this post was submitted on 15 Apr 2025
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Corporate tax is much less dangerous than tariffs, assuming you tax profits.
A tariff kills small businesses with low margins. It directly increases the cost of goods sold. I know because I got bit bad by tariffs this year and might have to close the company.
A tax on profits only reduces what you earn AFTER the cost of goods sold. So if you’re in a high margin tech business, great, pay a lot of taxes. If you’re in a low margin side hustle, great, you owe very little.
Profits are often made up numbers. They can be increased to show growth to potential investors and then lowered just as quickly to avoid taxes. Creative bookkeeping happens all of the time. Trump still does it. Taxing corporations makes everyone feel all warm and fuzzy, but at the end of the day we can't get corps to pay the taxes the owe now, what makes anyone think a 300% increase is going to get paid?
Edit: You all are mistaking the idea of taxing the rich with the reality. The idea is all cotton candy and unicorns and every kid gets free school lunch. The reality is exactly what we are living in right now. It's not like the rich have been paying their taxes this whole time and it just isn't enough. They aren't paying the taxes they already owe. You can increase the numbers all you want, but it will only lead to a higher cost of consumer goods and more creative bookkeeping. You have to start differently. You don't start wit the tax. You start with the regulations. You have to have oversight, and you have to have strong leadership. We have neither of those. If you tell your cat not to eat the open can of tuna on the counter and then walk away, the cat is going to eat the tuna. You can't just leave them to their own devices and hope the rules you put in place are followed. When you walk back in and see that the tuna can is empty, its easy to blame the cat, but it doesn't matter because the tuna is already gone. When the taxes aren't getting paid, and there is no one watching the corporations, you can blame the rich all you like, but it doesn't matter because that money isn't getting paid if no one is watching them. Oversight. Regulations. That is how you bring the rich back down to earth. You don't start at the end and hope the rest just fills itself in. But, please, keep downvoting.
The only way we fail is by not trying. The rich want you to believe it is impossible to tax them, it is not.
The objectice isn't to get them to pay the taxes.
The objective is to get them to lower their taxable income, either by decreasing revenue, or by increasing expenses.
The objective is to reduce the amount of profit they rake out of the business and turn into financial securities.
The goal is achieved when they try to figure out how to claim a yacht as a business expense (thus paying a shipbuilder their wages) rather than buying stock in a shipbuilding company (taking productivity from that shipbuilder).
The goal is achieved when they are forced to avoid the punitively-high tax, because those avoidance strategies are going to keep them from hoarding wealth-producing assets.
They are already avoiding their taxes. Increasing them won't change that. Decreasing them won't change it either. I feel like I'm taking crazy pills here and trying to explain the three card monte to a kindergarten class. The money just moves around. No matter what card you flip, it's the wrong one, because they've put the queen in an offshore account. We have to regulate and oversee. We have to put leadership in place to ensure that the laws are followed, otherwise it won't matter if the yacht was paid for or expensed out, because it will be in international waters where all we can do is watch them wave from it.
That's feeling is either because everyone around you is wrong... or you are wrong.
You are absolutely correct: it doesn't matter if they yacht is purchased or expensed. The yacht builder makes the same either way, and he's the one who actually matters here. The situation you need to consider is whether the yacht gets bought at all. When he buys a million shares of YCHT instead of an actual yacht, the yacht builder doesn't get paid.
The ostensible tax rate on a $1 million earner is about 35%. They should be "taking home" $650,000, which they can spend how they like.
They are effectively paying 25%, by declaring $100,000 of their spending to be a "business expense". That $100,000 ultimately has to be some sort of tangible good or service, not a financial asset.
This person is collecting $750,000, saying they are collecting $650,000, and is able to buy $650,000 of securities.
With the 91% top-tier tax rate, this person's ostensible tax rate is, say, 80%. They are avoiding enough taxes to bring their effective rate down to 25%, same as in the first case. That means they have $200,000 to spend on wealth-generating assets, and they are spending $550,000 in "business expenses".
In the first case, they expensed $100,000 in goods and services, paying the salaries of two median workers. They also purchased $650,000 in stocks.
In the second case, they expensed $550,000 in goods and services, paying the salaries of 11 median workers. They also purchased $200,000 in stocks.
I don't give a flying fuck how much tax revenue a 91% top-tier tax rate will generate. I have zero reason to think that it will affect tax revenue in the slightest; it may even reduce revenue. But I have every reason to believe that attempting to avoid a 91% top-tier rate will greatly benefit the economy.
What you are describing is trickle down economics. Word for word. The rich spend more, so the people below them earn more. Its not new, and its the whole reason we are in this goddamned mess to begin with. We stripped regulations and let the rich run roughshod all over the economy with the hopes that their money will trickle down to the rest of us. So...
I guess I know which one...
You have inaccurately described trickle down economics.
Trickle down economics is the idea that reducing income taxes makes more money available for employers to pay workers. Trickle down economics is the idea that richer employers pay more workers higher salaries than regular employers, so we should establish a tax policy that enriches employers.
They sine qua non of trickle down economics is "lower tax rates". If you are not talking about reducing taxes, you are not talking about trickle down economics.
Trickle down economics are bullshit, because taxes are paid on the money that is leftover after paying workers; after business spending. When an employer stops spending and tries to take money out of the business, the tax man takes his bite.
Avoiding the tax man is easy: pay out all your revenue to workers, contractors, venders. Pay out all of your revenue, and you owe nothing.
A punitively high marginal tax rate allows employers to take a reasonable amount of business profits at an acceptable tax rate, then threatens to confiscate pretty much everything after. Nobody pays 91% on any part of their income; everyone gets rid of their excess revenue by buying stuff from workers, contractors, vendors, so that there is no unreasonable excess left for the tax man to take.
Tax avoidance in the hopes of spending more money isn't any different than a lower tax rate. You are just putting a different face on trickle down, not changing the mechanism. Regulation and oversight are the first steps, and we don't have those, so no matter what we do, it won't change anything.
Big difference. Not all spending is the same.
With low tax rates, investment is incentivized: spending on securities, financial instruments. With high tax rates, trade is incentivized: spending on goods and services.
The mechanism you're describing still relies on wealthy decision-makers choosing how to allocate resources, with benefits supposedly trickling down, just with different incentives driving those decisions.
Without proper regulation and oversight, even with high tax rates, businesses can characterize financial instruments as "business expenses", create shell companies and circular arrangements, or move money offshore. Nothing changes.
We're having two different conversations, apparently. You're talking about enforcement. I'm talking about policy.
The low-tax policy we have is fundamentally designed to funnel money into the hands of the wealthy. It doesn't matter how much we enforce that policy: the policy itself is exacerbating wealth disparity, income disparity, wage stagnation, etc. "Regulation" and "oversight" of compliance with that harmful policy does not make it less harmful.
Policy enforcement is meaningless when the existing policy is the problem. We need a tax policy that drives wealth toward the working class.
Regulation and oversight only become important after we have a valid policy to be regulated and enforced.
We're having the same conversation. I'm just saying that the IRS has been gutted to a shell and had to be rebuilt before we even begin to worry about how much anyone is getting taxed. Regulation first. Then we can look at the rates.
The closest we've come to having the same conversation was when I claimed that the current tax policy is the root cause of wealth disparity, income disparity and wage stagnation. From my point of view, your response was "Enforce it anyway".
Our current tax policy was established by Reagan. It was not designed to incentivize a thriving economy. It was deliberately designed to funnel money to the rich.
It does not matter how much we regulate or enforce Reagan's tax policy, because even 100% perfect compliance with Reagan's tax policy promotes wealth disparity, income disparity, wage stagnation, and all the other socioeconomic problems that these conditions create.
Until we have a proper, economy-focused tax policy to enforce, enforcement is irrelevant.
I didn't say, "enforce it anyway." I said that we have to be able to enforce anything we go. Go ahead. Change the tax rates. Tell you what, I'll do it for you. Corporate tax is 91% now. Boom. Done.
What's that? I have no power to enforce it? Kinda like the IRS and our currently gutted system? Well, it doesn't matter, because we changed it and now everyone will just do it.
The IRS can audit books and initiate enforcement action at least 7 years after the fact. So yes, even if the IRS is currently gutted, "everyone" tends to at least pay lip service to the rules, because they don't know if the IRS will stay gutted through 2032.
Our current tax policy is not beneficial to the economy. Enforcement of the last seven years of Reagan's garbage policy doesn't get us anything. So there is no urgent need to rebuild the IRS, and won't be until we establish good tax policy.
Establishing new policy has to be the priority. We have seven years to rebuild the IRS to enforce the policy we establish today.
Im out.
You need the remeber your audience - lemmy isn't exactly filled with people that understand economics, they just think "higher taxes are better!"