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Letters by a modern St. Ferdinand III about cults

Gab@StFerdinandIII -

Plenty of cults exist - every cult has its 'religious dogma', its idols, its 'prophets', its 'science', its 'proof' and its intolerant liturgy of demands.  Cults everywhere:  Corona, 'The Science' or Scientism, Islam, the State, the cult of Gender Fascism, Marxism, Darwin and Evolution, Globaloneywarming, Changing Climate, Abortion...

Tempus Fugit Memento Mori - Time Flies Remember Death 

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Monday, April 11, 2011

Lower Corporate Taxes

They should be zero.

by StFerdIII


The dogma against low taxes is one populated by myth and ideology. Those who hate the individual, private contracts, markets, and pay for performance, usually rage against the 'heartless' and 'faceless tyranny' of corporations. Large firms account for 55% of the total workforce. The employ workers, pay exorbitantly high payroll and other taxes; have regulating fees to account for; are subject to punishing laws of governance which are not applied to the state sector or its public sector unions [a double standard]; engage in R&D and development; and in many cases spin off an impressive number of small firms who rely on large corporate budgets for survival. It is trite truism that small business accounts for 'most' new job creation. But what the media never says is that many of these small firms, and all of them outside of retail or consumer markets, rely on these big corporations and their budgets for survival. IBM for example has spun off somewhere in the order of 10.000 smaller firms, many of which sell their expertise back to IBM. I can remember when Steve Jobs started NeXT software a cutting edge development firm with its own operating system which competed with Microsoft back in the 1990s. The firm failed but its clientele included large banks and telecos. Jobs the genius sold his new firm back to another large corporation called Apple and re-assumed his post as CEO, a position he had left to start NeXT. Yet another simple example of why large corporations are necessary for our modern economy. They sustain everything from admin jobs to new technology startups.

Tax rates for corporations are thus very important. The lower the better. In my economic opinion the corp tax rate should be zero. If it was you would create thousands of jobs over the succeeding number of years as businesses rushed to re-invest improved profits in new systems, new ventures and expansion. Capital availability would rise and seek out higher returns. There is no good argument for high corporate tax rates. None. Businesses react to lower taxes as an individual would react to the same. They save, pay off debts, invest, expand or buy new products and supplies.

Corporations respond in precisely the same manner. Lower taxes may trigger price reductions if management is anxious to improve competitiveness.  If a business boosts dividends, individual and institutional shareholders will experience increased cash flow.  Companies could end up “spending” tax savings on acquisitions (possibly abroad—just  like our convenience store owner’s foreign holiday) but they would do so on the expectation of improved future earnings, flowing back to Canada.

Will reduced corporate taxes result in an immediate increase in investment and jobs?  No.  When markets are stressed, corporations are not likely to rush into new investments, expand output and hire new employees.  But when market opportunities present themselves, lower taxes will spark employment gains — if not immediately, certainly over the longer term.

Important as tax levels are, they remain a relatively minor component of the investment equation.  But there is no doubt that a favourable tax environment constitutes a crucial advantage for Canadian business. Rather than attempt to reverse the move towards lower taxation, good policy recommends further reductions—and even the elimination of corporate income taxes entirely.

Politicians who pit the interests of the public against supposedly faceless corporate entities perform a great disservice. Collectively we are all components of the economy—whether as employees, consumers or producers. We all directly or indirectly depend on a profitable private sector.  Our private and public pension plans rely heavily on dividend and capital gains incomes generated by corporations and banks. Solid returns on our savings and insurance plans are only possible so long as the corporate sector remains strong. Finally, one of the largest labour pools in the country is employed in the financial sector itself, spending millions of dollars in the local economy, and paying millions more in income taxes.

This is all obvious and true. Let us also not forget that the corporate sector in-toto is the largest giver to charity, sports, athletic training and myriad other worthy social causes. Business in other words is self-interestedly concerned with social and moral issues.

It should be obvious that to stimulate enough economic activity to cover 'socialised' markets such as health care, or the supra-regulated oligopolies which dominate the modern political-economy, and to stimulate social-giving, you need to have low taxes, smart regulation and proper incentives. The mindlessness – and that is the only word for it – of people who rave against 'profits' only highlights their ignorance of how markets actually work, how people really behave; and how economies produce enough 'rent' or revenues to pay for all the candies, goodies, and lollipops that the State and its abettors hands out to various clients to buy votes and social peace.

The facts are clear - in every single instance of 'tax cuts', the economy has eventually grown, jobs have been added and government revenues have increased. The tax cuts of the the Conservative JFK, who ran as a [un]Democrat to get elected, the policies of Reagan and Bush; the tax reformation in modern Canada all support this fact – lower tax rates will over-time increase government revenues and jobs and increased transfers to aid charity and various actors in our social fabric.


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