ALL our troops by air. Why? Because, for one thing, The USNS General R.M. Blatchford (on which I had the misfortune of being an involuntary passenger) took 28 days to get from Oakland to Cam Ranh Bay — 28 days in the South Pacific in the summer (August) in am overcrowded (designed for 2500, carried 3500 troops) un-air conditioned rust bucket. Thankfully, I flew home a year later — 29 hours, Saigon to Oakland with fuel stops at Clark and Hickam on a chartered civilian airliner (anyone remember the long-defunct Northeast Airlines?).

    the Coast Guard doesn’t operate in choke points like the Strait of Hormuz. The also don’t operate in the Malacca Strait (through which passes more cargo ships than any other sea lane in the world), or one either end of the Suez Canal, or in the strait between Taiwan and China…

    The Coast Guard operates anywhere in the world the government orders it to, including Vietnam , back in the day. It can go to Hormuz or Malacca — or anywhere.

  • Clavos

    The point is, Glenn, that, given the ways modern wars are fought and are evolving, the surface navies (all of them, not just ours) are becoming increasingly irrelevant and superfluous. Already we could eliminate more than half our surface ships without affecting our security at all.

  • Glenn Contrarian

    Clavos –

    You know, I suspect that you and are not as far apart as you might think, since after carriers, all that’s left (other than supply ships and ‘gator freighters’) are missile ships.

  • OG

    First, hello everybody, long time no see …

    Just a quick interjection – as a marine hitting the beach – #119: thanks Clavos, you’re making progress.

    Have a nice day.

    OG

  • Boeke

    Shouldn’t Big Oil pay their own security costs so that the cost is properly allocated to their customers, oil users?

    “What would happen to Big Oil’s supertankers proceeding through the Strait of Hormuz if we didn’t have Aegis-equipped destroyers on station to protect them from cruise missiles if, say, Iran decided to close down the Strait to all surface traffic?”

  • troll

    What would happen…

    we at Acme Bicycles have a proposal in place for just such an occurrence

    here is a rather long advertising piece put together at the behest of our pr team showing the possible benefits that municipal governments could realize through contracting with us…Cuba was only a small test market of course

  • Glenn Contrarian

    Boeke –

    Now, now – you know that if we didn’t provide our Navy ships to protect them and also pay them billion in taxpayer subsidies, Big Oil would go flat broke!

    Or at least the campaign funds of the Republicans would take a major hit….

  • Clavos

    Shouldn’t Big Oil pay their own security costs so that the cost is properly allocated to their customers, oil users?

    Yes. And while we’re at it, let’s withdraw ALL gummint subsidies from ALL industries, most especially agriculture.

    And let’s stop bailing out badly run corporations — it only perpetuates bad business practices.

  • Glenn Contrarian

    Clavos –

    Yes…and no. Support those industries that NEED support that are crucial for America’s future – like alternative energy. Did you happen to notice that during the State of the Union address, when Obama proposed cutting subsidies to Big Oil and giving them instead to alternative energy companies (like solar panel manufacturers), neither Boehner nor any of the Republicans clapped?

    And when it comes to bailing out GM – which is what I suspect you’re referring to – they’re making a profit now for the first time since 2004, thanks to the LOAN (not subsidy, but LOAN) that our government made to them…which literally saved at least two million jobs.

    But I’m sure you disagree since you’re of the opinion that government can’t do anything right. I guess it’s only the governments of OTHER nations that can do things right….

  • Clavos

    Yes…and no. Support those industries that NEED support that are crucial for America’s future – like alternative energy.

    No. And no. Subsidized alternative energy sources will never be competitive and will only be viable at the taxpayers’ expense.

    The Wright brothers didn’t need subsidies, neither did the early car guys, Michael Dell, Bill Gates, Thomas Edison, Alex Bell, — the list goes on forever.

    Emphatically no — you make exceptions and pretty soon you have a system resembling the tax code.

    And I was thinking of the banks.

    As you point out, the GM thing was a loan that’s not the same as a subsidy, but you also say, they’re making a profit now for the first time since 2004, which is true, but they still make crappy cars (can you say Volt?) so it won’t last — then what?

  • Glenn Contrarian

    Clavos –

    Subsidized alternative energy sources will never be competitive and will only be viable at the taxpayers’ expense.

    Earlier this year I read something on sciencedaily.com – or maybe it was discovery.com – about how they’ve finally developed a solar cell that produces electricity more economically than does nuclear power.

    And China disagrees with you, too – they’re subsidizing solar panel factories big time.

    And GM is making crappy cars? Are they? Ford is now making better cars than Toyota…and is GM really that far behind Ford? And do we really want GM to go Tango Uniform when they sell more cars in China than in America? And some of that profit DOES come back to America, you know.

    Just some more food for thought.

  • Clavos

    Ford is now making better cars than Toyota…

    Ford, of course, is not GM. Their cars are the best American brand, I own one, but as good as Toyota? No. I’ve had several of those, and Ford gets close, but not “as good as.”

    And yes, GM is really that far behind Ford, which is why GM needed to be bailed out and Ford didn’t.

    BTW, the Ford I now own (2010 model) is the first American car I’ve bought in 30 years. It’s also the last, precisely because I’ve now confirmed for myself once again that the Asian and German cars are better engineered and put together — even the ones made in the USA.

    I don’t want GM to go TU unless it deserves to do so and the only way to save it is with taxpayers’ money.

    Saving commercial enterprises should not be the function of government in any but socialist countries.

  • Boeke

    The US government has been openly subsidizing businesses since the republic was founded, starting with the deep water tall sailing ships that soon came to dominate world trade, cross country railroads, interstate highways, etc., and even including various computer companies whose massive government subsidies and contracts supplied the capital for their massive buildups. Even now the coal industry receives $4billion/yr in US subsidies for “Clean coal”, a myth, which money is easily diverted to ordinary uses, while PV gets about $200million.

    The US government has ALWAYS been in the business of financing industry, regardless of the boastful claims of “self made men”.

    What we should do is finance NEW industries, just as those Clipper Ships were in their day, and NOT sunset industries.

  • Clavos

    What we should do is finance NEW industries, just as those Clipper Ships were in their day, and NOT sunset industries.

    If the government is to continue its subsidies, then I agree with you, but I would still rather see the government get the hell out of business other than in a regulatory capacity.

  • http://blogcritics.org/writers/realist Realist

    I make more than 74% of Americans according to Census Bureau statistics. I paid the federal government 4.9% of my GROSS income, and I paid the State of California 2.02% of my GROSS income.

    BUT I STILL PAID MORE THAN GE DID!

    Turn off the crocodile. It’s an endangered species, for cripes sake!

  • D White

    I think, generally, you can never get rid of corruption or under the table benefits and companies will control the world, and politicians are just their lackeys. Just like how 5 a day was brought in by Dole which the labour party took up recently afterwards, funny that.

  • Boeke

    131-Clavos: that’ll never happen because the capitalists won’t let it happen. Capitalists see the government as a proper instrument of capital, useful for raising taxes from the peasantry, and for enforcing property laws against the mob.

    “…I would still rather see the government get the hell out of business other than in a regulatory capacity.”

  • http://eagleviews.org Allen Scott

    if it were true that America would become stronger if we got rid of all welfare and other entitlements, then there’s a lot of third-world countries that SHOULD be first-world countries because they have NO such entitlements or federal aid..

    THEY HAVE NO ECONOMIES EITHER.. The best way to end poverty is by creating jobs, the best way to create jobs is to have an ever-expanding economy, the best way to have an ever-expanding economy is to be business friendly and not by slapping onerous regulations (which is a tax) and taxation upon companies making it increasingly harder for these companies to stay in business.

    As an example take CALIFORNIA which at one time had a vibrant economy, now they are bankrupt. WHY? Ever increasing taxation and regulation making the business climate unfavorable, businesses moved across state lines into more business friendly states like Texas. The ever expanding public sector also added to the burdens placed on the economy.

    Detroit another example of a once vibrant economy turned to crap by socialist progressivism. The list is endless of the damages caused by over taxation and regulation. Of course there are many who refuse to see the obvious and simply think they have not charged enough yet and continue to push for more taxation.

    The solution Who is John Galt?

  • Leroy

    135-Allen is wrong. It is NOT business that creates jobs, it is markets. Without market demand not one businessman would hire one employee. Business just gets a free ride by providing a bridge between markets and people.

    Our economy in a Demand Drought because consumers don’t have enough money and credit. NOT because business is short of money. In fact, USA business is sitting on $2trillion of CASH which they are unwilling to capitalize BECAUSE THEY DON’T HAVE MARKETS. It is utterly stupid to direct more money at business when it is already unable to implement cash reserves. Utterly stupid. It would just freeze more assets.

    That’s just cash in business savings. The banks are sitting on another $2trillion.

    Sending money to banks or businesses is just like burning up the money.

    The way to stimulate the economy is to direct money at the Consumers. Even if that means business and finance taxes.

    Even if banks and businesses didn’t have all that dormant slack set aside, 80 years of economic measurements indicates that the Economic Multiplier of consumers is several times higher than that of businesses and banks. That is, a dollar to poor consumers results in about $2.5 increase in actual cash flow, whereas a dollar to business is about $0.60 increase in net cash flow.