The flavor of democracy we practice has been good. However, we must be honest enough to admit it can degenerate into mob rule, which generally means decisions are made by the most gullible and ignorant among us on any specific topic.
Simple example: There is no way my vote on a whole range of medical issues should have the same value as that of a medical professional, such as my wife. While I have a reasonable understanding of biology, the difference in knowledge and understanding in this area of knowledge is massive.
In other words, I am as ignorant about medical matters as she is about engineering. It isn’t an insult to classify me as ignorant in this category. It’s the truth. Why do our votes have the same value?
So, yes, 65% of Americans want to raise business taxes. They are ignorant fools being led by the nose by politicians using this ignorance to gain votes at their expense.
The most important reality to understand us that politicians are never negatively affected by some of the nonsense they push. They don’t lose their jobs, careers or level of pay. On the other hand, the fools who buy their nonsense very often end-up with the short end of the stick.
Raise business taxes? No problem. More businesses will go to China if they are able to. If they can’t, they’ll reduce costs through automation. Some will do both.
In a globalized economy we need lower taxes. Zero would be an even better number. Anyone who thinks otherwise suffers from a serious deficiency in perspective.
Strongly disagree. Your wife should educate the voters around her on issues that she cares enough about to invest the time (or treasure) doing so. Those better-informed votes should all count equally.
It's a slippery slope to suggest that being well-versed in an area should grant extra power. Who determines who is well-informed? Hell of a conflict of interest.
Also, consider how wildly primitive (and often wrong) medicine was two centuries ago but how respected the practioners were at the time. Things are better today but the medical profession is not infallible.
Lastly, should business people get extra votes on economic policy and taxation?
This is very real problem. Yes, experienced business people are far better at understanding the range of issues pertaining to economic and taxation policy. That is self evident. Most people have zero experience and very little understanding of this, once again, particularly as it pertains to a connected global economy.
Here's a simple example of this:
Today politicians in the US are pushing for a truly massive-beyond-description infrastructure spending plan. Removing political intent (buying votes with our tax dollars by throwing money at large groups through these programs), one of the most typical targets of this infrastructure spending are roads, bridges and government buildings.
Simple question for anyone:
Name just ten companies who, in the last, say, 50 years, decided NOT to base their operations in the US because our roads and bridges are deficient. Just ten. Fifty years is a long time. If this is a real problem it should be very easy to rattle-off ten, if not twenty or more companies.
Any?
Nope. Not one.
In other words, this "infrastructure" thing is a solution looking for a problem. Or, put a different way, it is a waste of time and money at a massive scale.
OK, that's a tough question. Fine.
Same question. Only this time, within the US. Name ten companies who, in the last fifty years, chose to move to another US state because of the condition of the roads and bridges in their original state.
No?
It's a fantasy, isn't it?
Spending money like that is irresponsible. It will waste a decade or more. You can't recover the opportunity cost.
You see, lay people buy this crap without perspective and analysis. Our roads and bridges are just fine. Sure, maybe some here and there. And yet this should not be the focus of our spending. I just watched our local transit agency tear-up and re-pave a one mile stretch of road near our home. There was absolutely nothing wrong with the road. In fact, you could argue what they have done is actually worse. The prior road was gray-colored. The current topping is black tar-based. In other words, they created a mile-long super-heating surface in an already hot summer area.
Anyhow, the obvious question then, might be:
If not roads and bridges, where should we invest?
Where it matters. Ask companies what it would take to have them come back. Ask business people what they need. You are likely to compile a list that looks something like this (not complete):
- Lower taxes, federal, state and local
- Lower regulatory burden
- Faster (light-speed fast) building permits and process
- Sensible, fair and fast legal immigration policy
- 10 to 25 year manufacturing subsidies aimed at in-shoring the supply chain
- Invest whatever it takes to bring in not-trivial capacity
in semiconductor and other essential manufacturing
- Stop the minimum wage madness that is killing competitiveness
- Cancel the treaty that allows Chinese companies to ship for free within the US
- Tort reform
- Stop funding and guaranteeing student loans (this raises costs)
- Create an intense pro-business entrepreneurial culture
- Stop throwing money at military crap and use it to fund an industrial revival
As someone in manufacturing, one of the things I want the most is a short and relatively local supply chain. If you are manufacturing microwave ovens in China your supply chain is insanely short. Almost everything you need is within a truck drive from your plant. In the US your supply chain stretches all over the world. Long supply chains cost a lot of money, hence the decision by many to migrate their manufacturing to China. If the glass, screws, wires, chips, displays, plastic you buy is made in China...well, it's hard to justify making your microwave oven in the US when all you can source here might be the box and instruction manual.
An investment in a localized, efficient, low cost supply chain spanning a range of products --from low tech to high tech-- is the single most important decision the US could make. Investing in roads and bridges is going to bring NOTHING to the US. An efficient local supply chain would change the game in ways one can hardly imagine.
Can this be done? Well, it's hard to say until we start focusing on it and getting the right people around the table. We have been focusing on the wrong things for years. Others, like China, have not. This comes with consequences. The uninformed don't have a wide enough view and deep enough expertise to understand where we are and what we need to do to avert disaster.
Perhaps this is the point: When things are good it is OK to make bad decisions here and there because you have a buffer zone. You can make mistakes, survive them and go on. However, when you find yourself in the emergency room, what you need is deep and wide expertise and the right knowledge for someone to be able to make the right decisions. No more amateur night or well-intended-but-dangerous decisions rooted in ignorance.
The US and Europe are in the same place with regards to China. They have intelligently sucked in every industry of any value from both regions. It is hard to create a list of the massive segments of industry that have migrated operations from the US and Europe to China. You have to be in awe of what they have accomplished in about fifty years. If the US and Europe don't change their approach to business we will both suffer further erosion of whatever job-generation we have left. This is no longer a hypothetical. This is very real. And, yes, people with expertise need to be making decisions, not politicians or ignorant voters.
> And, yes, people with expertise need to be making decisions, not politicians or ignorant voters.
I agree with the sentiment but there's no universal definition of ignorant voter in the political sphere. There's only, subjectively, useful to someone or not useful to someone.
Many decades ago I actually worked with Frank Zappa for a few months on one of his projects. Long story. We had dinner together almost every night, just a few of us, sometimes just he and I.
Frank was very active politically. One night, as we were discussing various ideas, he said something like:
"Martin, the reason people like you and I don't go into politics is that you have to be a member of a very specific human subspecies to be able to survive the brutality you will encounter. Most intelligent people don't want to touch politics because they know it is a meat grinder. The sad part is we end-up with people who know nothing about anything and would likely be ambulance chasers or criminals if they had not figure out how to scam their way into politics. We are hopeless."
The epic climax of this reality was when, out of all the amazing people in the US, we ended-up with Trump and Clinton as the only two choices we could make. I can't see how anyone could argue either of those clowns is an example of the best the US can offer.
I still agree with Zappa. I can't imagine ever getting into politics. Particularly these days. I have zero interest in having my life and my family's life violently ripped to shreds by the unscrupulous actors who permeate that world and protect their turf at all costs. One day we might just come up with a way to govern ourselves without these mutants, until then, it's the best we got.
Looking at monetary policy since 2008, I sometimes wonder if taxes are even necessary.
It's increasingly clear that central banks can print and fund ~20% of their host governments' budget without any risk of lasting inflation. Why not try ratcheting that up?
Also remember that inflation is compound. 4% a year inflation isn't a steady increase.
Isn’t that point precisely addressed by the Biden administrations of setting a global minimum tax rate? If every country, or at least every country without signify the trade barriers (who cares what happens in North Korea) has the same tax rate than there’s no incentive for companies to move their profits - or the entire company - abroad to save on taxes.
Wouldn't it be simpler to just set corporate tax rates to zero, and instead raise taxes on income and -- especially -- capital gains? And the US already has a personal tax system where it doesn't matter where you earn income: if you're a US citizen, you have to consider US income taxes, period. So the problem where people try to push their personal income out of the country to avoid tax just doesn't crop up as much.
Do you mean income as in profit (= revenue minus expenses), or income as in revenue (not subtracting costs)? If you mean profit... that's what corporation tax is already. So I'll assume you mean revenue.
No it wouldn't. It would kill many businesses overnight, and incentivise the worst behaviour in the rest.
Consider a company that buys components for $100 and assembles them into a widget they sell for $105 to shops. (Who sell it for $110.) Let's ignore other costs.
Corporation tax at 20% would charge the company $1 per widget.
Income (as revenue) tax at 20% would charge the company $20 per widget, and the company would immediately have to stop producing widgets altogether, or substantially raise the price of widgets. It wouldn't have a choice. You as the end user would see the prices of everything in shops shoot up, and many things would disappear from the shelves.
If you used a lower tax rate, say 1% so that companies like this can continue, it will be far too low for companies that pay $50 for components and sell their widget for $100. Those would be charged only $1 on their profit of $50, keeping $49.
You want to incentivise (and indeed help) the former type of company. It's selling widgets at close to the cost of making them, and if it is so minded, it may use the highest quality materials it can afford.
But you have designed a tax that strongly incentivises, even requires, the latter type of company: Only pursuing opportunities that use the cheapest possible materials while selling at high prices. Never doing anything that brings in just a small profit.
Society does not benefit from businesses operating on vapor-thin profits. When (not if) anything goes wrong these businesses trigger a job-loss chain reaction that is impossible to avoid.
What you want are businesses who make enough in profits to build a solid safety net, evolve, compete, provide security and upward mobility to employees, suppliers and the entire food chain that surrounds them.
Profits are not bad. They are an absolute necessity for growth and stability.
I didn't say profit was bad. The discussion point was not about razor-thin margins. The 5% was just notional for discussion. The same problems occur with fat margins.
Building on your point that profits are necessary for growth, stability and job security, presumably you have in mind that the company gets to keep the profit, to use for those things as needed.
The GP proposal I replied to is a tax system which sets a legally required minimum profit margin, and then takes 100% of that required minimum as tax, though I expect the poster didn't think of it that way.
As the proposal is to force the company to make some profit percentage and take that directly from the company, the remaining profit the company can reinvest in growth, stability and job security is reduced. Aside from reducing the amount available to plow back, this also acts to amplify variance in profit from period to period, increasing instability in the company's finances. Reducing profit that can be used by the company and amplifying instability both reduce growth, job security, upward mobility etc. So much for understanding business.
It's also ridiculously harmful to the "food chain" because it would tend to destroy independent supply chain companies, and prevent new ones from being competitve.
The GP proposal takes the legally required minimum profit margin from every individual company in a supply chain, so the total tax taken is the required margin multiplied by the number of companies in the chain. I.e. more companies in a supply chain == proportionally more tax. This creates an extreme pressure to merge small supply chain companies into a giant conglomerates that pay less tax for the same task. I say extreme because it is: Merging brings a benefit of 10-100x tax saving.
If you like giant conglomerates that's fine, but if you want a food chain of independent companies, it's a disastrous policy.
The tax level in that proposal could be set low enough to allow small supply chain companies to survive without succumbing to tax pressure to merge, but if that was done, giant conglomerates would pay a tiny amount of tax, compared with small companies. There would still be a 10-100x tax advantage available to giant conglomerates. Since this entire discussion is a complaint about giant companies paying too little tax, presumably that is not the intended effect.
Some accounting could obviously be done to ensure giant companies pay a similar share to small companies in a chain doing the same thing, to remove the tax pressure to merge. But that's what we have already, that's corporation tax.
They're making a lot of profit.
Its competition that reduces profits
> Its competition that reduces profits
The revenue tax scheme sets a minimum profit level that every company is required to make. Competition can't reduce it below that level.
It's also set things up so where many companies build things in a chain of specialised companies, for example manufacturing components, assembling devices then selling those, and shipping them, the minimum profit percentage is legally required at each step, compounding.
Currently, supply chains consist of hundreds of companies working together. That won't be possible any more, as the new system forces every supply chain to merge into a self-contained conglomerate that does everything in one company.
Companies in that system will be forced to merge into giants or die, and in the end most will be giants. It's probably not the intended consquence of the policy.
Did you know they can export products at cost and still make up to 15% on their international sales? The world is not a level playing field.
Did you know it costs them darn near zero dollars to ship products within the US, while US companies have to pay full fare?
The ONLY way the US and Europe could rebuild a solid industrial base lost to China is to be so pro-business it would make most of the uninformed projectile vomit. If we can do that and maintain it for 25 to 50 years we might have a shot at it. Nothing else will work.
Either we are a nation of pro-business entrepreneurs to the core or we resign ourselves to living in outsourced utopia. That’s how bad it has gotten.
Pick any product and try to source all of its components and manufacturing in the US or Europe. You won’t get far. In most cases it is simply impossible.
If we want a solid future we need to stop vilifying business. The 65% who don’t have a clue will learn this only when it is too late to do anything about it.
Perspective: We couldn’t make PPE, the materials they require and the machines we would need to make them.
China's corporate taxes are much higher than 15%, so it's not like they would be directly affected by this. They might oppose the plan (I have no idea), but it's unlikely to be on an economical aspect of that's the case.
Or you just introduce CO2 tariffs and use them to wreck China in the process of building a CO2 neutral economy.
The idea of a CO2 neutral economy is another utopia fantasy sold to the ignorant voters by politicians. Easy to sell. Easy to form voting groups around it. Who doesn't want to be for "saving the planet".
And yet, we know, without a shadow of a doubt, that we cannot do a thing about atmospheric CO2 accumulation and the climate effects surrounding it. Not a thing. This is what we know --scientifically, not guessing here: If humanity left the planet today and all of our technology simply shut down, it would take somewhere around 50,000 and 100,000 years for atmospheric CO2 to come down 100 ppm. This leads to a very simple conclusion: If such an extreme measure produces a rate of change of 100 ppm / 100K years, a partial measure will not improve on that rate at all.
So, no, a carbon neutral economy will do nothing. Neither will switching to electric cars, full solar and wind power, etc. All fantasies. Sorry. We are being lied to and we are deceiving ourselves.
So let them go, other business would fill up that place.
Businesses don't go to China because they want to. They do so because they have no other choice. When the combination of regulatory, tax and labor regulations makes it so it is impossible to compete you are left with two choices: Embrace China or close the doors.
While "other business would fill up that place" might sound like a nice heart-warming idea, it is a fantasy. The only businesses that will fill that place are Chinese businesses selling directly in the US and Europe (an ever-increasing category, just search Amazon) or US and European businesses who have outsourced enough of their operation to China to be competitive.
So dont allow those business to sell in the US
In June last year, the medical crème de la crème were proclaiming that COVID antibodies last 3 months. I (an engineer with no formal biology training past high school) read some obscure studies that past Sars-Cov-1 infection seems to still provide protection against severe Sars-Cov-2 infection, and it was also what my understanding about the mechanics of the immune system suggested (why would antibodies only last 3 months? how could the human race survive?!)
Lo and behold, I was right, the "medical professionals" were wrong. TL;DR: common sense is worth at least as much as a medical degree. Also, never trust people whose incentives aren't aligned with yours.
I had to read that twice.
The only way someone can have that thought is if they have no clue --at all-- about what a medical degree entails. Sorry my friend, you don't know what you are talking about.
Try this: Next time you need serious medical care...don't go to the ER or any doctor for that matter...just use common sense. Let's see how far that takes you.
Doctors are human beings. They are not gods. They are not perfect. And yet a medical degree --the knowledge and perspective that comes with it-- DWARFS even the most informed common sense.
Don't confuse politics with science.
First, countries would reduce their taxes to the minimum 15% based on the same dynamics we had until today (note that US's tax is higher). Later, countries would find ways to return the tax (not difficult when one could simply 'fail' to collect, or give 'investment aid' etc.).
IMHO, the importance of the treaty is with regards to establishing common standards. Raising corporate rates would require an additional vehicle.
This is the case with the OCDE literally calling countries with favorable taxation "tax paradises".
The only terrible shame here is you laundering your opinion on corporate taxes by making false claims about them being wildly unpopular.
[1] https://morningconsult.com/2021/04/07/infrastructure-corpora...
[2] https://americansfortaxfairness.org/files/Polling-Questions-...