Atlas Shrugged: The Mocking

Tuesday, July 14, 2009

In For A Penny, In For A Pound

Now that Megan McArdle has defended Wall Street in general and Goldman Sachs in particular, she has moved on to defending corporations. Like one of the capitalist cuties on CNBC, she's always ready to protect the rich from the poor and defend corporate greed and wanton destruction. Evidently not having any nuclear meltdowns, refinery explosions or poisonous gas clouds to excuse away, McArdle settles for a plea to relieve corporations of their onerous taxes. We will have to take this line by line. I apologize.
The corporate income tax may be the stupidest tax we have.

If a student of mine wrote that I would send it back and tell them that "stupid" is too vague and too general, and he or she must rewrite the sentence.
At 35 percent, America’s levy on corporate income is one of the highest in the developed world.

In 2007, about 2.5 million companies prepared lengthy returns at great expense, yet the tax generated only about 15 percent of total federal tax revenue.

Irrelevant to the question of how "stupid" the tax is. But, in retrospect, I now see that this sentence introduces the topic to the audience. And the topic is that it is expensive for corporations to have their taxes done. I would also send this paper back so the student could add information about why a corporate tax is a bad idea. I would write in the margins in red (I taught a while ago) "What is the effect of tax? How does it hurt corporations? Why was it put into place? Who does it help?"
The tax on corporate profits discourages capital formation, targets shareholders regardless of their wealth, and fuels frantic, and costly, business efforts to dodge it.

I guess this is the support for her topic sentence although it doesn't actually discuss anything specifically . Almost any expense could discourage capital formation or fuel efforts to dodge paying it. And taxes do have a bad habit of targeting everyone, to varying degrees. Freedom isn't free, you know.

Among experts who study its effects, support for the tax is at best sort of sheepish.

Give me names and quotes, otherwise it's just something McArdle made up.
Yet as taxes go, it is relatively popular.

Proof? Numbers? Polls? Studies?

Thank god that paragraph's finally over.Can you take my word for it that the rest is as stupid as the first paragraph? It is just complaints that paying taxes cost money and people want to avoid paying taxes. In the last paragraph McArdle finally gets around to proposing solutions.
Democrats are looking at ways to lower the rate and “close loopholes” so that more corporate revenue, particularly profits earned abroad, gets hit by the tax. But Uncle Sam could collect at least as much revenue in a more progressive and less distorting manner by eliminating the thing entirely, and raising taxes on capital-gains and dividend income (which were previously kept low to ease the negative impact of “double taxation”—taxing corporate profits first as corporate income, and then again as shareholder income). That might not provide the moral thrill of demanding that corporations cough up their “fair share.” But with so many real advantages, it’s an idea that both left and right ought to be able to get behind.

The solution is to eliminate the tax on corporate profits and raise taxes on individual shareholders and individual stock and bond holders. Shift all the corporate taxes to the individual. Incredible, considering the circumstances.

Note also the assumption that the other side wants corporations to pay taxes out of moral righteousness. Business really can do no wrong in her eyes, no matter how much she equivocates. It's one of the strangest things I've ever seen, and I live in Texas.


Downpuppy said...

I couldn't find that gem at the site. Does that mean its in the magazine?

It reads like a 6 year old wrote it. Any drunken first year accountant could tie her in knots in 30 seconds of asking obvious compliance questions, starting with: What's a dividend? What if the corporation doesn't pay dividends? What besides taxes keeps a company from padding earnings?

Malaclypse said...

I work at one of those companies that spends a boatload of cash on tax preparation. It does suck, as tax prep costs the same in a bad year as it does in a good, and you really want an outside firm doing it to 1) get it right and 2) prevent potential conflicts of interest.

But you know why that firm charges us a bundle? It is because we file 35 state returns on top of the federal return. And right now, those returns are based, at least somewhat, on the federal return. Eliminate the federal corporate tax, and you now have all those states making up their own rules for returns, far more than they do now. I'd expect our CPA bill to double, at least.

So, even leaving aside the "OMG DOUBLE TAZATION" mantra, her idea is just plain stupid.

Mr. Wonderful said...

Plus, since when is the expense of trying to circumvent a regulation an argument for its nullification?

"Your Honor, my client is spending a fortune--giving it to me, in fact--so that I'll get him found Not Guilty on these murder charges. Wouldn't the whole business be more streamlined and cost-efficient if we simply legalized murder?"