What online Companies will do to avoid taxes, AmazonUK, 7 billion, UK Corporate tax=000!

Does Amazon pay taxes in Germany> Does the British government contribute anything to the success of Amazon? Does Amazon use any services in Briton for which it is not paying tax by some other means? Just wondering.

Amazon in the US is a host for many smaller venues who pay income tax in the US. It is likely the same in Briton but governments conveniently overlook that fact as they take toll of all the entitlements they think are due them for no particular reason.

Corporations don't actually pay taxes, their customers do. Taxes are a cost of doing business and all such costs are passed on to the customer. If a copmany makes more than its cost of doing business it either invests it back into the business or distributes it to its shareholders who pay taxes on those dividends. Corporate taxes are just another way government extracts money from some people to give to other people, in particular the friends of the politicians who get to decide who gets it.

Corporations don't actually pay taxes, their customers do.

While it's true that corporations don't actually pay taxes, it's by no means evident that "their customers do." In fact, economists are unable to state with confidence how the burden of the corporate income tax falls.

Here's one paper that summarizes the data.

In view of the results from the theoretical and empirical literatures, the practice of assigning the entire economic incidence of the CIT to capital is certainly simplistic and probably wrong. Advances in theoretical models since the seminal 1962 Harberger paper, as well as the more recent empirical papers on the topic, suggest that labor bears a significant portion of the corporate tax burden.

It's redundantly obvious to say that consumers, since they are the corporation's sole source of revenue, actually pay the tax. The question is whether capital or labor bears the burden. The answer is that they share it, in some proportion.

....."The answer is that they share it, in some proportion"......

If that's true, and I believe it is, than both capital and labor are better off with the lower tax burden. Government seems to be the only one losing here!

WC

People are either producers or consumers or a combination of the two, but never more than 100%. Taxation represents the cost of government and anyone selling a product must recover their cost of production from either the producer or the consumer. If it does not pass along the cost to the producer through the reduction of dividends, it must pass the cost to the consumers in the price of its product. Life is a zero sum game, we start with nothing and end with nothing. What happens to any wealth we accumulate in the end it is either given or taken away by somebody else. Life can be reduced to pure mathematics, sometimes complex, sometimes very simple.

If we're considering the question - "Who bears the burden of the corporate income tax?" - it's redundant to say that customers actually pay the tax.

If, for example, a change in the cost of fuel oil made a paper company more or less profitable, we would gain no insight by observing that, in either case, the customers actually pay for the fuel oil. The question is, rather, to what degree does a change in the cost affect the business's profitability.

A tax is a cost to a business, and like other costs, it changes the structure and, consequentially, its profitability. To say that the tax reduces profitably is equivalent to saying that the burden of the tax falls on capital. If the tax doesn't reduce profit - which is equivalent to saying that the business can pass on its costs - we say that the tax burden falls on labor.

To observe that this is a zero-sum game in which customers ultimately bear all costs is, to repeat, redundantly obvious. It's not helpful in discussing the burden of corporate income taxes: it's a waste of time and pixels.

What is redundantly obvious is that some people just fail to understand simple economics and mathematics. Unfortunately, this population is increasing with the influence of government schooling.

This week LePage met with the latest special interest group du jour - family businesses. I considered going for a moment. The meeting was with The Family Business Center, The Department of Economic and Community Development and Lepage. There was no further information offered such as giving a clue as to what the meeting is about and so I considered it from the perspective of our current needs, which in a nutshell is upgrading our systems management to meet the growing needs of doing business on line. I developed our SEO on my own with no help from government or private consultants. Once I achieved front page status for our key words it has grown organically since then so that new we are at the top of the first page three times for my most targeted key word ( and others as well). Fortunately for us the growth is happening incrementally but I have to figure that it can at some point escalate dramatically and we need to have our systems in place at that point. The rules are different than they are when one's primary business is wholesale and brick and mortar retailing. One has to have items in stock and have a system that keeps that stock current on a daily basis.

So I went to the department of Economic and Community Development to see if there were any programs that would help a company such as ours figure these things out. I didn't look long but I have contacted the DECD before only to have my emails go unanswered. The DECD does a lot for high tech "precision" manufacturing but nothing for ceramic manufacturing which is not a precise science ( which in my opinion is part of the beauty of the process). I saw the MTI and the SEGF. MTI benefits high tech exclusively. I am familiar with the SEGF through personal experience and am aware that despite the rhetoric about "creating jobs", the SEGF prioritizes the interests of the high growth investor, which is about buying and selling businesses for profit. I am looking for working partnerships because I consider one of our core products is the work process its self, which I consider to be "socially beneficial" although that concept is not shared by our government overlords.

I did not see anything online that looked useful to us. The Family Business Institute , which sent the invitation did not give me any particular reason to go. I decided it would be more productive not to go.

I do not believe that there is anything that government will do to help us make the online transition. I know we need to work with others but I have to put my faith in God on that score because I do not know of any resources that see what I see. When I made a presentation to the SEGF , the value of a deeply layered line of products that have maintained their marketability for over half a century went right over their heads but, in my view that explains why once I got us on the first page of Google , we have not only stayed there but our presence has increased organically with no input from myself. As a matter of fact I am postponing being on certain venues until I am secure that our systems can handle a more dramatic increase in sales. The reason I credit our line with our effortless ability to maintain a number one spot on Google is because Google wants people to find what they are looking for when they search a key word and we are that. I do not see any other business in our key categories that have the depth of a product line that we have. Why would government get that?

Government cannot help me to make this happen- not just because there are no programs currently designed for a business such as ours but because they cannot .PERIOD. Government does not have that kind of know how.

And yet if we should become successful through our own efforts and financed through our own profits, then government will feel they are due a piece of our action (above and beyond income and other general taxes).

If government wants to charge additional taxes on businesses just because they are successful- they should give that tax the name it is due- The Robber Baron Tax.

The term derives from the medieval German lords who legally charged tolls on ships traversing the Rhine without adding anything of value. (see robber baron). Wikipedia

This is especially so when government has taken on a role that traditionally belongs in the private sector- that of investment bankers and entrepreneurs but what private sector investment bankers can demand that businesses give them a kickback for nothing- the only reason is that the big bad business has become unfairly successful according to the socialist masterminds encouraging government's sense of entitlement. With the world gone mad for socialism, of course government feels it is due a piece of everyone's pie just because the pies exist and not because government gives anything in return.

Mackenzie, the bureaucrats couldn't help you because they can't and don't want to. They are power seekers exploiting the power of government to support their own interests in meddling in what they feel like. If they had to sell the services they pretend to offer they wouldn't be doing it because no one would be willing to pay them. They are there now because they are the political class with a monopoly on power.

To find out more about the kind of computer systems you need for your database, and for organizing, controlling, accessing, and using your information yourself and by customers who place orders, try searching at http://komando.com and submitting questions there.

There is now a lot of experience out in the world of productive people in doing what you need and that may be a good place to get some leads on how to find it. There will be someplace you can go, perhaps online or in books, where you can learn more about what else you need or could be doing more effectively without hiring an expensive consultant to build it for you or relying on drones in the bureaucracy to mess up your business if they could do anything at all.

No argument with that- Like I said the government cant help PERIOD. Government is not supposed to be running the economy and being entrepreneurs. I will probably be using online sources which is how I learned everything else, but that's just part of it. Its a big challenge and there are some aspects that I wish there were some outside expertise to work with but it is hard to find. That's why I think twice about going to meetings. Time needs to be used productively. Thanks for the link. I'll check it out.

pmconusa Sat, 04/07/2012 - 11:55am #7: "What is redundantly obvious is that some people just fail to understand simple economics and mathematics. Unfortunately, this population is increasing with the influence of government schooling."

What simple economics and mathematics are you referring to? The question is not whether customers pay a business the current price, but who incurs what losses and where after government distorts the economy with a new tax.

Businesses cannot arbitrarily pass on any kind of cost increase to customers already paying a market price. If they could raise prices they would have already done so. Whether a cost increase can be passed on in whole or in part or at all depends on the elasticity of the demand, the competition and alternatives, whether the purchases are discretionary or can be postponed or cut back, and whether the tax is general or targeted.

Every tax distorts the economy and changes business operations. Prices, quantity, material used, number of workers hired and wages paid, and other factors may change, including the possibility of going out of business if prices no longer exceed costs. The losses may be incurred by customers, investors, suppliers, or labor in any combination as the economy shifts in response to the distortion. How much loss incurred and by whom compared to the state of the economy before the tax and what it would have been without the tax depends in part on what people are willing or able to tolerate in any connected role as opposed to doing something else.

Except in extreme cases, such as discretionary spending with alternatives available in a competitive market with taxes targeting only part of it, it is difficult or impossible to trace who actually "pays" for a tax imposed and how much. The economy is a complex, interacting system driven by unpredictable changes arising from choices of individuals, with multiple changes and causes taking place simultaneously. A shift anywhere can propagate changes throughout the system with no way of calculating in retrospect what caused what other than big changes easily observable.

What you can conclude is that a new tax means the government is getting it and private individuals somewhere have less than they otherwise would have, and you know that the actual burden of a new tax is not necessarily borne, partially or fully, by whoever the government says is paying it or by whoever shows up at the cash register as a customer. Economic laws are not legislated and legislation has consequences other than what it says as people react to it and the reactions propagate through society.

Mackenzie Andersen Sun, 04/08/2012 - 12:41am #10: "No argument with that- Like I said the government cant help PERIOD. Government is not supposed to be running the economy and being entrepreneurs. I will probably be using online sources which is how I learned everything else, but that's just part of it. Its a big challenge and there are some aspects that I wish there were some outside expertise to work with but it is hard to find. That's why I think twice about going to meetings. Time needs to be used productively. Thanks for the link. I'll check it out."

What you are doing illustrates the critical role of intelligence, creativity, ingenuity and mental effort in running a business. The Marxist labor theory of value attributing the source of profits to hired "workers" with the owners as "parasites" is false. Without the kind of intellectual productivity in running businesses throughout the economy and which you illustrate, those who do nothing but physical or rote labor (or living off others' taxes) would still be scratching in the dirt for food.

ewv: Government survives on revenue. Unfortunately, our government has discovered or created many sources for its revenue but if you don't believe the initial source of it are the individuals whom the government governs you have found the pot of gold at the end of the rainbow and I would you appreciate your divulging its location so I can move there too.

What you are doing illustrates the critical role of intelligence, creativity, ingenuity and mental effort in running a business

This is exactly the "boot" that President Obama decreed that the people did not have as he decried the opposition to his grand entitlement schemes as being based in bootstrap economics- as he did in his speech right here in the Marxist state of Maine.. One's "boot" is one's own operating system as is aptly identified in your quote. To encourage people to believe that they are deprived for lack of a boot is downright Un-American. The truth be told, with American's credit rating under increasing threat thanks to the policies of our Marxist administration, it may be precisely those in touch with the boot strap spirit that will be needed when the coffers of redistributed wealth that feeds the government's "innovative and creative economies" dries up.

pmconusa Sun, 04/08/2012 - 10:07am #13: "ewv: Government survives on revenue. Unfortunately, our government has discovered or created many sources for its revenue but if you don't believe the initial source of it are the individuals whom the government governs you have found the pot of gold at the end of the rainbow and I would you appreciate your divulging its location so I can move there too."

Yes there are only individuals and all the different taxes are ways of taxing people, often the same people, in different ways -- while hoping we don't notice the total and occasionally go along with shifting from one to another in the name of reform.

But the economic question e-mike was discussing is which people bear the burden of a new corporate tax. To observe that corporations are voluntary associations of people and that a corporate tax is payed by people, not mythical entities called "corporations", does not mean that the tax is "passed on" directly as prices to those people who buy a corporation's products.

The people who are consumers, laborers, suppliers, competitors, investors, etc., are impacted in different ways.

Thank you, ewv.

As you observe, my point is that tax incidence isn't necessarily tax burden. The structure of the tax regime affects whether, and to what extent, taxes fall on capital or labor. Stated somewhat differently, government can impose lesser or greater burden on productive activity.

Note to pmconusa: This isn't a "zero-sum game." There are different ways to tax individuals. Tax policy affects the creation of wealth over time. Tracing the consequences of tax policy can be a useful exercise.

Let A be the amount of capital needed to produce product Z, B the cost of labor to produce product Z, C the cost of materials to produce product Z, D (depreciation) the cost to maintain the capital necessary to produce product Z, R the return required by the owners for their investment of capital, RxT the tax for government services to produce product Z and P the price a willing buyer is willing to pay for product Z the, this can be represented by the following equation where P = Z or the value of the product.
- A - B - C + D + R – RxT = P or
- A – B – C + D + R – RxT – P = 0
If there are equivalent alternatives to a buyer and he can purchase them for a price less than P, P will have to be adjusted or reduced downward or A’s capital will earn no return at all or A’s capital will have a lower value. Simply stated, if competition drives the price P down, something on the left side of the equation must go down an equal amount.
Conversely, if A’s capital can increase the price P in an inelastic market R can increase to a point where a willing buyer will seek an alternative or do without. As I have alluded to in other posts, government has given unions the power to increase B with no recourse to the owner except to decrease R or increase P. The general reaction is to increase A to eliminate B altogether.
Economike: I think I have proven this is a zero sum game. I challenge you to prove otherwise

What we are talking about here is a sales tax on the internet, which if implemented would necessarily strengthen the concept and role of world government. I speculate that the sales tax first came into being as a way to tax out of state users of services provided by the state,- police, fire, roads, ect so that it was an attempt by government to get payment for services provided by a greater number of people using the services. However now it has metamorphosed into a government entitlement justification in which the government sees its self as entitled to the fruits of any one's labor- and this is an essentially Marxist world view.

The internet was first developed by the US defense department funded by the US taxpayer, then it was taken up by a European non-profit CERN, and then developed by private industry, which is paid for through the private markets. If the government of England or the government of Maine is providing internet service, then clue me as I have never heard of that.

I read The Non-Profit Economy by Burton Weisbrod a number of years ago , in which he spoke of three separate economic sectors, government, non-profit, and private. I was interested in finding this again and so I did some research on economic papers. The most interesting is post Weisbrod, in which theories are emerging that government and non-profits are not separate economic sectors but instead they are partners. However the most significant observation that emerged from all of the economic papers that I explored is that while communism and socialism were occasionally mentioned, there was never a mention of the United States Constitution or the political philosophy that underpins out constitution. The reason for this is two fold. One, the subject focused on the provision of common good services. Second, because Communism and Socialism are political philosophies grounded in materialism, while the United States is grounded in spiritual and metaphysical beliefs and principals out of which emerges the freedom of the individual and hence private capitalism - ie the private economic sector.Economic discussion included broader categories as "externalizes" but never so broad as to include the principals of freedom and small government that is foundational to the American political philosophy. The partnership of governments and non-profits is just an expansion of government.

The new government entitlement attitude toward profits made non-locally on the internet are in direct denial of individual liberty as they attempt to tax the individual activities that are not related to any common good service provided by the government, as if the people are the property of the government for which private industry should pay the government for the use of its property.

RxT the tax for government services to produce product Z

If government services are required to produce Z, then you must be talking about a political system in which government is directly involved in the manufacture of the product. To my knowledge Great Briton has not yet gone down that road nor does Amazon sell products produced by government agencies. If Amazon does sell such products, then the cost would have been negotiated at the point of sale and would have been subtracted from Amazon's profits, which is the pie from which the British government wants its "fair share" ( a value which should equate with zero)

However this particular discussion is not about manufacturing it is about marketing. The British government feels that it is due a kickback on profits that Amazon makes on sales to British citizens.
As far as I can tell the value represented by RxT is zero - the value of the government service ( needed) to produce the product sold in the transaction equals zero.

Economike: I think I have proven this is a zero sum game.

pmconusa -

You never fail to astonish. When I wrote "This isn't a 'zero-sum game.'" the "game" I was describing is how "Tax policy affects the creation of wealth over time." We don't need a clever exercise in algebra to grasp that the sum of wealth has increased over time.

As Adam Smith observed, a nation's wealth consists of its capacity to produce goods and services. This capacity depends on the creation and accumulation of capital.

As I wrote above, the structure of the tax regime affects whether, and to what extent, taxes fall on capital or labor. Stated somewhat differently, government can impose lesser or greater burden on productive activity.

In a capitalist economy, a proportion of income is set aside as investment and the rest is consumed. When government taxes the surplus income needed for investment - in contrast to taxing the income used for consumption - that government is reducing the value of the future stock of capital. When capital is taxed more, there is less capital.

Let A be the amount of capital needed to produce product Z, B the cost of labor to produce product Z, C the cost of materials to produce product Z, D (depreciation) the cost to maintain the capital necessary to produce product Z, R the return required by the owners for their investment of capital, RxT the tax for government services to produce product Z and P the price a willing buyer is willing to pay for product Z the, this can be represented by the following equation where P = Z or the value of the product.
- A - B - C + D + R – RxT = P or

First of all there are no values associated with any of the the above and so It can't prove anything.

Secondly capital needed to produce a product is inclusive of the cost of labor, materials and overhead and so you are subtracting the capital more than once.

You added depreciation and return though I am not sure why. You have arbitrarily called it the "return needed" and so it appears that you are subtracting the capital investment from the taxes charged ( forget about the reason they are charged for now) and the return needed , which would always make the return needed less than needed.

Then you have arbitrarily stated that the price consumers are willing to pay is less that the return needed. Why? We do not even know what the product is so this is one heck of a guessing game.

Normally instead of "return needed" , one would have a symbol for "income generated" and subtract the cost of generating the income to get the profit.- - or the return on the investment and then one can compare that to a projected return needed to make the investment worth while. One needs to know the values represented by the symbols in order to draw such a conclusion.

- A – B – C + D + R – RxT – P = 0

This is the only place you have included a value. You have subtracted the capital investment, taxes and the price charged for the product, which you have described as the "price the consumer is willing to pay" which could be anything in relation to the cost. Let us say for arguments sake that the price the consumer is willing to pay is equal to twice the cost of bringing the product to the market. That means you have done the equivalent of subtracting the cost three times which makes depreciation plus projected return (impossible in this equation being that it all adds up to zero) = three times the cost of making the project ( being that together they equal zero). Your equation is nothing but a self fulfilling prophesy.

"Amazon.co.uk, Britain's biggest online retailer .... paid no corporation tax on any of the profits......The UK operation avoids tax as the ownership.......transferred to a Luxembourg company in 2006."

Woodcanoe began this thread with an instructive story about taxation: in a global economy, service industries are more-or-less mobile. Note that an attempt made by the British government to impose an income tax on Amazon's Luxembourg operation can only raise costs for British consumers. To paraphrase Reuven Brenner, government attempts to redistribute income will redistribute taxpayers.

The tax man will just have to withdraw his claws somewhat back to the point where people are willing to pay taxes at a certain level, but not beyond, as, in reality, taxation is voluntary for the most part as if it gets too high, people and companies will take steps to avoid them.

I agree with woodcanoe that this is the moral of the story. Tax jurisdictions that make themselves uncompetitive also make themselves poorer.

I asked if Amazon pays taxes in Germany, which I would assume to be the case. That's normal. Companies pay income taxes in the country where they are located-or the stockholders do. I think that would mean that if an Amazon stockholder is located in Great Briton, they pay income taxes to Great Briton. Am I mistaken? What is the issue here? Sounds like it is not income tax but the desire to impose a sales tax on non-local transactions.

The title of this thread says Amazon is avoiding corporate taxes because it's corporate tax bill to Great Briton is zero. Why Amazon? Why Great Briton? What does Amazon pay in Germany? What is the corporate tax code in Germany? In Great Briton? We know what it is in the United States- the highest in the world!

Ms. Andersen -

A minor point, perhaps, but Luxembourg isn't in Germany. Luxembourg is a tax jurisdiction in its own right.

The Amazon subsidiary headquartered in Luxembourg owes corporate income tax to Luxembourg. For purpose of comparison the CIT in Luxembourg is 21%, and in the UK it's 28%. At least in part, Amazon has chosen Luxembourg for its European base because of its lower tax rates.

The title of this thread says Amazon is avoiding corporate taxes because it's corporate tax bill to Great Briton is zero. Why Amazon? Why Great Briton?

Woodcanoe's title is taken from an article in the Guardian, Britain's left-wing newspaper. The implication (the Guardian's, not woodcanoe's) is that as Britain's largest retailer Amazon ought to be taxed as a British corporation. By implication, it's the typical "It's not fair to us" collectivist argument. The basic theme is "We allowed you the privilege of exploiting us. Now give some of it back!"

Companies get to avoid taxes because they take advantage of tax laws that are promulgated for the sole purpose of generating more and more revenue for government to redistribute. Companies, like GE have lobbyists in Washington making sure that when these regulations are written, GE's income is shielded as much as possible from U. S. Taxes. If they can do this by moving their profits abroad to tax havens they will. If they can move their businesses to other states who offer tax incentives for companies to relocate they will do that too. If they pay any tax at all it is built into the cost of producing their product, is reflected in the price to the consumer and the consumer ends up paying it, Ms. Anderson's argument notwithstanding.

Look at it this way, if the government didn't spend the money there would be no need to tax anything other than the income of individuals which is who the government is required to protect.

....."Look at it this way, if the government didn't spend the money there would be no need to tax anything"......

I have shortened your answer a bit to make it mean more what I think of when I ponder on this situation.

We are watching a very liberterian thing take place. As government, and to an extent, organized labor, seeks to extract evermore from anybody producing anything, they see those former taxpayers, and companies, just simply pick up and move, to some other state or some other part of the world. This represents a "freedom" that has been missing for a long time in the USA. And you can look around and easily see this happening. Much of our manufacturing base has moved to parts of the world where labor is cheaper and taxes are too, in relation to the American Dollar. The internet allows anyone, as I have been saying here for some time, to shop anyplace on earth he wants to. Those who see the internet as truly "freedom" for way more than just speech, are getting in on the ground floor of it.

I sell collectible postcards, pictures and other historical items, mostly, on several websites. I just mailed several postcards this morning to Germany and Denmark. The whole world is my market for little ol me, now, thanks to this great invention that drives politicians and taxmen daffy! I am just a very very small potato who does it mostly for the enjoyment as I have been a lifelong amateur historian and it is great to connect with similar people, all over the world!

But the short story here is: Many governments do not have a "revenue" problem, they instead have a grossly overweight "spending" problem that they are unwilling to face, thus a world wide economic calamity is approaching rapidly now, as many governments exist mostly on "borrowed money" the worst kind, if you can't ever pay it back!

WC

If they can move their businesses to other states who offer tax incentives for companies to relocate they will do that too. If they pay any tax at all it is built into the cost of producing their product, is reflected in the price to the consumer and the consumer ends up paying it......

pmconusa -

Stop congratulating yourself for being a Wise Old Bird for just a moment. Your oblivious tenacity is unbecoming to you and frustrating to others who are trying to be helpful.

Imagine (please try!) that a corporation faced with paying an otherwise unavoidable income tax won't just raise its prices as a matter of inevitability. The cost of taxes might make an otherwise less valuable use of revenue more valuable.

Consider: The corporate decision to declare a profit or to reinvest revenue back into the firm hinges on which alternative enhances the value of the firm. In other words, given a sum of revenue, the firm's management will choose the higher-valued use of its capital over the lower-valued use of its capital. OK so far?

Now, suppose that the tax cost imposed on an otherwise more valuable choice of declaring a profit makes the lower-valued choice of reinvesting the revenue more remunerative. I want to be perfectly clear, so I'm going to repeat. The cost of paying the corporate income tax, in marginal cases, will cause managers to deploy capital toward otherwise less valuable uses.

Do you now see the point? The corporate income tax - or any tax on capital - creates widespread and insidious incentives that can hinder capital formation, because such a tax regime that creates incentives for producers to choose less-valued uses for capital over higher-valued uses. Over time, the effect is a reduction in the total of capital deployed in an economy.

Woodcanoe's title is taken from an article in the Guardian, Britain's left-wing newspaper. The implication (the Guardian's, not woodcanoe's) is that as Britain's largest retailer Amazon ought to be taxed as a British corporation. By implication, it's the typical "It's not fair to us" collectivist argument. The basic theme is "We allowed you the privilege of exploiting us. Now give some of it back!"

If the Amazon subsidiary is located in Luxembourg, then what makes it Briton's largest retailer? It seems to me that it is a Luxembourg retailer selling to British people. The collectivists may see anyone successful as exploiters but the reason they are being exploited is because they are being offered affordable prices,- go figure! And the reason why Amazon is located in Luxembourg instead of Briton is because Luxembourg is "exploiting" Amazon by offering lower taxes than Great Briton. The article is a sham. There is no exploitation- just smarter business practices- and isn't that unfair ?

In reading some various economic reports on the subject of the three economic sectors, the emphasis was on services for a common good, but there was a complexity to it in that not all government services serve all of the people. National defense was brought up of an example of a government service that serves everyone in the society . It also happens to be a role of the federal government that our founding fathers acknowledged. I think the solution to the complexity is obvious, Government should only be providing that which serves all of the people and leave the special interests to the other two sectors. However the discussion centered on services that the people voted for. The problem with that is that the tendency is to keep reintroducing a vote until finally whatever it is, is voted in. It is less often that there after a vote occurs to vote a service out- Obama Care being an exception but Obamacare was not voted in by the people, who, according to the polls, would have voted it down.

So unless there is a constitutional restriction against special interests , government will tend towards increasing in size. Even with a constitutional restriction- as in Article IV, part Third , Section 14 of the Maine State Constitution, which restricts the legislature from chartering corporations for special interests, (which is the case with all corporations)., this only works to the degree that the constitution is actually upheld, which has not been the case in Maine for decades.

pmconusa Mon, 04/09/2012 - 9:02am #17: "... Economike: I think I have proven this is a zero sum game. I challenge you to prove otherwise."

Aside from the fact that the algebraic symbols are not defined in terms of meaningful ability to determine their values or just who or what aggregates they pertain to, the algebraic formalism assumed the conclusion. It is a static analysis of a near-instantaneous state improperly extrapolated across time to "prove" what was assumed.

Economike: Mon, 04/09/2012 - 9:59am #20: "pmconusa - ... When I wrote 'This isn't a `zero-sum game`.' the 'game' I was describing is how 'Tax policy affects the creation of wealth over time.' We don't need a clever [?] exercise in algebra to grasp that the sum of wealth has increased over time."

More precisely it has changed over time under different social conditions. It is presently much more than previous periods in human history, but there have been periods within the evolution of mankind in which authoritarian, primitivist rule has destroyed wealth and reduced the standard of living (and ability to live at all) to grotesque proportions -- the Dark Ages, National Socialism, Communism, etc. -- illustrating how government can destroy wealth through statist policies when raw force destroys freedom to make individual creative action based on rational thinking impossible.

We cannot assume that economic and technological progress are the 'natural' state of humanity, with only secondary variations in rate due to government policies. Success in human life takes rational effort under the right moral and social conditions of individualism.

The enormous progress over the last few centuries would not have been possible without an Enlightenment and the consequent Industrial Revolution. Likewise, the counter-Enlightenment and its influence producing the varieties of pragmatism, skepticism, irrationalism, collectivism, and the consequent statism (including progressivism), are a very real threat to the continued improvement and perhaps survival of this country over time just as they have destroyed other countries.

We cannot assume that economic and technological progress are the 'natural' state of humanity, with only secondary variations in rate due to government policies.

ewv -

I fully agree with your historical view of progress and that neither freedom nor market capitalism, its close approximation, are inevitable.

I did not intend to suggest that tax policy alone drives economic development. I merely meant to show that tax policy can place greater-or-lesser burden on it.