bank secrets

[kandrathe]

I think most of what's going to be said has been said here. However, one point sticks out at me: the Laffer curve.

Do you really believe that reducing corporate taxes to zero will increase tax revenue? That increasing taxes will reduce revenue? You say "it has been shown", but I don't think it actually has. There is a theoretical argument that, past a certain point, taxation reduces revenue, but we* do not appear to be near that point.

Now, any tax is going to change behaviour, so higher taxes will almost certainly means the government gets a larger 'slice' of a slightly smaller 'pie'. And lower taxes mean the pie will get slightly larger, at the cost of a substantially smaller government slice. But the slice itself is almost certainly going to be larger with higher taxes and smaller with lower: more taxes is more revenue. To assume otherwise is to assume you can have your cake and eat it too, and we all know that's a lie. ;)

This video series pretty much documents my feelings about the Laffer curve.

Cato Institute - Laffer Curve Part I
Part II
Part III

It's pretty much common sense that if you raise the price (even of government), then people will have less money to buy other things (goods, or investments). The question is that if corporate taxes in the US are zero, will the GDP grow enough (sales of goods and services that are taxed at 5%) to offset the reduction in direct taxation. Corporations will still pay the 5% tax when they buy things, and another small tax when they export or import things. I'm betting that the GDP pie will get very big, and a small sliver of the big pie will be larger than the 30% slice of the smaller pie.

Secondly, we can see that corporations are leaving business hostile areas and being headquartered in places who have low or zero taxes (amongst other incentives). It's happening across Europe, and its beginning to happen in North America. One must only look to where businesses are booming (Ireland, Hong Kong, etc.) and consider why that happens. Consider also the US state of Delaware, which houses over 50% of LLP/LLC/PLC entities. In that case, you lose all the pie.

Is it hard to imagine that business will boom most where profits can be maximized, and business will flee from places where they are over-regulated, over-taxed, and otherwise abused by the government. Now don't read that as unregulated. No one wants a poisoned pie either.

Finally, the Laffer curve is not a stable line, which means that depending on the economy the point where taxation becomes a disincentive to invest will move up and down. I intentionally aim at a point lower than the peak point (28%) identified by Laffer, but high enough to collect a reasonable revenue stream for funding government services.