Taxes on the rich already gone...

Randolph (2006) and Gravelle and Smetters (2006) both develop general equilibrium
models in an open economy to examine the incidence of the corporate tax. Randolph finds that
labor bears 70 percent of the corporate tax in a model in which worldwide capital stock is fixed.
Gravelle and Smetters similarly assume the capital stock to be fixed and focus on product
substitutability. They find that labor bears less than 70 percent of the corporate tax if products
are not perfectly substitutable. Low savings elasticity and the ability of a country to affect world
prices also reduce labor’s burden in their model. However, by ignoring the effect of corporate
taxes on the growth of capital, these models likely underestimate the impact of corporate taxes
on labor.

 

What it really is all about is your inability to understand economics, yet you persist in making yourself the laughing stock with your intransigence. I didn't misrepresent anything, all I did was do a copy of paste from the article and you just didn't like the fact you were proved wrong. You typically use circular reasoning saying you are right because you said you are right. You got blown out of the water again.

 

Did little ole me fail to pat you on the head? Diddums! There is no debate here. You've googled blindly and misrepresented a paper, nothing more. To show burden sharing you have to show, as in the case of elasticity of demand, how the firm can pass on the tax via price increases. In the case of labour, you'd somehow have to show that the firm can somehow increase underpayment (driving a further wedge between wage and the marginal revenue productivity of labour). You don't have that. All you've got is how a tax can distort the market, with the resulting negative effect on economic opportunities then impinging on economic variable. Completely different issue, showing your inability to craft relevant remark

 

Baloney.

Obama hasn't touched one cent out of the multiple trillions sheltered in overseas tax free accounts by those wealthy elites.

 

I didn't only craft relevant remarks, I cut and pasted the relevant parts of a study by people a hell of a lot smarter than you. Actually from what I have seen, everyone on this board is not only smarter than you, they are a heck of a lot more civil than you. You are not only ignorant about economics, you are arrogant about it.

If you had a brain you would take it out and play with it. There are more ways than raising prices to recoup the amount of money paid it taxes. As the group of economists clearly said in their study, one way is to move the capital and cut jobs. If you understood economics instead of having a closed mine you wouldn't make such stupid responses.

 

You were correct about one thing, there really isn't any debate here. So far your input has been void of any relevant information.

Just to rub it in a little, here is the title of the study: Passing the Burden: Corporate Tax Incidence in Open Economies

R. Alison Felix∗
October 2007
http://www.kc.frb.org/Publicat/RegionalRWP/RRWP07-01.pdf

A few other economists with input: James R. Hines Jr., Joel Slemrod, Dan Silverman, Clemens Sialm

Two other studies for you to grapple with in your ignorance of economics: Randolph (2006) and Gravelle and Smetters (2006) both develop general equilibrium models in an open economy to examine the incidence of the corporate tax. Randolph finds that labor bears 70 percent of the corporate tax in a model in which worldwide capital stock is fixed. Gravelle and Smetters similarly assume the capital stock to be fixed and focus on product substitutability. They find that labor bears less than 70 percent of the corporate tax if products are not perfectly substitutable.

 

Sure he has, he has increased offshore holdings.

During the discussion on taxing the rich in 2010, they expected $65B. We gave the rich time to adjust their taxable income, so today we expect to get only $40B.

Anyone willing to bet by this time next year, that will drop to $20B.

 

Indeed! Well done. The excise tax can be shifted to the consumer through price rises. Its that price change that determines burden. You're still referring to something completely different: where the corporate tax is perceived to be problematic, such that other taxes can appear to be optimal. The argument is simple: the tax isn't paid because of the consequences of open economies and how that enables tax avoidance. That then can have a negative effect on domestic labour, essentially understood through a shift in the aggregate labour demand. To burden share you would have to show that wages directly fall, with that representing a redistribution of rents to 'pay' for the tax. No such direct fall occurs.

 

Correct! As well local and state property taxes.

You are trying to refute what well known and accepted peer reviewed studies have proved.

Actually Harbarger and James R. Hines Jr., Joel Slemrod, Dan Silverman, Clemens Sialm, have all shown that labor pays some times all and sometimes less than all taxes when capital is mobile. Your insistence that only price can affect labor is flawed. Of course capital can choose to lower price after the burden of taxes are shed, or they can take more profit, which is the point of the whole idea of shifting taxes to either the consumer or to labor. The burden of taxes can shift to labor even while demand stays strong if it chooses to go where taxes and other costs reduce their competitive advantage. The demand is then served by a product made with lower costs to include taxes. Of course it has a negative effect on domestic labor, even if the move is to a lower cost state within the US. The aggregate demand for domestic labor goes down when capital shifts out of the domestic area so as to avoid tax. Classic tax incidence of capital passing off tax onto labor.

Maybe you can tell me how labor does not lose wages when their jobs are lost through a move of capital. As I have said before, you do tend to go on and on without expressing actual facts about economics.

 

Its their choice of vocab that has confused you. It cannot be compared to the burden sharing created by the excise tax. That is necessarily passing on the tax through a price rise. As I said, here we merely have tax avoidance and, given 'race to the bottom' (arguably most understood within historical structuralism), that can have spillover effects. Different phenomena completely! These firms aren't passing on the tax by reducing wages; there is merely a shift in demand

 

Nothing is confusing me. Their words are clear. You just don't want to accept them. They are passing on the tax by moving and cutting jobs. The burden of the tax then fell on labor who lost their jobs or through a lowering of wages.

Do you think Felix is mincing words in the following?

A recent empirical contribution, Hassett and Mathur (2006), also finds that labor more
than fully bears the burden of corporate taxes in an open economy; they estimate that a one
percent increase in the corporate tax rate results in a 0.8 to 1.0 percent decrease in the
manufacturing wage rate.​

Harberger (62) determined that labor did not pay have the burden of corporate taxes passed on to them in a closed economy. But "As producers in the home country use less capital, the marginal productivity of labor will decline resulting in lower wages at home. Thus, a tax on capital is borne entirely by labor in a small open economy, and we would expect the corporate tax rate to have a negative effect on
wages."

"Harberger (1995) reevaluates the incidence of the corporate tax by assessing the burden of the tax in an open economy. Not only does Harberger find a negative effect of corporate taxes on wages, but he also finds that labor’s burden from corporate taxation is 2 to 2.5 times as large as corporate tax revenue."

 

There is no 'passing on' as they are not price changing. Its a mere reference to apparent market distortion. Completely different! Even with that alternative analysis there is no consensus. Jensen, in Comparative Political Studies, rejects a relationship between corporate tax and multinational corporation investments

 

IOW, you disagree with the words of all the economists involved with the various studies cited in that piece. I personally choose to believe the experts rather than you, and they didn't mince any words. There is more than one way to skin a cat, or pass on corporate taxation. Gravelle, Felix and Harberger are economists of the first order.

Maybe you should chew on a couple of quotes from Harberger (62) and (95) Maybe you should argue with Harberger about his assertions.

Harberger determined that labor did not pay have the burden of corporate taxes passed on to them in a closed economy. But "As producers in the home country use less capital, the marginal productivity of labor will decline resulting in lower wages at home. Thus, a tax on capital is borne entirely by labor in a small open economy, and we would expect the corporate tax rate to have a negative effect on
wages."

"Harberger (1995) reevaluates the incidence of the corporate tax by assessing the burden of the tax in an open economy. Not only does Harberger find a negative effect of corporate taxes on wages, but he also finds that labor’s burden from corporate taxation is 2 to 2.5 times as large as corporate tax revenue." ​

You still seem to be wrapped around price changing. If the taxes are known before the fact the price can go up to compensate for the taxes as long as demand remains relatively constant. In the case of excise or fuel or tobacco taxes the consumer always pays the tax at purchase. In the case of taxes on profits, which reduce profits below what capital wants, they will distort the market effectively costing labor for those taxes. What Jensen rejects does not happen as often in the real world as he theorized. Call it what you will, but when capital is mobile it can move cutting out jobs, and that Reiver is costs passed onto labor.

You might also recognize that the absence of substitutability also allows the price to increase to compensate for projected corporate taxes on profits.

Political writers tend to have a bet in the game, ie biased one way or the other. Pure economic studies tend to be more correct about economics without the implication of politics. Jensen appears to be trying to justify Corporate Taxation. I don't think he did a good job of proving his thesis.

Putting all of your eggs in Jensens basket will leave you coming up short. I would venture to say you also agree with Diamond and Saez that the law of diminishing marginal utility can justify higher progressive taxes; when in fact as wealth increases the marginal unit increases in size and the marginal utility of wealth is as likely to go up as stay the same rather than diminish.

BTW, looking at your signature line made me wonder, did you ever go through the Kyber? I did, in 1952. Rough country but the visit to Afghanistan was well worth the effort.

 

I disagree with your interpretation. As I said, they're looking at a completely different issue. There is no direct link between the tax and the wage rate. They are merely attempting to find an indirect link via the use of trade theory. Do I trust their findings with that theory? Certainly not. OECD, for example, published a report in the last decade referring to data problems with corporate tax analysis. We've also seen that the latest research rejects the investment-corporate tax link. This doesn't surprise me, given the complexities involved with dynamic comparative advantage. To think it can be reduced to a simple marginal analysis (like the Heckcher-Ohlin approach and its use of isoquant analysis) will assuredly lead to empirical bias.

Of course. Accepting your misinterpretation would create an unfortunate dissonance. However, I'm afraid that is the only rational result. There is no direct relationship. The only way you could try and achieve one is through some form of historical structuralist approach into wage bargaining. Of course, by doing that, you'd have to totally reject the relevance of supply and demand for labour markets. Good luck with that!

Again, that has nothing to do with passing on the tax (as you see with excise taxes). That is merely an attempt at suggesting there are market distortions

 

How can you disagree with my interpretation when I cut and pasted their comments and I DID NOT INTERPRET ANYTHING. You are disagreeing with the economists, not me.

Actually the STUDY I LINKED YOU TO HAS EVERYTHING TO DO WITH PASSING THE TAX ON TO LABOR. That is not an interpretation, it is the study itself including the empirical data.
Quite disingenuous of you to claim I misinterpreted the study, when I posted conclusions from the study rather than make an effort to interpret them to you, so YOU ARE DISAGREEING WITH THE CONCLUSIONS OF THE STUDY, NOT MY INTERPRETATION.

I was reminded twice yesterday by PM from others, that you tend to circular reasoning claiming you are right because you claim you are right. Why don't you argue with THE ECONOMISTS WHO DID THE STUDY.

 

I'll sum it up for you. I referred directly to the importance of price elasticity of demand when determining burden (with that referring to direct effects on price via shifts in the supply curve). You started by making error over that analysis. You've since googled for anything you can use, failing to realise that the analysis presented is quite different. Is there a direct price effect (e.g. reduction in wage) from the trade effect? No. As I've shown, we don't even know for sure those trade effects exist (ensuring that the more general analysis into market distortion effects is likely to be exaggerated)

 

Your entire post is irrelevant as a response to my post. I really am quite tired of you trying to debate a valid peer reviewed study and suggesting that I misinterpreted it. As to googling, I am sure you did a lot of that to try to REBUT THE STUDY. So far you have yet to comprehend the actual facts of the situation since you continue to parrot your lack of understanding about the study and the issue of mobile capital passing corporate tax off onto labor.

Why don't you simply read the study, the link of which is, http://www.kc.frb.org/Publicat/RegionalRWP/RRWP07-01.pdf

I don't see any reason to debate with you when you don't respond to what I say, rather you try to address what you erroneously want me to have said. You sir, do not understand economics, and you sir choose to be obtuse and intransigent.

 

Another study which shoots down your, "labor never gets corporate taxes passed to them by capital."

Multiple studies have simulated corporate tax incidence in an open economy . http://www.urban.org/UploadedPDF/1001349_corporate_tax_incidence.pdf

Randolph (2006) builds a two country, five-sector model with three factors of production (capital, labor, and land). The five sectors include a corporate sector producing tradable goods that are perfect substitutes with foreign goods; a corporate sector producing tradable goods that are not perfect substitutes with foreign goods; a corporate sector with go ods that are not tradable (e.g., utilities); a non-corporate sector
producing tradable goods (e.g., agriculture); and a non-corporate sector producing non-tradable goods (e.g., residential housing). The corporate sectors are taxed, the non-corporate sectors are not. Randolph assumes that capital is perfectly mobile across countries, labor is immobile, and markets are perfectly competitive. Randolph estimates how a tax on the corporate sector affects the equilibrium cost of capital, which in turn affects the allocation of factors of production across sectors, the equilibrium wage rate and land rents, output prices and consumer demand. Randolph then measures how this change in prices—both factor prices and consumer prices—alters consumption by foreign and domestic owners of each input; this change forms the basis of the incidence calculation.

Randolph’s results are largely dependent upon the mobility of capital across borders, but also depend upon the ability of the domestic economy to influence world prices and the capital intensities in the domestic corporate sector.

Randolph finds that under baseline assumptions, domestic labor bears the bulk of the tax—74 percent—while domestic capital bear s 33 percent of the burden, expressed as a share of revenue. Land benefits with a -3 percent burden, as does foreign labor with a burden equal to -71 percent of revenue. Foreign capital bears a burden of 72 percent.

Randolph also produces estimates assuming different relative capital intensities of the domestic corporate sectors, and finds that the burden falling on domestic labor can vary between 59 percent and 91 percent, while the burden falling on domestic capital can vary between 38 percent and 27 percent. He also produces estimates under an infinitesimal tax rate and with varying assumptions about whether the domestic country is a net capital borrower or lender.

 

I'm not surprised you think that as I'm afraid dissonance is impacting on your ability to respond. Is there a direct price effect from trade effects? Nope! Are we even sure these trade effects exist? Nope! As I said, you've blindly googled and forgot to ensure relevance to my original post.

 

After you read those studies, get back to me as nothing with which you have responed to me refutes what I said. Randolf I googled. Felix I have had on my computer for a couple of years. As to relevance to YOUR ORIGINAL POST, YOU CHOSE TO DISPUTE MY ORIGINAL POST.

 

I have no need. They clearly refer to ambiguous trade effects that are distinct from direct price effects

 

The only reason you won't read either of the studies presented is, YOU DON'T WANT TO SEE YOUR POINT OF VIEW TRASHED BY REAL ECONOMISTS. Your intransigence proves your error.

 

Nope, its because I understand the notion of opportunity costs. I already know the reference to ambiguous trade effects. I already know there is no direct price effect, with the whinge purely about market distortion.

 

Yep! You are not man enough to look at studies conducted by real economists, so you instead rely on your shade tree attempts at understanding economics. Sorry Charlie, you lose.

 

Do you have penis envy or something? You're always insulting others by claiming they aren't "man enough".