Why businesses oppose taxation

[Propertarian]

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You've assumed quite an interesting supply-demand curve there

[/ QUOTE ] Right, I admitted that most of the time the business, the workers, and the consumers all pay part of the tax increase for businesses ultimately, and that was just to illustrate.

And yes, I made an extremely hilarious editing oversight.

[andyfox]

We spent X last year and took in 1.2X. The government raised our taxes this year, so we're spending X+1. Let's take in 1.25(X+1).

[pvn]

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We spent X last year and took in 1.2X. The government raised our taxes this year, so we're spending X+1. Let's take in 1.25(X+1).

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Why not 125(X+1)? Small-time thinking is for losers.

[bobman0330]

I think this argument is pretty far-fetched.

First, you neglect the fact that ALL the costs of the tax, including collection and filing costs, are passed on to the consumer. Companies aren't lazy in the way individuals are. A company doesn't really care if it takes 10 man-hours to produce $100 profit or 100 man-hours. The results for the managers and owners are the same. Indeed, some theorists have argued that the manager who direct a company would prefer to run the larger company, even at the same profit.

Second, you don't really address the fact that a corporation is often the most efficient collector of a lot of taxes (sales tax leaps to mind). If so, the waste you mention will be minimized by levying the tax on the corporation instead of individuals. Although the corp. itself is indifferent to this, the humans who control it should prefer it, as lower waste means lower overall taxation.

Finally, you miss the real reason business are opposed to business taxes. Essentially no taxes that are levied today on business fall equally on all taxpayers. When you hear businessmen talk about taxes, they don't demand the end of taxes and the government. In general, they want to even out rates and eliminate distortive tax subsidies (except the ones they receive, of course). The real harm, both to a single business owner, and to society as a whole, come from uneven taxation, not from tax-collection costs.

[pvn]

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I think this argument is pretty far-fetched.

First, you neglect the fact that ALL the costs of the tax, including collection and filing costs, are passed on to the consumer.

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Even if this is true, that doesn't mean the company doesn't mind. Passing these costs on has an effect on customer satisfaction.

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Companies aren't lazy in the way individuals are. A company doesn't really care if it takes 10 man-hours to produce $100 profit or 100 man-hours. The results for the managers and owners are the same.

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Wrong. So wrong.

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Indeed, some theorists have argued that the manager who direct a company would prefer to run the larger company, even at the same profit.

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What a "manager" prefers and what "shareholders" prefer are two different things.

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Second, you don't really address the fact that a corporation is often the most efficient collector of a lot of taxes (sales tax leaps to mind). If so, the waste you mention will be minimized by levying the tax on the corporation instead of individuals.

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So what? The fact that one party may be the most efficient at something doesn't mean that party will prefer to do that to other activities, or that that particular party will not be even more efficient at some other activity.

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Finally, you miss the real reason business are opposed to business taxes. Essentially no taxes that are levied today on business fall equally on all taxpayers. When you hear businessmen talk about taxes, they don't demand the end of taxes and the government. In general, they want to even out rates and eliminate distortive tax subsidies (except the ones they receive, of course). The real harm, both to a single business owner, and to society as a whole, come from uneven taxation, not from tax-collection costs.

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This has nothing to do with who the taxes are actually collected by.

[bobman0330]

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Even if this is true, that doesn't mean the company doesn't mind. Passing these costs on has an effect on customer satisfaction.

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Well, true, but that's going to be trivial compared to the serious decrease in consumer satisfaction caused by passing along the tax. A 5 cent increase for collection costs on top of a $1 increase for the tax is a fairly minor problem.

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Wrong. So wrong.

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Hmm, I'm wrong? I'm not sure that's entirely convinc--Wait, what's that you say? I'm "so wrong"? Well, that tears it. I guess shareholders and managers DO have an irrational aversion to other people working for their corporation. Good argument.

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What a "manager" prefers and what "shareholders" prefer are two different things.

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Gee, really? That would be really insightful if it weren't the first principle of corporate governance, which everyone knows. (Google Berle-Means). If you and your fellow anarchists had ever gotten past supply and demand and the broken window fallacy in your economic studies, you might know that. But yes, I am aware that the managers have different interests from the shareholders. But the managers direct corporate policy, so it's their opinion that really counts.

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So what? The fact that one party may be the most efficient at something doesn't mean that party will prefer to do that to other activities, or that that particular party will not be even more efficient at some other activity.

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So, if you're a corporation, and you're choosing between an 11% tax levied by the government (who has to pay 1 additional percentage point in collection costs) or a 10.5% effective tax on corporations, passed on to the shareholders, which do you choose? Keep in mind that every individual involved in corporate decision-making is an individual who will pay the tax as a consumer.

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This has nothing to do with who the taxes are actually collected by.

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This is true. It's the real reason why businesses oppose taxation that falls on them.

[pvn]

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Even if this is true, that doesn't mean the company doesn't mind. Passing these costs on has an effect on customer satisfaction.

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Well, true, but that's going to be trivial compared to the serious decrease in consumer satisfaction caused by passing along the tax. A 5 cent increase for collection costs on top of a $1 increase for the tax is a fairly minor problem.

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I have no idea how this refutes anything I was saying. Businesses don't like passing costs along.

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Wrong. So wrong.

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Hmm, I'm wrong? I'm not sure that's entirely convinc--Wait, what's that you say? I'm "so wrong"? Well, that tears it. I guess shareholders and managers DO have an irrational aversion to other people working for their corporation. Good argument.

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Aversion to other people working for them? That's not what you were saying. You said "A company doesn't really care if it takes 10 man-hours to produce $100 profit or 100 man-hours." That's demonstrably false. Why do you think when you look at a stock profile on (eg) google, the first thing listed under "key stats and ratios" is profit margin?

A company that expends 100 man-hours to produce $100 profit is exposed to more risk than a company that can produce the same $100 profit with only 10 man-hours.

Let's say you need your lawn mowed. One guy will mow it in 30 minutes. The other guy will mow it in four hours. They both charge the same, and their work is of identical quality. Which do you select?

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What a "manager" prefers and what "shareholders" prefer are two different things.

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Gee, really? That would be really insightful if it weren't the first principle of corporate governance, which everyone knows. (Google Berle-Means). If you and your fellow anarchists had ever gotten past supply and demand and the broken window fallacy in your economic studies, you might know that. But yes, I am aware that the managers have different interests from the shareholders. But the managers direct corporate policy, so it's their opinion that really counts.

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And the shareholders hire and fire the managers.

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So what? The fact that one party may be the most efficient at something doesn't mean that party will prefer to do that to other activities, or that that particular party will not be even more efficient at some other activity.

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So, if you're a corporation, and you're choosing between an 11% tax levied by the government (who has to pay 1 additional percentage point in collection costs) or a 10.5% effective tax on corporations, passed on to the shareholders, which do you choose? Keep in mind that every individual involved in corporate decision-making is an individual who will pay the tax as a consumer.

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This has so little bearing to any situation in reality it's not even worth considering. Obviously, the correct answer is that the shareholders would prefer that the government give everyone ponies.

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This has nothing to do with who the taxes are actually collected by.

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This is true. It's the real reason why businesses oppose taxation that falls on them.

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[bobman0330]

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have no idea how this refutes anything I was saying. Businesses don't like passing costs along.

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You said that the reason businesses don't like passing taxes along is that they don't like doing work for for free. I'm trying to explain that that aspect is quite trivial compared to the real problem, which is that taxes increase prices and harm the business's profits. Collection costs are tiny compared to the actual tax.

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Aversion to other people working for them? That's not what you were saying. You said "A company doesn't really care if it takes 10 man-hours to produce $100 profit or 100 man-hours." That's demonstrably false. Why do you think when you look at a stock profile on (eg) google, the first thing listed under "key stats and ratios" is profit margin?

A company that expends 100 man-hours to produce $100 profit is exposed to more risk than a company that can produce the same $100 profit with only 10 man-hours.

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I'd venture to say the profit margin is considered an important stat because it allows investors to judge the relative efficiency of two companies in the same or similar lines of business. If everyone's margin drops by the same amount, I'm not sure why anyone would care. I don't really think that tax payment is a risky business activity.

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And the shareholders hire and fire the managers.

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They may formally elect the board of directors, but for all practical purposes, the shareholders have no influence whatsoever over the management of a public company.

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This has so little bearing to any situation in reality it's not even worth considering. Obviously, the correct answer is that the shareholders would prefer that the government give everyone ponies.

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Really? The sales tax would be essentially uncollectable if businesses didn't collect it. The income tax, too, would be very prone to fraud if employers weren't required to report income and withhold taxes on it. Just look at how many online poker players don't pay tax. I think you're seriously underestimating how much more collection money (and how much the overall tax burden can thereby be lowered) by putting responsibility on businesses.

[hmkpoker]

The moral of the story is, you can't tax someone without hurting someone else.

[natedogg]

Don't forget that many business support taxation... of their competitors. This is the biggest reason why business should not be taxed. It only opens the door for congressmen to hand out favors to corrupt contributors and create anything but a free market. American businesses have no chance of operating in a free market as long as congress can favor one or the other through taxation schemes.

natedogg