Pope Francis calls unfettered capitalism 'tyranny' in manifesto for papacy

[Sunstone]

Also the reason US businesses move out of the country is that the monetary restrictions arbitrarily imposed on them by the government makes their product so expensive that it can't be sold to customers.
​

:biglaugh:Is that you, Mr Beck? Or is that you, Mr. Limbaugh? Sorry, but I just can never tell you famous conservative economists apart.

 

[metis]

The truth is more complex than "Every cost incurred in business (including taxes) is passed on to the consumer." Depending on a mix of factors, including the competitive environment, market demand, the clout the business has with its suppliers, and so forth, the cost of taxes (or any other cost) is sometimes taken out of profits, is sometimes offset by improved efficiencies, is sometimes passed along to suppliers, and is only sometimes passed along to consumers.

Nice post, and I wished I had seen this before posting mine.

 

[Revoltingest]

The truth is more complex than "Every cost incurred in business (including taxes) is passed on to the consumer." Depending on a mix of factors, including the competitive environment, market demand, the clout the business has with its suppliers, and so forth, the cost of taxes (or any other cost) is sometimes taken out of profits, is sometimes offset by improved efficiencies, is sometimes passed along to suppliers, and is only sometimes passed along to consumers.

As a business owner & investor, I see it differently. In a steady state situation where profit margins are competitive (ie, they reflect the anticipated rate of return on investment), all taxes (eg, income, property) paid are passed on the the customer as a portion of the price. The reasoning is simple: Ignoring other variables for the moment, if taxes increase, prices will rise to meet the desired rate of return. If taxes decrease, prices will fall for the same reason. Some mechanisms: If profit in an industry falls below the desired rate of return, then new competition won't enter the market, & existing businesses will disinvest...until the rate of return rises to the desired level.
(Note: I'm holding constant some fluctuating things, eg, efficiencies, demand, rate of return)
We don't typically allocate taxes to this or that income source, except that for analysis purposes income taxes are usually a function of profit (ie, net income), & property taxes are closely related to facilities.

I understand BSM's perspective, but I would've worded it differently, since we businesses do pay taxes...tis just that we're not alone in bearing the cost.

Edit:
A case where taxes aren't passed on almost happened to me. A few years ago, our Canuckistanian governor (who is fun to blame) thought it would be a great idea to charge sales tax on almost all services (excluding lawyers...like her), including self storage. In the short run (5 years or so....the typical time for facilities to be built), we didn't know how much of it we'd pass on. Pass on the full amount, & we might lose too much business. Pass on nothing (ie, lower the rent for the same net cost to customer), & we might operate at a loss. The loss would continue until the market grew without new competition. Fortunately, the law & the governor were turned out, so I didn't have to face the problem. But it illustrates a short term case where taxes aren't passed on to the customer.

 

[metis]

If a corporation pays an increase of let's say $1 in federal taxes, one should realize that the amount paid extra for a product they make at any given local or state level is only a small fraction of $1. It's not 1:1. Therefore, a slight increase in taxes may not have any significant effect whatsoever. But there's more to the story.

If Company A and Company B are both making widgets in a competitive market, as long as they are both taxed at the same rate, the consumer is still likely to buy the product if they really need it. If A is taxed lower than B however, there's now a mismatch of sorts, so B now has a problem. If they can't get their tax rate reduced, then they can be out-competed, thus leading towards fewer companies producing widgets and thus reducing competition. IOW, it can become a race to the bottom whereas competition is reduced, plus the consumer is stuck paying high taxes to compensate for A's tax break, thus decreasing their spending ability, thus...

 

[Revoltingest]

If a corporation pays an increase of let's say $1 in federal taxes, one should realize that the amount paid extra for a product they make at any given local or state level is only a small fraction of $1. It's not 1:1. Therefore, a slight increase in taxes may not have any significant effect whatsoever. But there's more to the story.

If Company A and Company B are both making widgets in a competitive market, as long as they are both taxed at the same rate, the consumer is still likely to buy the product if they really need it. If A is taxed lower than B however, there's now a mismatch of sorts, so B now has a problem. If they can't get their tax rate reduced, then they can be out-competed, thus leading towards fewer companies producing widgets and thus reducing competition. IOW, it can become a race to the bottom whereas competition is reduced, plus the consumer is stuck paying high taxes to compensate for A's tax break, thus decreasing their spending ability, thus...

For the record....I've long opposed tax breaks on a company by company & industry by industry basis.
It reeks of corruption. Tax policy should create a general environment.

 

[CMike]

From the OP

Selections from paragraphs 53-60. No further commentary required:

"Just as the commandment 'Thou shalt not kill' sets a clear limit in order to safeguard the value of human life, today we also have to say 'thou shalt not' to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.




[...]

"ome people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.

To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase; and in the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.

[...]

"While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule."


Sounds like a communist/socialist to me.

Maybe he should stay out of politics.

 

[CMike]

If a corporation pays an increase of let's say $1 in federal taxes, one should realize that the amount paid extra for a product they make at any given local or state level is only a small fraction of $1. It's not 1:1. Therefore, a slight increase in taxes may not have any significant effect whatsoever. But there's more to the story.

If Company A and Company B are both making widgets in a competitive market, as long as they are both taxed at the same rate, the consumer is still likely to buy the product if they really need it. If A is taxed lower than B however, there's now a mismatch of sorts, so B now has a problem. If they can't get their tax rate reduced, then they can be out-competed, thus leading towards fewer companies producing widgets and thus reducing competition. IOW, it can become a race to the bottom whereas competition is reduced, plus the consumer is stuck paying high taxes to compensate for A's tax break, thus decreasing their spending ability, thus...

Another major problem, especially in Michigan, is that businesses are barely still open, because of profitiability.

Increasing taxe rates can be the difference between the business staying open or not. In fact, taxes now make it hard for a business to stay in business.

What happens when the business closes? Guess what? More unemployed people who don't have income.

The humane and moral think for the government to do is lower tax rates and burdensome regulations, and make it easier for businesses to stay in business.

The more businesses the more employed people. The more employed people the more people who have income.

The punishing of tax payers and businesses hurts everyone, ESPECIALLY poor people.

Therefore, the Pope's socialist/liberal message is one that hurts people and increases poverty.

 

[CMike]

For the record....I've long opposed tax breaks on a company by company & industry by industry basis.
It reeks of corruption. Tax policy should create a general environment.

Letting people keep more of their own money is not a "break".

It's just the government doing less looting.

 

[Sunstone]

Letting people keep more of their own money is not a "break".

It's just the government doing less looting.

Yeah, because it's not like you're at all dependent on the society you live in. Only a hermit could say something like that and it not be a hypocritical statement.

 

[metis]

From the OP

Selections from paragraphs 53-60. No further commentary required:

"Just as the commandment 'Thou shalt not kill' sets a clear limit in order to safeguard the value of human life, today we also have to say 'thou shalt not' to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.




[...]

"ome people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.

To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase; and in the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.

[...]

"While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule."


Sounds like a communist/socialist to me.

Maybe he should stay out of politics.

Actually what he is saying is sound economics and quite humanistic in its approach. No economic system should ever be deified to the point whereas it is more important than the people any economic system is supposed to serve.

 

[9-10ths_Penguin]

As a business owner & investor, I see it differently. In a steady state situation where profit margins are competitive (ie, they reflect the anticipated rate of return on investment), all taxes (eg, income, property) paid are passed on the the customer as a portion of the price. The reasoning is simple: Ignoring other variables for the moment, if taxes increase, prices will rise to meet the desired rate of return. If taxes decrease, prices will fall for the same reason. Some mechanisms: If profit in an industry falls below the desired rate of return, then new competition won't enter the market, & existing businesses will disinvest...until the rate of return rises to the desired level.
(Note: I'm holding constant some fluctuating things, eg, efficiencies, demand, rate of return)

Assuming a constant rate of return is a major error here, since doing that creates implied assumptions about the elasticity of investors purchasing investments that just aren't true.

Typically, an investor wants to maximize their ROI. If a governmental policy makes every option less profitable, it's not like a rational investor will say "I used to get 10% p.a. and now I get 8%, so I'll sell my investments, put my money under my bed, and earn nothing."

As long as the rate of return is high enough to outweigh any downside risk, rational investors will continue to invest.

 

[metis]

Another major problem, especially in Michigan, is that businesses are barely still open, because of profitiability.

Increasing taxe rates can be the difference between the business staying open or not. In fact, taxes now make it hard for a business to stay in business.

What happens when the business closes? Guess what? More unemployed people who don't have income.

The humane and moral think for the government to do is lower tax rates and burdensome regulations, and make it easier for businesses to stay in business.

The more businesses the more employed people. The more employed people the more people who have income.

The punishing of tax payers and businesses hurts everyone, ESPECIALLY poor people.

Therefore, the Pope's socialist/liberal message is one that hurts people and increases poverty.

First of all, the overall tax rate nationally and here in Michigan is low and was even lowered by the Snyder administration with no improvement in our state economy, which is roughly at 9% official unemployment and is 2% higher than the nation on an average.

Secondly, if taxes are lowered, services will also have to be lowered unless taxes are increased for others, and the effect of reducing services not only has implications for those directly affected but also indirectly affected. From an economic perspective, the last people that should be cut short are the poor and lower middle-class at the local level because these are the people who are more apt to spend a higher percentage of their income locally. To further hurt that element is economic suicide, besides being a violation of halacha.

We simply cannot squeeze blood out of a turnip, so if business and corporate taxes are lowered, programs either must be cut or taxes from others must be raised.

This may be hard to believe unless one understands how macro-economics actually works, but when the former Swedish minister of the treasury was asked how Sweden managed to have one of the highest standard of livings in the world (they passed us up several years ago), his response was "Higher taxes" (they also altered their national tax code whereas their federal tax rate of all businesses was lowered to 10% net with no funny stuff allowed, and most of the difference was made up by a VAT). As counter-intuitive as this might sound, it actually makes a lot of sense economically.

Shabbat shalom

 

[Alceste]

Well, the bible is largely anti-capitalistic; it denounces greed and materialism while encouraging sharing and giving alms.

Yes, it's nice to finally see a Catholic authority who appears to have read and understood the gospels, and actually wants to put the philosophy of Christ into practice.

 

[Kilgore Trout]

Yes, it's nice to finally see a Catholic authority who appears to have read and understood the gospels, and actually wants to put the philosophy of Christ into practice.

I don't know who this guy thinks he is trying to put church teachings ahead of centuries of entrenched tradition of putting the church and its executive officers first.

 

[Alceste]

I don't know who this guy thinks he is trying to put church teachings ahead of centuries of entrenched tradition of putting the church and its executive officers first.

Beats me, but I get a real kick out of the way he sneaks out at night to help the poor, leaving his less altruistic advisers and companions all flustered and annoyed.

 

[Kilgore Trout]

Beats me, but I get a real kick out of the way he sneaks out at night to help the poor, leaving his less altruistic advisers and companions all flustered and annoyed.

Such behavior in a pope just isn't decent.

 

[Revoltingest]

Assuming a constant rate of return is a major error here, since doing that creates implied assumptions about the elasticity of investors purchasing investments that just aren't true.

Tis an assumption to illustrate a point.
(But there is no error.)

Typically, an investor wants to maximize their ROI.

That's an over-simplification.
The typical investor wants some compromise between high ROI & low risk.

If a governmental policy makes every option less profitable, it's not like a rational investor will say "I used to get 10% p.a. and now I get 8%, so I'll sell my investments, put my money under my bed, and earn nothing."

That is not what I'm saying. The ROI (or capitalization rate) changes as a function of economic activity, government interest rate, perception of general risk, inflation, alternatives, etc. I've continually changed my expected return based upon these conditions, yet my points still stand.

As long as the rate of return is high enough to outweigh any downside risk, rational investors will continue to invest.

This is true, but peripheral to what I'm addressing about the pass thru to the customer of taxation, & why it happens.

 

[Revoltingest]

Letting people keep more of their own money is not a "break".
It's just the government doing less looting.

Your point has merit, but it's not what I'm addressing. The problem is when gov
decides that Mike's Widgets should pay lower taxes than Sunstone's Widgets. The
ability for gov to do this not only harms Sunstone, but opens the door to corruption.
(Note: I'm not accusing you of bribing governor Penguin.)

 

[CMike]

First of all, the overall tax rate nationally and here in Michigan is low and was even lowered by the Snyder administration with no improvement in our state economy, which is roughly at 9% official unemployment and is 2% higher than the nation on an average.

Secondly, if taxes are lowered, services will also have to be lowered unless taxes are increased for others, and the effect of reducing services not only has implications for those directly affected but also indirectly affected. From an economic perspective, the last people that should be cut short are the poor and lower middle-class at the local level because these are the people who are more apt to spend a higher percentage of their income locally. To further hurt that element is economic suicide, besides being a violation of halacha.

We simply cannot squeeze blood out of a turnip, so if business and corporate taxes are lowered, programs either must be cut or taxes from others must be raised.

This may be hard to believe unless one understands how macro-economics actually works, but when the former Swedish minister of the treasury was asked how Sweden managed to have one of the highest standard of livings in the world (they passed us up several years ago), his response was "Higher taxes" (they also altered their national tax code whereas their federal tax rate of all businesses was lowered to 10% net with no funny stuff allowed, and most of the difference was made up by a VAT). As counter-intuitive as this might sound, it actually makes a lot of sense economically.

Shabbat shalom

Business owners also pay a special state business tax. Therefore, Michigan has some of the highest business tax in the country.

The high taxes kill businesses, kill jobs, and kill incomes. It creats lots of poor people. And of course then the looters can do them all favors by making them dependent on them, then on their own work.

 

[Sunstone]

Another major problem, especially in Michigan, is that businesses are barely still open, because of profitiability.

Increasing taxe rates can be the difference between the business staying open or not. In fact, taxes now make it hard for a business to stay in business.

What happens when the business closes? Guess what? More unemployed people who don't have income.

The humane and moral think for the government to do is lower tax rates and burdensome regulations, and make it easier for businesses to stay in business.

The more businesses the more employed people. The more employed people the more people who have income.

The punishing of tax payers and businesses hurts everyone, ESPECIALLY poor people.

Therefore, the Pope's socialist/liberal message is one that hurts people and increases poverty.

Have your views of taxation and economics changed any in the past ten or twenty years? Just curious.