Tuesday, September 19, 2017

Maybe corporations pay less income tax overseas, but wealthy individuals pay more. We could do that here in USA to incentivize business investment.

Republicans are pushing for a corporate tax cut. They say business and corporations pay 35% taxes in USA while only having to pay 15% taxes in Canada. Lower corporate taxes in other developed countries as well. I can understand that logic, but what they don't say is that wealthy individuals pay higher taxes in Canada and most other developed countries. Maybe business gets more of a tax break, but wealthy individuals pay more.

I think the tax talk needs to do a better job differentiating between business and personal wealth.

I can see trying to reform taxes to create incentives for people to keep their money in business creating American jobs. Invest in the business, rather than the personal wealth that's spent on second homes and so forth. The wealthy, in this country, inflate things like the housing market by investing in already existing asserts; houses, collectables, famous paintings and so forth. Maybe the tax code should be modified to encourage people to put their money to work in a jobs creating business instead.

If we get a corporate tax cut, we shouldn't have it for nothing. Raising taxes on wealthy individual's personal income would be needed to balance that.

I know that some folks, on the left, would totally oppose any tax cut to business; especially corporations. They say that corporations find all the loopholes and don't pay much in taxes anyway. They really don't pay 35%. To some extent, that could be true. It's like a he said, she said kind of argument.

Another problem with the business tax cut idea is that artificial intelligence and automation is taking away many of the well paying jobs. Even if the business environment, in USA, is improved to make it more of an even playing field with other countries, there is no guarantee that lots of good jobs will follow.

To some extent, corporate culture and rampant materialism is the problem. We need to learn how to strive for quality of life. Part of quality of life could be developing business and a meaningful career so I can still see the logic in trying to help business to some extent. On the other hand, we also need to learn how to create quality of life in spite of whether the economy is booming or not.

I sometimes listen to Larry Kudlow on the radio who talks about corporate tax cuts, but people like him seem to never talk about balancing this with other taxes. It's all cut, cut, cut. Personal income of the wealthy, in this country, is vast and personal income taxes are much lower in USA than other developed countries such as Canada.

Some conservative economists say that just about any tax cut can be paid back from the taxes paid by increased economic activity caused by the tax cut. They always say that, but I'm sure there's a law of diminishing returns here. If tax cuts were always the road to prosperity we could conceivably cut taxes to 0 for maximum prosperity. I know, with the law of diminishing returns, this has to stop somewhere.

Other factors effect prosperity as well, such as environmental constraints; not just regulation that conservatives talk ad infinitum about. There are true constraints posed by the environment and the people living in that environment. Water shortages, lumber shortages, lack of space, traffic gridlock, you name it. Taxes are only one part of the picture.

Elon Musk has done a lot with his wealth to invest in new business frontiers such as Space X and electric vehicles. This is the kind of thing I can see as an argument for incentivizing investment in American business. On the other hand, it seems like most American business leaders and wealthy individuals are more risk averse.

The true bottom line should be quality of life which may, admittedly, be hard to measure. A good question to ponder is, are the wealthy helping us to do great things as a society or are they just hoarding money?