Taxes on the rich already gone...

You know my summary is correct. Those trade effects are ambiguous. There is no direct effect on the price of labour. Given that, you don't have much to say do you?

 

There is nothing about which I have envy. But I wonder why you insist on your amateur interpretations of economics when the experts prove you wrong.

 

What I know is, economist's studies prove that capital does, under certain circumstances, pass corporate tax onto labor in varying degrees based on mobility, substitutability, and openness of the economy. That you don't want to accept what economists conclude shows your intransigence and suggests you know little about economics; and you are not man enough to read either of the studies I linked you to because you don't want to see it in black and white that you are WRONG.

 

That is a very basic error. We never 'accept' in econometrics; we merely reject or fail to reject. Its a matter of fact that these effects are ambiguous. Whilst traditional trade theory predicts market distortion effects, the recent empirical evidence struggles to find any significant effects

 

Read the study. I categorically proved that the economists who did the studies concluded that corporate taxes were passed on to labor in varying degrees under varying circumstances.

You have proved to the other members of this forum that your assertions bear no credibility and that you are ineducable.

In addition, if you had even an ambiguous study which supports your contentions even a little bit you would have jumped at the opportunity to link them. You didn't, you lose.

 

As I said, there is no need. I know these trade effects are ambiguous. I also know that you've referred to a completely different literature that tries to assess market distortion effects. That these effects aren't robust just weakens your argument even further

 

Again, your unwillingness to read the studies show your intransigence and ignorance of the subject of economics. I linked you to actual studies by economists. You insist on using your shade tree (lack of) understanding of economics. Your loss, not mine.

 

That makes no sense as you cannot dispute my summary: ambiguous trade effects where there are no direct effects on prices

 

You have yet to put forth a logical rebuttal that corporate tax can be passed on to labor depending on the circumstances. You have ventured amateurish opinions, and you are not man enough to read the studies which dispute your summary.

 

You know that you haven't got an argument. There is no direct impact on labour. There is only an attempt- and a dodgy one at that- at referring to trade effects. This stuff is often old hat (as shown by the tags that they use: new trade theory; new new trade theory etc)

 

Let me start by thanking you for this opportunity to show you up as an arrogant self righteous amateur who knows little or nothing about economics, and end by saying your unwillingness to read verifiable and peer reviewed studies by economists proves your narrow minded efforts to advance your know-it-all theories of economics. Have a good day.

 

I stopped here. Cheers!

If you ever do get to realise the distinction between a direct price effect and an indirect effect then let me know. Remember that a reduction in MPPL is actually informing us of a negative production effect for the firm!

 

If you ever read those studies let me know.

 

And waste my time? My summary is water-tight. Have a go at it if you want. That would amuse me

 

You seem to be dwelling on direct effect without regard for any indirect effect on labor; whereas I am (and economists) am only concerned about the ultimate effect of capital passing on corporate income tax to labor.

A Review of the Evidence on the Incidence of the Corporate Income Tax

Abstract http://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/ota101.pdf

Who ultimately bears the burden of the corporate income tax plays an important role in the distributional analysis of tax
policy. Distributional tables often assume that the incidence of the corporate income tax falls on the owners of
capital but there is considerable uncertainty amongst economists about who bears the burden of the corporate income tax. This paper
reviews the evidence on the incidence of the corporate income tax, especially in light of recent empirical studies that focus on the relationship between the corporate income tax and wages. While further research is necessary to draw definitive conclusions, these studies suggest that labor may bear a substantial burden from the corporate income tax. These empirical results areconsistent with computable general equilibrium models based on an open economy in which a single country sets its tax policy independently of other countries; in these models, assumptions that capital is mobile and consumers are willing to substitute tradable goods produced in different countries imply that labor can bear more of the incidence of the corporate tax than capital bears. Evidence on the degree of capital mobility across countries and the sensitivity of corporate investment to changes in tax policy also corroborate the possibility that the corporate income tax lowers wages by reducing the productivity of the work force. In addition to changes in productivity associated with changes in capital intensity, labor may also bear part of the corporate income tax if wages are determined in a bargaining framework since the corporate
income tax may change the equilibrium wage bargain. Overall, the recent empirical evidence, the open economy computable general equilibrium models of tax incidence, and the sensitivity of the amount of capital investment within a country suggest reconsidering the assumption that the corporate income tax falls on the owners of capital; labor may bear a substantial portion of the burden from the corporate income tax.

William M. Gentry
Department of Economics
Williams College
Williamstown, MA 01267
(413)597-4257
William.M.Gentry@williams.edu

 

I''m but able to maintain relevance and understand inconsistent argument. An employer, to pass on the tax, has to change their prices. That's not necessarily a bad thing. Taxes, as a regulatory policy, are often motivated by an attempt to increase price in order to reduce overconsumption.

Now, without knowing the trade literature, you've gone for an indirect effect that merely attempts to model hypothetical market distortions. They're hypothetical as they're reliant on two factors. First, a rather simplistic view of trade (as indicated by the reference to isoquants). Second, ignoring the recent empirical evidence that finds these trade effects do not exist

 

If lowering taxs on the rich creates prosperity then someone needs to explain to me why when taxs on the rich have been cut fully in half since 1983, down from 70% to 35% and corporate taxs were cut by the same full 50% and while corporations sent most good jobs overseas to avoid paying even the 50% the country is in deep recession with the middleclass diminishing.
The rich took the only thing that the american working family had left, the equity in the homes, they have already taken most pensions and health benefits from workers and lowered pays across the board.
I bought into that tax cuts for the rich crap for decades and I dont anymore, Ive lived long enough to 'see' its bs

 

Low skill jobs were primarily replaced by automation, to improve quality, safety, and productivity. The low skilled jobs that went over seas, were to remain competitive.

The US lowered it's tax rate, but it is still higher than most. Profits are "made" over seas because the corporate tax rate is lower.

How did the rich do that? The needed the Fed to cooperate by keeping interest rates low, even though housing entered a bubble. They needed Fannie and Freddie to buy subprime mortgages.

Many of the near retirement pensions are in T-Bills, that have interest rates that don't keep up with inflation. Again, the Fed's interest rate manipulation. Why, if interest rates went to 6 or 8 percent, interest in the debt would go from $200B to near $1T.

 

Indeed. Supply-side economics has been shown for the load of bobbins it represents.

 

There are other ways to pass on taxes to labor. If you weren't such a no it all, arrogant andself righteous person who knows little or nothing about economics you would look at what the experts studies say. I personally don't think you are intelligent enough to understand the studies I have presented in support of our discussion.

Yet you have not offered a single link to justify your weird concept of reality. The links I offered had empirical evidenc to back them up.

 

What you mean is that market distortions can occur which then impact on wages (sometimes, but without any certainty). That isn't a powerful comment, nor is it relevant to my point. However, this invalidity is obviously important to you. You enjoy!

 

Low skill jobs were primarily replaced by automation, to improve quality, safety, and productivity. The low skilled jobs that went over seas, were to remain competitive.

First part of your statement is fact, the second is not many went to china for merely cheap labor and increased profit at the expense of americans.

How did the rich do that? The needed the Fed to cooperate by keeping interest rates low, even though housing entered a bubble. They needed Fannie and Freddie to buy subprime mortgages.

Allow me to change the rich to the Big Banks, which pretty much mean the same thing.

 

As much as you hate to admit it, the reality of tax incidence is, capital can pass taxes of certain types to consumers and under other circumstances pass them on to labor. Your failure to recognize and accept this shows your ignorance about the subject. What you call "market distortions" are recognized by economists of note as such tax incidents.

Gravelle (2010) took several studies and analyzed them.

Three recent studies – by Hassett and Mathur (2007), Felix (2007), and Desai, Foley, and Hines (2007) – combine data from the United States with observations from different countries in order to estimate the effect of corporate income taxes on wages. Those studies look not only at differences across countries but also over time – thus reflecting the reductions in corporate tax rates that have occurred in many countries since the mid-1980s.

The three studies face challenges common to all investigations that use cross-sectional data. First,correlation does not imply causation. The studies discussed below find a significant and negative association between wages and top corporate tax rates across countries and generally conclude that increases in those rates cause wages to fall. The finding of a relationship, however, does not necessarily imply that wages are “responsive” to corporate tax rates. For example, countries with a low-wage labor force—and thus a small tax base from earnings—may rely more heavily on taxing large multinational corporations in order to raise necessary revenues. Under those circumstances, corporate taxes and wages would be negatively correlated, but corporate tax rates would increase in response to lower wages, not the reverse.

Hassett and Mathur estimate elasticities of wages to top statutory corporate tax rate ranging between -0.3 to -1.Thus, a 1 percent increase in corporate tax rates is associated with between a 0.3 and 1 percent decrease in wage rates. Those elasticity estimates drop to a range of -0.4 and -0.6 with alternative measures of corporate tax rates (including the average effective corporate tax rate and the marginal effective corporate tax rate).

Another way to interpret Hassett and Mathur's results is to look at the implications for the effect of a dollar increase in taxes on wages. Using their lowest estimate of 0.3 and the ratio of labor income to corporate tax revenues of 21.1, their results imply that a $1 increase in corporate taxes would decrease wages by $6.33. That result implies that an extraordinarily large share (over 630 percent) of the burden falls on labor.

Desai, Foley, and Hines derive estimates ranging between 45 and 75 percent of the burden of thecorporate tax falling on labor. Their baseline case—which uses panel data and controls for country fixed effects —shows 57 percent of the burden falling on labor. Not controlling for country fixed effects increases the share of the burden falling on labor to 71 percent. Using annual cross-sectional data, the authors find that 69 percent of the burden fell on labor in 2004; that estimate drops to 49 percent when they do not control for the workforce’s education. They obtain similar results using cross-sectional data from 1989, 1994, and 1999.

State corporate income tax revenues in 2007 were about 0.38 percent of GDP, and labor income was about 57 percent of GDP, yielding a ratio of labor income to corporate tax revenues of 150; using that ratio and the range of elasticities, a $1.00 increase in the state corporate income tax rate would decrease average hourly wages by $1.41 to $3.60, suggesting not only that 100 percent of the burden falls on labor, but also that up to 360 percent could fall on labor.

Felix also looks at these results over time by using averages of the data for five different historical periods: 1977-1981, 1982-1986, 1987-1991, 1997-2001, and 2002-2005. She finds that the Felix (2009) uses data from the Current Population Survey (CPS), covering years 1977 to 2005, to estimate the tax incidence of state corporate tax rates. The tax variable is the highest corporate statutory tax rate in the state, and the individual wage is calculated as annual salary divided by number of hours worked per year. Felix controls for differences among individuals by including variables for age, gender, race, and education level. She also includes a number of state characteristics including the marginal state income tax rate calculated for each individual using National Bureau of Economic Research’s TAXSIM model, the state sales tax rate, and controls for government services (although details on the measurement of that variable are not provided). However, she does not control for state fixed effects, even though the data set appears to contain sufficient observations to estimate that type of specification.

Felix finds that the corporate income tax is significantly and negatively correlated with wages and concludes that a 1 percentage point increase in the state corporate income tax rate would decrease wages by between .14 and .36 percent. These results translate into a wage elasticity of -0.0094 to -.024 and imply quite large burdens on labor. State corporate income tax revenues in 2007 were about 0.38 percent of GDP, and labor income was about 57 percent of GDP, yielding a ratio of labor income to corporate tax revenues of 150; using that ratio and the range of elasticities, a $1.00 increase in the state corporate income tax rate would decrease average hourly wages by $1.41 to $3.60, suggesting not only that 100 percent of the burden falls on labor, but also that up to 360 percent could fall on labor.

Felix also looks at these results over time by using averages of the data for five different historical periods: 1977-1981, 1982-1986, 1987-1991, 1997-2001, and 2002-2005. She finds that the corporate income tax effect on wages appears to have initially decreased and then risen, with a drop in the most recent period. Felix’s findings in this study also contradict the results found in her paper with Hines (2009), discussed below.

Felix’s results are less extreme than some studies, but they still show very high correlation between high corporate income tax and lower wages. Given the ability for capital and products to move freely across states.

Carroll (2009) finds that a 1 percent increase in the statutory corporate income tax rate and in the average corporate income tax rate reduces production workers’ wages by 0.138 percent and 0.014 percent, respectively. Based on the latter result, he finds that a $1 increase in the tax revenue would decrease wages by $2.50. Both results are significant within standard confidence intervals. Varying some of the assumptions—allowing for different lengths of lagged tax rates and averaging wages over five years—has small effects on the coefficient estimate and the significance of the statutory rate variable, but does not change the estimates on the average tax rate.
Similar to Felix’s estimates, Carroll’s lowest elasticity estimate, which uses the average tax rate, suggests that a large share of the corporate tax burden (250 percent) would fall on labor. Again, while a standard closed economy model can result in 100 percent of the burden falling on labor, and depending on capital intensities it is theoretically possible for more than 100 percent of the burden to fall on labor in an open economy setting, such a large share is unprecedented among estimates from general equilibrium models.

Felix and Hines (2009) control for employer industry, the worker’s occupation, employment by a nonprofit firm, and residence in a metropolitan area. The regressions also include several demographic characteristics such as age, marital status, years of education, and race. In subsequent specifications, they add dummy variables for the state of residence and the presence of right-to-work laws. They also make adjustments for state apportionment of the corporate tax. They use the highest marginal state corporate income tax rate adjusted for the deductibility of federal taxes.

Even Gravelle (2010), whose assumptions were that there is minimal burden in the incidence of corporate tax shifting to labor, concludes, though the majority of the studies conclude that labor bears a substantial burden of the corporate tax, the various methodological limitations put the reliability of those specific estimates into question. Indeed, trying to address the long-run incidence of general corporate income tax is a daunting task, and these studies have made attempts at using the data available to provide insight into that question.

If you continue your intransigence to consider some of our more noted economists it further reflects negatively on your ignorance of economics.

 

I'm happy to admit my love of validity and my hatred of invalidity. You know that you've been referring to hypothetical distortion effects. To compare that with a direct price adjustment is cretinous. There is no comparison. Now we do have the more general literature into 'optimal taxation'. That would also be irrelevant to my argument, but you can refer to it if you want. It would be a fruitless exchange mind you, as you'd merely be blindly googling and continuing the misrepresentation.However, as I said, if its important to you then go ahead...

 

It does not show. I have posted some very valid studies which you have claimed you want even read.

So far you have not posted an argument. All you have done is deny validity and claim that very respected economists are all wrong. That doesn't look good for your willingness to support validity.