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To: Force Majeure who wrote (210645)7/13/2021 4:33:49 PM
From: Art Bechhoefer  Respond to of 211244
 
Intuitively, your evaluation is correct, but in practice, not so much.

"* raise prices on goods & services and punish customers, which could result in selling less products and less revenues

* absorb the costs and pass it along to investors thru reduced eps and/or dividend payouts in some cases

* absorb the costs and punish your work force thru reduced compensation (i.e. wages, raises and profit sharing in some cases) as well as 3rd party developers; and it also threatens retention of good talent"

Historically, higher tax rates on corporations didn't result in higher prices of their goods, unless they had a near monopoly in the market. Reduced eps have occurred mostly in the short run, but in the long run, where a corporation maximizes the taxpayer subsidy of its interest deduction on funds borrowed to expand, earnings more likely increase, especially in periods of low borrowing costs. As for punishing the work force, this has occurred mostly in response to declining union membership and the associated laws and regulations that discourage union membership.

Thomas Piketty's book, when it came out about five or six years ago, was powerful because of the humongus amount of data on which its conclusions were based. The idea definitely did not fit with the thinking of more conservative economists, yet the noted Economist publication, with a generally conservative economic view, was unable to present arguments that would dispute Piketty's conclusions. The key issue that Piketty presented was that a widening income gap produces lower economic growth. This is far more important than the effects of a change in the corporate tax rate. The recently signed executive order proposing steps to increase competition, along with the recently adopted legislation authorizing larger payments to households with children will more than likely reduce the income gap, leading to greater than expected growth.

I would add, though, that the action in the stock market in response to these changes seems to reflect the more conservative view that tax cuts are always preferred.

Art