Giving companies more money (loans, tax-breaks) only increases investor payouts, not expansion


#1

Originally published at: http://boingboing.net/2016/11/25/giving-companies-more-money-l.html


#2


#3

Another variation on:


#4

I was about to write:“let’s forbid buy back, that’ll be a step in the right direction”. Then I stopped and thought about it and realized the problem. Whatever is forbidden, they’ll find a way to circumvent it.

So the solution (assuming, of course, the whole idea of stock holders having a controlling interest isn’t scrapped altogether) is actually quite simple: no financial scheme will be possible unless specifically allowed by law. That should at least avoid open market destruction.

As to the dark, not so open market, let’s forbid them, with a penalty of confiscation of 100% of assets, and a few years in prison for good measure. After all, those people actually destroy lives.


#5

There is nothing wrong with investors wanting to get money out of their investments. People don’t invest in stocks to have a place to live; they invest for gains that they expect to get out.

In fact the idea that investors would never get dividends and should always be satisfied with rising stock price is a form of a bubble. You can’t survive on growth forever, but our capitalistic system relies on it.

Of course trickle down is ridiculous, but that doesn’t mean investors shouldn’t ever get returns.


#6

People expect to win at poker too, but the house does that.

Maybe we should have laws that protect us from charlatans rather than vice verse?! Radical concept, I know.


#7

This is simple to explain with a thought-experiment. Suppose you owned a Widget factory. If your Uncle Sam gave the factory a million dollars, would you use that money to hire more workers? Why - what would you have them do? Suppose the money went directly to you - would that make any difference?

Now look from the other side - what would make you hire more workers? Maybe if people wanted more Widgets, you would need more workers to make them. And how could Uncle Sam increase demand for Widgets? Maybe by giving that money to… consumers?

Actually, this is why stimulus money should go to the poorest people. They won’t save it, they will spend it, and that’s what creates jobs. QED


#8

[quote=“Boundegar, post:7, topic:90098”]
And how could Uncle Sam increase demand for Widgets? Maybe by giving that money to… consumers?[/quote]

I’ve always said tax breaks are nice, but what companies really want are more paying customers. That’s usually when they start hiring so they can deal with them all. And the people they hire become other company’s customers. And it just seems to get better from there on.


#9

The concept of the limited liability company primarily functions as a mechanism for wealthy people to socialise their debts.


#10

You miss the point. Lower company taxes make investment more attractive than other options, such as other countries. It is a measure to win investment or stop it going off shore.


#11

#12

You are assuming that companies go for long term thinking like that. They don’t, they only see short term gains as something to be chased.


#13

Fascinating however anyone who has rudimentary economic skills would has how companies like Walmart (privately held) or Facebook (not a brick and mortar store) manage to take the same tax breaks and expand to cover the entire nation. Then someone with those skills would ask how in the world you can claim tax breaks don’t increase expansion when tax breaks given during the Reagan era brought about the national chains in fast food, retail and speciality goods (like Office Depot) yet the moment those tax breaks were stopped so did the expansion leading to a retraction with many of those beloved companies closed up.


#14

Here’s a thought experiment. There are good logical arguments that lower corporate tax encourages investment which creates jobs. However, you believe this is not true, and that lower taxes harms the economy. So if lower corporate taxes compared to now is harmful, then higher taxes must be beneficial. And if a little bit higher is a little bit beneficial, then much higher taxes must be very beneficial. All the way until we get to France. But why stop there?


#15

Congratulations on a nearly perfect illustration of the Slippery Slope fallacy.

That aside, “good logical arguments” are no substitute for data. The “encouraging investment” argument makes perfectly good sense, but forty years of history says it’s still bunk.


#16

Surely the rise of internet shopping plays at least some role in retarding the growth of these chains. Also once you have expanded into an area you can’t expand into it again. So the pool of new locations diminishes over time. Add into that copy cat companies competing with you and it seems that associating the decline of these companies purely with the level of taxation is kind of simplistic.


#17

Because we’ve run out of hot air to blow up other peoples backsides?


#18

First of all, compensation in any form paid to the executives should be ‘after-tax’ money. Then reinstate the 70% top income tax bracket. It’ll never happen, of course, because the legislative bodies are so totally in the pockets of the 1%, but one can dream. When the masses do figure out that the right wing has been playing them for fools, the power of the right will be so entrenched that the people will be unable to do anything about it.


#19

There are equally good, if not better logical arguments that lower corporate tax discourages investment which creates jobs. So instead of theorizing, why not look at the actual data–which is showing that the money simply goes back to the investors and managers, and not to the workers. Corporate growth today is primarily by merger and acquisition, and Corporate America has done little in the way of innovation since Reagan. The digital revolution was carried out be people in their garages and basements. Once the big guys got a hold of it It became primarily a process of adding tail fins.


#20

What’s to prevent individuals from “investing” in a sham corporation which exists entirely for the purposes of reducing one’s individual tax burden?