And they want to do this so that the burden of tax is shifted from capital – business profits in this case – to labour. And this is part of the process of reallocating wealth from the poorest to the richest in society.
So what Wolseley is doing is not a politically neutral act. And nor is it all it claims – a move against regulation. This is about shifting power. From people to capital. From countries to corporations. From poor to rich.
And to prevent this we have to assert the right to tax corporations.
It\’s this ignorance of basic economics which leads him into such errors.
1) Corporations don\’t pay taxes, people do. The question therefore is who actually carries the economic burden of these taxes which are nominally collected from corporations.
2) There are three groups who could be carrying this burden. It could be the shareholders (ie, capital) in the form of lower returns from their investments. It could be the workers in the form of lower wages (ie, labour) and finally it could be customers in the form of higher prices (ie consumers).
3) The general conclusion in economics (please note, not neo-liberal economics, not new classical, not Keynesian, neo-Keynesian, any of the various heterodoxies, but a basic point agreed by all such schools) is that who carries it depends. And in any particular economy it depends, crucially, on the mobility of capital. The more mobile the capital the less of the burden that capital (ie, the shareholders) will carry and the more that labour (ie, the workers) will. Very few think that consumers carry a significant portion of the burden in any of the reasonable flavours of the universe.
4) We are, as in fact are most economies, small and open (there are those which are large, like the US and thus slightly less affected, there are those which are closed, like North Korea and thus hardly affected at all) meaning that capital is highly mobile.
5) The CBO in the US estimates that some 70% of the economic burden of the US corporate income tax falls upon labour, the workers, in the form of lower wages. Joe Stiglitz (Nobel Laureate recall) has pointed out that it\’s entirely possible that the burden falling upon labour can be greater than 100% of the tax raised. Mike Deveraux has asserted that this is the case in the UK.
6) The long term effects will be greater than the medium term effects which themselves will be greater than the short term ones in this shifting of the economic burden from capital to labour.
Now none of the above is really arguable. It\’s really just the straight economics of taxation and we\’ve known about this for a long time.
The one part that is arguable is whether the various estimates of the effect are correct: the CBO, Stiglitz and Deveraux could indeed all be wrong. The effect we know is correct: it\’s the magnitude which is arguable.
Now, note Ritchie\’s dreadful error in his base assumptions. That the burden of corporate taxation is actually carried by capital. We know absolutely that this is not necessarily so. We have a number of estimates telling us that this is not so….and we don\’t, at least as far as I\’m aware we don\’t (and entirely willing to be corrected here), have estimates telling us that this is so.
Simply because Ritchie doesn\’t understand economics he\’s led into this dreadful error: that we must tax corporations because this is the taxation of capital.
But it ain\’t, is it?