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Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically.
- David Ricardo
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Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically.
- David Ricardo
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https://static1.squarespace.com/static/56eddde762cd9413e151ac92/t/56f7200545bf216ba3b89f69/1459036166023/CorpTax8.pdf
Here's a policy paper from the Adam Smith institute on the topic. Let me clarify my point - one cannot tax a "corporation". It pays taxes, sure, but it's theoretically got no income whatever. One cannot directly tax the corporation. You can tax a human, because they pay tax under the law, and the incidence of tax fallse upon them. However, you cannot directly tax the corporation - consider if you were a CEO of a large firm, and corporation tax increased - in order to protect your own wage, you'd cut the wages of workers or slash dividends paid to stockholders to maintain your profit margin. In other words, the "burden" of the tax is falling upon the workers or the stockholders, not the company - it can't possibly, if it wants to maximise its profits (which it does).
>. It has not been legal for corperations to take taxes out of workers wages,
Doesn't happen in quite that way - simply that the corporation must maintain and maximise its profit margin and as such the "cuts" have to come from somewhere.
> every company is like this
for the purposes of macro and micro they pretty much are
>the government can't tax corperations because taxing comes out of wages
It's not quite that taxation of corporations comes out of wages - it's more that in order to maintain the profit margin companies must lower wages or good/service quality or raise prices or cut dividends.
Let me provide you with a few papers that prove my claims.
http://www.nber.org/papers/w0616.pdf
>[corporation tax] is likely to be borne primarily by residents of the taxing state, as consumers, immobile workers, and owners of land and immobile capital.
http://www.nber.org/papers/w8280.pdf
>The incidence is typically borne by domestic capital, as in the original Harberger (1962) closed-economy model. Second, for those parameter values in which the incidence is not borne mostly by domestic capital, interestingly, most of the incidence is exported.
http://www.nber.org/papers/w11686.pdf
>1. For a variety of reasons, shareholders may bear a certain portion of the corporate tax burden. In the short run, they may be unable to shift taxes on corporate capital.
Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically.
- David Ricardo
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1. I understand now that corperations might slash wages or consumers have to pay more, but could one person simply not buy from the company or leave the company for a better paying job?
2. If shareholder value comes from stocks and other legal matters, how come their value could be decreased legally? Wouldn't it come from a drop in stock value instead?
3. If a corperation started slashing wages and workers got upset as a result, wouldn't smaller buisnesses become more popular to support local communities while staying low on the taxing bracket?
If you could answer these questions for me, that would be awesome. Thanks for your argument!
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Wages are sticky. This means that it's hard for companies to cut wages, cause workers complain. This means essentially that the way for companies to decrease paychecks is simply to keep them the same - inflation will increase the prices of everything else incrementally .
>If shareholder value comes from stocks and other legal matters, how come their value could be decreased legally?
Companies are by law required to pay out value to shareholders, the loss in value comes from the following.
1.) decreased company value, so each "bit" of the company is worth less
2.)dividends aren't paid because the company has less "surplus" profit
on your last q, wages are sticky so cutting doesn't usually result in outrage immediately. corp tax also isn't banded to the extent where this would become a factor.
Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically.
- David Ricardo
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Great argument
Wouldn't mandatory national labor unions be able to solve this?
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Labour unions tend to be extractive - they tend to not be representative, essentially of the workers in them. This means they "rent-seek" - they try and maximise their efficiency at the cost of social goods.Even so, in places in time such as Britain pre-Thatcher or France pre-Macron where unions were very strong wages were still sticky. In short, no.
Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically.
- David Ricardo
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This isn't always the case. There are different variations of labor unions.
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Only for those who were members of it. This was the issue here. Mandatory membership wouldn't remedy it.
>then it would be possible for them to fight for higher wages. Wouldn't it?
Unions have pretty minimal effects on wages in reality. Source: http://www.nber.org/papers/w4195
>This isn't always the case.
Usually is the case, especially when the unions are larger.
Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically.
- David Ricardo
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"Only for those who were members of it. This was the issue here. Mandatory membership wouldn't remedy it."
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Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically.
- David Ricardo
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Another factor to consider is that "the road to hell is paved with good intentions". The notion that heavily taxing companies leads to a better life for other entities is suspect and is based only on the intended effect. There are various unintended effects involved, such as companies not being able to afford to hire as much workers, hence forcing a smaller number of workers to work harder for the same (or lower) wage rates - at the same time significantly increasing unemployment rates. Or companies going bankrupt, with the potential for entire domestic industries to collapse, leading to economical and societal shocks, even bigger unemployment rates, reliance on expensive imports, etc. In worst case scenarios, even the "boomerang effect" may happen, when furious population witnessing deterioration of the economy elects an extremist of the opposite leaning, leaning to completely unpredictable consequences and overall instability and chaos.
Throughout the entire human history, the most prosperous nations tended to have the most lax economical policies, mostly letting the market run its course. The market has proven to lead to much more fair and balanced outcomes than the heavy governmental intervention. And while some might object that the market leaves out certain segments of the population, I do not see heavy taxation on companies as a viable way to solve this problem. If anything, the government should instead find a way to jump-start these segments into the free market, rather than disrupting the free market to try to shift its production towards the segments in question - harming everyone as a consequence.
P.S. @Medic above explained very eloquently why taxation of companies is not as clear a term as it seems. In the end, it is the people who are taxed, even if the companies serve as a "temporary" fiscal object of taxation. This is a very important distinction with regards to the question of fairness.
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