End The Corporate Income Tax

Megan McArdle had a piece recently regarding the benefits of ending the corporate income tax.  The fact that we have one of the highest corporate income tax rates in the world aside, Mrs. McArdle-Suderman offers the following reasons for eliminating this onerous and wasteful burden.

You can't tax a corporation; you can only tax a person

Corporations simply pass along corporate taxes in the price of their products.  It is just that simple.

The incidence of "corporate" taxes is not necessarily progressive.

Big companies can afford armies of attorneys and accountants to help them avoid tax liabilities.  Smaller companies that earn far less do not have the benefit of those resources.

The corporate income tax encourages firms to use debt finance, rather than equity.

I know a fair bit about this.  Consider that Apple is one of the strongest companies in America.  I remember 10-15 years ago there were many people that thought Apple was done as a computer company.  Yet they are still in the business of making computers...and many other useful gadgets.

How did they survive?  They took the road less traveled and became an asset rich company.  They own most of their corporate facilities.  As a result, they have the flexibility to invest in future products.

Most other companies are in debt.  They borrow against their buildings.  They borrow against their office furniture.  They borrow against their inventory.  And when hard times come along, they end up doing what their lenders want instead of having the freedom to re-tool, re-design, and re-orient on new products, new markets, new customers, and new profits.

If we want more stable companies, then we need to get rid of incentives that make them less stable.

You can't eliminate all the loopholes

The corporate income tax encourages firms to waste resources on tax avoidance

The corporate income tax doesn't raise that much money

The above three justifications represent the careful dance that companies and tax inspectors do with one another.  Companies waste valuable resources so they pay the least tax possible.  Tax inspectors waste valuable resources looking for corporate malfeasance.

Eliminate the tax and companies will focus on earning a profit without the contortions and market distortions caused by the corporate income tax.  And tax inspectors can go do something productive...like picking up litter in Antarctica.

Without the corporate income tax, a lot of the incentive for lobbying would go away

If getting corporate America out of the political funding game is so important, you would think that more people would be racing to end the corporate income tax.

Megan has more details, but the above should be enough to pique your curiosity.  Have a read.

8 Predictions

Megan McArdle has offered 8 predictions about the future of health care outcomes in the United States under the just passed "reforms".  She then offers a defense of those predictions that is based not on "who is the better pundit", but instead "if things don't change, then why are we spending $2,000 per household on it"?

If you don't think that any of the effects of this bill will be large enough to measure and hopefully, large enough to justify the price tag of this bill, then I have to ask two questions:

1)  Why the hell are we spending $200 billion a year, plus the mandated spending by individuals and employers on premiums, plus the new money the states will have to spend on Medicaid?

2)  Why on earth did you bring up all these apparently irrelevant statistics?

 Not unlike Megan, perhaps I am wrong about these "reforms".  But if I am going to be wrong, it better be based on some objective standard and not on some "but I feel like we should just all have health care" nonsense.  If I am not wrong, then the solution will not to be to throw more government money at the problem.  The solution will be throw less government money at it.

A....lot....less....

Mortality Due To Lack Of Health Insurance

Megan McArdle has some thoughts on how mortality relates the the lack of health insurance.....or not.

After giving it a read and perhaps some time to simmer in the old brain housing unit, consider how successive waves of medical innovation have save lives that formerly were lost.  If health care "reform" causes medical innovation to decrease...and perhaps cease in some areas....how many people are going to die that we might have saved.

This is not an argument against health care reform.  It is an argument in favor of not enacting "reforms" that will condemn us all to medicine that is stagnant.

Too Good Not To Copy

From Megan McArdle:

When you treat women like commodities, caveat emptor.

'Nuff said.

Can Monopolies Be A 'Good' Thing?

Perhaps.

Megan McArdle notes that whenever a company has a monopoly that is not enshrined in the law, that there are limits to the amount of abuse a company can heap on consumers before it becomes attractive to do business with competitors.

By now, I'm assuming that most of you know the rough outlines of last week's dispute between Amazon and Macmillan.  The shorter version is that once the iPad was introduced, Macmillan used its new leverage to demand that Amazon let the publisher raise the prices of eBooks in order to protect sales of its front list hardcovers.  After a weak attempt at retaliating, Amazon folded.

The longer version you should get from our excellent Atlantic Business piece by Virginia Postrel.

So as soon as competition was introduced into the eBook market . . . prices to consumers go up?  This sounds like an odd outcome.  Isn't competition supposed to make prices go down?

Not necessarily.  Actually, if you're among the majority of Americans who view the Sherman Anti-Trust Act as one of the finest legislative achievements in our history, you'll be surprised to find that the evidence that breaking up monopolies helps consumers is actually kind of weak.  Monopolists often operate in markets where there are great returns to scale, and they keep competition out by offering prices too low for a smaller new entrant to compete.  After the breakup of Standard Oil, probably the Sherman Act's most famous scalp, prices for key petroleum distillates actually rose.

 Something to keep in mind.

Megan McArdle - The Blogs Will Roll

I'd like to officially welcome Megan McArdle to my modest Blogroll.

Megan is a generally libertarian...as opposed to Libertarian...minded economist that writes for The Atlantic; a monthly magazine and daily website.

I find her positions to be generally well reasoned, well informed, and presented in an open minded fashion.....even when I disagree with her conclusions.

As an example, she is opposed to the current Congressional proposals as she believes that they will not deliver the advertised cost savings without cutting into either quality or access of health care.  At the same time, she has said that if any of the current proposals does become law and prove to cut costs and increase access without harming quality, then she would be very happy to admit she is wrong.

A position not terribly different from my own.

A second example would be her acceptance of the IPCC conclusions regarding global warming; that it is happening, that human activity is a prime motivator of such change, and that the scale of change calls for significant action.  She dismisses concerns over the "Climategate" emails as being not significant enough to change the basic conclusion.

Megan's head is crammed up her backside with respect to this particular issue, in the opinion of your most humble host.

In any case, I thoroughly enjoy reading Megan's blog and hope that you will as well.