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.

By: Gil

Gil — Sat, 21 Nov 2009 04:31:00 +0000

If your rent an apartment does the rent you pay amount to “stealing the fruits of your labour” or “the apartment owner is the rightful owner of your income”?

By: Gil

Gil — Sat, 21 Nov 2009 04:31:00 +0000

If your rent an apartment does the rent you pay amount to “stealing the fruits of your labour” or “the apartment owner is the rightful owner of your income”?

By: Not Sure

Not Sure — Sat, 21 Nov 2009 04:24:00 +0000

Subsidy:

Merriam-Webster Online: a grant or gift of money.

Dictionary.com: a direct pecuniary aid furnished by a government to a private industrial undertaking, a charity organization, or the like.

Cambridge Dictionary Online: money given as part of the cost of something, to help or encourage it to happen.

There are more just like that, but this should be enough for now.

Of course, there’s no reason you can’t have your own personal definition, but it dos make it hard to have a discussion without agreeing on what words mean, don’t you think?

By: Not Sure

Not Sure — Sat, 21 Nov 2009 04:24:00 +0000

Subsidy:

Merriam-Webster Online: a grant or gift of money.

Dictionary.com: a direct pecuniary aid furnished by a government to a private industrial undertaking, a charity organization, or the like.

Cambridge Dictionary Online: money given as part of the cost of something, to help or encourage it to happen.

There are more just like that, but this should be enough for now.

Of course, there’s no reason you can’t have your own personal definition, but it dos make it hard to have a discussion without agreeing on what words mean, don’t you think?

By: Anonymous

Anonymous — Sat, 21 Nov 2009 04:08:00 +0000

We have different definitions of subsidy.

Good luck with that.

By: Anonymous

Anonymous — Sat, 21 Nov 2009 04:08:00 +0000

We have different definitions of subsidy.

Good luck with that.

By: Not Sure

Not Sure — Sat, 21 Nov 2009 03:59:00 +0000

A subsidy is a grant of money. In order for the fact that A is taxed less than B to be considered as a subsidy for A, you necessarily need to start from the position that the money involved belongs to the entity providing the subsidy.

Are there really people out there who believe that the government is the rightful owner of their income, with first call on how it’s used? Or are people confused about what subsidies actually are?

By: Not Sure

Not Sure — Sat, 21 Nov 2009 03:59:00 +0000

Are there really people out there who believe that the government is the rightful owner of their income, with first call on how it’s used? Or are people confused about what subsidies actually are?

By: Anonymous

Anonymous — Fri, 20 Nov 2009 22:13:00 +0000

So you would rather have no taxes, i.e., no government? Well, then.

I am taking taxes for granted and talking about their treatment.

(BTW, I am a fan of taxes on real property, neither income nor expenditures…)

I am a Berkeley libertarian, so I do see a role for govt.

By: Anonymous

Anonymous — Fri, 20 Nov 2009 22:13:00 +0000

So you would rather have no taxes, i.e., no government? Well, then.

I am taking taxes for granted and talking about their treatment.

(BTW, I am a fan of taxes on real property, neither income nor expenditures…)

I am a Berkeley libertarian, so I do see a role for govt.

By: John Dewey

John Dewey — Fri, 20 Nov 2009 22:00:00 +0000

I’m talking about exactly the same idea that Don has written about. Who would call absence of taxation a subsidy? Only those who believe that government and not the worker has a right to the fruits of the worker’s labor. You seemed to be saying you are one of those people – the people whop believe government has the only right to fruits of labor – when you referred to “the favorable treatment of debt”.

If you believe that government and not the worker has the right to the fruits of the worker’s labor, then continue to refer to the “favorable treatment of debt”. But if you do not hold that view, please consider referring instead to the confiscatory taxation of equity returns.

Is that a little more clear?

By: John Dewey

John Dewey — Fri, 20 Nov 2009 22:00:00 +0000

Is that a little more clear?

By: Anonymous

Anonymous — Fri, 20 Nov 2009 20:18:00 +0000

@JD — what are you talking about? Is that a cut and paste comment?

By: John Dewey

John Dewey — Fri, 20 Nov 2009 19:56:00 +0000

What are you implying, davidzet? That government automatically has a right to the fruits of our labor? and that any of those fruits we are allowed to keep is a subsidy?

In answer to your question, I would refer to the double taxation of business income – once at the corporate level and once after profits are distributed to business owners – as confiscatory taxation.

By: John Dewey

John Dewey — Fri, 20 Nov 2009 19:56:00 +0000

What are you implying, davidzet? That government automatically has a right to the fruits of our labor? and that any of those fruits we are allowed to keep is a subsidy?