A Logically Sound Rebuttal to Supply-Side Economics

[Psychic Robot]

Taxing the wealthy stimulates the economy. By lessening their personal economic gains, the wealthy will then seek to recoup their losses through expanding their businesses. In expanding their businesses, they create jobs and opportunities for others. This, of course, brings economic growth and prosperity for everyone involved.

[Zinegata]

Not a very good rebuttal. Because in an age of globalization, it is ridiculously easy to move the majority of your operations in a country with lower taxes. Or to move your manufacturing operations to China, which will have lower operating costs (even with shipping costs, as bulk shipping is relatively cheap) while still selling the finished goods for the same price in the US.

[Murtak]

Not a very good rebuttal. Because in an age of globalization, it is ridiculously easy to move the majority of your operations in a country with lower taxes. Or to move your manufacturing operations to China, which will have lower operating costs (even with shipping costs, as bulk shipping is relatively cheap) while still selling the finished goods for the same price in the US.

But that means you should make an effort to insure that you do not give money to any organisation large enough to easily take it out of the country. Instead give it to those who are going to stay, even if taxes are lower elsewhere. You can still tax those selling in your country at the borders.

[MfA]

Not a very good rebuttal. Because in an age of globalization

Get out of the WTO, problem solved.

Given that Keynes saw all these problems coming a mile off (note the penalization of trade surplusses/deficits in his Bancor scheme) it becomes very hard to not give some credence to conspiracy theories that the present situation has been engineered. He basically saw and clearly expressed the root cause for global economic instability 60 years ago, trade deficits are destructive ... but it has all been wiped from the general consciousness, what is called Keynesian now is an extremely warped version of his theories. It's hard to believe they haven't been intentionally warped.

[Psychic Robot]

Not a very good rebuttal. Because in an age of globalization, it is ridiculously easy to move the majority of your operations in a country with lower taxes.

I didn't say tax businesses; I said tax the wealthy. Of course, the entire point is that it is as valid a cognitive process as "rich people need to get all the money so they can us jobs."

[CatharzGodfoot]

...it becomes very hard to not give some credence to conspiracy theories that the present situation has been engineered.

One of the major creators of the World Bank and the IMF (and early heads of the IMF; no, not Keynes) was apparently a Sovjet agent. It's hard not to come up with conspiracy theories.

[Zinegata]

Get out of the WTO, problem solved.

Some countries can't really cut off foreign trade anymore, because they've killed off vital industries because it's cheaper to outsource.

Free trade isn't necessarily a bad thing. But concepts such as "service-based economy" are retarded and need to go. You can have free trade without handing all of your manufacturing over to China.

[Zinegata]

I didn't say tax businesses; I said tax the wealthy. Of course, the entire point is that it is as valid a cognitive process as "rich people need to get all the money so they can us jobs."

An even worse idea, because it's even easier for rich people to simply move to another country with lower taxes. That's why places known as Tax Havens exist.

Taking money away from rich people isn't the solution. The real solution is to find a way to keep the money flowing - up to the point that the country's actual resources and industry can support it.

And America's problem nowadays isn't keeping the money flowing. That's China's problem, which is why they keep gobbling up foreign investments and turning it into factories and jobs.

America's problem is that the money is moving too much (due to deregulated credit, retarded lending policies, and the Treasury wanting to keep printing money for nothing) - you're spending considerably more than what your economy is currently capable of producing.

And this is why Obama is gonna have a very, very cold welcome when he meets the Asian leaders this week.

[Juton]

Free trade isn't necessarily a bad thing. But concepts such as "service-based economy" are retarded and need to go. You can have free trade without handing all of your manufacturing over to China.

This.

There is a whole cohort of kids in my town that will never have a job that pays better than a few dollars more than the minimum wage. I'm not sure what a modern society without a middle class will look like, but I'm pretty sure I won't like it.

[K]

Free trade isn't necessarily a bad thing. But concepts such as "service-based economy" are retarded and need to go. You can have free trade without handing all of your manufacturing over to China.

This.

There is a whole cohort of kids in my town that will never have a job that pays better than a few dollars more than the minimum wage. I'm not sure what a modern society without a middle class will look like, but I'm pretty sure I won't like it.

It'll look like a Jane Austen novel, or an episode of Gossip Girl. Basically two worlds where there are ultra-rich, and then there are servants who are slaves in all but name. Even the idea of movement between the two spheres would be taboo worthy of high drama.

[MfA]

An even worse idea, because it's even easier for rich people to simply move to another country with lower taxes.

Let them go, just don't let them take their wealth with them. Wealth is not money, the real wealth is the property they own. With unrestricted free trade they can go overseas and convert profits from their properties into exports ... so you simply don't let them do that.

Enforcement of balanced trade, taxing all exports at internal market value (even of unfinished products in the production chain of a multi-national company), maintaining energy/water/food independence ... these are all basic things a nation which wants to be able to have sovereignty needs to do, otherwise they will just end up controlled by the multinational financiers. Which is where most of the world is now.

[RobbyPants]

Of course, that would make people cry about the government getting in the way of liberty and property. That's probably some form of unconstitutional seizure.

[CatharzGodfoot]

Of course, that would make people cry about the government getting in the way of liberty and property. That's probably some form of unconstitutional seizure.

To my knowledge it's illegal to take large amounts of wealth out of the United States without significant tariffs. Staying a rich ex-patriot is intentionality difficult.

[Psychic Robot]

To my knowledge it's illegal to take large amounts of wealth out of the United States without significant tariffs. Staying a rich ex-patriot is intentionality difficult.

Wow, I'd be pissed if I were rich and wanted to retire in Europe.

Aside from that, I've been thinking that minimum wage is a problem. Not a problem that needs to be eliminated altogether, mind you, but minimum wage disproportionately hurts small businesses, hindering their growth. What if minimum wage were based on annual income? So really small businesses might have a low-end minimum wage of $5.00/hour whereas giant megacorporations would have a high-end minimum wage of $15/hour?

Obviously, this would present some problems (though it would make working at Walmart desirable rather than an "oh wow the economy is in the shitter I guess I'll work there instead of going hungry"), but how do you think it would work out overall?

[Juton]

Aside from that, I've been thinking that minimum wage is a problem. Not a problem that needs to be eliminated altogether, mind you, but minimum wage disproportionately hurts small businesses, hindering their growth. What if minimum wage were based on annual income? So really small businesses might have a low-end minimum wage of $5.00/hour whereas giant megacorporations would have a high-end minimum wage of $15/hour?

The minimum wage is important, in a lot of places if you are getting paid less than that you won't have enough money to support yourself. Your idea is intriguing however, I know Ontario has a program where they will pay part of a young person's wages to help get them working experience. Megacorporations will never pay more than the minimum minimum wage though, they will make each retail outlet its own corporate entity or some other work around.

[K]

Wouldn't work at all. Lots of corporations shift profits so that they don't pay taxes, so there'd be no way to enforce it.

I mean, Google pays less than 3% taxes because of a tax scheme called the Double Irish where they pretend all their profits are in Ireland. Normally, they'd pay 22% on their profits.

[ubernoob]

Wouldn't work at all. Lots of corporations shift profits so that they don't pay taxes, so there'd be no way to enforce it.

I mean, Google pays less than 3% taxes because of a tax scheme called the Double Irish where they pretend all their profits are in Ireland. Normally, they'd pay 22% on their profits.

http://www.npr.org/blogs/money/2010/10/ ... h-sandwich

The money passes through a Dutch unit called "Google Netherlands Holdings" which lists no employees and pays out 99.8 percent of what it collects to the Bermuda unit, according to Bloomberg.

This arrangement is actually pretty common in the corporate world, Bloomberg says. It's called the "Double Irish" because of the two-company structure.

[MfA]

Wow, I'd be pissed if I were rich and wanted to retire in Europe.

Selling your property, exchanging your money for Euros and moving to Europe doesn't take wealth out of the US.

To take wealth out of the US you have to take product out of the US ... so for instance if you retain company ownership within the US, use the profits to buy products and ship them to the EU ... then you're taking wealth out of the US.

[Psychic Robot]

Ah, I see. And that's bullshit about the Double Irish. There any way to crush that bullshit underfoot?

[CatharzGodfoot]

Ah, I see. And that's bullshit about the Double Irish. There any way to crush that bullshit underfoot?

Theoretically, yes. Now that corporations can make unlimited anonymous campaign contributions? Probably not.

[Doom]

Sure, change a law or two...of course, corporations will find it cheaper to bribe, er, lobby to change the law back, or to open up an equivalent loophole.

This is why no 'tax the wealthy' strategy can work, incidentally.

[Sashi]

As long as you have relatively free trade, corporate taxes are always a race to the bottom because corporations don't care where they live, just what the tax environment is like.

There are two solutions:

1) One World Government, or at least a WTO-like organization that normalizes worldwide corporate taxes so it doesn't matter where a corporation is, they're paying tax to someone.

2) Acknowledge that since corporations can easily shift their profits around, set your own corporate taxes to zero, or near zero, and tax other stuff.

Personally, I'm very Republican when it comes to corporate taxes. Money earned by a business goes into five basic categories: Payroll, Dividends, Growth, Luxuries, and Philanthropy. Payroll and Dividends get taxed through income and capital gains tax, Luxuries and Growth get sales tax, and Philanthropy already has a tax breaks, so I don't know why we need to drive corporations to funnel their money into Ireland or Bermuda (note, I am not an economist).

[Psychic Robot]

Hrmph. Then we need to change the laws so that corporations aren't considered to be persons with free speech.

[MfA]

2) Acknowledge that since corporations can easily shift their profits around, set your own corporate taxes to zero, or near zero, and tax other stuff.

Environmental, labour standards and elevated wage levels are defacto taxes too. There are good reasons to abolish corporate taxes, but stopping the race to the bottom isn't one of them.

[Surgo]

Ah, I see. And that's bullshit about the Double Irish. There any way to crush that bullshit underfoot?

Have a sane tax structure in the United States.

This isn't just to the detriment of the US, it's to the massive benefits of the countries that are getting the money funneled through them. While they might take a tiny share, it's still a share. Quite simply, the United States should have a similarly low tax rate if they want to see the money.

That of course isn't the whole picture. The reason these loopholes happen is because no legislator even understands the tax code, and yet they keep adding to it (and the IRS's burden of enforcement) all the time. This creates countless loopholes, so this behavior should be entirely expected.