Where is Socialism in 2014?

[flyingsnail]

An increase in the tax rate, effectively reduces the impact of the deduction... If you are interested, I can show you the math.

I'm not sure what you're trying to say here, higher corporate taxes and individual income taxes encourage businesses to hire because they gain less utility from retained and/or distributed income.

In any case, my point is that most wealthy folks don't actually believe the narratives about high taxes. Those narratives are used to manipulate the working and middle classes.

Do you seriously believe that a purchase from Victoria's Secret by a male could be a legitimate business expense?!?

Could be, it would depend on the nature of their business. But there are, of course, many businesses that stretch the tax code but its not like they would spend the money on hiring more people if they were prevented from doing so. Furthermore, even if businesses stopped doing this it would do nothing to change the overall economic model, that is, an economic model that transfers wealth from the working/middle class to the upper classes.

Furthermore, university professors are not exactly poorly compensated...

Overall their compensation is relatively poor, it takes many years for them to make a reasonable salary. But, more importantly, their compensation is not related to their research. That is, they get paid the same (assuming tenure) whether they pick their nose or come up with a cure for cancer, yet the vast majority are highly motivated in their research. Money in itself doesn't motivate people.....status motivates people and money is just one way to gain status.

 

[Clueless Git]

Do you seriously believe that a purchase from Victoria's Secret by a male could be a legitimate business expense?!?

We famously had a female who successfully got HMRC to accept a bit more than sexy underwear as legitimate business expenses.

She was engaged in the worlds oldest profession though.

 

[beancounter]

I'm not sure what you're trying to say here, higher corporate taxes and individual income taxes encourage businesses to hire because they gain less utility from retained and/or distributed income.

In any case, my point is that most wealthy folks don't actually believe the narratives about high taxes. Those narratives are used to manipulate the working and middle classes.


Could be, it would depend on the nature of their business. But there are, of course, many businesses that stretch the tax code but its not like they would spend the money on hiring more people if they were prevented from doing so. Furthermore, even if businesses stopped doing this it would do nothing to change the overall economic model, that is, an economic model that transfers wealth from the working/middle class to the upper classes.


Overall their compensation is relatively poor, it takes many years for them to make a reasonable salary. But, more importantly, their compensation is not related to their research. That is, they get paid the same (assuming tenure) whether they pick their nose or come up with a cure for cancer, yet the vast majority are highly motivated in their research. Money in itself doesn't motivate people.....status motivates people and money is just one way to gain status.

P1: Basic math: When taxes increase, all other factors held constant, available cash flow decreases. Whether a firm chooses to retain those earnings, distribute it to shareholders, hire new employees or buy a corporate jet..the bottom line is they have less cash to utilize when taxes increase. The issue is how they choose to use the cash that's available. In other words, is buying a corporate jet or hiring new employees a better use of available cash. IMO, hiring employees is a better use. The problem is that many executives would opt for the jet...

P2: There is simply no legitimate way for you to tap dance around the point. A purchase from Victoria's Secret is never a legitimate business expense (Aside from extreme or unlikely examples) and no, I don't consider a prostitution ring to be legitimate. I dare you to start a new thread advocating prostitution as a legitimate business...

P3.a - Everyone starts out with relatively poor compensation and has to work their way up. This is how it works in both the corporate world and academia.

P3.b - No, that is a blanket statement and incorrect. Status isn't the sole motivation. There are plenty of wealthy people who have no desire to be recognized for their wealth. But if you insist that you're correct, please provide a source.

 

[Spang]

I dare you to start a new thread advocating prostitution as a legitimate business...

Sex work is a legitimate business, and should be legal.

"Sex work is not simply sex; it is a performance, it is playing a role, demonstrating a skill, developing empathy within a set of professional boundaries. All this could be more easily recognized and respected as labor were it the labor of a nurse, a therapist, or a nanny. To insist that sex work is work is also to affirm there is a difference between a sexualized form of labor and sexuality itself." --Melissa Gira Grant

 

[flyingsnail]

P1: Basic math: When taxes increase, all other factors held constant, available cash flow decreases. Whether a firm chooses to retain those earnings, distribute it to shareholders, hire new employees or buy a corporate jet..the bottom line is they have less cash to utilize when taxes increase.

Businesses do not use after-tax dollars to invest with, they use pretax dollars, so the fact that after-tax income (or after tax cash flow) decreases in response to increased corporate taxes, when the business changes nothing, doesn't tell you how corporate taxes impact hiring. Also holding "all factors constant" assumes away the very issue, when corporate taxes increase businesses can use hiring as a tax shelter. A business, a sane one at least, is going to hire up to the point where it no longer gains utility from adding new employees. But an increase in corporate taxes will shift the marginal unity since they reduce the value of most other uses of the money. The math here isn't so basic since the variables are not independent.

But this is besides the point, my point was merely that the wealthy don't believe the common narratives in popular culture. They, at least most, understand what is really going on. They what lower income and corporate taxes to allow for a greater transfer of wealth. Capitalism is more or less a system to transfer wealth from the working/middle class to capital owners but factors like the tax rate can be used to either increase or decrease the rate of transfer.

A purchase from Victoria's Secret is never a legitimate business expense (Aside from extreme or unlikely examples) and no, I don't consider a prostitution ring to be legitimate.

I don't agree with this, whether or not a purchase from Victoria's Secret is a legitimate business expense would depend on the details. It could simply be a gift and gifts are a common business expense.

Everyone starts out with relatively poor compensation and has to work their way up. This is how it works in both the corporate world and academia.

There is greater disparity in academia, post-docs get paid very poorly but once you finally get a tenure track position the trajectory is similar to the corporate world. But academics, at least in most fields, can generally make more in the corporate world....they forgo income for the ability to pursue their academic interests.

There are plenty of wealthy people who have no desire to be recognized for their wealth. But if you insist that you're correct, please provide a source.

Its not about being "recognized for wealth" but instead that wealth increases their status. As far a source, well, I'm not sure what you want to see. The fact that humans are status seeking animals is well known in the social sciences.

 

[Clueless Git]

Everyone starts out with relatively poor compensation and has to work their way up. This is how it works in both the corporate world and academia.

That's kinda true ...

In my personal experience work alone isn't enough to get your compensation up. Not past a certain point at least.

To get past a certain point you have to be able to play the salary negotiations game too.

It's a game of bluff. Employer risks losing employee by offering below true market value whilst employee risks getting turfed out of job for demanding too much.

Men being hormonaly more inclined to take insane risks tend to do slightly better than women at that game.

Weird thing though ...

Employers actualy like employees who have the balls to hold out for top dollar in negotiations.

Employees who have the balls to hold out for top dollar in negotiations are, for obvious reasons, a very valuable business asset.

 

[beancounter]

Businesses do not use after-tax dollars to invest with, they use pretax dollars, so the fact that after-tax income (or after tax cash flow) decreases in response to increased corporate taxes, when the business changes nothing, doesn't tell you how corporate taxes impact hiring.

Business use cash flow projections to plan their investing and financing activities. A cash flow projection includes all of the forecasted cash inflows and outflows (including taxes paid) that a company expects to incur over the period reviewed. So in other words, if taxes increase, forecasted available cash flow decreases, and a company will plan it's investing and financing activities accordingly.

I don't agree with this, whether or not a purchase from Victoria's Secret is a legitimate business expense would depend on the details. It could simply be a gift and gifts are a common business expense.

VS as a business gift? Now, you're just grasping at straws....

Its not about being "recognized for wealth" but instead that wealth increases their status. The fact that humans are status seeking animals is well known in the social sciences.

status motivates people and money is just one way to gain status.

And here you're getting into semantics and playing word games. I've posted your OP on this topic. You explicitly said that status motivates people.

Anda status seekers aim is to be recognized....

 

[beancounter]

Weird thing though ...

Employers actualy like employees who have the balls to hold out for top dollar in negotiations.

Employees who have the balls to hold out for top dollar in negotiations are, for obvious reasons, a very valuable business asset.

In a stable economy that's true. But in a recession where an employer has 300 people lined up outside the door waiting to fill your position at a lower salary, employees have less bargaining power.

 

[beancounter]

Sex work is a legitimate business, and should be legal.

"Sex work is not simply sex; it is a performance, it is playing a role, demonstrating a skill, developing empathy within a set of professional boundaries. All this could be more easily recognized and respected as labor were it the labor of a nurse, a therapist, or a nanny. To insist that sex work is work is also to affirm there is a difference between a sexualized form of labor and sexuality itself." --Melissa Gira Grant

Great start! Do you want to move this to a new thread?

 

[flyingsnail]

Business use cash flow projections to plan their investing and financing activities. A cash flow projection includes all of the forecasted cash inflows and outflows (including taxes paid) that a company expects to incur over the period reviewed.

Businesses certainly use cash flow projections...but cash flow projections do not include corporate taxes since businesses use pre-tax (i.e., before corporate tax) dollars to invest, hire, etc. Businesses may also project after-tax cash flow but this figure is used much differently, its mainly a concern to investors. So, as I was saying, higher corporate taxes tend to encourage hiring because it shifts the marginal unity of adding new workers. Most wealthy folks are aware of this....but they are more interested increasing their distributions from the business so have created narratives to get mass society to support policies that transfer wealth from them to capital owners.

VS as a business gift? Now, you're just grasping at straws....

Sure......what is so unbelievable about that? At least in the US the IRS makes no restriction on the sort of item you can gift someone. You're talking as if Victoria's Secret is only of interest to prostitutes....but they sale a variety of items. PJs, clothing, etc. But even lingerie would be a perfectly legitimate gift as far as the IRS is concerned.

And here you're getting into semantics and playing word games. I've posted your OP on this topic. You explicitly said that status motivates people.

I'm not sure what word games I'm playing.....not everything is cut and dry and the semantics nuances are often important. But, yes, status motivates people......that is people are motivated to do the sorts of activities that they can gain status from in their respective communities. Increased wealth, above and beyond what it can purchase, is a way for people to gain status. Its not that they want to be recognized for wealth...but rather they want to achieve the increased status that the wealth will provide.

In any case, this is all tangential to my original point, namely that wealthy folks don't believe the common narratives you hear in mass society. These narratives are just well crafted propaganda.....so well crafted that both liberals and conservatives are duped by them. The aristocracy controls the very way people talk about things and that I imagine that plays a big role in the decline in socialism and related political ideologies.

 

[beancounter]

Cah flow projections most certainly do take taxes into account. The first line on the statement of cash flows is net income. Net income by definition is.... net of tax.

You may be thinking of EBITDA which is used in valuing a company for sale. Ebitda is not used in determining free cash flow in operational investing or financing decisions.

Net income - Wikipedia, the free encyclopedia

Businesses certainly use cash flow projections...but cash flow projections do not include corporate taxes since businesses use pre-tax (i.e., before corporate tax) dollars to invest, hire, etc. Businesses may also project after-tax cash flow but this figure is used much differently, its mainly a concern to investors. So, as I was saying, higher corporate taxes tend to encourage hiring because it shifts the marginal unity of adding new workers. Most wealthy folks are aware of this....but they are more interested increasing their distributions from the business so have created narratives to get mass society to support policies that transfer wealth from them to capital owners.


Sure......what is so unbelievable about that? At least in the US the IRS makes no restriction on the sort of item you can gift someone. You're talking as if Victoria's Secret is only of interest to prostitutes....but they sale a variety of items. PJs, clothing, etc. But even lingerie would be a perfectly legitimate gift as far as the IRS is concerned.


I'm not sure what word games I'm playing.....not everything is cut and dry and the semantics nuances are often important. But, yes, status motivates people......that is people are motivated to do the sorts of activities that they can gain status from in their respective communities. Increased wealth, above and beyond what it can purchase, is a way for people to gain status. Its not that they want to be recognized for wealth...but rather they want to achieve the increased status that the wealth will provide.

In any case, this is all tangential to my original point, namely that wealthy folks don't believe the common narratives you hear in mass society. These narratives are just well crafted propaganda.....so well crafted that both liberals and conservatives are duped by them. The aristocracy controls the very way people talk about things and that I imagine that plays a big role in the decline in socialism and related political ideologies.

 

[flyingsnail]

Cah flow projections most certainly do take taxes into account. The first line on the statement of cash flows is net income. Net income by definition is.... net of tax.

A business is going to project both before-tax and after-tax cash flows among other things, their published cash flow statement is going to be after-tax but the business tax expense will be cited on their income state so its easy to determine the before-tax flows. I never denied that businesses project after-tax cash flows, what I denied is that this figure is the relevant figure when determining the impact of corporate taxes on hiring practices. The first sentience in my prior post was not clear on that. Hiring impacts a businesses tax expense so, in this case, you want to look at before-tax cash flows. Also, assuming the business is well capitalized, a business doesn't hire on the basis of their cash flow but rather the marginal utility of adding more employees. An increase in corporate tax rates will, in general, shift the marginal utility in favor of adding more employees. But if you're thinking of the economy as whole, which we are, then you have to consider more than just a single businesses hiring practices. Higher corporate and income taxes will also tend to increase the incentive to invest funds which will, of course, result in more hiring in other firms. You can't analyze the impact of tax policy by looking at a businesses' accounting statements.

You may be thinking of EBITDA which is used in valuing a company for sale. Ebitda is not used in determining free cash flow in operational investing or financing decisions.

No, EBITDA adjusts for more than just taxes. And we are just talking about productivity taxes. Hiring, in itself, doesn't have much impact on other types of taxation.

 

[beancounter]

No, EBITDA adjusts for more than just taxes. And we are just talking about productivity taxes. Hiring, in itself, doesn't have much impact on other types of taxation.

No kidding. However we are specifically talking about taxes. EBITDA is earning before interest taxes depreciation and amortization.

No, I am talking about all taxes. That which is left over as free cash flow, and how the execs choose to utilize it.

Incremental employee salary, and employments taxes and income taxes reduce free cash flow. There is just no way around that. And it is the available cash flow which is used to determine operational, financing and investing decisions.

 

[beancounter]

I'm done.

 

[ledboots]

Lol beancounter. ^^

@flyingsnail , I just don't understand why paying higher corporate taxes would encourage more hiring? There would be less money to spend paying the employees because more money is going to pay taxes, right? It seems like the corporation would invest more in tax avoidance investments instead.

 

[Spang]

Great start! Do you want to move this to a new thread?

No.

 

[flyingsnail]

No, I am talking about all taxes. That which is left over as free cash flow, and how the execs choose to utilize it.

The narratives you referenced earlier in the thread are about productivity taxes (i.e., corporate and income taxes) and that is what I've been discussing, other types of taxation have different impacts on business behavior. In terms of cash-flow, you started out talking about cash-flow projections and I pointed out that businesses make a variety of projections, both after and before tax, and in terms of analyzing the impact of increased corporate and income taxes you have to look at before tax cash flow. You then started to talk about the standard cash flow statement which is not a projection at all but a statement about a businesses after-tax cash flow in the given accounting period. I guess I'm having trouble piecing together what you are arguing in reference to my claim.

Incremental employee salary, and employments taxes and income taxes reduce free cash flow. There is just no way around that. And it is the available cash flow which is used to determine operational, financing and investing decisions.

You seem to be thinking of business as a static entity, simply as an accounting entity, but hiring impacts a businesses revenue, their tax expense, etc so its not a matter of simple accounting.

Much of this discussion has become tangential, my point again, has been that wealthy folks don't believe the common narratives about taxes you hear in mass society and that, if anything, higher corporate and income taxes encourage businesses to hire and invest. I'm not exactly sure what you argument against my claims have been.

@flyingsnail , I just don't understand why paying higher corporate taxes would encourage more hiring? There would be less money to spend paying the employees because more money is going to pay taxes, right? It seems like the corporation would invest more in tax avoidance investments instead.

Wages are a deductible business expense so businesses pay wages, then pay taxes, so assuming the business is well capitalized corporate taxes wouldn't reduce hiring. On the other hand since the business now has to pay higher taxes on its income, it may decide that its more worthwhile to spend that money hiring and/or investing and these activities would shelter the income from taxes and provide for future capital gains.

Admittedly I'm more so speaking from the perspective of a small or medium sized business, the situation with large corporations is much more complex and the presence of tax loopholes can change incentives.

 

[Second Summer]

It's now 2015. Still no sight of socialism around here.

The wealthiest 1% will soon own more than the rest of the world's population, according to a study by anti-poverty charity Oxfam.

The charity's research shows that the share of the world's wealth owned by the richest 1% increased from 44% in 2009 to 48% last year.

On current trends, Oxfam says it expects the wealthiest 1% to own more than 50% of the world's wealth by 2016.

BBC News - Richest 1% to own more than rest of world, Oxfam says (19. January 2015)

 

[Andy_T]

Lol beancounter. ^^

@flyingsnail , I just don't understand why paying higher corporate taxes would encourage more hiring? There would be less money to spend paying the employees because more money is going to pay taxes, right? It seems like the corporation would invest more in tax avoidance investments instead.

Many people (especially in the US) tend to think that taxes are something bad, money that is spent on frivolous things without care.

In many countries, however, there are responsible governments who use taxes to do something worthwile, e.g. build schools, roads, hospitals and so on. It's not all spent on nuclear weapons and golden statues of the respective country leader.