So who's the terrorist again?

[Ixion]

Ah, no. The reality is that if corporate taxes are reduced (and as you refer to 'business' I presume you are only proposing tax cuts for capitalists, not ordinary folk), the corporations will pocket the extra profits, send them off shore, and cut the number of NZ jobs by relocating them to Bangalore.

The myth that tax cuts to big business somehow 'trickle down' to Bill Battler is frequently repeated. Never proven or demonstrated.

If you ever actually met a real communist, you would discover that (a) none of us are university lecturers (about number 5 to go upgainst the wall, come the revolution, they add little if anything to the common good) and (b) we don't agree with taxes at all. No taxes. No need.

[svr]

Ah, no. The reality is that if corporate taxes are reduced (and as you refer to 'business' I presume you are only proposing tax cuts for capitalists, not ordinary folk), the corporations will pocket the extra profits, send them off shore, and cut the number of NZ jobs by relocating them to Bangalore.
Your simple categorization of classes into capitalists / non-capitalists is 80 years out of date. The point of my above 2 posts is that the small business owner has diametrically opposed interests with the large corporate, and in fact has fairly common interests with the average working person.

The myth that tax cuts to big business somehow 'trickle down' to Bill Battler is frequently repeated. Never proven or demonstrated.
True - the spurious nature of that relationship is well established

If you ever actually met a real communist, you would discover that (a) none of us are university lecturers (about number 5 to go upgainst the wall, come the revolution, they add little if anything to the common good) and (b) we don't agree with taxes at all. No taxes. No need.

(a)There are still plenty of `Marxist' (neo, post, reformulated, feminist, etc... -) academics kicking around universities today. They love the working class [I]in Theory[I] but not in praxis, and no they wouldn't last long come the sort of revolution you have in mind...

(b) I love Utopians - you lot give me hope.

[Ixion]

Your simple categorization of classes into capitalists / non-capitalists is 80 years out of date. The point of my above 2 posts is that the small business owner has diametrically opposed interests with the large corporate, and in fact has fairly common interests with the average working person.

To be sure. I would never (or very seldom, anyway) include a small business operator in with the capitalist corporations. The typical small business owner/operator in NZ is either a merchant, or a master tradesman. And his interest are almost always very different to those of the capitalists, and far more closely linked with those of the worker. Indeed it is not uncommon for people to move (perhaps many times) between the two.

Take a mechanic. He has a job working for Bloggs garage. Then he is appointed manager of the garage . It's a smallish place though so he still needs to get out the tools sometimes. So, a worker .After a few years he as an opportunity to open his own garage. So a small business owner. But it's a smallish business so he still needs to get out the tools sometimes. In reality his interests as worker are almost identical to those as small business owner. And almost certainly very different to the owner of the Commonwealth Bank of Australia (aka BNZ in NZ ) . Whoever the latter may be. After a few years he wants a simpler life so he sells up the business and gets a job as a mechanic . And many people move several times in their lives through such a cycle. The do not go from being workers to eing capitalists and back again. They go from being workers employed by another , to self employed workers and back again.

The differentiator is not between worker and business owner. It is between the worker, whether he works on his own account or for someone else , and the capitalist, who does not work at all. (and nowdays is usually hidden behind a corporate face). Mr Taylor is a (highly) skilled tradesman . Mr Bryers and Mr Petrovich are capitalists. I know which one I admire and which ones I despise.

[pete376403]

Trickle down economics (ie reaganomics) does anyone really believe in this any more? It's been pretty thoroughly debunked eg
http://www.colorado.edu/AmStudies/le...10/decline.htm
(lotsa reading here)

[Robert Taylor]

To be sure. I would never (or very seldom, anyway) include a small business operator in with the capitalist corporations. The typical small business owner/operator in NZ is either a merchant, or a master tradesman. And his interest are almost always very different to those of the capitalists, and far more closely linked with those of the worker. Indeed it is not uncommon for people to move (perhaps many times) between the two.

Take a mechanic. He has a job working for Bloggs garage. Then he is appointed manager of the garage . It's a smallish place though so he still needs to get out the tools sometimes. So, a worker .After a few years he as an opportunity to open his own garage. So a small business owner. But it's a smallish business so he still needs to get out the tools sometimes. In reality his interests as worker are almost identical to those as small business owner. And almost certainly very different to the owner of the Commonwealth Bank of Australia (aka BNZ in NZ ) . Whoever the latter may be. After a few years he wants a simpler life so he sells up the business and gets a job as a mechanic . And many people move several times in their lives through such a cycle. The do not go from being workers to eing capitalists and back again. They go from being workers employed by another , to self employed workers and back again.

The differentiator is not between worker and business owner. It is between the worker, whether he works on his own account or for someone else , and the capitalist, who does not work at all. (and nowdays is usually hidden behind a corporate face). Mr Taylor is a (highly) skilled tradesman . Mr Bryers and Mr Petrovich are capitalists. I know which one I admire and which ones I despise.

Thankyou for that. Small business owners are the backbone of this country and we are being screwed by the Government, by the corporates and yes by the over free market. We too despise the Petrovichs of this world. I looked at that guy on TV last night and thought you dirty rotten money grubbing bastard. Ditto for the Eric Watsons of this world.
Personally, I admire success. As long as those involved worked hard for it and are doing something positive for the country and are carrying people along with them. If they are speculators then I have a whole load less time for them.
And while its difficult for some to comprehend I think it is also entirely possible to combine conservative principles / government with social compassion.

[Robert Taylor]

OK, no comment required here. But here's one anyway. IMHO your fantasies should involve a lttle less fascist annihilation of democratic representation / corporal punishment etc. and a lot more naked women on RC8's.

And to think I let you fettle my bouncy bits!

The fishing was good for a little reaction! RC8s are not on my radar screen, how about curvaceous naked woman on Rossi race replicas?

[Sanx]

Please explain how this works. I've heard it cited repeatedly but I've never been shown the economics of the argument.

I have a small business making widgets that turns a profit. I employ two widget-makers at $75,000 a year. Between them, they turn out $350,000 of widgets. Out of the company income, I pay myself $100,000, leaving a profit of $100,000. At the end of the year, 33% of my profit is given to the tax man. Leaving me $67,000 to re-invest in my company.

Now let's say company tax is reduced to 15%. Now, only $15,000 goes to the tax-man, so I have $85,000 left. With that $85,000, I can afford to employ another widget-maker on $75,000 per annum plus invest $10k in new widget designs. With an extra widget-maker, my company is turning out $525,000 of widgets. Still taking a salary of $100,000, the company now makes $200,000 profit, of which the taxman now takes $30,000.

So I take my nett profit of $170,000 and employ two more widget-makers. Damn, my company's now turning out $875,000 of widgets and making $400,000 profit. Of which I give $60,000 a year to the taxman.

So, by reducing the tax-rate to 15%, my company has been able to expand, meaning the company's now paying $60,000 a year in tax instead of $33,000. On top of that, three extra widget-makers have gone off the dole, and are now paying tax themselves.

OK, this is a massively simplified example, but that's how the theory has gone. Ireland tried this a few years ago and enjoyed massive success with it, though one thing free-market economists often forget to mention is that Ireland also enjoyed huge European subsidy during the same period, and benefited from lots of American investment from companies whose owners considered themselves 'Irish' because a great grandfather had once sunk half a pint of Guinness.

[davereid]

I have a small business making widgets that turns a profit. I employ two widget-makers at $75,000 a year. Between them, they turn out $350,000 of widgets. Out of the company income, I pay myself $100,000, leaving a profit of $100,000. At the end of the year, 33% of my profit is given to the tax man. Leaving me $67,000 to re-invest in my company....

A very good example...

Lets look at another example - relocating your business to Singapore.

Your widget makers will still get about $75,000 - Singapore is no longer a low wage economy.

But you won't be paying Kiwisaver, ACC, 11 statutory holidays or 4 weeks annual leave. Almost enough money saved there to get an extra worker. Certainly enough for a part timer.

You can still pay yourself $100k, or maybe $50k each to you and wife.

But in Singapore, you only have to find a maximum of 18% company tax, not 33%.

Thats absolutely enough money to expand and get an extra worker.

Just by relocating, you have kept your personal finances the same, but doubled company profitability.

----------------------------------------------------------------------

The NZ Army had a base in Singapore in the 70's. I usd to go there from time to time, and we NZers were rich compared to the locals. Our dollar bought 2 or 3 of theirs, and we saw poverty everywhere.

They went down a path of low taxes, encouraged foreign investment, and hard work.

They had little spare land, no natural resources, aggressive neighbours, and were starting from the back of the field.

They now have a GDP of $134 billion from a population of 4.5 million.

About 30 billion more than NZ.

[pete376403]

I have a small business making widgets that turns a profit. I employ two widget-makers at $75,000 a year. Between them, they turn out $350,000 of widgets. Out of the company income, I pay myself $100,000, leaving a profit of $100,000. At the end of the year, 33% of my profit is given to the tax man. Leaving me $67,000 to re-invest in my company.

Now let's say company tax is reduced to 15%. Now, only $15,000 goes to the tax-man, so I have $85,000 left. With that $85,000, I can afford to employ another widget-maker on $75,000 per annum plus invest $10k in new widget designs. With an extra widget-maker, my company is turning out $525,000 of widgets. Still taking a salary of $100,000, the company now makes $200,000 profit, of which the taxman now takes $30,000.

So I take my nett profit of $170,000 and employ two more widget-makers. Damn, my company's now turning out $875,000 of widgets and making $400,000 profit. Of which I give $60,000 a year to the taxman.

So, by reducing the tax-rate to 15%, my company has been able to expand, meaning the company's now paying $60,000 a year in tax instead of $33,000. On top of that, three extra widget-makers have gone off the dole, and are now paying tax themselves.

OK, this is a massively simplified example, but that's how the theory has gone. Ireland tried this a few years ago and enjoyed massive success with it, though one thing free-market economists often forget to mention is that Ireland also enjoyed huge European subsidy during the same period, and benefited from lots of American investment from companies whose owners considered themselves 'Irish' because a great grandfather had once sunk half a pint of Guinness.

But in reality its most likely that the business owner (ie you) now give yourself a massive increase in pay, while keeping the same number of employees on the same rate as before. You will also tell the employees that business conditions make it impossible to increase their pay

[Robert Taylor]

But in reality its most likely that the business owner (ie you) now give yourself a massive increase in pay, while keeping the same number of employees on the same rate as before. You will also tell the employees that business conditions make it impossible to increase their pay

Not everyone is tarred with the same brush.

[Ixion]

... employ another widget maker...

That assumes that the market for widgets is expandable. That at present you are turning away customers, telling them "sorry, can't make enough widgets to satisfy the demand"

Now, if that were true, you would be a very poor businessman, because market economics says that in that case you would increase the price of the widgets. That would probably reduce demand .People might buy a widget at $20, but not at $40 - or buy an opposition brand. So you would increase the price you sell at, until the demand is just enough to be met by the work of the two widget makers.

So, in reality, taking on another widget maker would mean that you would either have him standing around doing nothing (because the existing two widget makers can make enough widgets to meet the customer demand). Or you would have to reduce your prices to stimulate extra demand. In which case you make more widgets, but still only make the same profit. So why bother?

More realistic scenarios are either that set forth by the overly numerical gentleman (boss pockets the tax cut , thanks very much, nothing else changes). Or maybe the tax cut is used to buy an automatic widget making machine. Now both the widget makers are out of work and on the dole, the government has less tax income, but has to meet higher social welfare payments (all those unemployed widget makers). And the economy tips further into recession.

I do not know of any situation where tax cuts have actually boosted an economy that was flagging , in the absence of other factors (eg the EEC in the case of Ireland). And in the classic instance, the Great Depression, it was Keynes and tax increases, not tax cuts , that turned things round.

And while the Singapore widget maker may not have to meet ACC or Kiwisaver contributions, he will have to pay massively (by NZ standards) for public liability insurance, and various city taxes. And his workers will have a very large compulsary savings deductions made from their pay packets, so their take home pay will still be less than NZ. Singapore flourished for three reasons .
1. The Singaporese are bloody hard workers. They work a lot harder than Kiwis (though not as smart often) . And the economy does not have to bear the crippling burden of thousands upon thousands of shirkers (no DPB there either )
2. In the early days there was a constant inflow of cheap labour from Malaysia. The Singapore nationals got reasonable money: the (mostly illegal) immigrants worked for SFA (and 16 hours a day at that)
3. Once the supply of cheap labour from across the border dried up, most Singapore companies relocated their labour intensive operations into Malaya.

[davereid]

But in reality its most likely that the business owner (ie you) now give yourself a massive increase in pay, while keeping the same number of employees on the same rate as before. You will also tell the employees that business conditions make it impossible to increase their pay

In a low tax, low government environment, a business owner would be balmy to do that.

But in a high tax, high government country like NZ he would be balmy not to !

Its just as likely in NZ, that the g'mint will interfere with his business.

Maybe the crystals or the tyres he makes will end up in a truck carrying nukes, so he will face closure.

Or he will want to expand, but he can't as the rural land next his factory has to be saved for future generations that might want to grow peas there.

Or he will compete, and invest in a new ship, only to find the government have decided rail is a strategic asset, and they wll buy his competitr, and use his tax money to take him out of business.

So you are right. In a country like NZ, the wise man takes his money when he can snatch it, buggar the future.

After all, if it all goes wrong he can just says its his wifes, and go on the dole.

[nudedaytona]

I would have thought that it was so damn obvious, if you are not suppressing business by overtaxing them they can use the capital that was otherwise fleeced to generate more business activity and in doing so employ more people. It beats having to spend so much on welfare and bureaucrats administering it because there are less employment opportunities.
Whether you care to believe it or not there are many employers who care about social responsibility, there are just those of us who prefer a system that gainfully employs people. This is exactly where the ex communist lecturers currently running this country have no flipping idea.

Too right ...... +1

[Winston001]

But in reality its most likely that the business owner (ie you) now give yourself a massive increase in pay, while keeping the same number of employees on the same rate as before. You will also tell the employees that business conditions make it impossible to increase their pay

When our business improved I can tell you that we increased our employees pay, plus increased bonuses. We have also voluntarily been paying 4% Employers Kiwisaver Contribution since July 2007.

In small businesses, the relationship with employees is close and sharing the good times just seems the fair thing to do.

Of course this is a one way street. Now that work has dropped off, we won't be reducing staff pay. Just reduced owners salaries.

[Robert Taylor]

When our business improved I can tell you that we increased our employees pay, plus increased bonuses. We have also voluntarily been paying 4% Employers Kiwisaver Contribution since July 2007.

In small businesses, the relationship with employees is close and sharing the good times just seems the fair thing to do.

Of course this is a one way street. Now that work has dropped off, we won't be reducing staff pay. Just reduced owners salaries.

I get the distinct feeling from some of the posts that there is for some an institutionalised / inbred mistrust in employers and that also having a business is a ''license to print money''. That as a blanket attitude is wholly unfair and I think many just have no idea how difficult it is to run a business, especially when you have a Government that is ( in practice ) very business unfriendly.
That we have an imbalance where there are too many ''drones'' just collecting their pay cheques and doing as little as possible is blatantly obvious. That is quite apart from the many hardworking New Zealanders that there actually are, but it is just too easy to choose welfare as an alternative to doing an honest days work.