Thursday, October 09, 2008

The Rich NEVER pay taxes

I become frustrated with the Republicans who aren't teaching the economic theory necessary to get the votes they need to take majorities and take the executive branch. Rule ONE:


There are no exceptions.

Above a certain point of wealth, particularly if the wealthy own the means of production, which you must assume they do, they do not pay taxes.

Really you say?

Really. They pass the buck, to you.

Capital is leverage, leverage gets you what you want. At some point I am not qualified to graph, the wealth of an individual becomes so large that whatever burden of taxation they have, they simply add it to the cost of whatever it is they provide to society and pass it along.

Let's take the oil companies for example. They are greatly vilified. Suppose the the oil companies make record profits hitherto unheard of. Obscene profits. Immoral profits. Opportunistic, price gouging profits. Tax them you say.

The demand of the stockholders are unchanged. They want a certain return AFTER TAXES, PERIOD. If not given that return they run to some other investment that WILL give them that return. The oil companies in turn adjust their supplies, their profit margin and their investment levels so as to produce that after tax return to the point that it will attract stockholders. Thus, you cannot tax them.

What will happen is that you can price their product out of the reach of poorer individuals, who may in fact need it. Thus the overall market contracts in size, the profit MARGIN needed per individual unit of what is sold must go up, until some new equilibrium is reached that gains the return that is necessary.

The great VIRTUE of consumerism is the widespread distribution of a good or service distributes its cost of development or acquisition or production. If it cost a billion dollars to develop a product and a billion people buy it, that's a dollar for every person that buys it. It's actually more than a dollar per item, but lets just leave it at that for the moment.

If you price a thing upward do the point that only half a billion buy it, the effect is obvious. Development now costs TWICE as much, the amount of profit also, that is distributed among the individual sales goes up by the same amount. The effect of increasing the cost, the INPUTS to a good or service simply spirals a good or service up in price to the point where less of us can have it. This IMPOVERISHES US ALL. This CANNOT BE CHANGED. It is an IMMUTABLE LAW of all economic transactions, whether the economy be government controlled, free market, or at some point in between the two extremes. If an activity becomes SO unprofitable that it cannot be engaged in, by excessive taxation, it will CEASE. Whatever that activity provided, will no longer be available.

Populist politicians that say they're going to SOAK the RICH are PLAYING you. They are soaking YOU, not the RICH. It is impossible to soak the rich. You can only REDUCE the number of them available to tax. That is an oligarchy where power in concentrated in the hands of the VERY FEW, and they never run a country to the benefit of the masses. NEVER.

What corporate taxation and business taxation amount to is a Value Added Tax. VATs are ways to HIDE from you the amount of tax you pay. You go to the store, pay 3% sales tax and feel like you WON because you know the RICH got SOAKED instead of you.


You paid EVERY dime of TAX the RICH PAID in the form of increased cost, and then the government took 3% of a much more expensive item. Corporate taxes should be viewed as a form of DOUBLE TAXATION and a form of TAXATION WITHOUT REPRESENTATION. These are fundamental causes of the Revolutionary War.

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Pliggy said...

You are correct, and wrong at the same time. The Super Rich do not pay income taxes because of tax shelters or tax exemt "Foundations". Corporations DO pay income taxes and pass that cost on to the consumer, but the government still gets the money the Corporations cannot hide. And oil companies already pay practically the least amount anyway, because of government subsidies. And stock

If you want to eliminate double income taxation, get rid of the personal income tax**, which is much more intrusive and illegal in a supposedly free country. there is not even a Federal Law passed by congress requiring Citizens to pay taxes on their labor, only an Amendmant "allowing" them to.

**the income tax is a form of welfare for the poor (EIC,CTC) and the rich (Dividend/Capital Gains income taxed at %15 regardless of tax bracket), and the middle class gets soaked.

The Pharisee said...

Pliggy, but YOU pay the corporations income tax bill. It's an input like the iron and plastic and leather in a car. An automobile manufacturer simply distributes its tax bill proportionally to the products it sells.

They don't pay taxes. Government just makes goods and services more expensive and less accessible.

Pliggy said...

I agree with you, but the Government is not losing money, the consumer is. Whether the tax is at the pocket of the Corporations, or at your pocket, or (by far the worst of all) the government taxes no one and just borrows the money and causes inflation and the need for higher taxation in the future to pay it off. You pay no matter what.

A flat Corporate tax is the least of the three ways of raising funds to hurt the consumer, even though they ALL do.

The Pharisee said...

Pliggy, my point is that in general, there should be no corporate taxes. Strictly speaking, corporations don't even exist. They're all owned by individuals, directly or indirectly.

The benefit of NOT taxing corporations is that you and I are no longer blind to how much we're being charged by the Government. Only INDIVIDUALS pay taxes, and the individuals who are wealthy do not.

Some percentage of the upper crust of society merely manipulates the economy and taxes have virtually no effect on them. As I said, they simply pass it on.