From: sug6@benedict.uchicago.edu (Patrick Sugent)
Subject: Re: The end of the Reagan Era
Reply-To: sug6@amber.uchicago.edu
Organization: University of Chicago
Distribution: usa,tx
Date: Fri, 13 Nov 1992 03:59:11 GMT

mccall@mksol.dseg.ti.com (fred j mccall 575-3539) writes:
>sug6@benedict.uchicago.edu (Patrick Sugent) writes:
>
>>mccall@mksol.dseg.ti.com (fred j mccall 575-3539) writes:
>>>sug6@benedict.uchicago.edu (Patrick Sugent) writes:
>>>>  Of course, you could claim that your "employer" pays the 1.5%, but
>>>>if you believe that, you probably believe in "employer contribution"
>>>>to FICA.  Businesses do not pay taxes, they collect them.  People pay
>>>>taxes in one way or another.  This is all fairly basic micro really.
>>>
>>>A prime example of proof by assertion, I see.  If you say something
>>>with enough confidence, people aren't supposed to questoin it?  Sorry,
>>>but the reality of things just isn't quite as cut and dried as your
>>>statement portrays it, nor is there anything like unanimity of belief
>>>in it.
>
>>  Review some economic studies and get back to me.  If you need any help with
>>text recommendations or that of studies in this area, I will be glad
>>to provide some.  You may want to look at the Chicago Fed's estimate
>>of the cost of regulations on jobs or studies done by Vedder and
>>Gallaway in the Fall issue of Policy Review.  New regulations have been 
>>repeatedly shown to cost jobs.  Certainly, the 2.5% increase in the cost
>>of labor since 1990 hasn't helped the job situation much.
>
>Note that saying that there is some economic impact from regulation is
>NOT the same thing as what you asserted above, unless you assume the
>only two possible choices a business can make are to pass through NONE
>of the added cost (unlikely in the extreme) or to pass through ALL of
>the added cost (also unlikely).  There's lots of middle ground there,
>and lots of reasons for companies to NOT pass all taxes, regulatory
>costs, etc., through 100% to the consumer.  It's this assertion that
>'companies don't pay taxes -- only collect them' that I disagree with,
>and you have provided no evidence to support such a claim, which is
>NOT, as you asserted it was, "fairly basic micro really".

  Note that I never asserted this.  You are building a strawman (which,
I admit is easier to destroy than what I actually said).  I never claimed
that corporations pass taxes 100% through to the consumer (though,
depending upon your theory, you could assert that).  I _did_ say that
businesses collect taxes and "people pay them _in one way or another_".  
Please read what I said more carefully since I'm not even sure we disagree.  

  This statement is certainly true and not only fairly basic micro, but common 
sense. I said this merely to point out that the government taxes on business 
tax _someone_ and not a faceless money generator as politicians pretend to 
believe.  Perhaps, I was somewhat unclear, but I suspect that you are 
deliberately altering my view to suit your arguments.  I still wish you would 
review some economic studies, but you seem unlikely to do so.

  Payroll taxes (such as the one proposed and FICA) have a very direct effect 
on labor cost and therefore a very direct effect on jobs and wages.  Read
some of the above studies.  One hopes that you don't believe that businesses
hire without regard to labor cost.  If you do, read the issue of Policy
Review and I think you will be enlightened.


  In my personal case, such is even more clear, but we can discuss that
by e-mail if you like.  U of C economists tend to come up with rather
direct compensation packages.

  You may also want to think in terms of small businesses, which is
where the large job growth has been throughout the last decade and which
can be particularly hard hit by new regulations. 

  A U of C economist estimated that (all told) the Clinton plan would
cost $150 billion/year in new taxes (including regulatory costs).  When
he brought this up to the Clinton campaign, he was told they were using
$190 billion/year.  Of course, he didn't count some things since he wasn't
really sure where Clinton stood.

>Once again we see this 'all or nothing' assumption on your part.  Note
>that I never asserted that regulation has NO effect on jobs or wages;
>merely that this idea that corporations will pass 100% of everything
>through is simply not supported by the facts (or the theory), and
>hence your efforts to portray it as 'basic micro' are simply
>incorrect.  See any basic micro text for reasons why this is so.
>

  I really wish you would review the above studies.  They would provide
you with much better information concerning this subject.  However, I do
note (once again) that you mistate my position on "pass everything
through".  Saying that "people pay taxes in one way or another" is
hardly saying "corporations pass 100% of everything through to consumers".
I should think that is obvious. (Although, I'm not terribly sure how
consumers got into this discussion.  I never even used that word.)  
Perhaps, you just want an easier position to defeat.  Or, perhaps,
you really believe that corporations are faceless money
generating machines.    

   Politicians rather like voters to believe in faceless
money generating machines since they are able to raise taxes on
such without losing too many votes.  The effects on the economy and on
employees are far less immediately visible to the layman than, say,
the federal income tax (though certainly great per the studies
I mentioned).  If you believe in the faceless money machine and that
taxes are not eventually paid by people in one way or another, then we must
just agree to disagree since I cannot possibly understand your position.
Last I heard, businesses were comprised of people.  Of course, maybe they
are "off budget" people until such a time as it is obvious you are taxing
them.  I'll let you tell me. :-)

  BTW, I suspect you really do believe that taxes are paid by people one
way or another.  I am not trying to say that you don't.  I also suspect that
you agree (or would if you read the studies I cited) that taxes that
directly effect labor cost have a very direct effect on jobs and wages.  I
think if you try to actually read all of what I wrote, you will see this.
If you keep making assertions based on what you _want_ me to say, I will just 
have to let you since I am rather at the end of my endurance level (3 posts) 
regarding this topic and given your prolific activity here you appear to
be subsidized in some manner (or at least have more free time than I do).  You 
seem rather reasonable, just a bit partisan.


Pat



-- 
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