Monday, April 20, 2015

Math Proves the Left's Obsession With Corporate Taxes is Futile

It is coming up on 5 years now that I have avoided getting into debates or arguments with leftists in person or at social settings.  I sit there, ignoring them at parties, knowing full well the BEST outcome is them saying "agree to disagree" and the worst is me being asked to leave as I offended the effeminate and weak sensibilities of Minneapolis' effete and aging Gen X intellectual class.  However, while that is how I handle myself in personal situations, I am not unaware of the general political pulse of the nation, as I am constantly reminded of society's ignorance online.

Be it comments sections, links, articles, news, or posts I am acutely aware that nothing has changed and have likely gotten worse.  College students and their professors are hard to discern as they throw equally childish and victim-whoring temper tantrums over adult-world realities.  Democrats don't even try anymore to come up with convincing lies about national debts and e-mail servers.  And every soccer mom is seemingly rushing to have her precious (and otherwise completely normal) child diagnosed with the latest mental disorder to excuse her and her husband's lack of parenting.  It's an insane world, and I take solace in that I no longer care and am just going to watch the show as I imbibe in as much Rumpleminze as possible before it's over.

However, every once in a while a leftist choir will sing a chorus that is so parroted, so knee jerk and so Goebbels that it compels me to dust off my ole Economist hat, fire up by economist spidey senses, and do a little research that will debunk the lie indisputably.  Not because I want to have the research to point to at a later date should I be debating a leftist and need it.  Not because I wanted to know for a fact what the truth of the matter was.  But merely to piss them off and force their brains to the uncomfortable brink of cognitive dissonance as quickly as possible.  And chorus the choir was singing this time was "evil corporate tax breaks."

Now this chorus has many variations:

If corporations paid what they did in 1950 all our problems would be solved
Corporations get all this "corporate welfare"

and the always bland, non-discript and completely void of any intelligence whatsoever

Corporations don't pay their fair share!

So I did a little bit of digging, pulled the national data on corporate profits and corporate taxes going back to 1947, and have more than enough data to put an end to this debate and the above claims once and for all.

First, corporate welfare.

Unfortunately, this isn't a matter of facts or statistics, as much as it is the left's complete ignorance of basic accounting.  Because there is no such thing as "corporate welfare" UNLESS you want to consider the bank bailouts and grant money to solar companies welfare.  In that case, yes, that IS corporate welfare and it is wrong.  But sadly most leftists confuse merely giving corporations a TAX BREAK with a HANDOUT like welfare.

The truth is that all taxes (corporate or individual) are based on there being a profit to tax in the first place.  This is the concept of "before tax profit," the amount of money left over after a company deducts all of its operating expenses from its total revenues.  This "before tax profit" is the amount taxed because taxing a company on its revenue would be like taxing a father of five on his gross salary.  Certain expenses need to be deducted so that the individual/corporation can pay for vital expenses to merely exist and run a business.

Now the stated corporate tax rate is 40% in the US (and most states).  However, sometimes local and national governments will give a corporation a tax break if they invest in a certain town, build a plant in an impoverished area, etc. etc.  However, this is NOT welfare.  It is merely LOWERING the tax the company has to pay to the government.  So instead of paying 40% the company pays 35% or 30%.  The company did not "collect a welfare check" that required the taxpayers to bail it out.  It was already self-supporting itself and NOT parasiting off of society.  It is merely just a lowering of its tax bill.

Understanding this fact allows us to move onto chorus #2, "Corporations use tax loopholes to lower their taxes!"

You damn right they do.  And it's all legal.

Historically, the left was right.  In one year (1951) the effective tax rate was 50% for US corporations and yes the economy was booming back then.  However, this had more to do with the fact the US was the only industrialized economy remaining in the world and our corporations were the sole suppliers of goods to the world.  That argument aside, the effective corporate tax rate has since gone down to today's rate of 25%.

This effective rate of 25% (whilst the statutory rate is 40%) proves corporations are indeed using whatever loopholes they can to park money overseas and lower their tax bills.

However, while the left will jump to say, "SEE!!! SEE!!!!!!" they need to realize it's a Pyrrhic victory.  The reason why is that corporate taxes are out of their control.  Many other countries have found that instead of hating and villainizing corporations, they'd rather woo them (and their jobs) to their home countries.  And they do this by LOWERING, if not ELIMINATING corporate taxes.  This has given rise to rich nation states such as Hong Kong, Singapore, Bermuda, the Caymans, Lichtenstein and Luxembourg, as well as corporations (who are global in nature) simply moving their HQ's and operations to tax-friendlier countries.  And no matter how desperate you are to get them to pay those 50% tax rates they did back in 1951, the more you squeeze them, the more they flee.

Alas, just like I have to accept the fact it is outside of my control to get leftist faux-intellectual Minneapolitans to adhere to logic, leftists have to accept the fact forcing private companies to pay more in taxes is increasingly outside of theirs.

But let us say corporations are not like wet soap, and the harder you squeeze them, the faster they slip out of your hand.  Let's just assume we "magically" could wave Paul Krugman's "magic wand of Keynesianism" and force ALL corporations to ALL pay 50% of their profits to the state.  And let's ALSO assume corporations would not move their investments or even be slightly disincentived by you stealing 1 out of every 2 dollars they earned.

Well that's the leftists' dream come true, isn't it?

If corporations "just paid their fair share" then all of the country's financial problems would go away?


So sorry.  It's that damn reality math that keeps getting in the way. 

In a make-believe Keynesian Dreamworld where Robert Reich and Paul Krugman run through daffodils, holding hands, while wearing speedos, the additional money raised if we retroactively applied a 50% tax rate to all corporate taxes going back to 1971 (when our national debt started its upward climb) would amount to:

$7.9 trillion.

A full $10.2 trillion short of our national debt.

I'd even be more than willing to throw in a couple extra trillion to account for inflation and savings in interest, but I'm terribly sorry leftist speedo worshipers, it's MATHEMATICALLY IMPOSSIBLE TO SOLVE THE COUNTRY'S PROBLEMS THROUGH TAXING CORPORATIONS!  In order to do that, we'd need a tax rate closer to 80% and that would just send companies screaming offshore.

The reality is that the US has a spending problem and not a revenue problem.  But complicating this problem is that the left in this country is too lazy to do some basic math to even determine whether their ideas are feasible, and complicating it even more is that the left is mentally impaired to the point they would rather believe in their religion of socialism than the reality of math.

The real issue is how do YOU react to these people?

Like I said, I gave up 5 years ago trying to convince them.  When I pointed out simple things like the above math I was called a racist, a fascist, etc. etc., and it finally dawned on me there's no reasoning with insane people.  The only thing to do is make your case, mock and ridicule those who believe in these lies, and then enjoy watching reality destroy these delusional peoples' lives as the reality socialism promised them never materializes.  It's my new favorite past time and sadly, about the only one left to truly enjoy.

Enjoy the decline!

Aaron Clarey is a mean guy who uses math and other tools of patriarchy and privilege to bring (only!) minorities and women down.  When he's not busy oppressing people or kicking kittens he hosts The Clarey Podcast as well as runs his consulting division, Asshole Consulting.


Anonymous said...

i would expect coverating every years profits to todays $$ should be more than a couple trillion.

Glen Filthie said...

Tax loopholes were put there specifically for corporations to take advantage of. There is no other reason for them to exist.

They're bullshit, of course, and should be eliminated. This would ironically benefit the low IQ/low skill wage earners of the left by going to a flat tax.

You should be able to do your taxes in 15 minutes right on the kitchen table. There should be no tax refunds, no exceptions, every body pays. Say about 15% for individuals and 18% on corporations. I am willing to haggle. One thing I won't concede is that our gov't has too much money and far too little accountability.

Actually I am more concerned about the leftists themselves. There seems to be a metamorphosis of some kind going on here. It used to be (pre-1965 perhaps) that you could almost respect a liberal...until they all started devolving into socialists and useful fools. Now they seem to be slowly descending into fascism with censorship, violent mobs, a degenerate/depraved elite, scapegoats, and the whole nine yards.

This can't end well.

Unknown said...

We don't have to accept its just out of our control. Of course its all legal, but the laws should be changed. Doy. That's the point of a policy debate.

I know you take issue with some of the globalization zealotry that is destroying our country. You could pivot into that with these people. That would be actually constructive.

Dump the you vs.them mentality. Something is wrong in the nation.

Anonymous said...

Mafths is hard for lefties. Always has been always will be, because reality sucks for them. Nirvanna doesn't happen with higher taxes on everything. Just tyranny, which is the left's overall goal.

Dreamer said...

I need to point out a few holes in your argument. Not trying to be a prick, just something I can see and you should note in some way.

All the rich countries you noted are all tiny countries. Even if you just go by population instead - like Hong Kong, there's seems to indicate a scalability issue with wooing corporations with low or no taxes. It seems their sizes plays a role in allowing them to enjoy wealth despite the lack of taxes to gain it.

Your 7.9 trillion argument is roughly 43% of the deficit. You're right that it that's not enough to cover the debt, but 43% is not insignificant.

In one of the manosphere bloggers recently argued of how we should care about things - he used as as an example - a $300 million a year education program. He mentioned that is a tiny amount to the overall budget and yet he argues we need to start caring about such "little things". So if numbers like that matters, so should the idea of revenue that can cover up to 43%.

Of course, I recognize that reality we can capture less than that number. All these numbers is still back-of-the-napkin. But I would imagine it's a lot easier to reduce spending of something like 13 trillion than 18.1 trillion.

If you're saying Leftist been arguing just pure taxes can fix that entire amount. Very well, that is mathematically impossible. But if you're saying we shouldn't look at that as an option at all because it can't fox 100%, then that's a problematic argument.

Also I should mentioned I liked your previous post before where you noted rival countries' tax rates as an argument that we can tax corporations that high than this one. As I see isusses above.

Dreamer said...

Something interesting that I should mention is lionoftheblogosphere (I believe he is on your list) has been arguing for more taxes on the rich.

This is not to say the manosphere have to be a monolith all agreeing to one thought, but some addressing on points would be likable.

Anonymous said...

Oh, I love you, nigger! Brilliant stuff.

grey enlightenment said...

The debt us never going away. the question is: if the government has to spend, what's the best way to allocate capital?

Kristophr said...

Dealing with tax havens is easy. Compete with them.

Set the individual and corporate tax to a flat 12 or 13 percent, and be done with it.

Companies and rich individuals will flock to the US, and tax revenues will go up. Why bother with jurisdiction arbitrage when you can get a better rate here?

Anonymous said...

Intel has been granted a discounted tax rate of 5pc and $300m (€233m) by the Israeli government in exchange for developing its chip manufacturing facility there.

Anonymous said...

(Reuters) - Israel's finance and economy ministries on Monday approved a plan by Intel Corp to invest $6 billion in the upgrade of its chip manufacturing plant, in what would be the largest single investment by a foreign company in the country

Intel will receive a government grant of $300 million over five years and will be eligible to pay a corporate tax rate of only 5 percent for a 10-year period, the ministries said.

The U.S. chip giant plans to hire close to 1,000 more workers at the plant in the southern town of Kiryat Gat by 2023, in addition to the 2,500 that already work there.

just an example :)

Robert What? said...

Ultimately the Left will want to overturn the 13th Amendment and force producers to produce under the barrel of a gun.

Kristophr said...

Robert What?:

Look up FATCA.

High Arka said...

Hey buddy, thanks for another prompt. Wrote on you here:

Corporate Taxes.

Anonymous said...

So here's the question to ask all those "lefties" that say we need to tax corporations and the rich more than the 60% they already pay. Cause, you know, the truth is just and "idea" that needs to be spun. Let's use some numbers, just to get an idea. They are probably way off in sum total, but the idea will remain scale able. So let's say there's 100,000 businesses that at the current corporate rate of 35% pay $100 billion in taxes, that's $1 million per business. Now if you raise that 15% to 50% you would increase the amount of taxes from $100 billion to $115 billion. However, since there are 95 million OUT of the workforce, lets look at putting 50% of them BACK into the workforce each earning $40k a year and tax them at 28%. That's now taxing $1.9 trillion in wages at 28% or $532 billion in taxes. That's a net INCREASE in revenue to the govt of $521 billion each year! Why you ask? Simple math actually. You've increased the NUMBER of taxable entities from 100,000 to 45,100,000. You can see here how you could quite easily DECREASE the TOTAL amount of tax each entity pays, and still DRAMATICALLY increase the amount of total revenue. But that's a difficult idea to explain when it's much easier to vilify those "nasty corporations". Not to mention, you have to do a bit of math. Raising taxes on the "rich" that have the means to move, simply gave them an incentive to do just that. It only hurts the little guy, who now has to "cover" the lost revenue. It's a downward spiral you cannot get out of. Put LOTS of people to work, you get LOTS of revenue. Simple math, really. But Nancy Pelosi, and many others, would like you to believe her fairy tale of "the best way to stimulate the economy is thru unemployment insurance". Say huh? So, let's look at that. Yesterday you were making $50k and had some disposable income for trips, replacing your broken fridge, etc. Now today, you're unemployed and the unemployment rate is 50% of your previous income, max. So now you're barely hanging onto your house, car, gym membership, etc. Your insurance bill just ballooned to 5 times what it was since you're now on Cobra. You're searching yard sales for a bargain fridge to replace your $1500 model that broke down. Have sold your beemer for a dodge. But somehow, YOU are the BEST way to stimulate the economy....please! I don't have a dump truck big enough to haul that load of hoey. I could go on, and on, and on, and on but my puppy has to potty. Have a wonderful day with your favorite "lefty"! But don't expect the truth to matter.