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Bill: Corporate Tax Elimination Act of 2125
Details
Submitted by[?]: Islamic Nationalist Front
Status[?]: passed
Votes: This is an ordinary bill. It requires more yes votes than no votes. This bill will not pass any sooner than the deadline.
Voting deadline: July 2126
Description[?]:
| A BILL to eliminate the corporate tax. |
Proposals
Article 1
Proposal[?] to change Tax percentage of the profit made by corporations.
Old value:: 20
Current: 20
Proposed: 0
Debate
These messages have been posted to debate on this bill:
| Date | 22:50:47, October 14, 2005 CET | From |  Islamic Nationalist Front | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | Profits attained by a corporation are used towards tow purposes: retained earnings and dividends. Dividends are the percent of profits that stockholders receive, while retained earnings are used for investment in capital. Decreased retained earnings translate into less investment in new capital (new machinery, new facilities, more workers, etc.), which consequently effects all the workers that would have been otherwise employed (whether by the corporation itself, or say the company that makes the new machinery). Decreased dividends decrease stock prices, preventing the corporation from releasing more stocks, which again impedes the growth of the economy by limiting the amount of money available for investment in capital. Additionally, stockholders are effectively double taxed as dividends are first taxed under corporate tax and then under income tax. This creates a disincentive to save and invest, again, decreasing the total amount of money available for investment by corporations. Eliminating the corporate tax would spur economic growth, creating more jobs and thus, decreasing unemployment and potentially increasing wages. OOC: I'm also going to try and pass a long-overdue bill to cut spending. Like I've said before, the current numbers were randomly generated and are, thus, completely' inaccurately represent our government's actual spending. So, no, we will not run a deficit of 24 trillion JAK. (: |
| Date | 00:28:50, October 15, 2005 CET | From | Jakanian Conservative Party | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | well, you can guess my reaction to this one. |
| Date | 03:04:45, October 15, 2005 CET | From | Nudist Party of United Jakania | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | Eplain further how a corporate tax CUT helps spur economic growth? |
| Date | 03:12:06, October 15, 2005 CET | From | Jakanian Conservative Party | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | well, it places more money in the hands of the market, and less in the hands of the government. |
| Date | 03:48:34, October 15, 2005 CET | From | Islamic Nationalist Front | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | "E[x]plain further how a corporate tax CUT helps spur economic growth?" OOC: Explain how taking money AWAY from businesses is supposed to help the economy? Anyway, I thought I explained fairly clearly how corporate taxes directly result in corporations investing less in new machinery, facilities, and workers (i.e. capital), which then prevents the workers that would have otherwise been hired to provide that new capital. So, without corporate taxes we have...more workers + more capital = higher productivity = higher GDP, not to mention the higher employment and, again, potentially higher wages if the demand for labor is high enough. |
| Date | 04:41:50, October 15, 2005 CET | From | none | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | "E[x]plain further how a corporate tax CUT helps spur economic growth?" OOC: Explain how taking money AWAY from businesses is supposed to help the economy? Anyway, I thought I explained fairly clearly how corporate taxes directly result in corporations investing less in new machinery, facilities, and workers (i.e. capital), which then prevents the workers that would have otherwise been hired to provide that new capital. So, without corporate taxes we have...more workers + more capital = higher productivity = higher GDP, not to mention the higher employment and, again, potentially higher wages if the demand for labor is high enough. |
| Date | 13:40:35, October 15, 2005 CET | From | Jakanian Liberal Socialists | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | The JLSP disagrees. This bill makes the assumption that all a corporation can contribute to Jakania is beneficial, when that isn't the case. This bill would boost our economy, but we are not of the belief this would be significant, while scrapping of the tax would have larger ramifications elsewhere. For example, a non-positive aspect to large industry and corporate practise: pollution, environmental damage and waste. Someone has to foot the bill to deal with this in a way that is not harmful to our environment. To clean our drinking water, to dispose of waste, to keep our air clean and safe. As corporations won't cover this kind of expense themselves, or at least can't be guarenteed to, we need to ensure there are services available that can cover for the detrimental effects of our corporations. Environmental issues aren't the only ones here, but those are the most obvious ones to make an example of. The JLSP would like to state however, that despite the perception of The Evil Socialists, the party does see the benefits of corporations in jakania currently more than make up for any downsides, but this does not mean we should begin ignoring those downsides, as this bill is proposing. This is another case whereby the economy is being seen as an end rather than a means to a better quality of life for jakanians, no matter what the consequence, and this is exactly the kind of thinking we should be avoiding. |
| Date | 15:17:36, October 15, 2005 CET | From | Democratic Labour Union | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | The DLU concur wholeheartedly with the JLSP. In addition taking these funds away will inevitably lead to a cut in public services, which is wholly unacceptable. Furthermore we agree this will lead to economic growth, but as a State we require sustained and measured economic growth, not quick solutions. Taxation of corporations are also used as a method of ensuring the economy does not lead to an increase in inflation. If you allow an economy to run away with itself you devalue your currency, which in turn lead to less economic growth and corporations becoming less able to compete on the international market. |
| Date | 17:11:33, October 15, 2005 CET | From | Islamic Nationalist Front | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | OOC: It's entirely too tired for me to try to make my argument IC *yawns* "This bill makes the assumption that all a corporation can contribute to Jakania is beneficial, when that isn't the case." No. It doesn't. I would never deny that there are negative spillovers associated with certain businesses. This bill simply says that government should not prevent corporations from contributing that which *is* beneficial to our citizens -- jobs. "This bill would boost our economy, but we are not of the belief this would be significant, while scrapping of the tax would have larger ramifications elsewhere." I would grant that the actual outcome of the reduction would be varied from company to company, depending on each corporation's payout ratio. However, please explain how exactly you can conclude that the resulting boost to our economy would not be "significant." "For example, a non-positive aspect to large industry and corporate practise: pollution, environmental damage and waste. Someone has to foot the bill to deal with this in a way that is not harmful to our environment. To clean our drinking water, to dispose of waste, to keep our air clean and safe. As corporations won't cover this kind of expense themselves, or at least can't be guarenteed to, we need to ensure there are services available that can cover for the detrimental effects of our corporations." So.... you're reasoning for keeping the corporate tax is that government should tax corporations for the costs it incurs as a result of spillovers? How wonderfully fair for all those corporations providing only services for their customers, like consulting, IT, maintenance, construction, education, financial services, health care, insurance... So just because manufacturing corporations pollute, we're going to penalize all other corporations? Seems to me if companies are not held directly accountable, that just offers them an incentive to pollute MORE. Hey, if those other guys are gonna foot most of my bill, why not? In reality, there are much more efficient, market-friendly means of decreasing pollution, from pollution licenses (which I disagree with but eh) to pollution tax to direct accountability through lawsuits. But, even simply charging each company directly for the costs of regulation, clean-up, etc. makes more sense than an across-the-board tax. "Environmental issues aren't the only ones here, but those are the most obvious ones to make an example of." So what would the not-so-obvious ones be? I certainly hope not low wages because that is exactly what you're encouraging by decreasing retained earnings. "...the party does see the benefits of corporations in jakania currently more than make up for any downsides, but this does not mean we should begin ignoring those downsides, as this bill is proposing." Again, I'm not proposing that we ignore pollution or other spillovers. If that were the case, I'd be trying to reduce regulation and I'm actually in favor of "moderate" regulation because, like David Friedman, I'm currently a supporter of pollution tax, even within a libertarian society. "This is another case whereby the economy is being seen as an end rather than a means to a better quality of life for jakanians, no matter what the consequence, and this is exactly the kind of thinking we should be avoiding." First of all, why do you think I spent my entire first post explaining how eliminating the corporate tax would decrease unemployment (which we both agree is an issue for United Jakania) and possibly increase wages? Your statement is completely misleading, as few people regarding the economy as an end in itself (economic freedom, yes, but not the economy). Everyone, regardless of income, has a vested interest in the economy because it is their means of obtaining that income, and therefore improving their quality of life. I also neglected an important point earlier: lower corporate taxes would induce foreign companies to open shop in United Jakania, which, on top of higher employment and wages, means potentially higher competition and, therefore, lower prices. |
| Date | 17:33:57, October 15, 2005 CET | From | Islamic Nationalist Front | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | "Taxation of corporations are also used as a method of ensuring the economy does not lead to an increase in inflation. If you allow an economy to run away with itself you devalue your currency, which in turn lead to less economic growth and corporations becoming less able to compete on the international market." I'm not familiar with that assertion. Would you care to clarify (IC or OOC; I don't care)? |
| Date | 12:56:54, October 17, 2005 CET | From | Democratic Labour Union | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | JLP hopefully you will see this response, though the bill has been voted on and apologies for my late reply (I’ll message you in just in case, hope you don’t mind). I seem to have a little difficulty loading the game at the moment. It wouldn’t load over the weekend and it is painstakingly slow even now. Anyway here goes, it’s a bit long sorry, but it is a little complex. When governments plan taxation there are two aspects, which need to be considered: a. How much money do we need to cover public services, salaries and contingencies; b. How do we keep the economy stable and grow it. Point a is an obvious mathematical exercise with some emphasis on the State’s foreign policy (disaster aid, refugees etc.) and what natural/economic disasters might happen to the country (much harder to quantify). Point b is much more difficult since here the government looks at a nation’s retail price index (RPI) to ascertain what goods cost before a year ago and what they cost now. For example a new glass bowl on average might cost $1 today, one year later that bowl costs $1.20, why? Because consumers are prepared to pay for it and of course the seller is hardly going to complain. On the surface this seems all fine and dandy, until you factor in that this increase is happening all the way down the production scale of the bowl right down to the salary level, to the raw materials. So in real terms no one ever actually made more money because the consumer salary was increased proportionally, the retailer increased their price because their supplier did so and so forth. The margin of profit for all concerned stayed the same and the only consequence of this is that that something, which previously was considered to be only of a $1 value is now $1.20 with no significant increase to the quality of life for the consumer, retailer, supplier or indeed any other involved. What has happened here is that $1 is now worth $1.20, thus meaning you can buy LESS for your money since before the rise you would have been able to buy the bowl and say Willy Wonka’s newest chocolate bar. This is the main problem with capitalism and unavoidable, since the perception exist that if I charge more I will get more. That is true in the short term, but only until such time as everyone catches on the fact and then everyone charges more for the same item and its materials. Salaries are increased accordingly as market forces try and compensate and then everyone looses because we are back at square one except we now we pay more for the same thing. Every modern country in the world has wrestled with this problem since the invention of currency, which is why everything costs more today than they did years ago. $1 was worth infinitely more 50 years ago than it is now. With that thought established we turn to prevention and the government’s role. Since corporations, businesses, retailers etc are in the business of making money they hardly consider the consequences to the value of currency so that only leaves the state to control it. The most effective way to do this is through taxation so that you force retailers/manufactures to keep prices at a reasonable level, keep salaries stable etc. You also try and encourage investment in technology to increase margins by driving down the cost base without increasing the overall price and thus driving a potential increase in salaries and the overall wealth of the individual and the State. In Jakania all we have done now is remove any control over our currency since we now have no method to control the RPI and by definition the inflationary increase leading to inevitable rises in prices. In addition since other States do have inflation control, our currency will be worth less and less compared to others since they can buy a bowl and chocolate bar for $1, but we can’t. Thus imports and exports are severely hampered leading to yet more difficulties for price and material control. I can go on about the consequences of this decision, but it’s safe to say that Jakania’s is now set on a very rough economic path and one that will take decades to reverse if not changed quickly. |
| Date | 04:16:59, October 18, 2005 CET | From | Islamic Nationalist Front | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | Not that the "labour" part didn't already give it away, but you're from the UK, right? Didn't the UK make the switch from RPI to CPI around 2004? I don't know much about the RPI. Does that only take into consideration goods and not services? Anyway, thanks for the lengthy, albeit largely unnecessary, explanation of inflation. I hope you don't mind if I pick apart your argument a bit (: "What has happened here is that $1 is now worth $1.20, thus meaning you can buy LESS for your money since before the rise you would have been able to buy the bowl and say Willy Wonka’s newest chocolate bar." However, you earlier said yourself that, "in real terms no one ever actually made more money because the consumer salary was increased proportionally..." So in fact, I don't have any less money because both my salary and the cost of the bowl (not to mention the chocolate bar) increased at the same rate of inflation. "This is the main problem with capitalism and unavoidable..." Capitalism... or maybe government issuing fiat money (: "Salaries are increased accordingly as market forces try and compensate and then everyone looses because we are back at square one except we now we pay more for the same thing." AGain, we're paying more in terms of nominal value, but not real value. The real costs are related to things like investments, loans, the amount of liquid money people hold and, of course, international trade. "Since corporations, businesses, retailers etc are in the business of making money they hardly consider the consequences to the value of currency so that only leaves the state to control it." And don't forget, comrade, that centralized control of the economy is the answer to all our problems ;) I still don't understand how you think companies are directly and solely responsible for devaluing currency. Inflation, depending on who you ask, is caused by an increased supply of money, decreased demand for money, increased demand for goods and/or decreased supply of goods... Higher profits mean lower prices, more dividends, and/or more investment in capital, so at best a corporate tax serves to lowers the demand for goods by lowering the incomes of stockholders and customers... but an income tax would achieve the same function without the negative effect on company investment in capital. "The most effective way to do this is through taxation so that you force retailers/manufactures to keep prices at a reasonable level, keep salaries stable etc." Taxation increases prices (higher costs to the company are transfered in part ot the consumer), so in order to effectively battle inflation, if I understand you correctly, we would need to increase corporate tax when prices are low and then decrease them when prices get too high... Right? I'm not trying to strawman you here, I just don't see how else you could hope to "keep prices at a reasonable level" through just taxation. That logic seems twisted to me, because we would need to tax the companies in the first place, at whatever level would be deemed "low" (let's call it L). This would then result in a rise of prices (L+T). If further inflation occurs (L+T+I), we then decrease taxes to lower prices, but we're only able to lower them to a naturally inflated level (L+I), which is where we would have been anyway without the additional taxation. Furthermore, the "most effective" way of controlling inflation is not necessarily taxation. Monetary policies, such as decreasing the money supply, can also reduce inflation. In fact, Monetarists (and Austrian economists too I believe) argue that poor monetary policy on the part of the government is the cause of inflation in the first place. "You also try and encourage investment in technology to increase margins by driving down the cost base without increasing the overall price and thus driving a potential increase in salaries and the overall wealth of the individual and the State." Sounds nice, but "encouraging investment in technology" generally means funding various government research programs and grants to universities. This money has to come from somewhere. If you're proposing using the revenues we would get from corporate tax, this seems a bit counter-productive. I've stated above that taxing corporations can result in decreases in investment in capital (particularly among high-growth companies that might pay out no dividends at all)... so you're taking money away that might have been used for investment in new technology anyway, while affecting a number of other factors like prices. "In Jakania all we have done now is remove any control over our currency since we now have no method to control the RPI and by definition the inflationary increase leading to inevitable rises in prices." Even if we're going just by Keynesian fiscal policy, we can still cut government spending to decrease demand for goods. Alternatively, we can decrease the supply of money. We could also abolish our central bank, but I'm not prepared to defend that proposition just yet. "In addition since other States do have inflation control, our currency will be worth less and less compared to others since they can buy a bowl and chocolate bar for $1, but we can’t. Thus imports and exports are severely hampered leading to yet more difficulties for price and material control." The fact that a country does have inflation control does not necessarily mean it won't suffer from high inflation, particularly if you accept supply shock inflation. But, you're right that inflation does severely impede trade... it's just a question of how we "control" it, or, in my opinion, prevent government from causing it :D "...but it’s safe to say that Jakania’s is now set on a very rough economic path and one that will take decades to reverse if not changed quickly." Sadly, the economy has not been implemented yet. I recorded the unemployment rates and such for our regions and they didn't change at all... Only the GDP changes to reflect government spending... but of course none of it actually matters. We don't even have government debt. So, there's sadly no way of determining the actual economic impact of any policy we undertake just yet. Nice rhetoric though ;P |
| Date | 12:04:45, October 18, 2005 CET | From | none | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | Ooh, Ooh I have lots of thoughts!! **Runs round in circles excitedly** :) I don’t have time to respond just now, but when I get home later I will prepare and post a descent reply. Thanks for the thoughtful reply though and apologies if my earlier reply appeared patronising, it was not my intent. :) |
| Date | 12:34:21, October 18, 2005 CET | From | Islamic Nationalist Front | To | Debating the Corporate Tax Elimination Act of 2125 |
| Message | Good deal. And it wasn't really patronizing, it's just that I have some grasp of macroeconomics so you don't need to elucidate quite that much. Also, don't hold back if you want to use more technical terms :D |
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Voting
| Vote | Seats | |||
| yes | Total Seats: 147 | |||
| no | Total Seats: 78 | |||
| abstain |
Total Seats: 25 |
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