If taxing equity-holder-owned corporations does not work, what does? May 21, 2013 at 5:14 am
David Cameron has finally* written to the Crown Dependencies asking them to buck up their game on international tax. I don’t have high hopes. Many of these places have based their business models on secrecy, tax avoidance, and perhaps even the whiff of money laundering. Asking them to help the UK get its rightful tax revenue is roughly equivalent to asking them to hand back a substantial fraction of their GDP. We can achieve something here, of course, but it is going to take something more coercive than a letter to get it.
Let’s be optimistic, though, and say that Cameron, perhaps as part of a G-20 initiative, succeeds. So what?
a 1 euro increase in [corporate] tax liabilities yields a 77 cent decrease in the wage bill.
In other words, companies just pass over three quarters of their new tax burden on to workers. Dillow then asks if taxing profits is infeasible, what policies would increase equality? One of his answers is radical:
Another possibility is … to abolish capitalism and profits. Granted, nationalizing companies so that the state can grab their profits might be like buying an airline to get free hot towels. But I suspect that worker-owned firms would provide a more stable tax base than profits do now. If workers owned firms, they could no more enrich themselves by shifting the burden of profit taxes onto workers than they could by moving their wallets from their left-hand pocket to the right-hand one.
Now, this really is left field, but I do like his thinking. Certainly the proposition that key service providers, like google, or vodafone, or the banks, should be in private hands is by no means proven. We could even nationalise them by issuing tracking stock that grants a share in their profits, like a share, but with no voting rights. What equity investors mostly want, after all, is a share of profits; companies routinely ignore their wishes anyway, so having the government in charge would not materially affect things. Indeed, you could simply change the legal nature of what a share is without having to buy anything: Marxism by corporate finance reform. It will never happen, of course, but that doesn’t stop it from being a good idea.
*I was far from the first to agitate about this, and my post was over four years ago.