Imagine you are a climate researcher who has been assembling the data that is used to support claims of global warming. Or imagine you are Phil Jones from the Climate Research Unit (CRU) of the University of East Anglia. Or imagine you are a scientific fraud. Did I write “or”? I meant “and.”
Before we get into the sleazy details let’s talk about science.
The scientific method that has produced such incredible progress over the last five hundred years depends on peer review, rigorously reproducible experiments, and transparent access to the original data as well as all operations performed on it. Factor analysis, time series analysis and other techniques lead to theories about cause and effect. Empirical data from experimental results indicates numerical relationships. Results are tested and vetted by many methods, including statistical analysis of the data for measurement bias. The result is that scientific theories are never proved. Two things can happen to them.
Theories can be accepted as good enough for a while; until
They get disproved.
In science, breakthroughs are made by disproving old theories that were good enough for a long time, and replacing them with new or refined theories. (more…)
At bottom a corporation is simply a legal fiction that allows a business or other concern to be treated as if it were a person. Since it is a fictional person, the taxman treats it like a real person when it comes time to pay taxes, and charges it a tax rate similar to the rate charged real people.
Is this a good idea?
Corporations are employers, buyers of raw goods, producers of finished goods, convenient holding companies for capital goods, and when times are good also sources of returns for investors. If the cost of raw goods plus the cost of production and sales is less than the sales price then the corporation makes a gross profit. Out of this gross profit come the wages of the workers and managers, further capital investments to improve the productivity of workers, and returns for investors. What happens when government reaches into a corporation and takes out a tax? Specifically, who actually pays corporate taxes with his or her reduced take-home pay?
When taxes increase to a business several things happen.
First, it cuts wages by reducing worker hours, giving pay cuts, or denying pay raises. This is almost always the first recourse, because variable costs like labor are the easiest expenses for any business concern to cut. The Washington Post reports that 70-92% of corporate taxes are paid by reducing employees’ pay.
Second, the corporation hires tax accountants, lawyers, consultants, and even lobbyists to cut its tax load.
Third, the corporation reduces maintenance and capital investment, which will slow down the corporation’s future growth and may cause it to fail at some future time if its competitors do business from places where their taxes are lower and they can increase their productivity faster.
Fourth, it tries to charge customers more.
Fifth, it tries to replace its raw materials with cheaper alternatives.
Sixth, it may engage in cost cutting measures on peripheral activities to do things like save energy, replace computers over a longer cycle, or reduce paperwork costs. These typically only produce minor savings as competent businesses are already cheap about peripheral activities.
Seventh, it may lower returns to investors, making its stock less valuable
Are any of these results of corporate taxes good things, or do they all damage workers, investors, and other businesses? Since corporate taxes mostly work by taking money out of the pockets of employees, with less impact on highly valued employees and greater impact on employees as their value to the company decreases, aren’t corporate taxes simply an extremely regressive tax that has disparate impact on entry level, unskilled, and disabled workers?
Let’s talk about this in a way that everyone can understand. The average employed married American worker makes about $50K and pays taxes at the 15% marginal rate. If he or she works for a for-profit corporation, then the impact of the corporate tax is to reduce his or her gross salary by 70% of 34%, or 23.8% (assuming a fairly successful small business). I’m choosing the lowest impacts I can find in the tax tables and I’m playing a little loose with adding and subtracting percentages, but the result is that I’m understating what happens, not overstating it. The average might be higher. That means the average worker would make 23.8% more money if there weren’t any corporate tax. It also at least doubles the federal tax that the average worker pays. For a worker making $50,000 that is a $12,000 raise that won’t happen because the government stole it away in the dark of night! Does the average worker making $50K receive more value from the government than he or she would get from that $12,000 that was cunningly taken out of his pocket? Or is it simply a sneaky way for the government to siphon money out of the economy with a “corporate tax” without workers realizing they are the ones who are being robbed?
Who pays corporate taxes? The answer is: if you work for a corporation, you do.
At least that’s what Joe Biden says. I think the plan is actually +180 seats in the House and +20 in the Senate. The progressive douchebags are well on the way to making it happen.
If free market principles were allowed to rule, like Schiff wants, what that means is everything is based on maximizing profit.
At this point we are all supposed to gasp at what a terrible prospect this would be. After all, the track coach and Michael Moore have told us about the wickedness of “profits,” so what more is there to say, really?
But as we’ve seen above, profit is simply society’s way of ratifying a firm’s past production decisions. It indicates what consumers want, and (by the process of imputation) the best process for producing it. Profits attract further investment in a given line of production, until the increased supply of goods in that industry brings the rate of return there back down to the level that exists elsewhere in the economy. This is how we ensure that our limited resources are not wasted, and that the most urgently desired goods are produced.
In the absence of profit as a driving force, how exactly would Che like to see resources allocated? We can either allow consumer preferences to guide production, or let the personal preferences of a monopolist (i.e., government) dictate what should be produced and how. When the question is posed this way, the choice is pretty clear, which is why the question is never posed this way.
Incidentally, would Che prefer to base economic decision making on maximizing losses instead? Would that be better?
There is so much more you have to read. Che was dumb, in his own way, but it was a completely different way than Che the Bloggista.
It’s the mess of the Democrats in the Senate and House. Randal Hoven explains:
Who controls Congress might just make a difference in economic affairs – more than who is President. (The President still wields primary power in foreign affairs, as both head of state and commander-in-chief.) Examine the graph below, for example. It shows the unemployment rate over the last 25 years. (Data source is the Bureau of Labor Statistics.) I color-coded the line to be red when the Senate was Republican, and blue when Democrat.
And yet Democrats, both those in power and those who voted for the hopechange express, continually claim that Obama is not and never will be responsible for the bad economy. They will always blame it on Bush, no matter how long it lasts or how bad Obama and the Reid-Pelosi Axis make it.
