Comments on: Taxes, Subsidies, and Distortions

By: Mike

Mike — Sun, 22 Nov 2009 07:38:00 +0000

He seems to not notice that there is a double taxation of corporate dividends and eliminating the “tax advantage” of interest is just extending double taxation to payments for the use of debt. How is that anything but a new double tax with all the distortions that entails? If he thinks the deduction encourages excessive leverage why doesn’t he propose substituting the interest deduction for making dividends tax free. Better yet, why don’t they repeal the corporate income tax all together as at best the tax distorts resource allocation and at worst it is a hidden tax on consumers of the corporation’s products.

By: Matt

Matt — Sat, 21 Nov 2009 18:05:00 +0000

Am I crazy or isn’t what Surowiecki was saying the exact same thing Don himself mentioned in a post a little bit ago, “Such a huge deviation from neutrality in taxing equity-financed corporate income and in taxing debt-financed corporate income cannot help but to distort financing decisions toward debt – perhaps dangerously so.”
Maybe the only point of this post is that you shouldn’t call it a subsidy, but it seems Don more or less agrees. Clearly, taxing something less is, by definition, not a subsidy, but I think the point was it does the same thing as a subsidy by encouraging bad behavior.

By: Gil

Gil — Sat, 21 Nov 2009 11:18:00 +0000

What? And when the rent rises because there’s an increasing apartment shortage and tenants are the ones competing for landlords then is that ‘stealing’?

By: Not Sure

Not Sure — Sat, 21 Nov 2009 05:04:00 +0000

If I agree to rent an apartment for $XXX, then of course, it’s not theft when I give $XXX to the owner as payment for the time I spent in the apartment.

By: Not Sure

Not Sure — Sat, 21 Nov 2009 05:04:00 +0000

If I agree to rent an apartment for $XXX, then of course, it’s not theft when I give $XXX to the owner as payment for the time I spent in the apartment.