September 21, 2011

I hate the corporate income tax.  I hate it for a number of reasons, which I hope to post here over the next week or two.

The first reason I hate the tax is because it is hard to determine who, in the end, pays the tax. Economists call the distribution of the burden of a tax its incidence. Economists prefer taxes with a clear burden; public policy objectives can be inadvertently distorted if the distribution of a tax is not well understood.  The incidence is not necessarily apparent. Many economists believe, for instance, that the division of the payroll tax into an employee and an employer share doesn’t accomplish its end–of putting half the burden on the employer.  The employer doesn’t calculate his pay offer based on the base number. He or she calculates total compensation, including benefits and the payroll tax, and makes the pay offer accordingly.

In comparison, the corporate income tax represents a nightmarish problem of determining incidence.  The tax is aimed at the shareholders of the corporation, but depending on the price elasticities in both the product and the labor markets, the tax may be shifted to either workers or consumers.  The corporation’s goal is maximizing after tax profits.  Doing so may involve both evading/avoiding the tax, and attempting to shift the burden onto either consumers of their products (through price increases) or their employees (through wage cuts).

If a product is highly price inelastic–that is, if consumers are not sensitive to price increases–and the industry concentrated, tacit pricing agreements shift the burden of the tax to consumers. Tobacco is an obvious example. Likewise, if labor markets are slack, the corporate income tax burden can be shifted onto workers, in the form of lower wages or reduced benefits.

If the intention is to tax capital holders, then it makes sense to use a tax that does so more directly.  For instance, a stock transaction tax would be very difficult to shift onto any group other than stockholders.

In the end, though, Mitt Romney was right. Corporations may not actually be people, but in the end, corporations don’t pay taxes, people pay taxes. The trouble with the corporate income tax is that it’s hard to figure out who those people are.


September 21, 2011

September 22nd brings cosmologist Lee Smolin to Virtually Speaking.  His current work involves questioning the widely held view among cosmologists that our universe is one of many, many universes–that it is part of a mulitverse.

Three decades ago, talk of other universes was not seen by most physicists to be part of science. Most research in theoretical physics and cosmology concerned observable features in our universe and most papers and seminars referred to experimental results. However, since then there has been a gradual shift, during which it first became acceptable to work on theories that described not only our universe, but other possible universes, universes with less or more dimensions, or universes with different kinds of particles and forces. In the last few years, we have moved further away from theories of our one universe, as these other worlds went from being logically possible to hypothetically actual. It is now common to hear about the multiverse – a quantum cosmology that takes for granted that the visible universe at we see around us is just one of a vast or infinitenumber of universes.

Lee has come to believe that this view (that he shared) is mistaken, and the linked article explains why.  One of the more interesting problems with the multiverse point of view is that it implies (in the formal, logical sense of the word) that the multiverse is time-less, that time is an emergent property of a particular universe, and is not a fundamental property. In Lee’s view, this is a serious problem, nearly as serious as the difficulties the multiverse paradigm has in generating testable hypotheses.

We get better results, he says, if we operate with a model of one universe that includes real time as a fundamental property. The difficulty with this paradigm is it violates a fundamental assumption of experimental physics, that the universe’s laws are uniform everywhere, and throughout time.

You can read a summary at the link above, or watch a video of Lee and his co-author presenting their position.


September 11, 2011

Cliff Schecter wrote THE September 11 post. here.

We’ll talk about it tonight.





September 6, 2011

Bill Keller lists them:

It was a large and estimable group of writers and affiliations, including, among others, Thomas Friedman of The Times; Fareed Zakaria, of Newsweek; George Packer and Jeffrey Goldberg of The New Yorker; Richard Cohen of The Washington Post; the blogger Andrew Sullivan; Paul Berman of Dissent; Christopher Hitchens of just about everywhere; and Kenneth Pollack, the former C.I.A. analyst whose book, “The Threatening Storm,” became the liberal manual on the Iraqi threat.

Worth noting they all have jobs, now.