Admittedly, I don’t have a lot of patience for the tax debate in America.
Maybe I should say I don’t have a lot of patience for the debate as it plays out online and across social media.
The number of Americans who purport to be aggrieved at the prospect of higher taxes for corporations, high-earners and the rich is wildly disproportionate to the number of people who should care, where “should” means you own lots of stocks, earn lots of money and/or control lots of wealth.
That discrepancy’s a manifestation of the “temporarily embarrassed millionaire” dynamic, whereby capitalism’s left-behinds (which is the vast majority of people) conceptualize of themselves not as victims of a cruel, predatory system, but rather as merely unlucky, and rich in a parallel universe.
In reality, there’s no reason whatsoever for most of society to support policies that disproportionately benefit corporate “citizens” and the rich. Because most of society would be in some measure better off in a more equitable system, or at the very least, in a system with more guardrails for capitalism.
Nobody wants to admit they’re not 90%ile (i.e., top 10%) or higher. Because capitalism tells us that anything below 90%ile is a “loser.” So, you get a lot of hand-wringing over redistributive policy proposals — a lot of “Keep your tax hikes away from me and my income that’s not large enough to tax, evil socialist!”
Let’s face it: The overwhelming majority of Americans complaining about “socialist” policies and “communism” have never seen a sixth digit to the left of the decimal in any of their personal bank accounts, which is to say millions of Americans who’ve never had $100,000 — let alone made $100,000 in a single month, on a paycheck — are inexplicably against higher taxes for corporations which rake in tens of billions in profits and high-earners who, on the lowest-end, make more in a month than the median household makes in a year.
If that’s you — i.e., if you’re out here waxing hysterical about Kamala Harris’s tax proposals and you don’t have at least one bank account with six or seven digits to the left of the decimal — you need to keep it real with yourself.
With that in mind — and I’ve buried the lede here, as is my wont — have a look at the figures below, from Goldman.
The chart on the left shows the estimated impact of a 1ppt change in the corporate tax rate across sectors, while the figure on the right is the modeled impact of two different tax realities on S&P 500 profits.
Needless to say, the “potential tax cut scenario” is the Trump scenario. He wants to cut the corporate tax rate to 15%, a plan he reiterated this week in remarks to the Economic Club of New York. The tax hike scenario is the Kamala Harris reality.
Harris, you’re reminded, wants to fund expanded tax credits for families and $25,000 in downpayment assistance for first-time home buyers by raising the corporate tax rate (and the capital gains tax rate on earners making $1 million or more) to 28%.
“The proposed corporate tax changes could directly shift S&P 500 earnings by 5-10%,” Goldman’s David Kostin remarked. Trump’s simple plan — i.e., lower taxes for corporate “citizens” — would lift corporate profits by around 4%. Kostin went into a bit more detail on the impact of the Democratic agenda. “A tax hike scenario in which the rate rises to 28% would reduce earnings by about 5% [and when] combined with additional proposed changes to the taxation of foreign income and an increase in the alternative minimum tax rate from 15% to 21%, this scenario could reduce S&P 500 EPS by about 8%,” he wrote. Of course, all of those calculations are ceteris paribus.
I’m sure a lot of readers — all readers, probably — have a strong opinion about this. And you’re entitled. To your opinion. But do yourself a favor: Make sure it’s calibrated to your lot in life. Otherwise you’re just voting against your own self-interests and in the process, you’re undermining the economic prospects of everyone like you, which is to say the vast majority of the country.
We know trickle down is very limited effect. The spending impulse from a tax increase is not figured into the math. S&P profits may increase to some degree.
It irks me that the very wealthy do not pay for the armed forces that protect their wealth.
Old Orange Hair is a perfect example.
I’m more anti-M&A rather than anti-tax. Having been through many RIF (reduction-in-force events) either as a layoffee or “survivor”, I have no sympathy for corporations that claim to need cost-cutting.
Corporations want to cut costs because it’s by far the easiest way to increase profits in the short run. It just occurred to me that C-Suite guys (most guys) are the bombardiers of the corporate world. They don’t have to see their victims die while they collect the spoils of their actions. Anyone ever met a nice cost cutter?
Plus the c-suite is usually the last ones to get fired, and even when they do, they walk away with hefty pay days. I’ll never understand the logic of golden parachutes. Why would you reward someone with a massive pay day when you are firing them for doing a poor job?
b/c shareholders aren’t really the practical owners of the company – and if the CEO fights you, it can take a long while to get the Board he/she populated to fire him/her. A big fat wad of cash can help smooth that out.
Enjoyed this. You made me laugh. One thing that’s not often mentioned (or not enough really) is that half of stocks are owned by non-Americans. So a good portion of any corporate tax cut automatically goes to non-citizens or foreign entities.
Even if I was in the demographic these tax policies would impact (I’m not and probably never will be), I’d like to think I’d be supportive of the proposals.
I have one relative that’s in the 9 digit level of wealth and despite giving their money away generously, I would imagine they’d resist this if only because it takes away control over how they give.
Bravo. It also irks me that there’s rarely talk of corporate ‘welfare’ and corporate socialism in the tax debate, too. A glaring example from just over a week ago, a la the NY Times, about dam removal in Oregon:
“After more than 20 years of advocacy from the tribes, federal regulators in 2022 approved an agreement to demolish four dams on the Klamath. The dams were providing less than 2 percent of the energy portfolio of their current owner, PacifiCorp — a subsidiary of Warren Buffett’s Berkshire Hathaway Energy — and the company would have had to pay more to upgrade them to modern-day standards than to take them down. The $500 million cost of the demolition project has been split between California taxpayers and surcharges paid by PacifiCorp customers in Oregon.”
So, the owner of the dams…. you know, the company with a $275 BILLION cash pile, wasn’t made to pay the $500 million to remove the dams, which would have been less than upgrading them and were past their usefulness anyway??!? But worse, the people of Cal and Oregon did pay for it.
A few thoughts.
Tariffs are a tax on the poor, since most wealthy do not shop in chinese import shops such as dollar general or walmart. Therefore net result of Orange tax policies is further dividing than you indicate.
I wonder how many of the ‘multitudes of online commenters’ regarding tax policies are not foreign bots trying to affect election outcomes. Not a comment about your pages.
Raising tariffs (tax on the poor) to create a sovereign wealth fund (likely administered by a person with last name Trump or Kushner) would be a transfer of wealth and power from the poor to the crown.