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View Diary: Eliminate corporate tax, seriously (422 comments)

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  •  Why? (3+ / 0-)
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    VClib, goodpractice, delver

    Distinguish between two very different things kos is talking about here.

    Let's be clear about the phrase "taxed for selling their shares".  The capital gains tax does not create

    more incentive for the large companies to get even bigger and even more pressure to grow their stock price
    The incentive is the price increase itself;  you might argue if you reduced the capital gains tax that there would be more incentive, but I sort of doubt that would be measurably true.  But the incentive to buy stock is to either get dividends (which you get by holding the stock) or by waiting for the price of the stock to increase.  Tax the price increase (i.e., the capital gain) and the incentives still all point in the same direction.

    The other other tax kos is talking about, the transaction tax, also occurs at sale time, but it's tiny.  If you're doing a few trades a year, you're not going to even feel it.  What the transaction tax will effect are people who doing thousands of trades to benefit from microscopic changes in price.  In other words, the big investment banks that do computer driven trades far faster than ordinary people have any hope of doing.

    To be on the wrong side of Dick Cheney is to be on the right side of history.

    by mbayrob on Mon Aug 25, 2014 at 01:04:08 PM PDT

    [ Parent ]

    •  I don't understand you at all (0+ / 0-)

      If the only time I pay tax as a shareholder is when I sell the shares, then I'm going to hold on to my shares as long as possible, right?  And while I'm holding my shares as long as possible, I'm going to demand with my shareholding voting rights that the company make as much profit as possible, to drive the stock price up as far as possible, right?

      I'm convinced that the main cause of the 2008 crash was risky behavior by banks and other corporate players because they had more money than they knew what to do with, in addition to a incessant drive to continuously increase profits.  Removing taxes from corporations, in my mind, would lead to more of this same risky behavior.

      Now I don't think it's a reason not to follow Robert Reich's advice.  I'm just saying it's a drawback that we need to be aware of.

      I agree there is always an incentive to drive up stock price.  My point is if there is a disincentive to sell the stock (by taxation), then there would be even more incentive to drive up the price by whatever means possible, leading to adverse societal affects.  Just something to be aware of and to take further measures to mitigate.

      Clearly, what has happened is that the use of the word Gestapo has clouded my message.
      - Maine Gov. Paul LePage

      by clinging to hope on Mon Aug 25, 2014 at 01:26:19 PM PDT

      [ Parent ]

      •  Doesn't that already happen? (0+ / 0-)
        If the only time I pay tax as a shareholder is when I sell the shares, then I'm going to hold on to my shares as long as possible, right?  And while I'm holding my shares as long as possible, I'm going to demand with my shareholding voting rights that the company make as much profit as possible, to drive the stock price up as far as possible, right?
        Shareholders already do that.  When your primary focus and legal fiduciary duty is to maximize shareholder value, then it's not like you can make it any more your main priority.  The disincentive to sell the stock can't create any more incentive to drive up the stock price because the existing incentive is already maximizing efforts to increase stock prices.  It'd be like pushing on a string.  

        The big difference that I can see is that it encourages more profits over the long term over more profits over the short term.  That seems to me to be a good thing.  The existing tax structure encourages logarithmic growth in firms.  The incentive is to grow as quickly as possible, as soon as possible, forgoing potential future profits for profits now, and cashing out before growth slows down or stalls after all the low-hanging fruit has been picked clean.  A FTT, no corporate tax, and higher capital gains tax would incentivize more exponential-style growth, forgoing potential profits now for greater profits later.  

        From such crooked wood as that which man is made of, nothing straight can be fashioned. -Immanuel Kant

        by Nellebracht on Mon Aug 25, 2014 at 02:36:49 PM PDT

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        •  Now that makes sense (0+ / 0-)

          I wish we could implement these changes and see if they worked!

          Clearly, what has happened is that the use of the word Gestapo has clouded my message.
          - Maine Gov. Paul LePage

          by clinging to hope on Mon Aug 25, 2014 at 02:42:47 PM PDT

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        •  I don't think that's quite right (0+ / 0-)

          Several problems with your argument, which is the Party Line on corporate governance. But the Party Line is a crock, and we need to be clear about that.

          First, while the current legal regime right now does make it possible to sue management as a shareholder if they do not "maximize shareholder value" -- interpreted narrowly to mean "maximize share price", the underlying argument assumes, wrongly, that the market correctly prices future gains in value -- your future growth is supposedly already "priced in".  Because markets are perfect, right :-)

          Nothing about corporate taxes or capital gains changes that.  The incentives are going to be as short term as they always have been.  Because the perverse incentive has more to do with the whole "must maximize shareholder value" legal nonsense than it does with the tax regime.

          And growth doesn't have to be truly "exponential" before a firm grows out of the opportunities immediately available to it -- the "low hanging fruit" is just another word for "diminishing marginal returns" in the area of business the firm specializes in.   At some point, it makes more sense to return money to investors who can invest their funds into another firm with better available opportunities.  Or even better: pay more of it to their workers.

          I don't think that investment outcomes have much to do with this stuff.  I think ultimately, it's the need to extra excess wealth from the investor class, a la Picketty.  Because frankly, modern economies will do better if more people have great financial stability.

          To be on the wrong side of Dick Cheney is to be on the right side of history.

          by mbayrob on Mon Aug 25, 2014 at 04:22:42 PM PDT

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      •  You also pay tax on any dividends (0+ / 0-)

        which rate should be put back up to full regular income rate.

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