Ep. 111 Cutting Corporate Taxes Helps Only “The Rich,” Says Krugman

4 November 2017     |     Tom Woods     |     10

This week, Krugman disputes the claim that reductions in corporate tax rates help anyone but the super-rich. So we explain to him how they work.

Krugman Column

Trump’s $750 Billion Gift to Wealthy Foreigners” (October 26, 2017)

Contra Column

Mainstream Economists Don’t Even Get Their Dimensions Right,” by Bob Murphy

Need More Episodes?

Tom and Bob have their own podcasts! Check out the Tom Woods Show and the Lara-Murphy Report.

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  • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

    Bob Murphy has expressed the opinion that sarcasm can needlessly complicate understanding these complex issues. Let me test this.

    πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰ πŸ˜‰
    As Bernie “Santa” has told us repeatedly, the government spends rich people’s money far more effectively than people spend their own money. Rich people are greedy and bad while governments are altruistic and well meaning always. We should take money from those who have to make a profit in order to survive and give it to those who run up annual trillion dollar deficits. As always, wealth is consumption and spending, while production is either irrelevant or merely incidental.

    Social Justice Warriors, broadcast journalists, humanity professors, left progressive politicians, and, in general, all correct thinking people: That’s Right! We have our cake BECAUSE we eat it!

    Maybe Bob is correct. Irony doesn’t seem to be possible anymore. We live in an era where it doesn’t seem possible to say anything so stupid that a majority of supposedly smart people won’t agree with it.

    Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.
    ~ Thomas Sowell https://uploads.disquscdn.com/images/4890dd5babb2f9d6e11756b23c13b5c0a33298c0901c4205765e3eb1e1df3697.jpg

  • Egg Salad Johnny

    If Dr. Woods wanted to be really obnoxious, he could explain to Dr. Murphy the difference between transitive and intransitive verbs. And the whole time, the dollar would be strengthening.

    • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt
      • Egg Salad Johnny

        You always do thorough research. That is an admirable quality.

        • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

          With Google,… it’s not even a minute’s effort. I LOVE IT!! And frankly,… I really was curious about the question/answer. At 62, it is important to keep the brain cells doing something.

          And, by an large, the folks here at Tom Woods’ watering holes are an interesting bunch. None of us have exactly the same perspective on most any question asked. Even when being prickly,… it’s because we care so much. As Stefan Molyneux might say,… none of us here prefer to live in Planet Small.

  • Intersnooze

    i love how Mr. Woods is getting down with the memes

  • Michael Fleischer

    I have listened to all of these podcasts and most of the Tom woods show casts as well. I love this episode. I have a question: I am not sure I understand why it is that when capital flows into a market ( in Dr Murphy’s explanation) that that new capital “competes” with the existing capital and then lowers the return on the capital. Dr Murphy is saying that the new capital does not necessarily benefit the existing capitalists because the new capital competes and lowers the profitability or return on the capital overall. I dont think I understand this. What if the new capital is being invested in the firms that are already owned by the existing capitalists? Wont that increase the resources of the existing capitalists and improve their ability to make things more efficient and possibly increase their volume and profits?

    • Gerald Hanweck

      Provided demand for capital remains the same, and the capital markets are somewhat competitive, new capital inflows means more capital is available for those who need it. The owners of capital are forced to compete with each other for investment opportunities and accept lower returns on their investments. Since the cost of capital is reduced, investments that were previously unprofitable might now be profitable. New investments may indeed spur efficiency gains, but if those efficiency gains are large enough to boost the return on capital beyond its level prior to the new inflows, those investments would likely have been made prior to the new inflows. (If you’re making 5% return on your capital, and you see an investment opportunity that through efficiency gains can boost your return on capital to 10%, wouldn’t you redploy your capital to that project?) As to your question, “What if the new capital is being invested in the firms that are already owned by the existing capitalists?”: the existing capitalists’ stakes will be diluted, so they will receive a proprtionally smaller piece of the now larger firm.

    • Daniel Campos

      They might increase marginal productivity, yes, but that simply increases supply. Depending on how demand will increase because of lower prices and/or higher quality, their revenue may or may not increase.

      But because now companies have more capital, they can calculate lower prices to better try and gain market share. If they all do this – as they should – their profit margins are actually lowered, because none of them is going to actually gain a significantly larger market share than the others.

  • Willy1964

    – Oh yes, Krugman is absolutely right. The taxcuts as proposed (& implemented) by the Trump administration benefit the rich the most. Anyone who takes a close look sees that about 90% of taxcuts benefit the rich and the corporate sector.
    – However, Krugman is right but for the wrong reasons. His reasoning is too complicated, too wonkish (“gift to foreigners”).
    – There is a good reason why the taxcuts won’t help the economy too much.
    – People expect that the corporate sector will be encouraged to invest in new production (capacity) and that will help overall employment. However, before companies/producers decide to increase production they want to know whether or not there is enough (extra) demand.to justify those extra investments. and then they see that the workers don’t benefit at all from these taxcuts. So, why invest in new production capacity at all ?
    – One reliable source here in the US said that US taxpayers actually have to brace themselves for a “sticker-shock”.