Profit or Society?

I want to talk about the profit motive, because despite being the cornerstone of capitalism it is highly misunderstood. All sorts of proclamations about the profit motive's success as a social and economic model are published in the media daily. Other causes for social and economic conditions are often avoided, and where profit has a clear negative bias, it is generally de-emphasized.

The profit motive is a simple form of the incentive model. Incentives are conditions in a system which reward or punish different kinds of behavior. Profits refer to one subset of incentives: those which resolve in positive or negative changes to net worth. Needless to say, human incentives are more complicated than this, and strictly for-profit business models still need to account for more different changes which may not be clearly linked to positive or negative account balances. But the capitalist system tends toward this model of profit, and incentives processes are typically explained in this way as well.

The Job Creator's Tragedy

It's tough being a job creator these days. High taxes make it virtually impossible to hire more workers and an atmosphere of uncertainty is discouraging more investment in capital. Nobody would propose raising taxes on job creators under these conditions, right?

George Washington oversees the "car in the ditch" economy on Wall St / September 16th, 1920

That's the setting for the latest tragedy, that is. The job creator, ever heroic and noble, is accosted at all sides in his attempt to get the economy back on track. He confronts the Hydra of government and the armies of ignorance in his uncompromising quest to get the economy back on track. And this truly is a tragedy - our hero could perhaps be known as Supervacuo, and his tragic weakness - the fact that the job creator has absolutely no interest in creating jobs.

Why Can't We Get Good Data on Corporate Tax Rates?

And why does it consistently come from firms with a material interest in lowering taxes, and therefore embellishing current rates?

Politifact Virginia recently reviewed comments by George Allen which claimed that the US tax rate on corporations is 35% - 2nd "worst" in the world, according to him. Politifact argued that the rate was 27.6% (the official "effective" tax rate) - 4th highest in the world. Comprehensive accounting might place the real US corporate tax rate as lowest among all industrialized nations. The conservative Tax Foundation places the rate at only 24.1%. Whatever the case, US corporations have paid more taxes overseas than in the US since 2008, relying on accounting practices that transfer profits out-of-state or overseas, while sales are mostly captured at home - taking advantage of a high-cost consumer infrastructure without having to pay for that platform.

Like so many economic indicators, the official corporate tax rate has a very important function in politics. In the context of a political philosophy which conflates job creation with accumulation of wealth, higher corporate tax rates provide political capital which allows for a more effective lobbying effort to lower taxes. Capitalist graft, therefore, has two incentives in its model of accounting and government graft:

• to diminish the apparent profits reported to governments, while maintaining (or even expanding) profits reported to stockholders
• to maintain official tax rate figures