Taxing Corporations Largely Equals Taxing Ourselves

(this is a slightly edited copy of a second recent BLOG comment I made in response to someone at Bilerico.com, a web site that primarily geared towards the LGBT community that was started in Indianapolis. Bil Browning, the founder, and I probably don't agree on lots of things politically, but he is a good guy and has had great success with his site which covers an eclectic range of topics.)

Before I start, it is important that everyone set aside their political bias and the rhetoric that gets thrown about as the two incumbent parties attempt to plunder on behalf of their own constituencies. Let's just logically look at things.

The United States has the 2nd highest corporate tax rate in the developed world (Japan's is higher). When we think about taxes being a "price" that is paid for government services, setting aside whether or not government SHOULD be doing everything it does, if the price moves beyond a certain threshold (overcoming the frictional barriers of moving) then those activities will be conducted in a place where the price is lower. While people will be quick to demonize this behavior, everybody benefits from lower prices which means they can expend dollars on other economic activity that they might otherwise not.

Also, we must consider where the taxes paid by corporations come from and what they do with their profits. The price of each item we buy contains a portion of the taxes that corporation will pay. When we talk about increasing taxes on corporations we are saying increase the cost of the things we buy OR decrease their profits (many don't have profits [GM, FORD, Chrysler, most airlines it seems .. why can't our own companies make any money in America? Another long discussion to have.])

Leftover profits, if the company is public, go to their shareholders or to grow the business. For most publicly traded companies those shareholders include institutional holders like mutual funds, pension plans and other retirement vehicles. So, when these companies make money and they distribute dividends, A LOT of those dividends end up in people's retirement accounts (including police and school teacher pension funds). The value of those holdings also rises and falls based on earnings.

The next fact we must examine is that the total value of our government debt (current and future existing obligations) now surpasses (a) the value of EVERYTHING our country owns and (b) the earnings ALL OF US will make for the next 8 to 10 years. You can jack tax rates all you want, our elected officials have already bankrupted us and will now attempt to "inflate" their way out of the mess. Inflation of course hurts the poor the most as those at the top of the food chain get the benefit of the inflation (increase in the money supply without a commensurate increase in wealth or production) before the economy adjusts price levels upward to compensate for the devalued currency.

Besides, "The latest data from the Internal Revenue Service show that more than half of all federal individual income taxes—50.8 percent—are paid by the five percent of taxpayers who earn the most." (Tax Foundation)

Considering that infrastructure is not a very big tax item, these people (arguably) utilize the big budget line items of government the least which means we are basically transferring (plundering) from one group to another and we must remind ourselves that the Law is primarily purposed with avoiding plunder (Bastiat), not being a tool for such purpose as it largely is today.

I would argue that without the tax reductions of JFK and Reagan we might not have made it as far as we have. Unfortunately, under Reagan the necessary reduction in government bloat and expense didn't occur and our deficit exploded and has continued to (especially when intellectually honest and removing any current Social Security surplus from the numbers that politicians like to spin).

It is important that people not just parrot the rhetoric of the political class. Keep in mind that most of them are just parroting and haven't really thought for themselves.

Lessons in Liberty: Your rights and Eliminating or Sharing the Plunder?

Annotated quotes from Bastiat's "The Law".

Thus, since an individual cannot lawfully use force against the person, liberty or property of another individual, then the common force - for the same reason - cannot lawfully be used to destroy the person, liberty or property of individuals or groups.

If one person has no right to murder, enslave or steal from any other person than no organization of individuals or other group has the right to murder, enslave or steal from other individuals or groups.

Men naturally rebel against the injustice of which they are victims. Thus, when plunder is organized by law for the profit of those who make the law, all the plundered classes try somehow to enter - by peaceful or revolutionary means - into the making of the laws. According to their degree of enlightenment, these plundered classes may propose one of the two entirely different purposes when they attempt to attain political power: Either they may wish to stop lawful plunder, or they may wish to share in it.

When you hear Libertarians speak, do they intend to "share" the plunder or eliminate it? Are libertarians power hungry political cronies attempting to partake in the great profitable endeavor that is elected office or are they running for office to fight for the restoration of personal freedoms and end the plunder by the political classes?

And when you think of "plunder" think not just of your tax bills and special favors doled out to interest groups and contributors, but things like the $46,000 per American Household in bailouts and loan guarantees that have been doled out thus far. That's right. $46,000 per family in more debt hoisted upon the shoulders of our children and children's children in order to try and fix an economy that government largely broke to begin with.

End the plunder.

UPDATE: Some measures say the number is now $65,000 per American household.  Regardless, it's a big number.