Companies do pay other taxes roughly comparable to their size, I was just simplifying for the sake of explanation. Employee tax is one example. Don’t know how it works in the US but in the UK all businesses will pay a “national insurance” tax contribution for every employee they have. This is a level that can be turned by the treasury. But increasing any tax burden discourages the activity that leads to it. Taxes on employees, although paid by companies, are seen as “anti job” taxes. Taxes on profits are seen as “punishment” for honestly raising a profit in the home country (rather than various offshore licensing schemes). The raw market value of a company could be taxed, but that sort of perversely encourages a company to downplay its value.
Ultimately we want companies to be successful, the only issue with it is when the ownership is concentrated in the hands of the very few. Unfortunately that appears to be what drives success in many cases. Small ownership = focussed quick decision making. Sometimes that really is what’s led to an American company seeing the success it does rather than some Chinese competitor gaining the edge.
That’s why I throw a lot of this back on consumers. We’re the democratic force in all this, and we have a lot of power when we act en masse. Why is there one Amazon instead of two? Because people also choose cheapest and they fail to properly value the fact they can have all sorts next day (even same day) when that service never existed ten plus years ago. If they valued that properly then they’d be more able to see competitor B at $10 is still providing them good value service even if Amazon is selling the same at $7.
I’m not sure that’s it’s healthy to stop people having free choice of where to shop. People being able to vote with their money is what makes capitalist countries the innovation experts of the world.
The issue is what happens when that capital concentrated into a small number of hands starts to wield anti-choice power and / or political power. So I think people building successful companies and being wildly rich (on paper) is fine, but legislation should stop them hoovering up smaller competitors (anti trust laws). And money should certainly be capped and prevented from undue influence in political processes.
The US and UK are quite different in that regard. Our anti trust laws could be better, but at least our political processes are relatively short and the use of money in them held to a reasonably high level of disclosure. Both could be improved.
And I think they will when the population elects a social-good minded government that’s pro business. Typically in the past I’d personally say this mostly lines up with what used to be called New Labour. They certainly did some social good but they made some appalling mistakes trying to partner with business.
I don’t know that the equivalent hope in the US is. I see the democrats gets criticised a lot of not being well connected to working class people and too cosy with big business. But campaign finance laws would need to change before the way in which money and politics interacts could ever reasonably change.
Which all feels a bit far off, which is why I come back to what small actions individuals can do… Buy local, from small businesses, be prepared to spend more to spread wealth a little more evenly, buy domestic, not foreign, avoid the services of megacorps wherever you can, enable others to do the same. Who knows? Can you imagine a community run Amazon that cost a bit more but funneled profits back into the local community? Things like this can be tackled by a relatively small band of motivated individuals regardless of what’s going on in the halls of power.
Except your argument on small ownership is quick decision making has a counter arguement… shareholders… they appoint a small group for daily operations and decisionmaking. But the real power is with the shareholder meeting and a large group of possibly anonymous owners.
Yes that’s true, I was trying to make the point that the ownership of the company is usually directly responsible for its success, whatever form that takes. And forcing the dilution of ownership (by taxing a company on its overall market cap rather than its profits) is only going to be disruptive to whatever arrangement made it successful in the first place (be that forcing control out of the hands of a good founder or diluting the control of a group of investors that approved a good board). Don’t get me wrong, that might sometimes be a good thing. It’s just that the logic “you’ve made this company is so successful you’re going to have less control over it” is unlikely to work out well in the long run. Better to take more taxes from profits if anything (as long as that’s internationally competitive) or have stronger laws preventing companies with huge value from muscling in and taking over competitors or whole industries (eg Musk etc)
That would be true if companies did not create elaborate constructions and park money in tax havens.
I’d almost say that companies should be taxed (a different rate) not on profits but on revenue. If they make the revenue in your country, it should be taxed in your country.
I’d almost say that companies should be taxed not on profits but on revenue
This is what sales tax is though. Tax collected at the point of sale (ie revenue). You can collect it direct from companies instead but all you’d see is the ‘sales tax’ line of your shopping cart go higher.
Profit is taxed instead of revenue (in general) because companies operate on wildly different margins (the difference between revenue and profit). So let’s ignore the fact it would get passed directly onto consumers and assume a revenue tax is borne by the companies… Say your revenue tax was 2% you might have a negligible effect on Apple, they have a large gap between their revenue and costs so they just absorb this as a tiny dent on profits, Tesla might be hit moderately hard (the amount of profit they turn compared to revenue is smaller so a revenue tax makes a much larger impact on profit), and it may have a catastrophic impact on Starbucks (very small gap between revenue and expenses so decreasing revenue via a 2% tax almost completely eradicates profits).
I’m making up which company’s which just to illustrate that a revenue tax doesn’t land equally across companies. Some industries are low margin some are high margin and a revenue tax disproportionally clobbers low margin industries. Which might not be the effect we wanted. So it’s better to tax profit.
This does create issues where companies deliberately don’t turn a profit because they aggressively reinvest in expansion and acquisition.
Except in this case the tax is levied across the entire value chain. But yes, this would favor high margin business over low margin ones. But isn’t the current system doing that too? Investors throw money at high margin companies while not so much at low margin ones.
Companies do pay other taxes roughly comparable to their size, I was just simplifying for the sake of explanation. Employee tax is one example. Don’t know how it works in the US but in the UK all businesses will pay a “national insurance” tax contribution for every employee they have. This is a level that can be turned by the treasury. But increasing any tax burden discourages the activity that leads to it. Taxes on employees, although paid by companies, are seen as “anti job” taxes. Taxes on profits are seen as “punishment” for honestly raising a profit in the home country (rather than various offshore licensing schemes). The raw market value of a company could be taxed, but that sort of perversely encourages a company to downplay its value.
Ultimately we want companies to be successful, the only issue with it is when the ownership is concentrated in the hands of the very few. Unfortunately that appears to be what drives success in many cases. Small ownership = focussed quick decision making. Sometimes that really is what’s led to an American company seeing the success it does rather than some Chinese competitor gaining the edge.
That’s why I throw a lot of this back on consumers. We’re the democratic force in all this, and we have a lot of power when we act en masse. Why is there one Amazon instead of two? Because people also choose cheapest and they fail to properly value the fact they can have all sorts next day (even same day) when that service never existed ten plus years ago. If they valued that properly then they’d be more able to see competitor B at $10 is still providing them good value service even if Amazon is selling the same at $7.
I’m not sure that’s it’s healthy to stop people having free choice of where to shop. People being able to vote with their money is what makes capitalist countries the innovation experts of the world.
The issue is what happens when that capital concentrated into a small number of hands starts to wield anti-choice power and / or political power. So I think people building successful companies and being wildly rich (on paper) is fine, but legislation should stop them hoovering up smaller competitors (anti trust laws). And money should certainly be capped and prevented from undue influence in political processes.
The US and UK are quite different in that regard. Our anti trust laws could be better, but at least our political processes are relatively short and the use of money in them held to a reasonably high level of disclosure. Both could be improved.
And I think they will when the population elects a social-good minded government that’s pro business. Typically in the past I’d personally say this mostly lines up with what used to be called New Labour. They certainly did some social good but they made some appalling mistakes trying to partner with business.
I don’t know that the equivalent hope in the US is. I see the democrats gets criticised a lot of not being well connected to working class people and too cosy with big business. But campaign finance laws would need to change before the way in which money and politics interacts could ever reasonably change.
Which all feels a bit far off, which is why I come back to what small actions individuals can do… Buy local, from small businesses, be prepared to spend more to spread wealth a little more evenly, buy domestic, not foreign, avoid the services of megacorps wherever you can, enable others to do the same. Who knows? Can you imagine a community run Amazon that cost a bit more but funneled profits back into the local community? Things like this can be tackled by a relatively small band of motivated individuals regardless of what’s going on in the halls of power.
Except your argument on small ownership is quick decision making has a counter arguement… shareholders… they appoint a small group for daily operations and decisionmaking. But the real power is with the shareholder meeting and a large group of possibly anonymous owners.
Yes that’s true, I was trying to make the point that the ownership of the company is usually directly responsible for its success, whatever form that takes. And forcing the dilution of ownership (by taxing a company on its overall market cap rather than its profits) is only going to be disruptive to whatever arrangement made it successful in the first place (be that forcing control out of the hands of a good founder or diluting the control of a group of investors that approved a good board). Don’t get me wrong, that might sometimes be a good thing. It’s just that the logic “you’ve made this company is so successful you’re going to have less control over it” is unlikely to work out well in the long run. Better to take more taxes from profits if anything (as long as that’s internationally competitive) or have stronger laws preventing companies with huge value from muscling in and taking over competitors or whole industries (eg Musk etc)
That would be true if companies did not create elaborate constructions and park money in tax havens.
I’d almost say that companies should be taxed (a different rate) not on profits but on revenue. If they make the revenue in your country, it should be taxed in your country.
Yes, tax havens are a problem
This is what sales tax is though. Tax collected at the point of sale (ie revenue). You can collect it direct from companies instead but all you’d see is the ‘sales tax’ line of your shopping cart go higher.
Profit is taxed instead of revenue (in general) because companies operate on wildly different margins (the difference between revenue and profit). So let’s ignore the fact it would get passed directly onto consumers and assume a revenue tax is borne by the companies… Say your revenue tax was 2% you might have a negligible effect on Apple, they have a large gap between their revenue and costs so they just absorb this as a tiny dent on profits, Tesla might be hit moderately hard (the amount of profit they turn compared to revenue is smaller so a revenue tax makes a much larger impact on profit), and it may have a catastrophic impact on Starbucks (very small gap between revenue and expenses so decreasing revenue via a 2% tax almost completely eradicates profits).
I’m making up which company’s which just to illustrate that a revenue tax doesn’t land equally across companies. Some industries are low margin some are high margin and a revenue tax disproportionally clobbers low margin industries. Which might not be the effect we wanted. So it’s better to tax profit.
This does create issues where companies deliberately don’t turn a profit because they aggressively reinvest in expansion and acquisition.
Except in this case the tax is levied across the entire value chain. But yes, this would favor high margin business over low margin ones. But isn’t the current system doing that too? Investors throw money at high margin companies while not so much at low margin ones.