Net neutrality non-neutrality
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@Kian said in Net neutrality non-neutrality:
@xaade said in Net neutrality non-neutrality:
If I want a cookie, and I'm willing to pay $1 for it, but two places are charging 50c. I pay 50c. If a 100% tax is added, I'll pay one of them $1. There's more to prices than supply and demand in a vacuum of two entities.
To reiterate, I was making the case that profit taxes don't affect sale price. If two places are selling at 50c, they'll continue to operate just as they did before. If they were selling a thousand cookies a month, so a revenue of $500, and their costs were $300, then the'd have a profit of $200, and a say, 35% tax on that (assuming a high bracket) would come out to
$75$70 in taxes for the business.If they instead had $400 in costs, meaning $100 in profit, they'd instead pay $35. In either case, modifying their sale price would lead to lower profits, so they would have no reason to attempt it.
price per cookie number of cookies sold income cost to make these cookies pre-tax profits 35% profit tax net total (after tax) $0.30 1000 $300 $300 $0 $0 $0 $0.50 1000 $500 $300 $200 $70 $130 $0.75 1000 $750 $300 $450 $157.50 $292.50 $1 1000 $1000 $300 $700 $245 $455 Yes, this makes the assumption that people would still be willing to pay $1 per cookie, and no competition, but it clearly shows that the higher the prices (given the same number of sales), the more after-tax income for the business (to pay dividends to owners/shareholders, to spend on increasing the business, etc.).
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@Kian said in Net neutrality non-neutrality:
I'm saying that they can only keep doing what they were doing, because if they could do better, they would have done better already. You don't decide to be a more successful company when you suddenly get taxed. If you could lower costs, why hadn't you done it already? If you can raise revenue, why hadn't you done it already? You're either making all the profit you can already, or you were giving money away before the government decided to tax you.
You do understand that costs and wages are sticky to some degree?
And it still doesn't help situations where a profit tax puts the margin below where the company wants to be and they stop investing.
And what about small business where the owner is taking home a small salary?
@Kian said in Net neutrality non-neutrality:
This is the very basics supply and demand.
If the market could react that quickly, then yes.
These concepts are great to help you understand broad scope behavior, but they aren't 100% accurate. There are a lot of exceptions and lag and other effects.
The company can decide that this one location is worth saving at a loss because of the promise of future profits, or even operate at a cost just for market coverage, or other strategic reasons.
Not everything is cut and dry supply meets demand.
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@djls45 said in Net neutrality non-neutrality:
Yes, this makes the assumption that people would still be willing to pay $1 per cookie, and no competition, but it clearly shows that the higher the prices (given the same number of sales), the more after-tax income for the business (to pay dividends to owners/shareholders, to spend on increasing the business, etc.).
He's saying that if they could already raise prices, they would have.
But that's not always a given thing. It's not always that cut and dry.
When you look at real life situations, a lot of effects happen when you lower margin or raise costs.
For one, an immediate effect will be stock prices lowering as confidence drops at the impending lower margins.
Stock that used to be kept in portfolios for the delicate but predictable price, will be dropped.
If a company suddenly goes from 20% margin to 15% margin, they may cut back on less profitable locations to reduce fixed costs. Certain investments will become riskier, jobs and businesses will be dropped.
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@djls45 said in Net neutrality non-neutrality:
Yes, this makes the assumption that people would still be willing to pay $1 per cookie, and no competition, but it clearly shows that the higher the prices (given the same number of sales), the more after-tax income for the business (to pay dividends to owners/shareholders, to spend on increasing the business, etc.).
Yes, if you ignore even the most basic precepts of market economics, the argument leans your way. But if your hypothetical customers will buy the same number of cookies for $1 that they did for 30c (triple the price!), why not sell at $2? or at $20? Sell a thousand cookies at a billion dollars each and you can make a trillion dollars in revenue!
@xaade said in Net neutrality non-neutrality:
And it still doesn't help situations where a profit tax puts the margin below where the company wants to be and they stop investing.
If those investors want to move their assets to another business with better returns, they have to sell off the company in some way. Assets don't turn into cash by the will of the investors, someone has to buy them. So you either close the company and take a loss on selling the parts, or you sell the whole thing to someone willing to accept a lower threshold. Taking a loss, likely a significant one, is unlikely to be a decision people take lightly. And where would you invest instead? Presumably other companies will also see their margins decrease, since taxes apply to everyone, which will move people to financial markets, which will lower the price of money due to a glut of supply, lowering the return on investments across the board.
@xaade said in Net neutrality non-neutrality:
And what about small business where the owner is taking home a small salary?
What about them? The owner simply pays income tax on his salary, like all his employees, and a separate tax on the profit of the business, which is legally a separate entity. He'd probably want to distribute how much he pays himself as profits and how much as a salary based on the exact tax code and brackets for people and companies to minimize the total tax. Details like having the company pay for his mortgage or other living expenses to lower the company's profit (computing those expenses as business costs) would fall under tax evasion. Not sure what your point is.
@xaade said in Net neutrality non-neutrality:
The company can decide that this one location is worth saving at a loss because of the promise of future profits, or even operate at a cost just for market coverage, or other strategic reasons.
And in those cases it would pay 0 taxes on those because they're not making a profit. Or rather, the loss on those would offset the profit on other stores. It would only pay taxes on the global profit of the whole.
@xaade said in Net neutrality non-neutrality:
Stock that used to be kept in portfolios for the delicate but predictable price, will be dropped.
Ok, sure. The money moves away from those. And where does it move towards, if everyone's profits are lower? Given a reasonable set of tax brackets, giving a lower rate to companies making less profits, money would move towards smaller businesses, giving an incentive to fragment large companies to get better tax conditions, instead of just making the biggest company you can. That would actually be better for the economy and result in a more dynamic economy.
Remember, you can't just have everyone drop everything. For one person to drop an asset, someone else has to pay for it. Otherwise you're throwing money away. So your own analysis requires that someone else willing to accept those lower profits exists. You can't just turn a company into money by will alone.
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@Kian said in Net neutrality non-neutrality:
@djls45 said in Net neutrality non-neutrality:
Yes, this makes the assumption that people would still be willing to pay $1 per cookie, and no competition, but it clearly shows that the higher the prices (given the same number of sales), the more after-tax income for the business (to pay dividends to owners/shareholders, to spend on increasing the business, etc.).
Yes, if you ignore even the most basic precepts of market economics, the argument leans your way. But if your hypothetical customers will buy the same number of cookies for $1 that they did for 30c (triple the price!), why not sell at $2? or at $20? Sell a thousand cookies at a billion dollars each and you can make a trillion dollars in revenue!
And you
'd the main point: there is no difference in how a company will handle a profit tax versus any other kind of tax. All taxes are treated as a cost by the business. They will accept higher taxes whenever they are also accompanied by increased (net, after-tax) profits as well. There is no way to force a business to simply take a loss via taxes without at least some attempt to offset that loss, unless you also get the government into mandating pricing as well. But then you don't have a capitalist system; it's becoming socialist. Well, nationalist, which is effectively the same thing.
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@djls45 said in Net neutrality non-neutrality:
And you 'd the main point: there is no difference in how a company will handle a profit tax versus any other kind of tax.
I didn't woosh. You are simply wrong. The fact that you have to resort to doing away with basic concepts like the elasticity of demand to support your argument is proof enough. The evidence lies in the fact that a profit tax behaves very differently to a sales tax, for example, and so the reaction of the business will be different.
Let's make a simple model. Let's say we have made some market research, and we "know" the elasticity of demand for cookies:
unit price | demand | revenue | fixed cost | marginal cost ($0.1*cookie) | profit $0.3 | 1500 | $450 | $200 | $150 | $100 $0.5 | 1000 | $500 | $200 | $100 | $200 $0.7 | 650 | $455 | $200 | $65 | $190That is the basic economic equation for the business. Given that, clearly the optimal price to sell the cookies at with this cost structure is $0.5.
So, what happens if we apply a 0% profit tax, a 10% profit tax, or a 35% profit tax?unit price | profit | 0% tax | 10% tax | 35% tax | final profit (0%/10%/35%) $0.3 | $100 | $0 | $10 | $35 | $100 / $90 / $65 $0.5 | $200 | $0 | $20 | $70 | $200 / $180 / $130 $0.7 | $190 | $0 | $19 | $66.5 | $190 / $171 / $123.5As you can see, whatever the profit tax is, staying at the pre-tax optimal sale price continues to give the optimal profit after taxes. How about a sales tax, though?
In the case of a sales tax, the actual demand doesn't move. You are still only going to sell a thousand cookies at 50 c because your clients only care about how much the cookies costs them, not how much you make and how much the state takes. But our costs do shift. Lets consider 0% sales tax (which looks like the first chart), 10% sales tax and 25% sales tax.
EDIT- Ah, made a small mistake calculating tax. Multiplied revenue by the tax%, when I should have divided by 1+tax%. Rather than change the charts, I'll adjust the taxes to 0%, 11.1% and 33.3% which result in the same numbers.unit price | demand | revenue | fixed cost | marginal cost ($0.1*cookie) | sales tax (11.1%) | profit $0.3 | 1500 | $450 | $200 | $150 | $45 | $55 $0.5 | 1000 | $500 | $200 | $100 | $50 | $150 $0.7 | 650 | $455 | $200 | $65 | $45.5 | $144.5unit price | demand | revenue | fixed cost | marginal cost ($0.1*cookie) | sales tax (33.3%) | profit $0.3 | 1500 | $450 | $200 | $150 | $112.5 | -$12.5 $0.5 | 1000 | $500 | $200 | $100 | $125 | $75 $0.7 | 650 | $455 | $200 | $65 | $113.75 | $76.25As you can see, as the sales tax increases, the relationship between the profit at the different prices changes, which didn't happen with the profit tax. In fact, at 33.3% sales tax the sale of cookies at $0.3 stops being economical, which not even the 35% profit tax managed, and the optimal move becomes to raise the price of cookies to $0.7. You could raise the profit tax up to 99%, however, and the optimal move would still be to sell cookies at $0.5, while selling at $0.3 remains economical if not desirable.
So there you go, a practical example of how different taxes have different effects on prices, and more pointedly, that sales taxes lead to higher prices while profits taxes don't.
I really don't know how to explain this any more clearly.
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@izzion said in Net neutrality non-neutrality:
Yeah, the top end ISP market isn't very competitive on a regional basis. Ultimately, for the 90% of standard users in the 90% of the US population that is covered by Verizon and AT&T 4G, mobile broadband Internet is at the point where its technology can compete with local ISPs (though the cost is generally not competitive yet, unless you're defraying the data cost over many cell phone lines, at which point you're going to hit the throttling cap even faster and Netflix will suck even more during peak hours). Obviously, for power users (VPNing in from home, playing real time online games, etc) even that isn't a viable option -- the jitter and packet loss spikes on a 4G hotspot would be bad enough that I would never be able to play League of Legends well while using my mobile hotspot.
Actually, if you want some more concrete numbers on "fixed broadband" (which for some reason also includes satellite), here's the latest report from the FCC released on April 21, 2017 on the Internet Access Services Reports page of the FCC's website.
According to the chart on page 6, 79% of the US has more than two fixed line providers at 10/1 Mbps speeds or faster. That drops to 13% at 25/3. And presumably, the 66%* that have 1-2 providers, those are the cable company (mainly Comcast) and the phone company (mainly AT&T/Verizon).
Mind you, Comcast and AT&T are using the courts to try to block any third player from entering the market, both businesses (such as Google Fiber) and cities who are trying to roll out their own fiber network.
*21% have no 25/3 or faster providers.
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All tax is eventually paid either by companies or by the government themselves. After all, where else does everyone's income come from?
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@masonwheeler said in Net neutrality non-neutrality:
a company's budget is complex enough that a change in taxes will not necessarily automatically result in a proportional change in prices charged to the customer, which is what you seemed to be implying.
You guys should be reading words instead of listening to shoulder aliens.
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@asdf said in Net neutrality non-neutrality:
The fact that money circulates more or less endlessly in an economy is exactly why it isn't as simple as you and @boomzilla try to make it seem.
You're imagining things that aren't there.
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@Kian said in Net neutrality non-neutrality:
If a company is making a profit, however slim, it is necessarily worth more as a company than as a bunch of disparate assets (it can't be worth less, since whoever buys the company could themselves sell it as disparate assets).
This does not follow. Others might very well be better able to use the assets.
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@asdf said in Net neutrality non-neutrality:
Your irony detector seems to be defective. You should have that checked.
Poe's Law is a
to irony detection (but I think you really meant sarcasm).@asdf said in Net neutrality non-neutrality:
Let me stop you right there. More money for the consumers also means that they spend that additional money somewhere (and that the currency is potentially devalued a bit), effects which you are completely ignoring.
If that really works, why not raise the minimum wage to $1000/hour?
Filed under: go big or go home
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@antiquarian said in Net neutrality non-neutrality:
If that really works, why not raise the minimum wage to $1000/hour?
I wasn't arguing for minimum wages here (that flamewar is
), just questioning xaade's logic.
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@Captain said in Net neutrality non-neutrality:
Also, the proportion of taxes a customer bears depends entirely on the elasticities of supply and demand. For example, when demand is elastic and supply is inelastic, the customer will bear virtually none of the tax and it will come out of the producer's profit.
I suppose I should explicitly address this, because it's glaringly wrong. The customer pays 100% of the taxation (previous caveats apply). The elasticities will affect how much profit they'll be paying for, however.
The tax is the tax, regardless of consumer and supplier feelings, and that's getting paid under penalty of law (i.e., that's another
caveat...everyone follows the law).
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You should address this in a 200 level microeconomics course, with a professor who can explain it to you.
Raising a tax can make the business worse off, instead of the consumer. In that case, it is entirely reasonable to say that the business is paying the tax. If, under the imposition of a tax, the price for a widget does not change, the customer does not face higher costs. The business does. It is the business who loses welfare/opportunities, not the customer.
But you know this.
And in case you don't, see
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@Captain said in Net neutrality non-neutrality:
You should address this in a 200 level microeconomics course, with a professor who can explain it to you.
I've already explained in pretty simple terms.
@Captain said in Net neutrality non-neutrality:
Raising a tax can make the business worse off, instead of the consumer. In that case, it is entirely reasonable to say that the business is paying the tax. If, under the imposition of a tax, the price for a widget does not change, the customer does not face higher costs. The business does. It is the business who loses welfare/opportunities, not the customer.
But you know this.
You seem to be sharing shoulder aliens with @asdf. I never claimed anything about welfare/opportunities. Sure, the business is the one writing the check but the customers are still paying the tax. The business just may or may not be able to charge enough to make a desired level of profit.
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@boomzilla said in Net neutrality non-neutrality:
This does not follow. Others might very well be better able to use the assets.
And how does that contradict what I said? The ability of someone else to use those assets influences the market valuation of those assets, which affects the valuation of the company. A company is worth the sum of the individual parts, plus the value of the market research, contacts, and other intangibles that make it operate.
So if some asset is particularly valuable to someone else, the fact that your company has that asset raises the value of your company because you retain the possibility of selling that asset. Thus, the company is worth at least as much as how much you can get for the assets. Your comment doesn't contradict my conclusion.
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@Kian I understand the supply/demand curves. A business is still going to consider a profit tax as one of its costs, and, like @xaade noted, that cost may cause the owners to decide that it will not be profitable enough to justify its existence, and the location would thus be closed; or there may be other reasons that they decide to keep it open, but profitability will not be one of those reasons. But too many of those, and the company cannot stay afloat.
By considering a profit tax as a cost, a business will try to find ways to decrease its impact and pass it along to someone else. It may decide to push more advertising to increase the demand so that the price can be increased. It may try to find ways to decrease its fixed costs, in order to have a higher profit margin at the same price. Every tax pushes down on the supply curve and increases the minimum business that a company must do in order to stay profitable.
That last point is probably the biggest problem with business taxes. It stifles "new blood" from entering the system. The bigger companies are least affected because their huge profits may be little affected, but small businesses that are already barely making a marginal profit are pressed hard to find enough extra profits to cover the increased costs and may not be able to stay open. That actually increases the likelihood of a monopoly taking over the market.
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@Kian said in Net neutrality non-neutrality:
And how does that contradict what I said?
Uh...in the obvious way? Such that a purchaser could get a better return by shutting down the business and selling the assets or using them in a different way instead of continuing to run it at the low level of profit you mentioned originally.
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@boomzilla said in Net neutrality non-neutrality:
Such that a purchaser could get a better return by shutting down the business and selling the assets or using them in a different way instead of continuing to run it at the low level of profit you mentioned originally.
Which is a point I acknowledged in the sentences following your quote:
So you'd be either selling it to someone who is willing to have that lower return on their capital, in which case all that happened is that the name of the owner changed, or the owner will take a loss by selling the company piecemeal to a bunch of different people. It'd be akin to declaring bankruptcy on a healthy company, a very strange decision to make.
At most your comment points out the existence of middle-men that have better information than either of the parties (otherwise the original owner would be selling to the middleman's customer directly) which represents the very loss I pointed out the original owner is incurring. My point being it's possible, but it would be rare for it to happen. Many companies continue to operate at a loss for years until they are forced to declare bankruptcy rather than close and liquidate their assets because of poor performance. The risk of someone liquidating a healthy company would be slim.
@djls45 said in Net neutrality non-neutrality:
that cost may cause the owners to decide that it will not be profitable enough to justify its existence, and the location would thus be closed;
And as I pointed out to him too, if you are going to close the location, SOMEONE IS BUYING IT. No one looks at a $100,000 investment making a 2% return down from a 3% return (the result of a 35% tax, say) and choose to consider it a loss. That means they want to turn it into money, and that money has to come from either someone who is willing to have that return, or someone that has an use for those assets. My point being, one of those is far more likely than the other.
@djls45 said in Net neutrality non-neutrality:
It may decide to push more advertising to increase the demand so that the price can be increased.
And why didn't management do this before the tax was applied? Do they hate money?
@djls45 said in Net neutrality non-neutrality:
It may try to find ways to decrease its fixed costs, in order to have a higher profit margin at the same price.
And why didn't management do this before the tax was applied? Do they hate money?
Are you under the impression that businesses decide how much of a return they want to make, and then try to stay in that % rather than trying to make as much as they can at any point? That's not how businesses operate.
@djls45 said in Net neutrality non-neutrality:
Every tax pushes down on the supply curve and increases the minimum business that a company must do in order to stay profitable.
I JUST showed you how the profit tax never affects whether a company is profitable. It affects how profitable you are, but it never turns a profitable company unprofitable. It may affect the shareholder's desire to hold on to it because they feel they can make a better return elsewhere, but the company remains profitable either way.
@djls45 said in Net neutrality non-neutrality:
The bigger companies are least affected because their huge profits may be little affected, but small businesses that are already barely making a marginal profit are pressed hard to find enough extra profits to cover the increased costs and may not be able to stay open.
Are you incapable of understanding what a profit tax is, even after I showed it to you with charts and everything? The bigger companies are the MOST affected, because a profit tax taxes profits. If you have large profits, you pay more, if you have low profits you pay less. It is not a fixed cost, and it is not proportional to how much business you have. It is only proportional to how well you are doing. It mathematically can't make a company struggle to remain open, because it's only taken from profits after all other costs have been accounted for.
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@Kian said in Net neutrality non-neutrality:
Which is a point I acknowledged in the sentences following your quote:
No, you said exactly the opposite.
@Kian said in Net neutrality non-neutrality:
or the owner will take a loss by selling the company piecemeal to a bunch of different people.
@Kian said in Net neutrality non-neutrality:
The risk of someone liquidating a healthy company would be slim.
Depends on what you consider to be a healthy company. A company making a tiny profit (what you originally brought up) may not fit many people's idea of such.
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@boomzilla to amplify, the profit margin is an average. Having a tiny margin on average usually means that in any slight downturn your business hemorrhages money. It's like a student riding right on the edge of a passing grade going into a final exam. Not a safe space to be.
In addition, deciding what "profit" means is a complicated thing with much room for gaming. What about a company like Amazon that reinvests almost everything? What about Hollywood movies that officially never show a paper profit but everybody makes out like bandits? A profit tax would be even more gameable than an net income tax (the current business tax system).
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@Kian said in Net neutrality non-neutrality:
SOMEONE IS BUYING IT.
No. Someone is buying the assets that the company used, but it is extremely unlikely that they are actually buying them to run the same kind of company. They may want the land, equipment, etc. for other completely different reasons.
@Kian said in Net neutrality non-neutrality:
No one looks at a $100,000 investment making a 2% return down from a 3% return (the result of a 35% tax, say) and choose to consider it a loss.
They do if they figure that they can make more money doing something else.
That means they want to turn it into money, and that money has to come from either someone who is willing to have that return, or someone that has an use for those assets. My point being, one of those is far more likely than the other.
Yeah, the second one.
@Kian said in Net neutrality non-neutrality:
Are you under the impression that businesses decide how much of a return they want to make, and then try to stay in that % rather than trying to make as much as they can at any point? That's not how businesses operate.
Are you under the impression that there is not a minimum profitability that a business owner will accept for their company? Because that's exactly how businesses operate.
@Kian said in Net neutrality non-neutrality:
I JUST showed you how the profit tax never affects whether a company is profitable. It affects how profitable you are, but it never turns a profitable company unprofitable. It may affect the shareholder's desire to hold on to it because they feel they can make a better return elsewhere, but the company remains profitable either way.
No, you didn't. The level of profitability that a company has is the primary determiner of whether that company is profitable. If the company's profitability drops enough that the shareholders decide to drop it from their portfolio, it won't stay a company for long, much less a profitable one.
@Kian said in Net neutrality non-neutrality:
The bigger companies are the MOST affected, because a profit tax taxes profits. If you have large profits, you pay more, if you have low profits you pay less.
The bigger companies pay more in flat numbers, but they are more able to "eat" that cost. Smaller companies are less able to do that. $400,000.00 from $1,000,000.00 (a 40% tax) still leaves $600,000.00 of profitability to distribute to the shareholders, who probably have several separate companies in which they hold ownership. $8,000.00 from $20,000.00 is a bigger hit for a smaller company, leaving only $12,000.00 for after-tax profits distribution. If the owner(s) of this small business cannot live off of that amount, they won't keep the business open.
@Kian said in Net neutrality non-neutrality:
It is not a fixed cost, and it is not proportional to how much business you have. It is only proportional to how well you are doing. It mathematically can't make a company struggle to remain open, because it's only taken from profits after all other costs have been accounted for.
Profits are proportional to the amount of business. The fixed costs do not change that fact.
Changing the costs (via profit tax or any other tax) also changes the equation that the company will use to decide whether to stay in business. It doesn't matter much for large, well-established companies, but for small mom-'n'-pop businesses and start-ups, it's a major factor. A profit tax increases the minimum profitability that a company must sustain.
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@Kian said in Net neutrality non-neutrality:
SOMEONE IS BUYING IT
Yeah, they're a shipping company, that buys another shipping company, shuts down the operations, fires all the employees, and uses the resources of the company because they just got a whole fleet on discount.
You have a good model for how the economy works, and that it balances out, but you're missing the details of what happens in REAL LIFE.
BAD SHIT HAPPENS that affects real people when you go mucking around with costs and margins of every single company in a whole nation. Sure, other people get hired, but for the people that lost their jobs or businesses, you're just going to shrug and tell them the economy still works.
You see, this is how government picks the winners, and it always seems to favor the big companies with big lobbying resources, that find a way out of the system.
LOL... have fun getting re-elected.
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@boomzilla If you want to be pedantic, look at what I actually wrote:
the proportion of taxes a customer bears depends entirely on the elasticities of supply and demand.
"Tax burden". Your trivial point, such as it is, is irrelevant. What you see as "glaringly" wrong, is 100% correct, and your ignorance is your blindspot.
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@Captain said in Net neutrality non-neutrality:
What you see as "glaringly" wrong, is 100% correct, and your ignorance is your blindspot.
You have, in fact, provided exactly no evidence to contradict my claim.
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@boomzilla Except for the fact that your claim is not relevant to tax incidence, and that is what I was talking about. Indeed, that is what everybody is talking about when they ask "who pays for a tax". Except for you, apparently.
If you wish to speak your own language, you're going to have trouble communicating.
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@Captain The problem with what you're trying to say is equivalent to saying, for example, that the customers don't pay for the cost of materials.
You're focused on the marginal changes, which is all correct as far as it goes, and if that's all you meant then we agree.
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@boomzilla said in Net neutrality non-neutrality:
A company making a tiny profit (what you originally brought up) may not fit many people's idea of such.
Perhaps, but breaking up a company has costs associated with it that means that even if it's making less than you'd like, you might lose more on the operation than you can recover in a realistic timeframe. You have to fire people and pay severance, find buyers for the parts, continue to maintain whatever assets require maintenance while you find buyers for them, continue to pay taxes on land and such, anything you can't find a buyer for has to be written off as a loss, etc.
Then you have to move into whatever new business is giving the higher return you left this one for (keeping in mind that the tax lowers everyone's returns). Then you have to wait for the higher returns to bring you back up to where you were when you decided to sell off your previous investment, and only then do you begin to see a return.
If your previous investment was giving you 5%, taxes lowered that to say 3%, you lost 10% of your business' valuation by liquidating it, and you move to something else that for some reason still provides a 5% return (why weren't you investing in this thing before, if it should also have been affected by the tax and so must have had an 8% return before?), it would take about 5 years to just get back to where you were when you started. But had you remained in the other business, you would have been getting a profit during that time too, so you have to wait for your higher returns to overcome the hypothetical performance of your previous business. So add another 5 years to break even.
So, ten years to start seeing a return on liquidating one company and moving your assets to another, assuming that other alternative even exists. Obviously what numbers you choose to use will influence the time it takes. But now we're in the realm of arguing what someone may find reasonable.
@Benjamin-Hall said in Net neutrality non-neutrality:
Having a tiny margin on average usually means that in any slight downturn your business hemorrhages money. It's like a student riding right on the edge of a passing grade going into a final exam. Not a safe space to be.
True, but during a downturn you would not pay those taxes, and different schemes may allow for the losses on bad years to offset profits on good years so that risk is lessened.
@Benjamin-Hall said in Net neutrality non-neutrality:
In addition, deciding what "profit" means is a complicated thing with much room for gaming. What about a company like Amazon that reinvests almost everything? What about Hollywood movies that officially never show a paper profit but everybody makes out like bandits? A profit tax would be even more gameable than an net income tax (the current business tax system).
This is moving into the realm of implementation. Companies that don't pay dividends, for example, would also be exempted. That's not bad in and of itself. I'm not saying a business tax is the only tax that should exist. Personally, I think a single net income tax that's correctly applied would be best. But those are also gameable: a small business may pay for the owner's living expenses and allow the owner to avoid paying tax on that income, for example. One thing is the principle, another is reality and how to apply it.
@djls45 said in Net neutrality non-neutrality:
Are you under the impression that there is not a minimum profitability that a business owner will accept for their company?
You have it backwards. There is no minimum profitability threshold. What there is is a variety of options the investor has to choose where to invest. The minimum is 0% return, essentially putting that money in a safe somewhere. Different business ventures then offer different returns, with different risks associated, and money is allocated. A profit tax lowers profitability across the board, so all of an investors choices become worse off. So the question of whether they move or not can't be answered by looking at just how much of a return they're making, but also how much of a return he can make elsewhere. If there was another investment that was definitely better, he would have been on that investment already. So we start from the assumption that they are on the best investment they are aware of already, and the tax lowered the profitability of that investment, but also the profitability of every other option he had access to.
Arguably, yes, they could move their money to another country. That carries its own share of costs with it, though.
@djls45 said in Net neutrality non-neutrality:
Profits are proportional to the amount of business. The fixed costs do not change that fact.
Proportional is a word that has a specific meaning. Fixed cost are exactly the reason why you are wrong. You may want to say that profits are correlated to the amount of business, in that if one increases the other will too, but proportional implies that both are linked by some constant such that if one doubles, the other will double as well, and I already showed with math that because of fixed costs you can have a situation where your business doubled and your profits tripled. So not proportional.
@djls45 said in Net neutrality non-neutrality:
If the owner(s) of this small business cannot live off of that amount, they won't keep the business open.
If you tax a company's profits, you would allow that income to be exempted from income taxes for the people keeping that profit (so as to avoid double imposition). So the tax the small business owner was paying ought to stay close to the same. Either he paid it as his own income, or he paid it as the company's profits. This goes into the realm of implementation, which deals with such things as "how do we keep people from gaming the system". Personally I prefer a single income tax charged on people, but then a company could pass off its profits to another company in a tax heaven, pay dividends on the tax heaven, and the owners would avoid any income tax at all.
All systems can be gamed, and once the best system is gamed by enough people, you have to start taking less desirable measures to work around those hacks. Each additional tax is worse than the one before. In my own view, income tax is better than business tax which is better than sales tax.
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@boomzilla said in Net neutrality non-neutrality:
@LB_ It undermines innovation and competition.
Now, would you explain why you support net neutrality? I'm equally curious. I've never heard an argument that adequately justifies the increased regulation.
What are examples of innovation and competition you speak of? Charging for access to your network or for preferred speeds is not innovation. Coming up with new network technologies and deciding where to build infrastructure would be. The better those are, the more competitive you are.
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Part of a tax increase will go to the price and another part will be absorbed from the profit.
The price is whatever the math say will achieve maximum profit. If the margin gets too low it may be worth selling less quantity for a higher price. If the margin is still large, the price won't change that much.
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@djls45 said in Net neutrality non-neutrality:
That last point is probably the biggest problem with business taxes. It stifles "new blood" from entering the system. The bigger companies are least affected because their huge profits may be little affected, but small businesses that are already barely making a marginal profit are pressed hard to find enough extra profits to cover the increased costs and may not be able to stay open. That actually increases the likelihood of a monopoly taking over the market.
WONTFIX_ASDESIGNED
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@Kian said in Net neutrality non-neutrality:
you might lose more on the operation than you can recover in a realistic timeframe.
Yeah, sure. Lots of stuff can go wrong. But maybe the current guys running the place were just idiots, too.
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@mikehurley said in Net neutrality non-neutrality:
Charging for access to your network or for preferred speeds is not innovation.
Why not? It's a different way to compete for customers. Sounds like innovation and competition to me.
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@mikehurley said in Net neutrality non-neutrality:
What are examples of innovation and competition you speak of?
I mentioned one earlier: Unlimited Music on a mobile plan. With it active, any streaming music* didn't count towards your monthly data limit. The net effect was not only unlimited music, but also the data you would've used to stream music being free for any other service.
* as long as it was legit, licensed music. They encouraged people to suggest services they didn't have.
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@Kian said in Net neutrality non-neutrality:
@Benjamin-Hall said in Net neutrality non-neutrality:
Having a tiny margin on average usually means that in any slight downturn your business hemorrhages money. It's like a student riding right on the edge of a passing grade going into a final exam. Not a safe space to be.
True, but during a downturn you would not pay those taxes, and different schemes may allow for the losses on bad years to offset profits on good years so that risk is lessened.
@Benjamin-Hall said in Net neutrality non-neutrality:
In addition, deciding what "profit" means is a complicated thing with much room for gaming. What about a company like Amazon that reinvests almost everything? What about Hollywood movies that officially never show a paper profit but everybody makes out like bandits? A profit tax would be even more gameable than an net income tax (the current business tax system).
This is moving into the realm of implementation. Companies that don't pay dividends, for example, would also be exempted. That's not bad in and of itself. I'm not saying a business tax is the only tax that should exist. Personally, I think a single net income tax that's correctly applied would be best. But those are also gameable: a small business may pay for the owner's living expenses and allow the owner to avoid paying tax on that income, for example. One thing is the principle, another is reality and how to apply it.
One phrase: epicycle theory. You're piling up tweak upon tweak to try to eliminate the foreseeable consequences of a rather daft tax idea. The more tweaks and exemptions and schemes just make it easier to reward cronies and pick and choose winners and losers. Read up on public choice theory.
As far as tax schemes go, probably the best is a simple, flat, universal sales tax or VAT. Adding one now would just be one more tax going to Leviathan. The biggest problem is that the government of the United States (at all levels but especially federal) does way too much. That that it does, it does poorly. And you want to give it more responsibility?
This whole discussion makes me wonder--if, as the left tends to say, government fails because it is captured by corporations and capitalists, then WHY IN THE BLUE BLAZES would you want to give it more power? You think that the corporations won't just gobble that up too? Who do you think runs the government? Angels with computers for brains? If so, think again. They're people too.
Lord Acton's dictum applies to government as well as to all other organizations: Power corrupts. Absolute power corrupts absolutely.
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@Kian said in Net neutrality non-neutrality:
There is no minimum profitability threshold. What there is is a variety of options the investor has to choose where to invest. The minimum is 0% return, essentially putting that money in a safe somewhere.
Have you looked at European bonds lately?
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@Benjamin-Hall said in Net neutrality non-neutrality:
As far as tax schemes go, probably the best is a simple, flat, universal sales tax or VAT.
How do you define best? What do you think that scheme would encourage or reward? VAT is a pretty shitty tax. It is regressive by it very nature, and it's hilariously easy to evade, especially if it's the only tax. Just don't emit a ticket for the purchase and no tax is paid. And since that evasion benefits both the customer and the business (they can split the savings), there's no incentive for anyone involved to make the other pay it.
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@Kian said in Net neutrality non-neutrality:
The minimum is 0% return, essentially putting that money in a safe somewhere.
To get 0% return, the money would have to sit in an account that matches inflation. Money
sitting in a safeunder a mattress actually depreciates due to inflation, which means it's earning a negative return. The minimum acceptable return for a business is one that allows the company to continue to operate and grow faster than inflation devalues the currency.
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@djls45 Again, have you looked at European bonds lately?
There are some seriously insane things going on in the last few years...
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@masonwheeler TDWTF could create an WTF fund that puts money in whatever things are the biggest WTF at the moment.
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@masonwheeler said in Net neutrality non-neutrality:
@djls45 Again, have you looked at European bonds lately?
There are some seriously insane things going on in the last few years...
https://www.bloomberg.com/markets/rates-bonds/government-bonds/germany
Note the YIELD column. I do not believe these are inflation-corrected.
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Or this one, which has a graph:
Germany 2-Year Bond Yield - Investing.com
Stay on top of current and historical data relating to Germany 2-Year Bond Yield. The yield on a Treasury bill represents the return an investor will receive by holding the bond to maturity.
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I think net neutrality is good, because if the 'Net wasn't neutral, I'd get an electric shock off it every time I touched it. And electric shocks give me an ow and a sad.
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@RaceProUK I'm kind of addicted to the shocks by now, though. Better than caffeine!
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@PleegWat and government bond markets aren't really a good measure of much, since with the Basel II(?) reforms they're all considered 0 risk for bank reserves. Even Greece. Whenever you see long-term WTFs in markets, it's usually a sign of interference (either from the government or from monopolistic (or oligopolistic (wheee! it's LISP)) groups).
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@Benjamin-Hall @PleegWat
Or, to translate that to something approximating English:- Several years ago, governments got together and changed the rules for banking so that banks can count Government Bonds the same as having cash in their vaults, in relation to how much cash they need to keep on hand as reserves in case a bunch of their checking / savings / CD customers come in and all want their money at the same time.
- Thus, there is more demand for government bonds (especially short term ones - banks do still need to be able to convert those bonds back into actual cash for their customers) than would exist in a world where the bonds were only investment vehicles
- Because a bond represents a specific fixed income stream (the German 2 Year bond right now represents 0 interest payments and getting back the face value of the bond after 2 years), when the price goes up, the yield goes down.
In addition, prices are further inflated (and yields are further depressed) by the fact that short term bonds are the tools that government banks use to manipulate the money supply and "the economy" - the European Central Bank is in the second or third phase of a "quantitive easing" program, which is a fancy way to say print a bunch of money but instead of dumping it out of helicopters we're going to give it to bankers.
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@Kian said in Net neutrality non-neutrality:
How do you define best?
Every tax has a downside: taxing a thing makes that thing more expensive, which means the supply of that thing will go down. In other words, every tax will discourage some economic activity, so we want to prefer taxes that do the least amount of harm. Economists usually agree that consumption tax (VAT or sales tax) is the second-best kind of tax in this sense (after land/resource taxes). Worse taxes, in order of increasing negative effects, are income, capital (corporate profit), and transaction taxes.
I agree that VAT/sales tax seems like a regressive tax. I'm not an economist, so I don't know whether that's true or how bad that is.
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@NedFodder said in Net neutrality non-neutrality:
I agree that VAT/sales tax seems like a regressive tax. I'm not an economist, so I don't know whether that's true or how bad that is.
Flat taxes on everything are formally regressive, as they tend to result in a larger fraction of the poor's income going on taxes than of the rich. This is because everyone has some semi-fixed expenditures, relating to providing shelter, sustenance, etc. For the poor, this means that they spend their income virtually entirely, with little discretion and next to no net savings. Exempting certain basic goods and services from tax reduces the tax take, but can make a regressive tax into a more progressive one. It might also improve the efficiency of tax collection; it costs a lot more to collect small amounts of tax from each of many people than a large amount of tax from a smaller number of people (due to different numbers of people required to do so), but whether that actually works depends on a lot of other details too.
Whether it is right to do this or not is a much more political question. In fiscal terms, we're discussing an abstract piece of economics nomenclature. :)
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@Kian A few basic principles (for me at least):
- Government should only do those things that are constitutionally required.
- In doing this, they should interfere as little as possible in people's freedom.
- To do their jobs, they need revenue.
- Since taxes interfere in freedom (by reducing resources available to the individual), the most efficient (least distortionary per unit revenue) tax should be used.
- VAT taxes are pretty much at that optimum.
I don't care at all about distributional effects from taxation. If you want to subsidize people, do it on-budget, not through the tax system.
Tax incidence - Wikipedia
