I was pointing out the “reductio ad absurdum” fallacy of the simplistic argument of the article. Of course, it works both ways; if it is true that a slightly higher tax on profits is net good, then an ever higher tax must be even better … on the flip side, you end up with 0% tax. But I didn’t write such a stupid article, so I allow myself to sketch an argument in a reply. The onus of good reasoning falls harder on the author, I feel.
The point is to understand the compromises, something we need more than ever in Western politics. I react to the patently extreme comment that lower corporate tax has no overall benefits. If that was actually true, corporate tax would be 100% ( communism). A reasoned debate needs to acknowledge the compromises involved in setting taxes. Higher corporate taxes make investment in companies less attractive relative to other investments. This is clear, and I don’t even care if you acknowledge that or not, because it is the actions of those who command capital which matter in this case:this point is not up for debate. Witness the billions of offshore US corporate profits hiding from the high tax on repatriation.
In the short term, policies which reduce investment won’t do any damage: if capital has a useful life of five to 20 years, then a loss of investment in new assets won’t have a short term effect, and perhaps the state can find good investments with its higher revenue. But history shows to me that the state will run out of good investments, and an economy starved of investment by owners of capital will see declining productivity. The owners of capital will find other investments, probably overseas, so they won’t be harmed. But those who can’t move as easily as capital will be harmed, eventually. This is why I dislike the simplistic argument. It is wrong, as many simplistic arguments are, but the the system does not provide immediate pain to let you know a mistake has been made. Instead you wander into a fog of good intentions and get lost in a morass, like France, Spain and Italy.
