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Response to TampaAnimusVortex (Reply #42)

Sat Dec 19, 2015, 02:22 PM

44. Well, your "central thrust" is rejected by all economists.

Economists -- even conservative ones -- who have studied how corporations handle taxes have disproven it.

The whole canard rests on very silly oversimplifications. To paraphrase,

"Everyone who makes widgets has to pay more tax, so widget prices go up."

But what if one company cuts stock dividends instead of raising prices? What if another company cuts executive pay? Or finds a more efficient technology? Or sources materials differently? Or falls into a different category of taxation?

It's a gross oversimplification that appeals to "common sense" that just isn't supported by reality. It survives like a lot of fallacies because corporations REALLY don't want to pay taxes, and repeat these false rationalizations endlessly.

Which raises the question of why, if it's all a wash anyway, corporations spend billions trying to avoid paying taxes in the first place, eh?

The fact is that corporations do not treat taxes like a fixed cost like labor. They can't, for a number of reasons. Profits are uncertain. Not all competitors pay the same taxes in the same way. Just tacking on extra costs to consumers to cover "taxes" is literally impossible and is never done.

If you had a completely inelastic demand, and a completely identical set of producers operating under completely identical conditions -- a virtual or literal monopoly -- you could theorize that taxes could be handled that way, but those conditions don't generally exist, which is why all the data shows things don't work out that way.

And the solution there would not be to lower corporate taxes, but to break up the monopoly. If for example all oil companies are so in-sync that any increase in their taxes raises costs in a 1:1 fashion, they are either colluding, or there are too few of them.

"Taxes are just passed to consumers" is not an economic theorem. It's a political fallacy used as a pretext for the most politically powerful entities to pay less of their share of the tax burden.

It's not the only one. Raising the minimum wage does not effect a 1:1 increase in consumer costs, either, not only because in a competitive market, companies can choose to deal with increased costs in a number of ways, but because higher wages decrease turnover and improve employee performance.

And then there was the grandaddy -- the "Laffer curve" -- the silly proposal that "tax cuts pay for themselves," long discredited but still used as a pretext by Republicans. That at least had a small basis in reality, which is that you can theorize that an extreme level of taxation would lower productivity, but it never purported that any reduction in taxes would automatically magically increase tax revenues, as Republicans routinely argue.

There is a whole catechism of irrational economic talk, created expressly by and for wealthy interests, that somehow has been swallowed by large numbers of people as reality. But it doesn't come from economists or from empirical study, but from political pundits and the monied interests they represent.

I think it's no coincidence that the same people claim that scientists, teachers and journalists all have "liberal bias." They know that their appeals to magical thinking and oversimplification simply aren't borne out by facts and reality.

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LineLineLineLineReply Well, your "central thrust" is rejected by all economists.
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