Jump to content
Ford Edge Forum
pintokid

My Kids Chose Japanese Competitors

Recommended Posts

I dont understand how tax cuts are subsidizing car sales.

More money in circulation, more likely it will be disposable and get spent on a new car (or boat or rv, etc.).

 

Just wait in four years Wil the tax cuts expire and the national debt mushrooms and more money needs to be printed to cover the vig.

Share this post


Link to post
Share on other sites

akirby,

 

You said in a post, "Corporations don't pay taxes, we do." Then you discussed how taxes suppress their profitability.

 

Look at this way, It costs x amount of dollars to run the country. The needed x amount is collected through taxes. When tax cuts are given they are paid for in one of two ways. 1.) Somebody else pays more or 2.) debt, which is just a delayed 2.) with interest.

 

As you said about cars costing more without corporations getting the tax cuts. You put it as "Add $10k to every car sold and the price will go up $10k." That makes sense so when that $10k cost is removed as a financial burden, the price of a car goes down but the need for the money doesn't go away. Is it better for the person buying the car to pay that money or is it better that everyone else covers that cost now or in the case of debt, your kids or grandkids?

 

As an aside the evidence is also overwhelming that an arbitrary example $10k per vehicle tax break will result in an arbitrary example $8k reduction in the price of the vehicle. That's 10k windfall results in an arbitrary example $12k total loss to be made up for. The $10k loss in tax revenue we cover and an additional $2k removed from the expected sources to use that money. To an individual a dollar is a dollar. To an economy, every time that dollar gets used or turned over it's value is increased by a dollar. A multiplier effect. If a dollar bill is spent 1,000 times before it is destroyed because it's worn out, the value of that dollar bill is $1,000 dollars. That has to be factored in to the loss to the economy and the tax base also when considering tax cuts.

 

I'm not trying to impress the idea that all tax cuts are bad because they certainly are not. When they are arbitrary like the recent tax cut than they are not serving the economy or more directly, the people living under that economy. They become destructive to the economy because they disrupt the balance designed in to the system but also because the philosophy of, "If you build it they will come," only works in the movies. Money if not exchanged in an economy because of production. Money is exchanged because of need and demand. These tax cuts undermine "need and demand." Giving corporations tax cuts so they can buy back their stock does not create need or demand. Just the opposite. Tax cuts shrink the pool of money available to for someone to realize a fulfilled demand or need. This is why the originators of Laffer Curve or supply side economics, The Chicago School of Economics, now say the experiment in it were a failure. It disregarded human nature and assumed people would act as benevolent players with their role in the economy. IMO, common sense should have made this obvious.

 

Tax cuts are fine when they are targeted, thought out and planned to prop up a weakness in an economy but cuts for cuts sake doesn't do that. That's unneeded corporate welfare that we pay for.

Share this post


Link to post
Share on other sites

You forgot the result of creating new jobs - those employees pay taxes. More profit for companies means more taxes paid even if the rate is lower.

 

We are overspending and the only solution is to cut spending. We may have to raise individual taxes to pay down the debt but the first thing you do when your credit card is maxed out is stop overspending.

 

I don’t understand why liberals are so anti-business and anti-jobs and pro-government. The government doesn’t create anything - businesses create jobs and that’s where the taxes come from.

 

Will some companies pocket the extra profits? Sure, but look at it this way. Every dollar in profit either gets reinvested back in the business which creates or keeps taxpayers employed and paying taxes, it goes directly to taxpayers as salary and bonuses or it goes to shareholders as dividends which are eventually taxed. So you’re still taxing the profits at an individual level while allowing companies to grow and create more jobs.

 

By the way I would also make the personal tax rate 35% on anything over $250K - period. No tax shelters no deductions - if you make $10M then you pay about $3.4M in taxes. So if companies want to give that tax break money to their executives then they’ll pay the taxes.

Share this post


Link to post
Share on other sites

akirby,

 

You're basically right about governments don't create jobs but in return, businesses don't create the conditions necessary for businesses to succeed. Governments do that.

 

First, businesses don't exist in a vacuum like many conservatives, which I am BTW, want to believe. As I said, "If you build it they will come" only works in the movies. Understand this, creating jobs does not create wealth. This is where many conservatives fall off the rail. Creating jobs redistributes wealth, not create it. The value or worth of an economy or by extension, all economies is pretty well fixed. It takes major upsets to change the aggregate worth of an economy(s). Recent upsets have been the industrial revolution, the great depression, the computer-information-digital age and unfortunately, war. Creating money only results in inflation and restricting it results in deflation. But, both are proportional in the up and down in value. That doesn't mean access and control is proportional.

 

Giving business or anyone money does not create jobs. The only way to create jobs in a free market economy is by taking an action to meet a demand. A common example of this in the study of economics is the buggy whip. It doesn't matter how many people you hire to make them it's a waste if nobody wants them. You can give a company every penny in an economy to make buggy whips isn't going to create a demand for buggy whips. Economies run on demand, not production.

 

There's also the limit to growth known as competition to individual companies. If Ford, GM, Chrysler or Nissan had any inkling that putting up 5 more factories would increase sales to support them they wouldn't sit around waiting for tax cuts or local tax deals. If they believed that if they made enough cars to put 12 in every driveway they would be doing it. The reality is only so many cars are going to be sold every year and how many are sold has nothing to do with how many are made unless not enough are made. The annual year end sales identify that, that's not the case. The belief that just giving businesses money will create jobs is just wrong and untrue. Competition doesn't create jobs. It creates lateral moves. The amount of market share a company has determines their workforce. Shifts in market share means one company will create jobs but it's at the expense of layoffs at another.

 

Can you give me any example of how giving a car company tax breaks will create jobs? I can give you any number of examples though of how they costs jobs. Usually by the companies that reinvest the money back in the company, which too few do, they invest in innovation. Innovation is usually in the form of robotics and automation which doesn't require a weekly paycheck, lunch breaks or benefits.

 

Your comment about liberals being anti-business, anti-jobs and pro-government is untrue. I know there are sources that like to repeat for this nonsense to fulfill their agendas but it's not true. I will accept that liberals and conservatives disagree with how economies should proceed but just because they disagree with you doesn't mean they are naturally anti or pro anything. For cars a reality is the future of the carbon based, liquid fuel vehicles are coming to an end. The next upheaval in the economy is going to be with energy and liberals want to support growth their now while conservatives want to support it's last grasp. That's not my opinion either. That's the opinion of Ford, GM, Chrysler, etc. In the 80's when all the manufacturing in this country was leaving it was leaving with a "good riddance" attitude but along the way that attitude has morphed in to something else and it's liberals that are anti-government over the change in attitude. I suggest you're not seeing the forest for the trees on your liberals comment. Both conservatives and liberals are equally pro and anti when it comes to business and government. The difference is in the focus of the pro and anti attitudes. Liberals want to use the economy to invest in overcoming the well known problems with alternative energy while conservatives think the resources of the economy are better spent on supporting the time honored energy sources of the past.

 

Please don't read in to what I'm writing. I have no clue about who is right or wrong in this and I'm not suggesting I support one side or the other by challenging your perspectives. I'm just commenting on what I've read and what I've observed and giving both sides equal deference. What I will say though is that the latest tax cuts are hurting this economy and will soon be negatively effecting people. Bottom line, the tax cuts will create very few jobs and cost many more. We would have been better served by taking all that money and rebuilding our infrastructure which would have created more jobs than could be filled and left everyone better off.

 

Finally, have you ever heard the expression, "What the market will bare?" It's often erroneously explained to be about what price can be put on a good or service. It's actually about the resources of an economy and how much can be put in to A before it becomes detrimental to B and C. Often explain with an arbitrary example called "guns and butter." What happened to Russia is often used to explain this example. In an attempt to keep up with our military build up in the 80's, Russia diverted so much of their economy to military spending that their economy collapsed. The total of their non-military spending couldn't survive with the resources leftover in their economy after the military spending. The tax cuts aren't going to be this hard on our economy but it's going to hurt. Answer this, if the tax cuts were to have the results you believe they will, why weren't they enacted with a plan for the expected result and made them contingent on working towards that goal? The tax code is full of contingencies but not this time. There is only room for one faith in an economy and that is the value of a paper dollar, or whatever, is actually worth a dollar when the value of the actual piece of paper (cloth) isn't even one cent. Now back to my original question, why should anyone else subsidize the price of a car you or I buy? Because they are.

Share this post


Link to post
Share on other sites

I have to agree that cutting corporate tax rates was a necessary thing to make America more competitive. The 39% rate we had before the cut was pricing us out of the market. But I'm pretty sure that the cuts went too far... cutting the rate to be more in line with other countries (say, somewhere between 25% and 30%) would have helped a lot without having quite so much impact on the deficit. If America's corporate tax rate was in line with other countries then the other advantages of building a business here would have more influence on corporate decision making.

Share this post


Link to post
Share on other sites

I thought 20% was in line with other countries. I don’t think people realize we are competing with other countries for businesses. It’s no different than your local county charging 13% sales tax while the next county over only charges 7%. People will drive to the next county to shop and all your local businesses go out of business. You can no longer force companies to do business here so you have to compete. When Monaco wanted to encourage businesses to locate there they cut the tax rate to 0. Monaco is filled with thriving businesses and employs a lot of people and they make their tax money elsewhere.

 

I work on business cases occasionally in a large corporation - some as large as $1B. It’s not about just giving money to businesses with no growth potential - that is the case in some businesses. It’s about making it easier for new businesses to get started and easier for businesses that are growing to expand.

 

Businesses evaluate every growth opportunity and the tax rate absolutely makes a difference in whether projects get done or not and whether new jobs get created. And that includes taking jobs and business from other countries.

Share this post


Link to post
Share on other sites

The world average is 22% but the weighted average based on GDP is 29% so something between 25% and 30% for an economy as large as the US would be right in line with the weighted average. Those are statutory rates (rates in the tax code). Actual rates paid have been substantially lower - averaging about 19% in the US because of deductions and write-offs. Many of those deductions have remained after the cuts so the effective rate for corporations now is ridiculously low... lower even than most individuals pay. It's one thing to promote business in an effort to boost the economy (which really didn't need a boost at the moment) but giving away the store is something else entirely.

Share this post


Link to post
Share on other sites

I thought this thread was about a man and his children that bought foreign vehicles, not all the economics and opinionomics behind it

Share this post


Link to post
Share on other sites

Like live conversations, forum discussions tend to wander to related points around the central topic. Personally, I've found this discussion quite interesting and members are making well-reasoned points contributing to it. As long as it remains civil and somewhat related to domestic vs foreign products, I see no reason to limit it to strictly responding to the OP's post.

  • Like 2

Share this post


Link to post
Share on other sites

dolsen,

 

For the most part I agree with you. I expected to be done with this but apparently not. Also, the original post was a comment on economics and how individuals effect economies. As far as the economics go, when anything I wrote was an opinion I said so. I didn't put much opinion in to my comments.

 

Wizard and akirby.

 

I have to question your comments on tax cuts based on rates. All a tax rate means in this country is "potential maximum." The aggregate federal income tax paid by energy utilities, natural gas and electric, from 2008 to 2017 was 3.1%. It's obviously even less now. En masse the corporate tax rate over the same time period was 21.2% for half of the fortune 500 not the legislated 35%. All the 35% tax rate businesses as a whole paid between 17 and 18% based on taxes collected. This is due to tax strategies and loopholes. 18 of this countries biggest corporations paid no taxes over that time period. Most of those companies provide gas or electricity but it also includes General Electric and Priceline. Those that paid but at a drastically discounted rate isn't even addressed here with this information. 5 to 10% is common.

 

Also consider this, China and Mexico have top rates of 25% and 30% respectively with no where near as many legislated loopholes. Most of the countries our economy competes with have no where near as many loopholes as we do and most also have specific legislation about how loopholes can be designed and most also have a maximum allowable discounted rate. The are some that even have flat rates. They have no loopholes at all. That 10 or 12% rate now isn't really as attractive as it appears. In actuality the US had a very competitive effective tax rate. What isn't competitive about our tax system has nothing to do with other countries. It's with those businesses that have been locked out of the loophole legislative process because they don't have the resources to buy loopholes through our lobbying industry. Any politician that uses the often used phrase, so and so, "is using tax law to pick winners and losers," is disingenuous, hypocritical or outright lying because they all do. It can't be avoided by the process that our politicians have created.

 

Again, I'm not anti-tax cut. I'm anti-tax cut without a well thought out and developed plan to go with it. There is nothing planned or thought out about the recent tax cut.

 

Let me say it again, it takes X amount of tax dollars to run this country and with the recent cuts the only way to meet the need of the X dollars is with more debt. All debt for tax cuts is, is a declaration by our legislatures that they are ineffectual and incompetent at developing legislation that holds us all responsible now for what we do rather than passing the buck to our kids and grandkids to clean up and pay for our popular but bad legislation. Dolsen, you can label this as a mix of common sense and opinion.

 

An extended perspective. There is plenty of evidence that tax cuts better serves us all when they go to companies that are the "real" small companies. Our tax code defines small as 1,500, or less employees. The person that opens a plumbing or electrical company with 7 employees is what comes to mind for me with "small company." This is an arbitrary example to highlight my opinion of, I don't think of a company with 1,500 employees when I hear small business.

 

Will some jobs be created? Of course but it won't be many and the cuts will cost many more as evidenced by the vast majority of the windfall from the cuts going to buying back stocks. Using the windfall to look inward instead of outward is a fairly safe historical indication that the money will go more for innovation that costs jobs than creating jobs. And again, there is only so much demand for every industry. Using cars as an example, if Ford needs to add 1,000 new employees it means their market share has grown. More cars aren't being sold. What changes is who is selling them. This also means the market share of the rest of the industry has gone down which leads to layoffs at those companies. It's a lateral move of employees. No new employees are created and all that changes is where people work. As far as jobs go, it's a wash.

Edited by I'manedgeowner

Share this post


Link to post
Share on other sites

dolsen,

 

For the most part I agree with you. I expected to be done with this but apparently not. Also, the original post was a comment on economics and how individuals effect economies. As far as the economics go, when anything I wrote was an opinion I said so. I didn't put much opinion in to my comments.

 

Wizard and akirby.

 

I have to question your comments on tax cuts based on rates. All a tax rate means in this country is "potential maximum." The aggregate federal income tax paid by energy utilities, natural gas and electric, from 2008 to 2017 was 3.1%. It's obviously even less now. En masse the corporate tax rate over the same time period was 21.2% for half of the fortune 500 not the legislated 35%. All the 35% tax rate businesses as a whole paid between 17 and 18% based on taxes collected. This is due to tax strategies and loopholes. 18 of this countries biggest corporations paid no taxes over that time period. Most of those companies provide gas or electricity but it also includes General Electric and Priceline. Those that paid but at a drastically discounted rate isn't even addressed here with this information. 5 to 10% is common.

 

Also consider this, China and Mexico have top rates of 25% and 30% respectively with no where near as many legislated loopholes. Most of the countries our economy competes with have no where near as many loopholes as we do and most also have specific legislation about how loopholes can be designed and most also have a maximum allowable discounted rate. The are some that even have flat rates. They have no loopholes at all. That 10 or 12% rate now isn't really as attractive as it appears. In actuality the US had a very competitive effective tax rate. What isn't competitive about our tax system has nothing to do with other countries. It's with those businesses that have been locked out of the loophole legislative process because they don't have the resources to buy loopholes through our lobbying industry. Any politician that uses the often used phrase, so and so, "is using tax law to pick winners and losers," is disingenuous, hypocritical or outright lying because they all do. It can't be avoided by the process that our politicians have created.

 

Again, I'm not anti-tax cut. I'm anti-tax cut without a well thought out and developed plan to go with it. There is nothing planned or thought out about the recent tax cut.

 

Let me say it again, it takes X amount of tax dollars to run this country and with the recent cuts the only way to meet the need of the X dollars is with more debt. All debt for tax cuts is, is a declaration by our legislatures that they are ineffectual and incompetent at developing legislation that holds us all responsible now for what we do rather than passing the buck to our kids and grandkids to clean up and pay for our popular but bad legislation. Dolsen, you can label this as a mix of common sense and opinion.

 

An extended perspective. There is plenty of evidence that tax cuts better serves us all when they go to companies that are the "real" small companies. Our tax code defines small as 1,500, or less employees. The person that opens a plumbing or electrical company with 7 employees is what comes to mind for me with "small company." This is an arbitrary example to highlight my opinion of, I don't think of a company with 1,500 employees when I hear small business.

 

Will some jobs be created? Of course but it won't be many and the cuts will cost many more as evidenced by the vast majority of the windfall from the cuts going to buying back stocks. Using the windfall to look inward instead of outward is a fairly safe historical indication that the money will go more for innovation that costs jobs than creating jobs. And again, there is only so much demand for every industry. Using cars as an example, if Ford needs to add 1,000 new employees it means their market share has grown. More cars aren't being sold. What changes is who is selling them. This also means the market share of the rest of the industry has gone down which leads to layoffs at those companies. It's a lateral move of employees. No new employees are created and all that changes is where people work. As far as jobs go, it's a wash.

It only takes X dollars to run the country because our politicians have been overspending for years. We could get by with a lot less but Congress doesn’t have the balls (other than Rand Paul) to do it.

Share this post


Link to post
Share on other sites

akirby,

 

There's a lot of validity to what you wrote but because of how the money is spent more than the amount. Our infrastructure isn't falling apart because of over spending on it. There are also many good arguments on both sides about our balance between discretionary and non-discretionary spending. My opinion on this is that the adverse effects on both sides is really about state of being or mind and not the money itself. Also, social welfare doesn't have anything on corporate welfare because much of social welfare is corporate welfare. Walmart is a good example of what I mean. They have gotten better but just a few years ago more than half of their full time employees were eligible for social welfare. Walmart is a private corporation and each family member makes a million a day--last I saw--from Walmart's retail sales alone. I have no problem with the family making as much as they can and more power to them but not at our expense. Again, we subsidize Walmart with corporate welfare as a pass through to social welfare for half of their full time employees. Employees they would not have without the support of social welfare to keep them above water. Unfortunately there are many that place a blame on those full time employees for needing the welfare. Equally unfortunate, I know some of those people that blame the employees but they are at Walmart every weekend. They don't see the relationship involved. If the members of the Walton family could find a way to survive on the paupers sum of half a million a day and paid their employees a living wage those employees on welfare wouldn't have a need for it.

 

What I don't understand about our politicians is why they allow this? The tax code is full of penalties for people and corporations that make decisions that are determined to be detrimental to the balance of the economy but not on this one. We subsidize Walmart or the Walton's through the social welfare systems because without it they wouldn't have those employees that are making that million a day for them. The politicians have looked at the greater pool of taxpayers and determined that from that pool we sill subsidize Walmart by covering for them the shortcomings of their wage policies. That's our tax dollars that are going to Walmart employees instead of roads, bridges, airports, military, research, etc.

 

I have to say I don't blame the Walton's or anyone else in this position for taking advantage of the rules as they exist. Even if the rules exist because of Walton or anyone's supported lobbying efforts, that doesn't stop the politicians from saying "no." All things being equal though, it's easy to blame the politicians but ultimately we put them their.

 

As of 2012 there are 3 working welfare recipients for every none working recipient. Remove minors that are recipients from the ratio and there are 6 working for every non-worker. Remove seniors and it goes to 7 to 1. I couldn't find statistics for other exemptions like the infirmed. These numbers represented a steady 20 year trend.

 

Just my opinion but I'm against all welfare except for the truly needy. I have an equal disdain for both corporate and social versions but an honest discussion needs to take place about what is really social and what is really corporate welfare.

 

The Wizard,

 

I agree with everything you wrote. In "The Wealth of Nations," the first text on economics, Adam Smith devoted a good amount of the text to the hidden and obscure influences we are usually unaware of but highly impact the decisions we make about our wealth and how we use it. By beginning to understand the basics we get a better understanding of what we do and why. And just as important we begin to understand why others do what they do and why. At that point, criticism whether positive and\or negative begins to lose its appeal in favor of participation.

Share this post


Link to post
Share on other sites

We agree on welfare. My solution would be to create local gov’t jobs for anyone who needs a job. Pick up trash, paint - whatever needs to be done. Improve infrastructure. If there is nothing to do then you take training courses. That way people who need help get help but we don’t let people sit on their ass at home getting a check for nothing. And leave disability for those who are truly disabled and can’t work.

 

As for WalMart my solution is not to tax the corporation but tax the individuals making the money from the corporation without tax shelters and tax breaks.

  • Like 2

Share this post


Link to post
Share on other sites

akirby,

 

Hey, we agree. About putting people to work locally though there is kick back from those that do this work for a living already. The answer to this is to put those people to work for them and subsidize their pay and benefits through them rather than a township, city, county or whatever.

 

I totally agree with your answer for Walmart. Easy enough too since it's a private corporation. There are no stocks to be bought for them. Why don't we do it? This is more difficult to figure out with public corporations since it is owned by stock holders but I'm convinced there is a solution to be found if our legislators would just do it instead of being bought with a wink and a nod, to promote lobbied agendas.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×