ECON 101

“Everyone should pay their fair share.” I’m sure you’ve heard this example of liberal speak from many liberal politicians and especially from our beloved leader, President Obama. What you probably do not know is precisely what it means. You may think you do, but there is much more to it than you realize. I will translate it for you. “Everyone who ‘I’ think has too much money should have it redistributed ‘by me’ to those who ‘I’ think don’t have enough money.” Actually, even though POTUS says that a lot he really only means that as a starting point. He actually believes that he knows best ‘who’ should have ‘what.’ Suffice it to say that POTUS believes in a completely centralized (Marxist) government with himself at the ‘center.’

You are perhaps thinking “what has started Sam on this tirade?” Corporate taxes! Some conservatives think it is necessary to explain to liberals that corporations do not pay taxes as if liberals are just dumb. Nothing could be farther from the truth. Liberals understand perfectly in an evilly brilliant way. A conservative will explain something like this –

“If a company needs to charge $100 to make and sell a product at a profit and the corporate tax rate is 10% then the corporation will sell the product for $110. If the tax rate is raised to 20% then the corporation will just pass on that additional amount to the buyer by charging $120 for the product.”

Liberals view this in a totally different manner. Here is the liberal view –

“Why not use the corporation to collect additional (hidden) tax revenue for us. That way we won’t have to go on record (and incur the wrath of the voters) for increasing personal income taxes, but we still get more money. We already know that almost all voters are too stupid to get it that we’re just using the corporation to hide our additional revenue collection. And as a secondary bonus we can increase the corporate tax rate and when they raise the price to pass on that increase, we’ll castigate them for gouging the consumer with higher prices. It’s just too wonderfully perfect for us.”

All that is old news though. After WW2 the United States adopted a policy of trying to help nations to improve their economies as a means of avoiding the kinds of conditions that allowed the Nazis to come to power in Germany. The problem today is that we’ve been pretty successful. In addition, other countries like China and India have been encouraged by the success of other nations to free up their own markets. So instead of Ford competing with Chevy, they’re both now competing against Honda, Toyota, Nissan et al. And therein lies the biggest problem with corporate taxes. Suppose a big developer, Honcho Corp., gets a gigantic contract to build a dam in Africa. They’re going to need 500 bulldozers. Let’s further suppose that U.S. company, Patterputter, can produce and deliver an identically capable bulldozer at an identical cost as one produced by Asian company Coconi. However, the U.S. corporate tax rate is 35% and the Asian country’s rate is only 10%. So the $100,000 bulldozer from the U.S. will now cost $135,000 delivered as opposed to the Asian bulldozer, which will cost only $110,000 delivered. From who do you think Honcho will buy?

Of course, the immediate, involuntary, knee-jerk reaction of liberals to a suggestion that we lower the corporate rate will be “they’re not paying their fair share!” This, even though we’ve seen that corporations do not pay taxes and we know that liberals know that. They just can’t help themselves. The fact is they would rather deny American workers a job than NOT punish a big company. The phrase “cutting off your nose to spite your face comes to mind.”

And how do corporations try to deal with this problem.  Well, if they build their bulldozers in another country with a better tax position they will make more money.  They may also benefit from lower worker cost, though this advantage is rapidly decreasing.  Of course, if Patterputter sells 100,000 bulldozers per year and they start building 25,000 of them in another country, that means American workers will build 25,000 fewer bulldozers and a lot of Americans will lose their jobs.  Doesn’t matter one little bit to liberals.  Patterputter must pay its fair share!  Now you know why I think the corporate rate should be 0%.  There are a lot of other things in our trade policies that cost Americans jobs, but that must wait for another day.

2 thoughts on “ECON 101

  1. I’m uncertain. What is the real problem? It’s not that he’s an idiot (he really is an idiot). It’s that his earlier and now rescinded price rise made a medication, for all practical purposes, unavailable to patients who desperately need it. Would increasing his personal or his corporation’s taxes help? If, in fact, his taxes go up the normal corporate reaction would be to raise prices on all their products to compensate. On that basis a decrease in taxes would make a lowering of product prices possible. Marti’s big price increase was unrelated to tax rates. He just did it because he’s an idiot. Congress is investigating, but you can’t always fix stupidity with legislation. Suppose Marti’s personal taxes are increased to redistribute his wealth. Will he get less greedy or less stupid?

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