Ktismatics

4 June 2012

Nonprofit Capitalism

Filed under: Culture, Psychology — ktismatics @ 9:38 am

The point of high corporate income taxes isn’t just to finance public works. A high tax rate also provides an incentive for corporations to reinvest pre-tax operating profits in business expansion. Buying infrastructure — land and buildings — doesn’t really reduce the tax burden, since real estate is just as tangible an asset as the cash you pay for it. But staffing and capital improvements are expenses: liabilities without offsetting tangible assets. Hiring and building become the preferred means of dodging the taxman.

The value of new workers and enhanced means of production are measured not in the present but in the future, as growth. Corporate taxes aren’t eliminated forever; they’re deferred until some future date when the company decides to cash out its retained earnings and take the profits. That’s the situation the US economy faces now, with a historically low corporate tax rate exacerbated by a historically low capital gains tax rate.

At a corporate tax rate of 100 percent all businesses are effectively transformed into nonprofit corporations, regardless of whether they engage in do-gooder activities traditionally associated with the label. The 100 percent corporate tax doesn’t necessarily dismantle capitalism. It does, however, remove the incentives for investors to accumulate profits, either in the present or in the future. Expansion can go only so far. Eventually there’s nothing else to do with chronic business success but to lower prices and/or raise wages.

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17 Comments »

  1. Well, seems a bit sad that this piece has sat there all this time without a response, so here’s mine: sorry, that just didn’t come together for me. I’m not totally ignorant of economics, but I’m not that confident either (though I tend to read more on that side of things than anything else these days)… whatever, I coudn’t see anything wrong with that, but I just wasn’t sure whether there was a conclusion at all, and if so, if the preceding necessarily pointed to it. The whole little thought seems to hang in the abstract world that mainstream economists seem to inhabit – absent the really-existing prevailing conditions and ‘externalities’, like offshoring for instance. But what do I know? In short, I’m not sure I see what you’re getting at.

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    Comment by lafayettesennacherib — 10 June 2012 @ 7:25 pm

  2. This post makes a nice contrast with the preceding one. Since 4 June, the date I put up this post, it’s had 17 page views. In contrast, during that same time interval the Ouroboros post has had 502 page views.

    I’ve been pounding away at Deacon’s book about the evolution of intentionality, which I wrote about on the “Why Life?” post and discussed also on the “Ontology for Whose Sake?”, as well as Juarrrero’s book on a related topic. Also writing fiction — 26K words on the new novel since starting on it the first of May; not going too badly I think. The overlap on those two topics would be something about whether I believe that fiction writers have particularly sharp insight into people’s intentions.

    Yesterday I picked up the Blackmore translation of Mallarme from the library. I’ve read a few of the prose poems, but have nothing particular to say about them at this point.

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    Comment by ktismatics — 10 June 2012 @ 8:02 pm

  3. Good, I didn’t really want to talk about economics.

    I don’t know how you find the time for all you do. Then again, when I think of the time I waste these days… I remember Chomsky describing the internet as a great time-waster, and that’s increasingly what I find – huge chunks of time just frittered away. I need to get it back in its corner.

    The prose poems are certainly not the core of his work, but they shouldn’t be overlooked – that’s all I meant. Apart from that, I don’t know what I’d have to say about them, except that they seem to get more charming every time I read them. See if you can see why Patrick’s writing sometimes reminds me of Mallarme’s prose poems; sometimes when P. goes into his convoluted tales about NY high society, it makes me think of Mallarme sitting in for Taki in his gossip column.

    You already know Prose for Des Esseintes. Other essentials are Toast Funebre (for Gautier) – my favourite; The Afternoon of a Faun (sublime); Herodiade (all 3 parts – 2 parts are in the ‘uncollected’ section) – maybe you noticed I had some discussions about this with Patrick (sort of) because Martha Graham did a dance based on it; and I guess you haven’t noticed ‘Un Coup de Des’ yet. They’re the big substantial ones. But all the collected ones after maybe ‘Don du Poem’ are first-rate. And most of the uncollected ones too – there’s a few of those that are included in most collections, but that’s enough to be going on with.

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    Comment by lafayettesennacherib — 10 June 2012 @ 9:31 pm

  4. Oh I’m a huge time-waster. Reading these two heavy-theory books: is it a waste when I don’t really have an agenda related to them? I don’t know: I found them interesting if obtuse, plus there’s a soap-opera feature: one of the authors accuses the other of, if not plagiarism, then at least lack of professional acknowledgment. The accusations and denials have been floating around on several different blogs, including Dead Voles, but it never materialized here.

    There was a big crowd this afternoon on the downtown pedestrian mall: “Jewish Festival” was in full swing. I couldn’t quite tell exactly what was being celebrated. A rock band was playing something loud that I could not recognize as Jewish, food stalls were selling falafel and other Middle Eastern cuisine; maybe if I’d lingered I’d have picked up more of the ethnicity angle from the event. I stopped at the bookstore looking for a used copy of DeLillo’s End Zone, but no such luck — I can’t even get it from the library. I’ve not read Cosmopolis, which Cronenberg has now made into a movie for which the reviews from Cannes weren’t very enthusiastic.

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    Comment by ktismatics — 10 June 2012 @ 10:04 pm

  5. In other news, I see that “Mikhail” is posting again at Perverse Egalitarianism. Carl left a comment, and in his reply Mikhail wrote this:

    “Ironically, it was John Doyle from Ktismatics who gave me up to the OOO crowd (I trust just for the shits and giggles of it all) – go figure…”

    Mikhail made this revelation public before departing the blogging scene over a year ago. And it’s true, as I told Mikhail at the time via email: I identified his real name to one person. I didn’t make a public announcement on Ktismatics, nor did I spread the news through private channels to anybody else in, or out of, “the OOO crowd.” Evidently that one person I told decided to spread the news for reasons to which I’m not privy, since I am not in regular correspondence with that individual. I’m no fan of OOO, so I wasn’t acting in some sort of solidarity with my chums or defending their ideas or their character from argumentation or ridicule, much of which is deserved in my view. Having previously written posts defending anonymity on blogs, and having known the secret identity of some other bloggers with no intention of ever “giving them up” to people who really want to know, and having retained cordial commenting relations with bloggers who write all manner of slanderous material on their own blogs and with whom I disagree on various substantive issues, it seems unlikely that in Mikhail’s case I’d have named him “for the shits and giggles of it all.”

    For me the most “ironic” part of the whole incident is this: I greatly respect the distinction between public and private correspondence. That I revealed Mikhail’s name, which I knew because I’d enjoyed several personal conversations with him, suggests certain extraordinary circumstances behind my decision to violate confidentiality. I did not tell Mikhail the reason why I identified him, though I’m pretty sure he knows what that reason is. Some other bloggers could probably make a good guess too. I didn’t explain my rationale to Mikhail or to anyone else because it would have involved my disclosing the substance of someone else’s personal correspondence with me, which I chose not to do. In light of Mikhail’s publicly outing me as the rat, I would have no objection if the person to whom I identified Mikhail explained publicly what happened on his own blog. This might be especially apt since it’s this person’s private correspondence that I’ve protected and since he saw fit to spread the private information I gave him about Mikhail’s real name to others, effectively rendering private knowledge public. Such a move on this individual’s part might clear things up, and might even alleviate some of the assholery being ascribed to me. As I said, I’m not in correspondence with this individual, and I have no intention of writing him an email suggesting that he reveal the inside scoop publicly.

    In any event, I’ll read Mikhail’s blog now that he’s back. I get a kick out of a lot of his posts, and I learn about stuff I otherwise wouldn’t know about.

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    Comment by ktismatics — 11 June 2012 @ 7:22 am

  6. I’m a big fan of this analysis. Two points, the first supportive and the second cautionary.

    1. In Against Thrift, which I cite because I happen to have read it recently, Jim Livingstone purports to show (I am not enough of an economic historian to expertly vet his demo) that private capital has not been driving growth since the early 20th century. In effect, all private profits do is inflate speculative bubbles, while public and consumer spending carries the load of actual productive investment. All the more reason for big social-democratic transfers then, as he argues.

    2. Even so, in a global economy there’s a pragmatic limit on taxation rates that has to do with capital mobility. Beyond a certain marginal rate, which varies contextually, capital will simply go away from where it’s too highly taxed to where it’s not. The Mediterranean economies are actually excellent examples of this, necessitating the unsustainable borrowing spiral we’ve seen to get government / collective consent done. The U.S. has the huge advantage of currently being a mandatory economy, but that can change.

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    Comment by Carl — 11 June 2012 @ 10:22 am

  7. The idea of 100% corporate tax rate is purely hypothetical, since as both you and Lafayette note the capital isn’t tied to the country: it can go to any safe harbor that offers low corporate tax rates. Still, the clamor for raising taxes always has as its justification the ability to pay for government services, but there are effects on the private sector as well. Back when the highest marginal personal tax rate in the US was 75% or so, the discrepancy between minimum wage and highest-paid workers was much lower than it is today. If $3 of every extra $4 you earn goes to Uncle Sam, then there’s less motivation to keep getting more and more pay.

    I don’t think that any national government can do much to stimulate the private sector to expand and create jobs. Raise taxes and the company moves away; lower taxes and the company takes its profits rather than expanding. An exception is China, in which the government owns its central bank, suppresses private wages, enters into contracts with private firms in other countries, etc. In effect the Chinese government runs as a huge for-profit corporation in the world economy. And of course they’re experiencing good growth even during the current trumpeted downturn. I don’t really know how much the big bosses skim off the top, but I understand that wealth inequality is happening pretty fast there now.

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    Comment by ktismatics — 11 June 2012 @ 12:22 pm

  8. If I was starting another company now, I’d set it up as a for-profit company but make the following formal commitments:

    1. No employee, including the CEO, can make more than X times the lowest-paid employee.
    2. All operating profits go toward:
    a. raising everyone’s pay and/or
    b. lowering prices and/or
    c. expanding the business

    I would support a policy in which all government contracts would be awarded only to companies run something like this. Given that the government has outsourced to private contractors so much of the work that was formerly performed by government employees, limiting contracts to companies that are effectively nonprofit would limit the ability of investors and other tycoons to get rich at the citizenry’s expense.

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    Comment by ktismatics — 11 June 2012 @ 12:42 pm

  9. Says Carl to Mikhail on PervEgalit: “In fact it’s my impression he had some kind of Enlightenment/stroke event and thought if everyone could just get together face to face, know each other as real live feeling thinking human beings, good will would prevail …”

    Related to discussion on Dead Voles and to fiction-writing, it’s not always easy to infer another’s intentions. I’d say that while I might have hoped for an eventual cumbaya reconciliation, I didn’t really expect the hope to be realized, nor was it the reason propelling my action. On the other hand, Carl has demonstrated deep insight into my depths of being so maybe he knows my motivations better than I do. I will say that I did not act out of malice toward Mikhail, and that I enjoyed knowing him before this hit the fan.

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    Comment by ktismatics — 11 June 2012 @ 2:41 pm

  10. Nah, I have no commitment to that explanation whatsoever. But it’s certainly preferable as a relationship-enabling fiction to “shits and giggles.”

    It’s interesting that the first time I read your reply @7 I only processed the “less motivation” in your “less motivation to keep getting more and more pay,” and went straight to all those libertarian/propertarian arguments about how people won’t try unless they’re goosed by the possibility of ever-increasing wealth. Which we’ve amply debunked from time to time, but it does show one of the critical constraints on this discussion in real political terms.

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    Comment by CarlD — 11 June 2012 @ 4:32 pm

  11. Agree on the merit of your explanation, Carl, which is in fact closer to the actual than is the shits-and-giggles alternative. Who knows, maybe one day the three of us will again raise our beer glasses together in Fort Collins. We’ll abide by the house rules of the Old West: check your weapons at the door.

    I agree with the debunking. The most recent study I saw involved preverbal little kids who, in watching someone who seemingly couldn’t locate something in the room, spontaneously offered help. When kids weren’t rewarded they persisted in being helpful; when rewarded, they stopped being helpful in the absence of reward.

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    Comment by ktismatics — 11 June 2012 @ 4:40 pm

  12. “I greatly respect the distinction between public and private correspondence.”

    Yes, you make of it a near-religion and are seemingly surprised that others don’t think it’s so hard-and-fast. In fact, you don’t always do it either. Although that doesn’t mean I know who ‘Mikhail’ is btw, nor do I any longer particularly care. What it does mean is that this hard-and-fast rule is pretty relative when you tell part of the ‘private correspondence’ from someone else, but not the rest. Why did you want me to know who ‘Martin’ and ‘Joxter’ were, which is a kind of confesssional from the private correspondent, but wouldn’t name the person who told you? I don’t know who anybody is at this point and do not, as you do, defend anonymity, although some can be seductive with it. But then they don’t know how to pull it out in public either.

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    Comment by Patrick J. Mullins — 11 June 2012 @ 4:45 pm

  13. As I remember it, Martin was a discussant on some thread on Traxus’ blog. Somebody told me via email whom he suspected Martin to be; I passed the suspicion on to you. Did my unnamed informant know Martin’s identity for certain? Not that I recall. Would I have passed on the rumor if I’d known that you would make it public? No. I don’t remember Joxter: maybe he was on that same Traxus thread.

    “But then they don’t know how to pull it out in public either.”

    LOL. How do you know? I don’t recall discussing the topic either publicly or privately. I confess to standing full-frontal naked in my 33rd floor KC hotel room at the window at night with the lights on. It was kind of a kick.

    There are circumstances in which I would agree with you, Patrick, that anonymity isn’t inviolable. I had previously posted a hypothetical example of such circumstances but subsequently thought better of it and took it down. Suffice it to say that one such circumstance did arise. Whether I made the right call or not is of course a matter of opinion.

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    Comment by ktismatics — 11 June 2012 @ 5:09 pm

  14. I have nothing further. You totally perverted my comment, so that means I just let you read it here rather than on email. I see why the ‘intellectual virtues’ could have been mistaken as something else, though, as the technique is very devious.

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    Comment by Patrick J. Mullins — 11 June 2012 @ 5:32 pm

  15. Here’s a hypothetical situation in which I would agree with you, Patrick, that anonymity isn’t inviolable. If I were persuaded, say, that someone under cover of anonymity was directing private personal harassment or threats, however veiled, at someone else, then I would reveal that person’s identity to the victim. Let’s call it removing an unfair advantage. I suppose another way to go about it would be to tell the anonymous person that, as long as he or she stops the personal attacks, then I won’t reveal the secret identity.

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    Comment by ktismatics — 11 June 2012 @ 5:48 pm

  16. Excuse me if I jump straight to a current ‘bee in my bonnet’ (as we say ‘up by’ – that’s Scotland), re the Blackmores’ translation again. They are the only people who have EVER (at any time) translated the title of the poem, ‘ Un coup de des jamais n’abolira le hasard’ as ‘ A Dice Throw At Any Time Never Will Abolish Chance’. That ‘At Any Time’ seems quite gratuitous and is plainly wrong as a translation of that sentence, but I assume their choice is determined by the way those words are distributed through the text ( which you can hardly miss, even on a first read), to avoid (this poem isn’t ‘page-facing’ translation for reasons which will be obvious) having ‘will abolish’ as equivalent for ‘ n’abolira’. I don’t KNOW if that was why they did it, but it seems a strange choice, and, to me, a wrong choice. You’ll see what I mean.

    They make too many choices like that, but they’re still the best place to start, so what the…

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    Comment by lafayettesennacherib — 11 June 2012 @ 9:33 pm

  17. A throw of the dice never will abolish chance… every thought emits a dice throw.

    And there’s lots of good stuff in between.

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    Comment by lafayettesennacherib — 11 June 2012 @ 9:36 pm


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