Hello all, this is my first post on the wonderful LvMI forums so please be gentle with me!
Firstly, after graduating from university in June, I have been fascinated with free-market ideas (Milton Friedman started my inquisitiveness!) and I certainly feel that I've learnt a lot and my mind has become freer (I use to be a liberal democrat, urgh!). I think I might have found my true love - freedom!
Anyway, enough of the sappiness.
I am debating this self-confessed social democrat and "economic pragmatist" (which I suspect is code for blissfully ignorant of economics!). His argument is that for competition and flourishing of small businesses, government should impose a progressive tax across businesses such that a higher taxation on big businesses will force their prices to rise and so they are then priced out of the market and the smaller businesses (which have been paying a proportionally lower tax) can undercut and become more competitive.
I would argue that if his goal is to help small businesses then government should impose no tax whatsoever on them. However, I suspect he can't give up on the idea of a business not paying its "fair share".
Since prima facie, there doesn't appear to be anything wrong with his reasoning and deductions. I was wondering what attack I should use? It seems like I could use a Bastiat argument of what is *not* seen. But how should I go about this? Basically I'm asking for a refutation of why progressive taxation doesn't result in its intentions.
He's being unreasonable because fairness is subjective.
Your opponent wants to overrule the choices of consumers and producers by taxing successful companies. Firms flourish by serving consumers. Firms that displease consumers lose market share, maybe go out of business. By the way, taxation is theft.
Oh dear! Welcome to the battle!
Most of us here are radicals (I hope!), so our first response will be that taxation is theft, and theft should not be supported. But I recognize this is so far from his position that it might not get the debate you are hoping for to start.
First point: it's a pipe dream to hope that government will function in this way. The rich and powerful tend to get their way more than the relatively poorer, not to mention the relatively more numerous who therefore have significantly higher transactions costs to their lobbying.
Next point: Did not small businesses flourish just fine before the income tax?
Next point: the proper size of firms in an industry can only be determined through the market discovery process. If he taxes the larger firms, then the firms will be smaller than their optimal size. What if some things are better done through large firms?
How about leaving the market alone?
Every decent man is ashamed of the government he lives under - Mencken
Hey! Welcome to these forums! I hope you have a long and productive stay where you will be bathed in economic knowledge and clear-headedness.
I think one of the simpler things to argue is to ask "why are smaller businesses necessarily better?"
Is "competition" not simply patronizing businesses with the lowest costs (since we assume something close to a neoclassical theory of the firm) which leads to the lowest price? It seems like taxing large businesses more actually creates inefficiencies and resource misallocation because the costs of large businesses are artificially increased. This affects the price of consumer goods, which affects most greatly the poor.
This is a simple, off-the-top-of-my-head argument, but not too shabby, imo.
Perhaps you could start with (possibly) simpler battles to fight. For example, show how the existence of the Fed increases inequality and helps the rich bankers. Then show that subsidies go to gigantic businesses which drive out smaller ones.
The guy obviously knows nothing about economics. Even a mainstream econ textbook should shed him of his ignorance.
Gocrew - remember that the morality of private property is not provable... I hope that the right-lib definition of the NAP is the only consistent universally-palatable theory possible, but private property as we define it is not objectively moral :)
Thank you so far guys.
I understand the raison d'être for "taxation is theft", but I live in jolly-old tryrannical, the state is right, "we love monarchy and statism", freedom-hating UK and that line of reasoning is fiercely hated and despised (I have tried it - they don't understand voluntaryism). At least America was conceived in freedom and liberty (albeit not of an anarchist flavour) and so taxation has a history as being viewed of as theft (XVI amendment 1913, income tax UK - 1798!).
Wheylous:Gocrew - remember that the morality of private property is not provable... I hope that the right-lib definition of the NAP is the only consistent universally-palatable theory possible, but private property as we define it is not objectively moral :)
But anyomne who argues against it accepts it, implicitly. So I don't need to prove it to them! ;-)
Libre: His argument is that for competition and flourishing of small businesses, government should impose a progressive tax across businesses such that a higher taxation on big businesses will force their prices to rise and so they are then priced out of the market and the smaller businesses (which have been paying a proportionally lower tax) can undercut and become more competitive.
His argument is that for competition and flourishing of small businesses, government should impose a progressive tax across businesses such that a higher taxation on big businesses will force their prices to rise and so they are then priced out of the market and the smaller businesses (which have been paying a proportionally lower tax) can undercut and become more competitive.
Too complicated. I'd suggest a much faster and cleaner way for satisfying his fetish for small business: the government should just confiscate all businesses larger than size X.
z1235:Too complicated. I'd suggest a much faster and cleaner way for satisfying his fetish for small business: the government should just confiscate all businesses larger than size X.
LOL! Excellent!
How so? Self-ownership, maybe. But what about owning the means of production, for example? Or land, for that matter? Are you trying to use some form of argumentation ethics?
That is basically what I was going after.
I am not yet ready to declare unconditionally for AE, because I haven't read any really careful critiques of it. But my instinct is to lean in that direction, as of right now.
Oh, pshhhhh.
Haha. I read AE and thought it meant "Austrian Economics", so I was gonna say that Arg Eth isn't part of Aus Econ. Lol.
But yeah, Arg Eth has been thoroughly critiqued before. I am not sure whether this is the article I was reading before, but here is one by Murphy and Callahan:
http://mises.org/journals/jls/20_2/20_2_3.pdf
After getting through the first few mistakes he made I decided to quit :P
z1235: Too complicated. I'd suggest a much faster and cleaner way for satisfying his fetish for small business: the government should justconfiscate all businesses larger than size X. i.e. a marginal tax rate of 100% over $X. I wonder how he would respond to that (given that he is an "economic pragmatist" - which by the way, can anyone define ?!). "The State is the great fiction through which everyone endeavours to live at the expense of everyone else." - Frédéric Bastiat (1801-1850) | Post Points: 35
Too complicated. I'd suggest a much faster and cleaner way for satisfying his fetish for small business: the government should justconfiscate all businesses larger than size X.
i.e. a marginal tax rate of 100% over $X. I wonder how he would respond to that (given that he is an "economic pragmatist" - which by the way, can anyone define ?!).
Thanks for the link. I shall read it and HHH's reply (I assume there was one).
Ah, Callahan. Right before he went to the dark side because not enough people thought he was the most awesomest libertarian.
(given that he is an "economic pragmatist" - which by the way, can anyone define ?!).
No, no. You defined it quite nicely.
I wonder what an economics-based non-pragmatist is.
His argument is that for competition and flourishing of small businesses
To what end, other than the flourishing of small businesses?
And I agree with the above, that the rich, being rich, can get around these kinds of clever solutions. If you can't have one large business, what about many small businesses? There also seems to be a whole lot to do before approaching this tax solution, such as abolishing subsidies and licensing restrictions. Get that stuff done, and if he still sees a "problem," then start talking about a clever taxing scheme.
So, is there anything to counter the charge that "progressive taxes help small businesses"? As I said, with my opponent's reasoning it prima facie sounds ok. But what is the real expense? The expense of big businesses, the consumer? Or am I going down the wrong route here?
That's a valid question, but right now I have another point to make:
How big is too big? Why not tax any "business" of more than 1 person? In fact, how do you define a business?
Wheylous: That's a valid question, but right now I have another point to make: How big is too big? Why not tax any "business" of more than 1 person? In fact, how do you define a business?
I have tried such basic inquiry, but was accused by one guy of being a nihlist! Its supposedly assumed by everyone that we know what constitutes as small business and what as big business. But if not, allow someone else to decide that. That "someone else" being code for government.
I'm not overly impressed with that paper. The part about AE only proving, at most, a right to the parts involved in speech has merit, and it had occured to me before. But they are misunderstanding, it seems to me, the nature of HHH's proposition in most of the rest.
As I said, I am not yet totally sold on AE, but Murphy and Callahan did not exactly hit the nail on the head with their article.
I have tried such basic inquiry, but was accused by one guy of being a nihlist!
I'm assuming that they have therefore already disproved nihilism to you? Strange, because Nihilism is essentially the Subjective Value Theory, which is in itself true.
Its supposedly assumed by everyone that we know what constitutes as small business and what as big business.
Most definitely not. If they do not define this then they are not being honest. Is it defined by market share or number of workers? Revenue? What about companies which cooperate? If these are not covered, then some rich man may decide to have many small companies cooperate. If they are covered, then how do you define "cooperate"? Am I cooperating with BP if I buy its gas for my car? What if I use their gas as part of the production of my own distinct product? What if I used gas as an input to create a slightly different type of refined gas? What if they themselves had this capacity but just delegated the responsibility to me?
And really, why small businesses?
I don't know his fetish for small businesses. I suspect he views "big" businesses as ipso facto evil. They've succeeded because they're evil. Argument by assertion.
I will try and rebuttal his argument and report back. This guy loves to have the last word - no matter how preposterous or ad hominem it is, so this is going to be a lengthy "debate". I'm reminded of the parable "don't argue with idiots. They'll drag you down to their level and beat you with experience."
So, is there anything to counter the charge that "progressive taxes help small businesses"?
As you said, focus on the "unseen" aspect. "Big business" is likely seen by your social democrat as a big corporation producing consumer goods. But what about businesses selling producer goods, especially to smaller businesses? Are there small businesses that rely on the goods produced by big businesses, which are big due to economies of scale? If so, the taxes get passed on to the small businesses.
GE makes lightbulbs and toasters, but they also make the washing machines used by laundromats, dishwashers for restaurants and plenty of other capital goods. What does taxing GE, and thus NBC Universal, mean for the companies producing content for NBC channels, for the companies editing those shows, or doing sound for those shows, all the way down to the small talent agencies, prop houses, etc., some of which may employ only a handful of people? Home Depot brings in $68 billion a year, and how many small businesses rely on their prices and accessibility? Costco and Sam's Club make even more money, and I see plenty of micro-businesses getting their supplies there.
I work at a small post-production company that employs no more than 10 people, yet we depend on goods produced by Sony, Apple, AVID, Fujifilm, Panasonic, etc. Throw another tax on those companies, and I'll probably be out of a job.
Thanks Michael J Green. Great example. I'll push him on this. If he falls back on to syndicalist styled arguments over non-scarcity and how anything is possible if only the capitalist pigs were out of the equation, then I guess the discussion is over.
Another line of attack:
Alright, tax big business. Then, you only have "good", small business. However, if the small business is so good and at an advantage due to the tax, it will grow. If it is good enough, it will then become a big business. Should we then tax it?
I suggest you have this argument over the internet so that you can post exactly what he replies here.
Wheylous: I suggest you have this argument over the internet so that you can post exactly what he replies here.
Will post verbatim.
Wheylous: Oh, pshhhhh. Haha. I read AE and thought it meant "Austrian Economics", so I was gonna say that Arg Eth isn't part of Aus Econ. Lol. But yeah, Arg Eth has been thoroughly critiqued before. I am not sure whether this is the article I was reading before, but here is one by Murphy and Callahan: http://mises.org/journals/jls/20_2/20_2_3.pdf After getting through the first few mistakes he made I decided to quit :P
Kinsella just gave me a link to his reply to Murphy and Callahan. After reading, I have to say I think he mowed down M and C's arguments. It is a far more convincing paper, and frankly I think I am ready to commit to AE.
I think we should take this to some other thread. I suggest this one or a new one.
This thread is awesome! Glad to see questions like these being asked. Anyways, onto the matter:
Under a progressive tax scheme for businesses, the larger a business becomes the heavier tax burden there is. This means that the big companies costs are going to increase and eventually they will have to raise prices to compensate. This means that the tax on business eventually becomes a tax on goods. Consider this, big-box stores like Wal-Mart make it possible for poor people to be well-fed (not that Wal-Mart is a purely free-market institution but that's a different matter). If a heavy tax was imposed on 'big-boxers', then the costs of business would be transferred onto the customers in the form of higher prices. So ask your debating opponent this: does he hate corporations more than he loves poor people? Why?
This tax scheme also makes it harder for small firms to become big firms. When owner of business A is on the cusp of moving into a higher tax bracket he faces a possibly crippling blow which might scare him off from expanding. At the least it will make his costs rise should he decide, if he can, to move up. 'Unhampered' (which really means: keeping what you earn) expansion is a good thing. It provides employment and economies of scale wherein more goods can be supplied cheaper to the masses. Doesn't he want poor people to be able to buy food?
The above points, however, are moot given the condition of a non-free/political economy wherein the size of a business is not an accurate indicator of its ability to please customers. By this I mean, in non-free markets businesses may expand at the expense of everyone through taxpayer money with unfair perks (licensing, eminent domain, subsidies, legal protections, etc.). Before coming up with a new tax scheme with which to crush evil capitalists, why doesn't he first suggest to take off the economic equivalents of laser guns and armor plating that has been given to them by means of taxation (at the expense of everyone)?
The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger
If the big businesses are acting within a competitive market, I am not sure that taxes on them specifically would lead to an increase in the price of the goods. Mises points out that sales taxes aren't passed down to consumers but absorbed by companies.
Look at it this way: The tax decreases your profit by 50%. You can't increase the price of the good to make up the loss because in a competitive market, you are a price taker, not a price maker. What this means is that the small businesses without the tax would simply offer the lower price you just left. You would lose your customers to the lower price, and hence you'd have no revenue (assuming perfect information).
Then again, the reason the small businesses weren't taking the business in the first place was because they weren't as efficient... Hence, even if the trade is transfered to them, their price would be higher than the original big business price.
SOMEONE CORRECT ME IF I'M WRONG!!!!!
Quasi-unrelated note: if there were only 10 big businesses selling the same product, and their taxes were raised, would one go into deficit to try to win customers or raise the price to compensate for higher cost?
@OP: Here's a visual depiction of my answer:
http://s833.photobucket.com/albums/zz252/claytonkb/?action=view¤t=Taxes_Fairy_Real.jpg
The root problem with your friend's argument is one or more of the following false beliefs:
You need to ask some probing questions to try to find out which of these fallacies are being espoused. You cannot refute an assertion (seen recently on the low-content thread, h/t Wheylous):
Clayton -
Libre: z1235: Too complicated. I'd suggest a much faster and cleaner way for satisfying his fetish for small business: the government should justconfiscate all businesses larger than size X. i.e. a marginal tax rate of 100% over $X. I wonder how he would respond to that (given that he is an "economic pragmatist" - which by the way, can anyone define ?!).
z1235: Too complicated. I'd suggest a much faster and cleaner way for satisfying his fetish for small business: the government should justconfiscate all businesses larger than size X. i.e. a marginal tax rate of 100% over $X. I wonder how he would respond to that (given that he is an "economic pragmatist" - which by the way, can anyone define ?!).
My (reductio ad absurdum) proposal uncovers that he's no "pragmatist" -- just a bully attempting to contort reality to reflect his subjective values/fetishes. All socialists are. How about the government shoots all blondes/redheads and confiscates all non-vanilla ice-cream towards forcing "society" to satisfy my own subjective preferences for brunettes and vanilla ice-cream?
And no, I'm not proposing an income tax rate of 100%, but a 100% property tax rate (confiscation!). Any business that grows above size X would be immediately confiscated by the government. Wouldn't this be the most efficient way of achieving his goal? If he likes/accepts it, then you rest your case, or ask: "Then what would be the incentive for any business to become successful/grow beyond size X, and what would this do to its customers and the economy?". If he's against it, then whatever he states against this bizarre proposal could be used directly by you as an argument against his luke-warm version of it.
Don't be intidimated by the socialists' debate tactics. Just keep your calm, disregard the emotional outbursts, the ad hominems -- and wipe the floor with him through cold reason. I've found that the Socratic method and reductio ad absurdum are most effective in such debates.
opponent: If you're a small business you're taxed less than if you were a big business. Simple as.
If you're a small business you're taxed less than if you were a big business. Simple as.
me: That is undeniably true. But what happens to small businesses that rely on goods produced by bigger businesses, businesses that are in the higher marginal tax bracket?
That is undeniably true. But what happens to small businesses that rely on goods produced by bigger businesses, businesses that are in the higher marginal tax bracket?
opponent: If it's a bigger business and is taxed more it can still provide cheaper goods using economies of scale. Look at independent supermarket retailers and compare their prices with the likes of Morrisons or Tesco. They still have that advantage over small businesses.
If it's a bigger business and is taxed more it can still provide cheaper goods using economies of scale. Look at independent supermarket retailers and compare their prices with the likes of Morrisons or Tesco. They still have that advantage over small businesses.
me: You tax the big businesses, they'll pass them onto their customers. If these customers are small businesses just eking out a profit, the higher costs incurred may make the differences between being in profit, and loosing the whole business.
You tax the big businesses, they'll pass them onto their customers. If these customers are small businesses just eking out a profit, the higher costs incurred may make the differences between being in profit, and loosing the whole business.
opponent: That may be true, but businesses don't pass their savings on as well as they do their costs. These Taxes will go to something that'll help everyone in society, not just the traders. As far as I'm concerned Corporation Tax is a tax on profits. If there is a 'eking' of profit, they wont be taxed at all.
That may be true, but businesses don't pass their savings on as well as they do their costs. These Taxes will go to something that'll help everyone in society, not just the traders. As far as I'm concerned Corporation Tax is a tax on profits. If there is a 'eking' of profit, they wont be taxed at all.
I'm reminded of Hayek's definition of "superstitious": When a person imagines they know more then they actually do.
Got him:
but businesses don't pass their savings on as well as they do their costs
And small businesses do? How come? He seems to assume that having more small businesses will pass down profits more. Plus, what's wrong with profits? Profits merely show that there is potential for growth in a market. They are an essential part of the free market. If there are no profits to be made, you know that demand meets marginal cost (in a competitive market).
Also, I'm under the impression that you haven't used the stronger lines of attack mentioned.
It's very hard to argue against this guy. Every time I go down one line of reasoning, his answer swerves to another line.
He never explained why "smallness" is desirable.
Keep posting the dialogue, if it's still going.
All of this is garbage. The savings amassed by companies are used for reinvestment or maintenance, which means employment and the greater possibility of providing cheaper goods to more people. Lower prices mean higher real wages/higher standard of living. Those taxes which prevent companies from reinvesting are then allocated to a federal budget, where the money is chopped up into bureaucrats wages, munitions, subsidies, etc. Funds are reallocated from voluntary, productive, vulnerable-to-dissatisfaction ventures to coerced, destructive, insulated ventures. By destructive I mean that with state spending there is no incentive and quite plausibly a negative incentive to have income outweigh costs. The state's stream of income is not related to its performance, it is a constant.
What does he think that businesses do? Play catch with satchels of money? They are producing things which are demanded.
Anyways the corporate tax is a tax on income, not profit. And even if they are 'eking out a profit' they will be taxed all the same.