Timmy elsewhere

At the ASI.

We tax corporate profits because it\’s a convenient place to tax. Globalisation has meant that it\’s no longer a convenient place to tax. So perhaps we should stop doing so?

6 thoughts on “Timmy elsewhere”

  1. We tax corporate profits because if we didn’t all the shareholders would go and live in tax havens, or at least send their wives to go and live there.

    In other words, corporate taxation is a necessary evil because we don’t know where the shareholders are. It ensures some kind of stream of income from capital gains even when the shareholders are offshore.

    And if we’re going to have taxes (which regrettably we must) and thus we must tax labour, we should surely also tax capital gains, yes?

  2. JamesV, even if you accept that taxes are necessary (I don’t, I’d love to see a citation on that one), your last paragraph is a complete non-sequitur. Why does the necessity of taxing labour once mean that it must be taxed twice? Capital gains are just the return from investing one’s after-tax income.

  3. …and when Capital Gains excludes indexation you can easily end up taxing non-existent nominal gains where the purchase was decades ago or across periods of high-inflation.

    That is truly egregious.

  4. @Richard Allan,

    Unfortunately we need a government to do some things. I’m on everyone’s side here when I think it does way too much, however reducing government to zero does not result in optimal circumstances for wealth creation or for most individuals (with the possible exception of those in the anarchy wielding the biggest sticks).

    Given that the other way of governments raising revenue (tarrifs) is going out of fashion big-time, taxation would seem to be inevitable.

    Sure, capital is essentially nothing more than the accumulated proceeds of labour, but it ain’t all your labour. I am by no means rich but have plenty of capital that I didn’t “earn” by working for. And taxes do tend to be raised on flows not stocks – you earn money you pay income tax. You pay a plumber to do work, he doesn’t get some tax relief just because you have to pay him out of your post-tax income.

    So what we (well, I) would like to see is something of a consumer-pays approach to government. You benefit from government you pay for it. Obviously it can’t be perfect – the utlimate point is redistribution and if you really didn’t need any of that to achieve your particular flavour of optimum society you would (arguably) indeed need no government.

    And holders of capital income most definitely benefit from having a government that stops the French invading and puts police on the streets to stop arsonists burning your factory. Therefore you should pay something towards that. You pay too much, I agree, because the government does too much.

  5. Reduce the barriers to entry for the little guy. High barriers to trade encourage the dominance of the multinationals who can afford to wait while their lawyers do the red tape. The multinationals choose their headquarters via their accountants whereas the little guy wants to make money providing necessary goods or products from his home town.

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