Like anyone with right-leaning views, economic conservatives feign logical consistency but can’t seem to stop shooting themselves in the foot when presented with new information.
Let’s review the standard fiscal conservative story:
Competition brings out the best in business owners. Corporations have no incentive to overcharge customers because, if they do, those customers will buy from a cheaper competitor. Corporations have no incentive to underpay effective low- and mid-level employees because, if they do, those employees will be hired by a more ambitious competitor.
You’d be hard pressed to get a libertarian or wingnut to admit that corporations will molest consumers and employees to suck up every last dime and pass it to the top of the pyramid… unless it helps them argue for cutting taxes, it appears.
Jane Galt thinks she’s got this whole economy business figured out. Way back in 2002 she argued for the abolition of the corporate income tax, and now that the CBO claims 70% of that tax is shouldered by domestic labor, Jane’s busting out an enormous “I told you so.” She even quotes herself. Isn’t that adorable?
Of course, what she quotes from her 2002 piece is rather intriguing:
When you put a tax on wages, such as social security or the unemployment tax, the employer doesn’t say, “oh, well, profits dropped 15% this year; better tell Merrill Lynch to issue a ‘sell’ rating” — they pay their employees less, both to lower the tax burden and to recover the lost profits. They hire fewer employees, because each employee is now more expensive. This costs real people money. When you up the corporate tax, either the employees pay, because the firm can’t afford as many of them; the customers pay, because the firms have to raise their prices to cover the taxes; or the shareholders pay because dividends are lower and the company is worth less.
But now I’m confused. Won’t paying people less cost them the best employees? Won’t hiring fewer people leave them at a competitive disadvantage? Won’t charging more for the product leave them behind hungrier competition? Why wouldn’t a corporation just reduce its executive bonus packages and the like?
For Jane’s tax arguments to make sense, she has to admit that executives and capital owners bleed everyone else dry before touching their own income. But that doesn’t jive with the fun stories they like to tell about competition enforcing customer and employee protection, does it?
After all, if a corporation’s profits rise, wouldn’t a conservative argue that, to stay competitive, that corporation would lower costs to consumers, pay their good employees more, or hire more good employees at a fair wage? Why, then, if profits are cut by a corporate income tax, would the first people to suffer be employees and consumers?
If Jane thinks about it, her arguments necessarily mean that abolishing the tax won’t do a damn thing for the employees currently shouldering the burden. She’s now admitted that the workforce and the consumer base are pawns of the corporate fatcats, and if those are the first people burdened by profit loss, then they’ll also be the last to be rewarded by profit gains.
Of course, liberals and progressives know full well the workforce and/or customer base will almost always suffer to keep capital owners in the lap of luxury. Just fire up a cigar at the country club with CEOs from Wal-Mart and Exxon-Mobil to learn a few lessons about working over the typical American.
The CBO numbers merely reflect the ugly nature of corporate business practices. I’m deeply amused that a conservative pointed them out and made my arguments about corporate behavior for me.
Sadly, we can’t rely on the conservative to draw the proper conclusion, but that’s nothing new, is it?
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