May 20, 2017

Net Neutrality Nixed: Why John Oliver is Wrong

Filed under: Humour, Law, Liberty, Technology — Tags: , , , — Nicholas @ 05:00

Published on 19 May 2017

Progressives are freaking out now that the Federal Communications Commission (FCC) is beginning the repeal of Net Neutrality regulations, which give the government the right to regulate Internet Service Providers (ISPs).
The main arguments in favor of Net Neutrality are really arguments guarding against hypotheticals: that ISPs could otherwise block and censor content (they never have) or that they’ll run their operations like shakedowns, requiring content providers to pay up or slow their traffic to molasses. The main documented instance of an ISP favoring one content provider over others wasn’t sinister collusion. Metro PCS offered unlimited YouTube in a budget data plan but not unlimited Hulu and Netflix, because YouTube had a compression system that could be adapted to the carrier’s low-bandwidth network. In a different context, critics might have applauded Metro PCS, since bought by T-Mobile, for bringing more options to lower-income customers.

Net Neutrality is a proxy battle over what type of internet we want to have — one characterized by technocratic regulations or one based on innovation and emergent order. Progessives are generally suspicious of complex systems existing without powerful regulators present and accounted for. Small-government folks are repulsed by bureaucrats in general, and think the internet will fair better in a state of benign neglect. The FCC has come down on the side of an organic internet, instead of treating the internet more like a public utility.

We don’t know how the internet is going to evolve over time, but neither do the government administrators trying to rein it in. But given the record of free-market innovation vs. government-regulated services, the odds are with market forces and entrepreneurs.

Written and performed by Andrew Heaton, with writing assistance from Sarah Rose Siskind and David Fried.

Edited by Austin Bragg and Siskind.

Produced by Meredith and Austin Bragg.

Theme Song: Frozen by Surfer Blood.

May 14, 2017

QotD: Big business, crony capitalism and regulatory capture

Now, Pope Francis has the beginnings of a point about large “private corporations” (note the oxymoron), which in their wealth may grow (though only temporarily) to a size rivalling the smaller national governments. And I would add, they become nearly as centralized and monopolistic (through “regulatory capture”), and faceless and bureaucratic as the agencies of State. Whenupon, unlike the self-perpetuating agencies of the State, they begin to disintegrate from their own lack of enterprise.

It is not enough, as the libertarians suppose, to leave them to their fate, in the knowledge that if they are inefficient they’ll be gone tomorrow. For new large corporations rise to take their place, and at every moment the great majority of people are reduced to wage-slaves of one large corporation or another. Indeed, part of the power of large corporations comes from their scale as employers. A democratic government which tries to stand up to them will quickly relent, and switch to subsidies instead, when they threaten to create mass unemployment.

The question must be asked: What makes vast, morally obtuse, centralized corporations possible? And the answer should be easy to see. It is vast, morally obtuse, centralized governments, which command regulatory regimes that are consistent over huge areas. That has actually become our model for global “free trade”: making regulations and taxation consistent not only across nations, but across continents. This creates an order which large corporations, and only large corporations, are well-equipped to exploit.

Imagine instead they were to face different regulatory regimes, parish by parish. They could still operate, but would have to adapt each franchise to local conditions, as defined by the sovereign local authority. This immediately flips the onus, and gives the local merchant or producer the advantage over his multinational competitor, in being on the spot. It reduces that competitor’s economy of scale, while also imposing upon him a new model of corporate governance, as network, that must of necessity become decentralized and responsive (just as creatures in nature) to every single environmental niche.

The re-focusing on what is local, and what is doable locally, would have tremendous ramifications on “the environment” at large — overwhelmingly positive, given some time. Yet it would also have the happy effect of disempowering the ecological whack cases.

David Warren, “Five thousand max”, Essays in Idleness, 2015-06-19.

April 12, 2017

United Airlines implies that the beatings will continue until customer morale improves

Filed under: Business, Humour, USA — Tags: , , , , — Nicholas @ 03:00

One of several videos from other passengers on the flight:

Some reactions from around the net to a United Airlines initiative to treat their customers like unruly prison inmates:

Reason‘s Brian Doherty:

The world is rightly abuzz over an awful incident yesterday in which a man was beaten and dragged off a plane by police at Chicago’s O’Hare airport for the crime of wanting to use the seat he’s paid for on a United Airline flight getting ready to leave for Louisville.

The man claimed to be a doctor who had patients to see the next morning, explaining why he neither took an initial offer made to everyone on the plane to accept $400 and a hotel room for the night in exchange for voluntarily giving up his seat nor wanted to obey a straight-up order to leave, in an attempt on United’s part to clear four seats for its own employees on the full flight.

No one considered even the $800 that was offered after everyone had boarded enough for the inconvenience, so United picked four seats and just ordered those in them to vacate. But the one man in question was not interested in obeying. (Buzzfeed reports, based on tweets from other passengers, that the bloodied man did eventually return to the plane.)

While United’s customer service policies in this case are clearly heinous and absurd, let’s not forget to also cast blame on the police officers who actually committed the brutality on United’s behalf. NPR reports that the cops attacking the man “appear to be wearing the uniforms of Chicago aviation police.”

However violent and unreasonable the incident might appear to us mere ignorant peasants, the CEO assures his minions that beatings of this sort are totally within normal procedural guidelines:

The head of United Airlines said in an email to his employees Monday that the security guards who violently dragged a passenger from his seat were following “established procedures for dealing with situations like this,” according to a tweet by CNBC reporter Steve Kopack.

“As you will read, the situation was unfortunately compounded when one of the passengers we politely asked to deplane refused and it became necessary to contact the Chicago Aviation Security Officers to help. Our employees followed established procedures for dealing with situations like this,” wrote Oscar Munoz, CEO of United Airlines.

Munoz’s message to staff comes amid public scrutiny after a passenger refused to relinquish his seat on an overbooked plane and was violently dragged off the plane by three security officers.

Surfaced videos of the incident have since gone viral.

April 6, 2017

QotD: The “real” “synergies” of corporate mergers

Filed under: Business, Quotations, USA — Tags: , , , — Nicholas @ 01:00

There can be a few factors behind consolidation. For example, massive economies of scale. Or … well, I’m afraid this is a bit delicate, but I can’t let it go unmentioned: Industries consolidate to reduce the number of players in the market, giving the remaining players more pricing power. Antitrust regulators tend to put on their big frowny face if companies cite the latter reason, so the public statements made by companies in consolidating industries tend to focus on more superficially attractive reasons like cost savings and “broader industry reach,” or more ethereally vague words like “synergies.”

True to form, Anthem is claiming that nearly $2 billion in synergy savings will be realized by the merged entities. This is probably true, to some extent. But you should keep in mind that mergers are themselves extremely costly. And I don’t just mean the fabulous fees that investment bankers and consultants collect to facilitate them. Joining two entities into one is really difficult: Corporate cultures clash, turf wars damage morale and profits, IT systems never do work right together, key employees leave, customers are alienated. So in general, these sorts of statements should be taken, not just with a grain of salt, but while sitting next to a salt lick with a big bag of Mr. Salty Pretzels and some cocktail peanuts to wash the whole thing down.

Megan McArdle, “No Wonder Insurers Want to Merge”, Bloomberg View, 2015-07-24.

March 25, 2017

QotD: Why I hate Big Oil

Filed under: Business, Politics, Quotations — Tags: , , — Nicholas @ 01:00

For many years now, I – and many sceptics like me – have been accused by climate alarmists of being “in the pay of Big Oil”. But even though we deserve it for promoting fossil fuels so enthusiastically and fighting their critics so heroically, few of us have ever received even a penny for our troubles. That’s because Big Oil is far too busy trying to greenwash its image – as Shell itself did by sponsoring the Guardian’s environment pages for many years – to waste time on the plucky, outspoken heroes who do a better job for Big Oil’s PR than the Big Oil’s paid PR departments do.

Mainly, though it’s disgust. Big Oil has this public image of being an industry for fearless, no-nonsense manly men who aren’t afraid of getting their hands dirty or braving the environmentalists’ wrath in order to do their ugly but important work supplying the world with much-needed energy.

Yet it’s an image almost entirely undeserved.

Almost everyone at a senior level in Big Oil is a craven, simpering, politically correct, spineless, surrender-monkey corporate shill. They’re cowards who are scared of free markets, won’t speak up for capitalism, won’t even defend their core business.

James Delingpole, “Why I Totally Hate Big Oil – And Why You Should Too…”, Breitbart.com, 2017-03-14.

January 15, 2017

Corporate sponsors should have no place at national memorial sites

Filed under: Cancon, Government, History, Military — Tags: , , , , — Nicholas @ 03:00

Ted Campbell reacts to the news that corporate logos will be included at the updated Vimy Ridge Centre:

I’m not faulting Prime Minister Justin Trudeau nor Veterans Affairs Minister Kent Hehr for starting this, but they can and should put a stop to it. The business of getting the private sector to “support” public projects is not new and, generally, the public, including me, approves of it: in almost all cases it is good to have commercial sponsorships … almost all. National memorials are different […]

The Welcome Centre of the Canadian National Vimy Memorial in France flying the Canadian Red Ensign ( 1868 – 1921 version ). This flag along with The Maple Leaf fly at national memorial as Canada was only using the Red Ensign at the time of the First World War Engagement.

I don’t doubt the generosity or patriotism of Bell Canada or WalMart are anyone else, but a few things have to be sacrosanct, and our national memorials honouring our war dead must be amongst them.

Let is be very clear: it is the visitors’ centre, not the memorial itself that is being rebuilt and I’m guessing that the officials close to the project can see a very big difference between the little visitors’ centre building and the memorial, proper, but I, and many others, do not and will not; If the see even an understated, dignified sign in the visitors’ centre they will likely conclude that a corporation is, now, responsible for the whole monument. From the very first moment one sets foot on the land which France ceded, in perpetuity, to Canada it is “our” place, honouring our war dead and, more broadly, the significance of our contribution to the Great War. It is a small, $10 million, project and I am sure that officials will say that they are only trying to make the best use of their budget so that they can devote more to providing much needed care to veterans by spending less on this little building … and I would, normally, applaud them, but not on this.

April 10, 2016

QotD: Big business

Filed under: Business, Humour, Quotations, Religion, USA — Tags: , , , — Nicholas @ 01:00

If you still believe big business is, as novelist and philosopher Ayn Rand famously described it, “America’s Persecuted Minority,” then you must be on the same amphetamines she was taking.

Conservatives have a nasty habit of being sympathetic to corporations, viewing them as a bulwark against government overreach. The reality is far different. If you’re a religious traditionalist in 21st-century America, big business hates your guts.

James E. Miller, “The Business End of Freedom”, Taki’s Magazine, 2016-03-31.

September 17, 2015

QotD: Corporate culture and management overstretch

Filed under: Bureaucracy, Business, Quotations — Tags: , , — Nicholas @ 01:00

Corporate culture is another limiting factor: The larger your company gets, the harder a great corporate culture is to maintain. From all accounts, WinCo has a great community of workers, and it has 15,000 of them, which sounds like a lot. But Wal-Mart has more than 1 million employees in the U.S. It might be hard to maintain that level of excitement as you get into the hundreds of thousands of employees. If you try to expand quickly to get scale, your core of loyal employees who have been with you forever shrinks relative to the newcomers who don’t yet have the same commitment to the company. This is particularly a problem in employee-owned companies; as you get more employees, you can dilute the sense of ownership, because each employee’s contribution makes such a tiny impact on the bottom line — or you may get wars between groups of employees, as we saw with United Airlines.

This is related to another key challenge: management. As organizations grow, they have to change. Anyone who has been through a startup can attest to this — when you start out, you don’t need to have many meetings; you just hash stuff out impromptu when the need arises. As the company grows, you start to need management reporting lines, and defined roles, and scheduled meetings, and other bureaucratic unpleasantness that everyone hates. But if you try to do without it, everything quickly degenerates into a chaotic mess.

Not every company is good at this transition. If one of the things that made you great as a little baby company was your informality and flexibility, you may find that growing makes your key producers unhappy and ultimately saps the creative flux that made you great at what you do.

This is also a big challenge as the company moves beyond “small” and into “large”; in fact, every time you dramatically increase the size of your business, you will find that it needs to gut-rehab its management structure. Your three great managers who made all the trains run on time can no longer oversee things at the level of detail they once did; they need to spend more of their time making sure that other people do so. Some of them aren’t good at that role, but they will be unhappy if someone else is promoted or hired over their head. You start to rely more and more on well-standardized processes rather than individual initiative, which may require some compromises on quality to maintain the price point that your customers expect. It is the difference between an exquisitely pulled shot at your local coffee shop and the massive amount Starbucks has invested in machines that make exactly the same coffee every time.

Megan McArdle, “In-N-Out Doesn’t Want to Be McDonald’s”, Bloomberg View, 2014-10-02.

August 31, 2015

The NDP and federal corporate taxes

Filed under: Cancon, Economics, Government — Tags: , , , — Nicholas @ 04:00

In Maclean’s, Stephen Gordon looks at how the New Democratic Party is talking about their approach to corporate taxation during the current election campaign:

… the OECD says that the current combined (that is, federal plus state/provincial) corporate income tax rate in the US is 39 per cent. In Canada, it’s 26.3 per cent (the federal rate of 15 per cent plus an average provincial rate of 11.3 per cent.) Getting us up to something resembling the U.S. rate (in the absence of changes in provincial rates) would require increasing the federal rate to around 27 per cent.

The NDP has made use of several different reference points since then. For example, rolling back the cuts made under the Conservative government would bring the rate back up to 22 per cent. Increasing the federal rate to 19 per cent would bring us up to the average of the other G7 countries. The NDP’s target is apparently now down to 17 per cent or so.

As far as the prospects for Canadian economic growth go, this steady reduction is good news: corporate income taxes are the most harmful to economic growth. The growing recognition of the negative effects of corporate tax rates explains why Canada and other OECD countries have made it a point to reduce corporate income taxes over the past few decades […]

If you look at just the relationship between federal corporate income tax rates and federal income tax revenues, you get pretty much the same story. Even though federal corporate tax rates have fallen by more than half over the past 30 years, corporate income tax revenues have continued to fluctuate around two per cent of GDP.

Canadian corporate tax rates and revenue 1985-2014

There are at least two reasons why you might think that higher corporate tax rates might not result in higher corporate tax revenues:

  1. Higher corporate tax rates reduce the after-tax rate of return on investment. Everything else being equal, this reduces investment, capital accumulation and profits. Less profits means less corporate income to tax.
  2. Higher corporate taxes produce an incentive for multinational firms to shift taxable activities away from high-tax jurisdictions.

In the short and medium term, the second point is probably more important.

June 27, 2015

QotD: The corporate tax game

Filed under: Bureaucracy, Business, Law, Quotations, USA — Tags: , , , , — Nicholas @ 01:00

You can think of corporate taxation as a sort of long chess match: The government makes a move. Corporations move in response — sometimes literally, to another country where the tax burden is less onerous. This upsets the government greatly, and the Barack Obama administration in particular. Treasury Secretary Jack Lew has written a letter to Congress, urging it to make it stop by passing rules that make it harder to execute these “inversions.”

I’ve got a better idea: What if we made our tax system so attractive to corporations that they would have no interest in moving themselves abroad?

The problem with this extended chess game is that every move is very costly. First, it adds to the complexity of the tax code. With every new rule — no matter how earnestly said rule attempts to close a “loophole” — it becomes harder to know whether you are in compliance with the law. This is true on both sides; corporate tax law has now passed well beyond the point where it is possible for a single expert to be familiar with its ins and outs. This makes it harder to plan business expansions, harder to forecast government revenue, and it requires both sides to hire more experts in order to determine whether corporations are compliant. It also means more lawsuits, and longer ones, as both sides wrangle over how this morass of laws should be applied to real-world situations.

You can think of it this way: Every new law has possible intersections with every other tax law in existence. As the number of laws grows, the number of possible intersections grows even faster. And each of those intersections represents both a possible way to avoid taxes and a potential for unintended consequences that inadvertently outlaw something Congress never intended to touch. This growing complexity makes it more and more difficult for either companies or lawmakers to forecast the ultimate effects of new tax laws.

Megan McArdle, “We Don’t Need a Corporate Income Tax”, Bloomberg View, 2014-07-16.

April 28, 2015

Another misleading statistical quirk about US corporate profits

Filed under: Business, Economics, USA — Tags: , — Nicholas @ 07:02

Earlier this month, Tim Worstall explained why the huffing and puffing over the increased share of corporate profits in the US GDP figures is misdirected:

There’s all sorts of Very Serious People running around shouting about how the capitalist plutocrats are taking ever greater shares of the US economy. This might even be true but one of the pieces of evidence that is relied upon is not actually telling us what people seem to be concluding it is. The reason is that we’re in an age of increased globalisation. This means that large American companies (we mostly think of the tech companies here, Apple, Google, Microsoft) are making large profits outside America. However, when we measure the profit share of the US economy we are measuring those offshore profits as being part of the US economy. But we’re not also measuring the labour income that goes along with the generation of those profits. It’s thus very misleading indeed to be using this profit share as an indication of the capitalist plutocrats rooking us all.


It’s possible that that rise in the profit share is actually nothing at all to do with the US domestic economy. If American corporations are now making much larger foreign profits than they used to then that could be the explanation. No, it makes no difference about whether they repatriate those profits, nor whether they pay tax on them: those foreign profits will be included in GNP either way. Note also that measuring the profit share this way is rather misleading. Yes, it does, obviously because this is the way we calculate it, mean that the profit share of GNP is rising. But we’re not including the labour income that goes along with the generation of those profits. That’s all off in the GNP (or GDP) of the countries where the sales and manufacturing are taking place. The only part of this economic activity that we’re including in US GNP is that profit margin.


Now to backpeddle a little bit. I do not in fact insist that this is the entire explanation of the increased profit share. It wouldn’t surprise me if it was but I don’t insist that it’s the entire explanation. I do however insist that it is part of the explanation. The sums being earned offshore by large American companies are large enough to show up as multiple percentage points of the US economy. So some of that change in the profit share is just because American companies are doing well elsewhere in the world. It’s got very little to almost no relevance to the American economy itself that they are. At least, not in the sense that it’s being used here, to talk about the declining labour share. Because these profits simply aren’t coming from the domestic American economy therefore they can’t have any influence upon the percentage of that American economy that labour gets.

This does, of course, have public policy implications. If the above is the whole and total reason for the fall in the labour share of GNP then obviously we can raise the labour share of GNP just by telling American companies not to make profits in foreign countries. Which would be a completely ridiculous thing to do of course. But given that that would indeed solve this perceived problem, and also that it’s a ridiculous thing to do, means that the worries over the problem itself are also ridiculous. So, we don’t actually need a public policy response to it.

April 14, 2015

(Some) Corporations love (some) social causes

Filed under: Business, Environment — Tags: , , — Nicholas @ 04:00

You’ll notice some corporations are quick to climb onboard certain social causes. Because reasons:

My absolute favorite example of corporations using social causes as cover for cost-cutting is in hotels. You have probably seen it — the little cards in the bathroom that say that you can help save the world by reusing your towels. This is freaking brilliant marketing. It looks all environmental and stuff, but in fact they are just asking your permission to save money by not doing laundry.

However, we may have a new contender for my favorite example of this. Via Instapundit, Reddit CEO Ellen Pao is banning salary negotiations to help women, or something:

    Men negotiate harder than women do and sometimes women get penalized when they do negotiate,’ she said. ‘So as part of our recruiting process we don’t negotiate with candidates. We come up with an offer that we think is fair. If you want more equity, we’ll let you swap a little bit of your cash salary for equity, but we aren’t going to reward people who are better negotiators with more compensation.’

Like the towels in hotels are not washed to save the world, this is marketed as fairness to women, but note in fact that women don’t actually get anything. What the company gets is an excuse to make their salaries take-it-or-leave-it offers and helps the company draw the line against expensive negotiation that might increase their payroll costs.

April 8, 2015

This is probably why so many people think businesses should pay more tax

Filed under: Business, Economics, Government — Tags: , , — Nicholas @ 04:00

At Forbes, Tim Worstall reports on a staggering misconception among Americans about what corporate profits amount to:

A wonderful little find by Mark Perry. Something that helps to explain quite why so many completely ridiculous economic ideas and public policies manage to gain traction. The problem is that the average person just doesn’t understand the economy at all. No, I don’t mean economics, or the abstruse arguments about whether we should use monetary or fiscal policy. But just the basic raw numbers of what’s actually going on out there. As Perry goes on to point out this, well, let’s not beat about the bush here, let’s call it what it is, this ignorance of the universe they’re inhabiting by the average person out there is what keeps the economic demagogues in business.

Here’s what Perry found:

    When a random sample of American adults were asked the question “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” for the Reason-Rupe poll in May 2013, the average response was 36%! That response was very close to historical results from the polling organization ORC’s polls for a slightly different, but related question: What percent profit on each dollar of sales do you think the average manufacturer makes after taxes? Responses to that question in 9 different polls between 1971 and 1987 ranged from 28% to 37% and averaged 31.6%.

That’s simply a ridiculous belief. Plain howling at the Moon crazy. The capital share of the economy isn’t that high and the capital share is made up of a great deal more than just profits (depreciation, rent, interest and so on as well as profits). There’s just no way that this is anywhere near true. As Perry goes on to point out:

    According to this Yahoo!Finance database for 212 different industries, the average profit margin for the most recent quarter was 7.5% and the median profit margin was 6.5%.

March 4, 2015

The odd secular religion of Corporation Theology

Filed under: Business, Religion — Tags: , , — Nicholas @ 02:00

Megan McArdle on the weird things some people can believe:

I got a lot of responses to my post last week on Wal-Mart’s decision to raise the minimum wage many of its employees earn to $10 an hour next year. One variety of response stood out: the folks who said “Wal-Mart is doing this because it’s good for its business.”

It stood out because it is almost right, but not quite. The correct statement is that “Wal-Mart is doing this because it thinks it’s good for its business.” Never ignore the possibility that Wal-Mart could be completely wrong.

I remark on this because some of the arguments I saw verged upon what I’ve come to think of as “corporation theology”: the belief that if a corporation is doing something, that thing must be incredibly profitable. This is no less of a faith-based statement than the Immaculate Conception of Mary. Yet it is surprisingly popular among commentators, not just on the right, but also on the left.


This left-wing writer was evincing considerably more faith than I have in the American corporation. Corporations do dumb stuff all the time — for decades, even. Moreover, advertising has multiple purposes. It can of course induce you to consume more of a product, but frankly, no matter how much Pepperidge Farm advertises, it’s probably not going to dramatically increase America’s consumption of prepackaged cookies. So why does it advertise? Because it wants you to choose a Milano instead of an Oreo or one of them newfangled biscotti.

This is corporation theology. Of course, you also see it on the right — arguments that if some product were good or desirable, a corporation would already have provided it. The entire history of human progress argues against this theory.

As these two examples suggest, corporation theology gets trimmed to personal and ideological convenience, as all theologies often are: A liberal is capable of simultaneously believing that market failures abound in industries he or she would like to regulate, and also that Costco knows how to run Wal-Mart’s labor policy better than Wal-Mart does; a conservative, the inverse. Both are wrong. Corporations, like all human institutions, are great engines for making mistakes. The only reason they seem so competent is that companies who make too many mistakes go out of business, and we don’t have them around for comparison.

December 30, 2014

Tax-splaining a headline

Filed under: Business, Economics, Law, USA — Tags: , — Nicholas @ 03:00

The headline that grabs attention says that a vast number of US corporations pay absolutely no corporate taxes. Tim Worstall explains that this is quite true:

Timothy Taylor has a nice piece here on the subject:

    More than 90 percent of businesses, representing more than one-third of all business activity, in the United States are structured as flow-through entities — businesses that do not pay the corporate income tax, but rather pass profits through to owners who pay tax under the individual income tax.

    We have two (actually, more than two, but this is the distinction that matters to us here) forms of business ownership. The first is the C Corporation, what we all normally think of as a corporation. The second is an S corporation (in taxation, very like a partnership). And the important thing is that C corporations are the only ones that pay the corporate income tax. S corporations don’t: their owners pay individual income tax on the profits. So, if we saw a move from C to S corporations as the method of organisation then we’d see a reduction in corporate income tax paid. But not, possibly, a reduction in total tax paid on business profits.

And that is what seems to have happened at least in part:

    Back in 1980, nearly 80% of business income went to “C” corporations–so named after the applicable part of the tax code that governs them–which are what most of us think of when we think of a “corporation.” Back then, the remaining 20% was almost all sole proprietorships, which were just taxed as individual income. …..(…)…But C corporations now account for only about 30% of all business income. The share going to sole proprietorships hasn’t changed much. But much more corporate income is going to partnership and S corporations….(…)…Back in the 1960s, the corporate income tax often collected 4-5% of GDP. Since about 1990, it has more commonly collected 1-2% of GDP. Part of the reason is that a smaller share of business income is flowing through the conventional C corporation form.

That really is a large part of the explanation. It’s not that business profits are not being taxed, it’s that they’re being taxed in a different way. And that explains much of the fall in the corporate income tax revenues: and all too few people are over on the other side looking at the increase in individual income tax payments stemming from corporate profits.

So a legal change has drawn a lot of corporations to change how they are structured, so that profits are taxable in the hands of their individual owners, rather than in the imaginary hands of the corporate person. And another US tax quirk explains even more of the headline:

There is another point to be made here, about how we measure the share of corporate profits in the US economy. This has very definitely risen, this is absolutely true. And the tax bill hasn’t, that’s also true. A goodly part of the explanation is the above, about C and S corporations. But there’s this one more thing. Profits in the US economy includes all profits made in the US, by both Americans and foreigners. But it also includes foreign profits made by US corporations. Those tens of billions being made abroad by Google and Apple, Microsoft, they’re all included in the US profit share. And as we also know, those foreign profits aren’t paying the US corporate income tax because, entirely legally, they’re being used overseas to reinvest in those foreign businesses. My stick my finger in the air estimate of the difference those profits make is about 2% of US GDP. Meaning that if we measure US profits as 10% of GDP, then look at tax payments, we’re only seeing the tax payments from 8% of GDP (before we even look at the C and S corporation thing).

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