Only 10% Don't Pay Federal Taxes, Stop Complaining

[Brandenburg-Altmark]

If I offer you $4,999,999 for something and you refuse it, then I offer you $5,000,000 for something and you accept it, then obviously it was worth $5,000,000 to you. If you're going to dispute that, then there's not much I can do to convince you of anything.

Unless he accepts the $5,000,000 for something he considers worthless because he wants $5,000,000. If you are willing to go the extra mile to offer the whole $5,000,000 he would gladly lead you on on the pretense that he considers it worth $5,000,000 for as long as he feels you think it is worth the same amount, to get that amount. You don't have to believe a product is worth something to sell it for that price, if that were the case almost every business would cease to be profitable.

[NotnotgnimmiJymmiJ]

If I offer you $4,999,999 for something and you refuse it, then I offer you $5,000,000 for something and you accept it, then obviously it was worth $5,000,000 to you. If you're going to dispute that, then there's not much I can do to convince you of anything.

Unless he accepts the $5,000,000 for something he considers worthless because he wants $5,000,000.

Your ability to sell something counts as part of its value. That's why they call it an opportunity cost in economics.

[Tahar Joblis]

Actually there is some empirical evidence supporting the existence of investor taste. But the fact that investors disagree on the appropriate price of a stock just means that they assign different values to those stocks. It doesn't mean they don't assign any value at all.

There's empirical evidence indicating that individual investors are, in fact, worse at picking stocks than chimpanzees. Including "expert" investors.

Yes, which is why a rational investor ought to demand a higher return for the liquidity risk he's bearing.

Higher than what? Loan rates?

Not true. For one thing there are thousands of securities out there in financial markets. Many of them have higher returns than my borrowing rate, many of them have lower returns than my borrowing rate. That doesn't mean I will borrow as much as I can and throw it in the stock market, especially not if I were Homo Economicus.

Not that many, and most of those are pretty risky. If there were many independent opportunities with a high rate of return, you could statistically assure yourself that going below the loan rate was highly unlikely.

If I were Homo Economicus, I would objectively select the optimal portfolio and then subjectively adjust my mix of cash (or borrowed funds), and the portfolio to target my desired level of risk and return. Hence, why we learn about the CAL in Finance 1 (or 2 depending on your school).

And in reality, your computations of risk and return are both likely to be severely flawed.

But to address the circumstances you are describing, if I'm operating with limited resources, if my relative demand for cash in terms of shares of Joe Corp rises, then the cash value I assign to shares of Joe Corp must fall.

And all of it comes down to this:

An estimation of what, if any, money I gain in the long term as a result of purchasing JoeCorp shares. The "true" value of stock is ultimately all about cash profits - not of the corporation, but of the investor. That's the perspective that's relevant to the value of shares.

No, you don't own the government. No one owns the government.

It's "my" government. It's "your" government. We own it as much as Joe owns JoeCorp - which is to say only in a limited sense.

Hence, shareholders own the corporation.

Only in a very limited sense, and one which does not imply transitivity of activity.

Since you're having a great deal of trouble grasping this, let's explore some concrete analogies to your claim. Here is your claim:

"Joe owns [0.1% of] JoeCorp."
"JoeCorp pays corporate income tax."
=> "Joe pays corporate income tax."

Here are similar claims:

"Billy owns a rottweiler."
"The rottweiler ate my baby."
=> "Billy ate my baby."

"I own a sword."
"You should be careful with my sword, because it might cut your fingers off."
=> "You should be careful with my sword, because I might cut your fingers off."

In these two cases, legal responsibility can actually be assigned to the subject of the first sentence - unlike the case of Joe and JoeCorp, LLC. However, the conclusion is complete gibberish in spite of a stronger form of ownership being present. Joe does not in any meaningful sense of the word pay corporate income tax.

[NotnotgnimmiJymmiJ]

Actually there is some empirical evidence supporting the existence of investor taste. But the fact that investors disagree on the appropriate price of a stock just means that they assign different values to those stocks. It doesn't mean they don't assign any value at all.

There's empirical evidence indicating that individual investors are, in fact, worse at picking stocks than chimpanzees. Including "expert" investors.

Yes, which is why a rational investor ought to demand a higher return for the liquidity risk he's bearing.

Higher than what? Loan rates?

Higher than a security that is identical in every way except for liquidity.

Not true. For one thing there are thousands of securities out there in financial markets. Many of them have higher returns than my borrowing rate, many of them have lower returns than my borrowing rate. That doesn't mean I will borrow as much as I can and throw it in the stock market, especially not if I were Homo Economicus.

Not that many,

Yes that many, there are thousands.

and most of those are pretty risky.

That's the whole point. Why else would they have a higher rate of return?

If there were many independent opportunities with a high rate of return, you could statistically assure yourself that going below the loan rate was highly unlikely.

No, you really couldn't.

If I were Homo Economicus, I would objectively select the optimal portfolio and then subjectively adjust my mix of cash (or borrowed funds), and the portfolio to target my desired level of risk and return. Hence, why we learn about the CAL in Finance 1 (or 2 depending on your school).

And in reality, your computations of risk and return are both likely to be severely flawed.

But to address the circumstances you are describing, if I'm operating with limited resources, if my relative demand for cash in terms of shares of Joe Corp rises, then the cash value I assign to shares of Joe Corp must fall.

And all of it comes down to this:

An estimation of what, if any, money I gain in the long term as a result of purchasing JoeCorp shares. The "true" value of stock is ultimately all about cash profits - not of the corporation, but of the investor. That's the perspective that's relevant to the value of shares.

When did I dispute this?

No, you don't own the government. No one owns the government.

It's "my" government. It's "your" government. We own it as much as Joe owns JoeCorp - which is to say only in a limited sense.

No one owns the government.

Hence, shareholders own the corporation.

Only in a very limited sense, and one which does not imply transitivity of activity.

Since you're having a great deal of trouble grasping this, let's explore some concrete analogies to your claim. Here is your claim:

"Joe owns [0.1% of] JoeCorp."
"JoeCorp pays corporate income tax."
=> "Joe pays corporate income tax."

Here are similar claims:

"Billy owns a rottweiler."
"The rottweiler ate my baby."
=> "Billy ate my baby."

"I own a sword."
"You should be careful with my sword, because it might cut your fingers off."
=> "You should be careful with my sword, because I might cut your fingers off."

In these two cases, legal responsibility can actually be assigned to the subject of the first sentence - unlike the case of Joe and JoeCorp, LLC. However, the conclusion is complete gibberish in spite of a stronger form of ownership being present. Joe does not in any meaningful sense of the word pay corporate income tax.

That's not how the transitive property works buddy.

Johnny is smart.
Smart is an adjective.
Johnny is an adjective.
QED

But anyway, yes shareholders own a corporation, therefore they are the ones paying the corporate income tax.

[Tahar Joblis]

Higher than a security that is identical in every way except for liquidity.

Ah, so a 20% share of a corporation, being less easily liquidated than a 0.1% share of a corporation (you'd want to shed it slowly to avoid suddenly depressing the price of the stock sharply), should have a higher return?

You're digging yourself in deeper here. All the "shoulds" and "woulds" in the world do not make your arguments come to reality.

That's the whole point. Why else would they have a higher rate of return?

Why? Being good investments versus bad ones.

Informational asymmetry plays a key role in this.

No, you really couldn't.

If you have a family of thousands of truly independent securities, which family has an expected average rate of return above the market, the odds that the mean rate of return of the entire family of securities will be below the market rate of return is vanishingly low. (This is precisely the theoretical underpinning of the notorious subprime-mortgage backed securities).

What we quite often see instead is that these products offer asymmetric high-variance returns, and are not independent of one another... and are generally subject to informational asymmetries in their processing and sale.

But anyway, yes shareholders own a corporation, therefore they are the ones paying the corporate income tax.

Repeating yourself ad nauseam doesn't make it true. If you don't have anything new to say, or any argument to offer, you may as well not post at all rather than just repeat the same tired unsupported claim.

It's really quite simple. JoeCorp manufactures JoePads... Joe does not. JoeCorp is fined by the EPA ... Joe is not. JoeCorp is subject to an ethics probe... Joe is not. JoeCorp fires 10,000 Brazilian call-center employees... Joe does not. JoeCorp owns 10% of JimmyCorp... Joe does not own any of JimmyCorp. JoeCorp owns an office building... Joe does not. JoeCorp loses a lawsuit... Joe doesn't reach into his wallet to pay damages.

Nothing that JoeCorp does becomes something that Joe does by virtue of his ownership of some portion of JoeCorp.

[NotnotgnimmiJymmiJ]

Higher than a security that is identical in every way except for liquidity.

Ah, so a 20% share of a corporation, being less easily liquidated than a 0.1% share of a corporation (you'd want to shed it slowly to avoid suddenly depressing the price of the stock sharply), should have a higher return?

I said an identical security. A 20% share of a corporation is not identical to a .1% share of a corporation.

You're digging yourself in deeper here. All the "shoulds" and "woulds" in the world do not make your arguments come to reality.

It's not entirely clear to me that you even know what my arguments are. You keep on arguing against a bunch of points that I never made. But anyway, you were the one who brought homo economicus into this discussion, not me. I'm just responding to your false claims about what homo economicus "would" do.

That's the whole point. Why else would they have a higher rate of return?

Why? Being good investments versus bad ones.

Yes, higher risk securities tend to have higher returns. That's why there are thousands of them, because there are plenty of high risk securities out there.

Informational asymmetry plays a key role in this.

No, you really couldn't.

If you have a family of thousands of truly independent securities,

Now you've added in a caveat out of the blue. Of course if they displayed no covariance whatsoever, then it would be insanely easy to build a low risk portfolio out of those securities and their prices would immediately rise causing their rates of return to immediately fall. Weren't you accusing me of shifting goalposts earlier?

which family has an expected average rate of return above the market, the odds that the mean rate of return of the entire family of securities will be below the market rate of return is vanishingly low. (This is precisely the theoretical underpinning of the notorious subprime-mortgage backed securities).

What we quite often see instead is that these products offer asymmetric high-variance returns, and are not independent of one another... and are generally subject to informational asymmetries in their processing and sale.

I'm not sure you know what "these securities" are.

But anyway, yes shareholders own a corporation, therefore they are the ones paying the corporate income tax.

Repeating yourself ad nauseam doesn't make it true. If you don't have anything new to say, or any argument to offer, you may as well not post at all rather than just repeat the same tired unsupported claim.

You haven't really added any new relevant information since your first post, so I haven't really felt the need to change any of my arguments.

[Tahar Joblis]

I said an identical security. A 20% share of a corporation is not identical to a .1% share of a corporation.

It's about as similar as you're going to get in "identical in every way except liquidity." The underlying product is the same.

You simply happen to be more focused.

It's not entirely clear to me

Nothing is clear to you. End of story.

Yes, higher risk securities tend to have higher returns.

.... soooometimes.

There's a very neat statistical property whereby high-variance medium-return investments are more or less indistinguishable from high-variance high-return investments until it's too late. It's called "noise." Savvy? It suckers people every day on the market.

Now you've added in a caveat out of the blue.

Which illustrates precisely the delusional nature of a great diversity of high-risk high-return products. In truth, most of them are essentially repackagings and reconfigurings of the same old shit. The angle may be creative, but the leverage isn't.

I'm not sure you know what "these securities" are.

By all means, let's call them by their proper name:

"Gambling."

The mechanism by which a high-risk and [theoretically] high-return product tends to be the precise inverse of a hedging tool used to reduce return in order to reduce risk. Pretty much every method of insuring against loss can be mathematically inverted to produce an apparent high-risk high-gain product. What's very typical is that they run into boundedness problems. There's an understated "small" risk of an extraordinarily large loss... or, conversely, a non-obvious upper limit on the payout, derived from circumstances outside of the financial product purchaser's field of view.

There are quite a few scams on Wall Street. Not all of them are even intentional scams, just idiots who think the numbers are actually working their favors. Genuinely high average returns with a high variance is what a lot of people think they're getting into in many of their stock picks, financial product purchases, et cetera... and not nearly as many of them are actually getting high-mean high-variance as they think, especially with the hopes of a lucky strike pushing up the prices on such products/stocks/etc.

You haven't really added any new relevant information since your first post

Says you. Incorrectly, I might add.

Now, are you yet going to come up with a single example of even colloquial language mirroring your chosen oddity of usage in claiming that Joe pays corporate income taxes because Joecorp does? Or are you going to keep stuffing your ears in your fingers and blindly repeating what you've been taught like a mantra, neglecting that 'double' taxation is the normal rule of affairs, neglecting that ownership does not entail transitivity of the subject of actions, neglecting that even "ownership" of a limited liability corporation means strikingly little?

[Lelouche]

I won't stop doing something simply because you tell me to
I don't exist to please you
Nor does you existing in the same place as me, entitle you to the product of my labor
So long as anyone pays a disproportionate tax to the amount they consume, I will always complain
for that is not justice, not even "Social Justice"

[The Adrian Empire]

*forehead smack* Ok.

A: Anything the government does is something that NEEDS to be done (hopefully) right? Otherwise why would it do it? Services for the sake of services? If you defend that, well, you're stupid.

B: If everything the government does is NEEDED and required by people then they are WILLING TO PAY FOR IT (as you good folks so obviously display "No we need these tingz pl0x!") otherwise WHY would people pay taxes?! They realize at the very least on a shallow, sheep-like, follow-the herd ideologically mislead level that they are gaining something.

C: If people are willing to pay for them they can be subscription based. That is the true test of a necessary government service.

E.G.: "BUT THESE HOMELESS PPLZ NEEDZ HOMEZ!" "Ok do the majority of you think that?" "YEEEEZ!" "Ok so why don't you all donate...?" "Do- donate?" "Yea instead of forcing us to. Cuz if the majority of us supported it like you said, we'd have enough to cover them through charity, right?" "Uhm... but we need... uhm sweeping... uh... broad-moving... uhm on a high level... UHHH! UHH!! *self-destruct*"

"Anything taxes do, business does better, business does everything better than feds."
"No it doesn't"
"Yes it does, yes it does! Anything taxes do business does better, I am a winner, a pick-upper, go-getter, you arrest anybody who does not pay you!"
"No I don't"
"Yes you do yes you dooo! Any insurance there is I do better, I do insurance much better than you!"
"Social security?"
"401k's"
"Mal-investments?"
"Financial consultants"
"Bank insurance?"
"Bank surety loans!"
"But I do it for free!"
"Free plus a small fee!"
"No I don't!"
"Yes you do yes you dooooo!"

Oh, dear gosh! Sigging most definetly sigging that

You get my argument 100%! Which is essentially to turn the government into one gigantic charity/business, in the same way many Christians (and other nice people just taking a specific example) like my family donate 10% of their income to charity because they want to help poor people, they would donate from their income to pay for the government services, exactly like a business with a subscription basis, or a charity where you donate without expectation of reward if necessary.

[NotnotgnimmiJymmiJ]

I said an identical security. A 20% share of a corporation is not identical to a .1% share of a corporation.

It's about as similar as you're going to get in "identical in every way except liquidity." The underlying product is the same.

You simply happen to be more focused.

Hence, not identical.

It's not entirely clear to me

Nothing is clear to you. End of story.

Good one, bro!

Yes, higher risk securities tend to have higher returns.

.... soooometimes.

Higher risk securities tend to have higher returns sometimes? Isn't that redundant?

There's a very neat statistical property whereby high-variance medium-return investments are more or less indistinguishable from high-variance high-return investments until it's too late. It's called "noise." Savvy? It suckers people every day on the market.

Now you've added in a caveat out of the blue.

Which illustrates precisely the delusional nature of a great diversity of high-risk high-return products. In truth, most of them are essentially repackagings and reconfigurings of the same old shit. The angle may be creative, but the leverage isn't.

I'm not sure you know what "these securities" are.

By all means, let's call them by their proper name:

"Gambling."

The mechanism by which a high-risk and [theoretically] high-return product tends to be the precise inverse of a hedging tool used to reduce return in order to reduce risk. Pretty much every method of insuring against loss can be mathematically inverted to produce an apparent high-risk high-gain product. What's very typical is that they run into boundedness problems. There's an understated "small" risk of an extraordinarily large loss... or, conversely, a non-obvious upper limit on the payout, derived from circumstances outside of the financial product purchaser's field of view.

There are quite a few scams on Wall Street. Not all of them are even intentional scams, just idiots who think the numbers are actually working their favors. Genuinely high average returns with a high variance is what a lot of people think they're getting into in many of their stock picks, financial product purchases, et cetera... and not nearly as many of them are actually getting high-mean high-variance as they think, especially with the hopes of a lucky strike pushing up the prices on such products/stocks/etc.

You haven't really added any new relevant information since your first post

Says you. Incorrectly, I might add.

Now, are you yet going to come up with a single example of even colloquial language mirroring your chosen oddity of usage in claiming that Joe pays corporate income taxes because Joecorp does?

The government has property taxes. I own property. The government taxes me.

[Tahar Joblis]

Hence, not identical.

As identical as you're likely to get. It's literally the same thing - you just happen to be holding more or less of that same thing.

Hence, by your logic, "should" be demanding a higher return, since you're losing liquidity.

The government has property taxes. I own property. The government taxes me.

Cute, but your property doesn't file property taxes - you do. You're almost there, though; you've gotten to the passive voice:

"I own a house."
"My house is taxed."
=> "I am taxed."

Of course, your house doesn't actually pay taxes. You pay taxes on owning the house. If the house had no owner, nobody would be paying property taxes on it. If an incorporated entity has no shareholders and makes no profit, it may nevertheless be taxed on its income unless specifically exempted by law (see, for example, the recent attempt to un-503(c) the CLDS in response to its meddling in California politics; organizations with non-profit based motives are nonetheless active entities in their own right). Now, can you make it over to the active voice?

(Property taxes, for reference, an entirely different type of tax than the other taxes I've been talking about; they are transaction taxes, this one is a wealth tax. Wealth taxes are rare and generally quite small in the US.)

There remain several major differences between JoeCorp and Joe's house - chiefly, that Joe's house is a simple inanimate object. It does nothing of its own accord. It just sits there. JoeCorp, on the other hand, is an active entity with responsibilities, legal obligations, the ability to own property, et cetera. In nearly every legal sense that matters (including some that are perhaps ill-advised, as oft debated vis a vis the recent SCOTUS case on political 'speech'), a corporation is an active individual in its own right.

[NotnotgnimmiJymmiJ]

Hence, not identical.

As identical as you're likely to get. It's literally the same thing - you just happen to be holding more or less of that same thing.

Hence, by your logic, "should" be demanding a higher return, since you're losing liquidity.

More or less of something is not identical.

The government has property taxes. I own property. The government taxes me.

Cute, but your property doesn't file property taxes - you do. You're almost there, though; you've gotten to the passive voice:

"I own a house."
"My house is taxed."
=> "I am taxed."

Of course, your house doesn't actually pay taxes. You pay taxes on owning the house. If the house had no owner, nobody would be paying property taxes on it. If an incorporated entity has no shareholders and makes no profit, it may nevertheless be taxed on its income unless specifically exempted by law (see, for example, the recent attempt to un-503(c) the CLDS in response to its meddling in California politics; organizations with non-profit based motives are nonetheless active entities in their own right). Now, can you make it over to the active voice?

(Property taxes, for reference, an entirely different type of tax than the other taxes I've been talking about; they are transaction taxes, this one is a wealth tax. Wealth taxes are rare and generally quite small in the US.)

There remain several major differences between JoeCorp and Joe's house - chiefly, that Joe's house is a simple inanimate object. It does nothing of its own accord. It just sits there. JoeCorp, on the other hand, is an active entity with responsibilities, legal obligations, the ability to own property, et cetera. In nearly every legal sense that matters (including some that are perhaps ill-advised, as oft debated vis a vis the recent SCOTUS case on political 'speech'), a corporation is an active individual in its own right.

You were the one who asked for a colloquial usage... Do you know what colloquial means?

[Tahar Joblis]

More or less of something is not identical.

And what would you propose is more similar to JoeCorp shares than more or fewer JoeCorp shares?

You were the one who asked for a colloquial usage... Do you know what colloquial means?

Yes. In common language. Obviously, by a philosophically precise meaning, you're completely fucked regardless of whether or not you can come up with some anachronistic expression, but I'll give you partial credit if you can come up with a colloquial expression that matches the form of:
"Joe owns [part of] JoeCorp."
"JoeCorp pays corporate income taxes."
=> "Joe pays corporate income taxes."

You got closer than I expected (though I'm aware of one far closer than what you came up with - still with important distinctions, mind, but closer nonetheless)... but half a mile off is still a miss, and you're still in the realm of gibberish as a result. Billy did not eat the baby. I didn't chop your fingers off. And Joe didn't pay corporate income taxes. Not in any remotely meaningful sense of the terms.

[Neu Leonstein]

Congratulations! In one single line, you've offered more argument in favor of saying that shareholders pay corporate income taxes than Jimmy has in several extended posts.

The franking credits offer a similar structure to VATs, in that you're tracking the same thing through multiple transactions and then trying to manage the total tax on that object. However, there's nothing (theoretically) wrong with taxing the same object through multiple transactions. This happens with the resale of used items in retail settings and sales taxes.

The core mechanism of percentage-based taxation schemes is to apply a fee to a transaction between two entities, and so it's fundamentally nothing strange to tax money both entering and leaving a corporation. See my above post on "double" taxation - money often gets taxed again and again as it passes through different transactions. It's possible to privilege certain transactions, and other transactions are logistically difficult to apply taxes to (barter, for example) but transaction taxes are the cornerstone of most modern taxation schemes IMO. The differences lie in the rates and how the transactions are aggregated.

So all you're arguing is that a corporation pays income tax rather than its owners, purely on the basis of legal niceties? You can't honestly argue that the tax paid by a corporation does not reduce the income of its owners. So in an economic sense, the owners suffer a cost equal to the tax paid and causally linked to it - ie they pay it. The corporation itself always finishes breaking even, it doesn't pay a thing. Franking credits recognise that, and attempt to incentivise corporate owners to do something through that recognition and that mechanism.

Sure, the corporation is legally separate from its owners. That's the point. But unless that has a material impact on the economic incentives, it doesn't matter. And I don't think it does in the area of taxation.

[Tahar Joblis]

So all you're arguing is that a corporation pays income tax rather than its owners, purely on the basis of legal niceties? You can't honestly argue that the tax paid by a corporation does not reduce the income of its owners.

It tends to but does not (a) necessarily or (b) "intrinsically" reduce the net gains/losses of shareholders invested in the corporation.

It is in the nature of a business that a shareholder or their heir will generally either receive a portion of bankruptcy proceedings or sell out, and for the typical shareholder in the modern market, the income derived from this will be of similar significance to the dividend income.

Certainly a sales tax reduces the effective income I have available as a retail consumer. Taxes paid by my neighbor reduce the amount he's able to lose to me at poker. Both of those are "causal," but only one of them I'm actually paying myself - however direct the relationship may be between my neighbor's finances and his persistent poker losses.

So in an economic sense, the owners suffer a cost equal to the tax paid and causally linked to it - ie they pay it. The corporation itself always finishes breaking even, it doesn't pay a thing. Franking credits recognise that, and attempt to incentivise corporate owners to do something through that recognition and that mechanism.

Sure, the corporation is legally separate from its owners. That's the point. But unless that has a material impact on the economic incentives, it doesn't matter. And I don't think it does in the area of taxation.

Now is that a result of exempting income, or a result of taxing very selectively corporate income?

From my perspective, it is the latter. The structure of corporate income tax is that of a moderate apparent rate with enormous de facto loopholes that encourage a corporation to engage in creative accounting. The simple fact is that it is quite possible to pass money onto shareholders without paying a dime in corporate income tax (as many a US corporation has managed to do in recent years, start with the GAO report if you're not sure where to start looking) means that corporate income tax is not very strongly coupled to dividend income in all tax structures.

The fact that one way of avoiding corporate income tax might be failing to pass money into shareholders represents as much a failure of the loopholes as the failure to provide incentives for dividend payouts. It is the internal structure of the tax code at each transaction point, more than the choice of transaction points, which generate the behavorial incentives you refer to.

Franking credits may well be an effective method of convincing corporations that dodging corporate income taxes isn't worthwhile. I don't think that they're a bad idea (except to the degree that they represent another incremental increase in the complexity of the tax system).

But I digress. Here's a point in the main: There's a very real benefit to investing in a limited liability corporation that has nothing at all to do with how many times or how heavily a dollar is taxed from door to dividend (answer: Pretty minimally), and that's the disconnect that exists between the corporation and the shareholder.

If I personally go out and do X, Y, Z to get money, I am legally liable for the debts incurred, fines incurred, and criminal infractions committed. If the corporation does X, Y, Z on behalf of me, as a shareholder, I'm not responsible for that. If the corporation gets itself 3:1 in debt as a result of leveraged positions or heavy short-term borrowing, I don't have to pay that excess debt overflowing above and beyond the net worth of the corporation.

That disconnect is important. It's one of the things that makes "ownership" of a limited liability corporation less causally intimate than any other kind of ownership... which renders even stronger the core point of the argument:

Even in the ordinary sense of ownership, which is clearly stronger and more intimate, we do not treat subjects performing actions interchangeably. Joe "pays" corporate income taxes in the same sense that I buy fighterjets - not really, but my finances are in some fashion affected by said actions.

[NotnotgnimmiJymmiJ]

More or less of something is not identical.

And what would you propose is more similar to JoeCorp shares than more or fewer JoeCorp shares?

On the run and off the run Treasuries are the first thing that come to mind. Different classes of the same company's shares would be the second. Gold futures in NY vs. London (or any commodity that trades in two different markets for that matter), convertible bonds vs. stock, depository receipts vs. stocks, dual-listed companies, private vs. public equity. These examples aren't as good as the first two, but they are similar enough to observe the phenomenon.

You were the one who asked for a colloquial usage... Do you know what colloquial means?

Yes. In common language. Obviously, by a philosophically precise meaning, you're completely fucked regardless of whether or not you can come up with some anachronistic expression, but I'll give you partial credit if you can come up with a colloquial expression that matches the form of:
"Joe owns [part of] JoeCorp."
"JoeCorp pays corporate income taxes."
=> "Joe pays corporate income taxes."

You got closer than I expected (though I'm aware of one far closer than what you came up with - still with important distinctions, mind, but closer nonetheless)... but half a mile off is still a miss, and you're still in the realm of gibberish as a result. Billy did not eat the baby. I didn't chop your fingers off. And Joe didn't pay corporate income taxes. Not in any remotely meaningful sense of the terms.

As I already pointed out, the transitive property is only something that exists in mathematics. Math is a fundamentally more precise language. It doesn't apply in English. I'm not sure why you're getting so tripped up on this point.

[Tahar Joblis]

And what would you propose is more similar to JoeCorp shares than more or fewer JoeCorp shares?

On the run and off the run Treasuries are the first thing that come to mind.

Seriously? Treasuries are more similar to JoeCorp shares than a larger or smaller number of JoeCorp shares? Did you even read what I was asking?

As I already pointed out, the transitive property is only something that exists in mathematics. Math is a fundamentally more precise language. It doesn't apply in English. I'm not sure why you're getting so tripped up on this point.

Transitivity can apply in plain language logic along the lines pointed out by a verb. That verb is "to be," and is an identity relation in its soul. Unfortunately, it can be used in several senses of identity, and thus, while you can often state, for example:

"A is B"
"B is C"
=> "A is C"

This is not always so. Such is not actually exhibited with verbiage in general or "owns" in particular, and also fails when different forms of identity, or metaphorical uses of "is" are in use. The result is that under certain circumstances, you may actually apply substitution between subjects and objects within "IS" relations into other sentences.

"A is B."
"B causes C."
=> "A causes C"

What you require, however, in order for the structure:

"A owns B."
"B does C."
=> "A does C"

To be valid, Is for "owns" to behave nearly as an identity relation. You need to accomplish one-directional substitution. Which, with even basic transitivity questionable (as exhibited by Joe's lack of ownership of Office Building C, JoeCorp) is so remote from reality as to present absurdity. The sum total of your argument has been precisely of the above form - as in our example, you would say "Joe owns [part of] JoeCorp. Therefore Joe pays corporate income taxes."

So then you have to scale back. At the end of the day, you will have to assume a priori that there is a special relationship between "pays" and "owns," tied to net balance operations over finances, in order for your argument to have any merit - but then this a priori assumption conflicts again with actual usage.

Namely, if Joe pays what JoeCorp pays, then dividends aren't actually paid. This litmus test shows that the proposed redefinition of the term necessary for your argument to become valid is at odds with strikingly common usage.

We can say that Joe pays corporate income tax in the same sense that Johann in 1920's Germany was paying war reparations - not really, but it had an effect on his finances and thus some chain of payments through various entities actually connects him in that direction.

And for the purpose of discussing how much of a share of taxes are paid by what part of the population, it's strikingly absurd to say that shareholders actually pay corporate income taxes. If the shareholders of JoeCorp packed up out of the country and refused to pay taxes, JoeCorp would still pay corporate income taxes as it operated.

It also is a measure of striking inconsistency across the entire conversation, since when we're talking about who pays what fraction of what taxes, it's quite relevant to discuss what the pre-tax income shares are...

... which are always measured in terms of personal, rather than associated corporate income. Nobody I've ever seen decides to adjust personal income shares based on corporate income taxes.

I'll demonstrate the sort of distortion this generates. In terms of personal income, the top 10% have 47% of personal income according to the 2007 SCF. Let's say that for all outside of the top 10%, an average of 20% of their income comes from investments, while in the top 10%, we're generally talking multi-million ranges, so let's say 80% of their income comes from investments.

Now, suppose for one minute that all this income comes from corporations that actually pay corporate income taxes at 35% (lots of ducking means this isn't the case). Then in terms of share of income including "owned corporate income" of the top 10% jumps up sharply to about 55%.

Suppose the NYT made the very likely mistake of dividing "total tax paid + estimated share of corporate income tax" by "personal pre-tax income," because all the "double taxation" advocacy groups are giving them tax burden figures including corporate income tax, and all the demographic analyses are giving personal income.

This is the "bad math" I alluded to earlier. Then their estimate of the relative tax burden of the top 10% of the population would be off by as much as a sixth - easily enough to exchange positions between upper and lower percentile brackets. And that's what's precisely relevant to this thread.

[NotnotgnimmiJymmiJ]

And what would you propose is more similar to JoeCorp shares than more or fewer JoeCorp shares?

On the run and off the run Treasuries are the first thing that come to mind.

Seriously? Treasuries are more similar to JoeCorp shares than a larger or smaller number of JoeCorp shares? Did you even read what I was asking?

I was obviously naming different places where you could clearly observe liquidity premiums. On the run and off the run Treasuries is one of them. Reading comprehension fail?

But to answer your question (again), right after that sentence, you know the one you decided to delete and ignore, I pointed out that different classes of the same company's stock can be identical in every way, and almost every way, except for liquidity.

[Tahar Joblis]

And what would you propose is more similar to JoeCorp shares than more or fewer JoeCorp shares?

On the run and off the run Treasuries are the first thing that come to mind.

Seriously? Treasuries are more similar to JoeCorp shares than a larger or smaller number of JoeCorp shares? Did you even read what I was asking?

I was obviously naming different places where you could clearly observe liquidity premiums. On the run and off the run Treasuries is one of them. Reading comprehension fail?

Is entirely yours. In bold red is what you were replying to.

[NotnotgnimmiJymmiJ]

And what would you propose is more similar to JoeCorp shares than more or fewer JoeCorp shares?

On the run and off the run Treasuries are the first thing that come to mind.

Seriously? Treasuries are more similar to JoeCorp shares than a larger or smaller number of JoeCorp shares? Did you even read what I was asking?

I was obviously naming different places where you could clearly observe liquidity premiums. On the run and off the run Treasuries is one of them. Reading comprehension fail?

Is entirely yours. In bold red is what you were replying to.

Again, I answered your question right after that, you know, that part you keep ignoring. But, if I choose to write a few extra sentences on a subject you were clearly confused about just 2 posts ago to try to clear things up, it's certainly not unheard of, and certainly not a failing of my own.

[Tahar Joblis]

Again, I answered your question right after that

Really?

And what would you propose is more similar to JoeCorp shares than more or fewer JoeCorp shares?

On the run and off the run Treasuries are the first thing that come to mind. Different classes of the same company's shares would be the second. Gold futures in NY vs. London (or any commodity that trades in two different markets for that matter), convertible bonds vs. stock, depository receipts vs. stocks, dual-listed companies, private vs. public equity. These examples aren't as good as the first two, but they are similar enough to observe the phenomenon.

CLIPPY SAYS: You look like you're making a list! Would you like to bullet that list?

• On the run and off the run treasuries.
• Different classes of the same company's shares.
• Gold futures in NY vs equity

This list is not exactly an answer to the question answered, especially since it's an ordered list, and you think that "different classes of the same companies shares" are the second best example. Still, perhaps you meant to say that holding, say, 1,000 shares of non-voting JoeCorp stock is more similar to holding 1,000 shares of voting stock than holding 10,000 shares of voting stock is to holding 1,000 shares of voting stock.

Except clearly, your prior statements indicate the former 'should' hold out for a higher return for the latter to compensate for their lost votes, leading to a return differential with no liquidity differential (since the volume of shares is pretty similar, it's not likely to be significantly harder to sell them), returning us to the same disreprency. In other words, generously, you did not meet the challenge posed, and your answer was framed in the manner of a completely irrelevant response.

If you follow the thread of conversation back, it gets even more ridiculous. Here's what it started with. You said that shareholders 'should' demand higher return in exchange for lower liquidity. I pointed out that this meant, paradoxically, that dividends 'should' be disbursed disproportionately within a share class, since it's harder to liquidate a large share of stock in a hurry without lowering the share price along the way.

You then claimed that the two scenarios - holding a high volume of JoeCorp and holding a low volume of JoeCorp - were simply incomparable. I found that absurd, and said so, challenging you to explain why. When that failed to provoke anything resembling an adequate answer, I asked you to come up with an example of anything more similar to holding JoeCorp stock than...

... holding JoeCorp stock.

[NotnotgnimmiJymmiJ]

Again, I answered your question right after that

Really?

Yes.

And what would you propose is more similar to JoeCorp shares than more or fewer JoeCorp shares?

On the run and off the run Treasuries are the first thing that come to mind. Different classes of the same company's shares would be the second. Gold futures in NY vs. London (or any commodity that trades in two different markets for that matter), convertible bonds vs. stock, depository receipts vs. stocks, dual-listed companies, private vs. public equity. These examples aren't as good as the first two, but they are similar enough to observe the phenomenon.

CLIPPY SAYS: You look like you're making a list! Would you like to bullet that list?

• On the run and off the run treasuries.
• Different classes of the same company's shares.
• Gold futures in NY vs equity

This list is not exactly an answer to the question answered, especially since it's an ordered list,

When did I claim it was?

and you think that "different classes of the same companies shares" are the second best example. Still, perhaps you meant to say that holding, say, 1,000 shares of non-voting JoeCorp stock is more similar to holding 1,000 shares of voting stock than holding 10,000 shares of voting stock is to holding 1,000 shares of voting stock.

I never said anything about voting versus non-voting stock. Please reread my post if you are confused.

Except clearly, your prior statements indicate the former 'should' hold out for a higher return for the latter to compensate for their lost votes, leading to a return differential with no liquidity differential (since the volume of shares is pretty similar, it's not likely to be significantly harder to sell them), returning us to the same disreprency. In other words, generously, you did not meet the challenge posed, and your answer was framed in the manner of a completely irrelevant response.

I get the distinct feeling that you are confused.

If you follow the thread of conversation back, it gets even more ridiculous. Here's what it started with. You said that shareholders 'should' demand higher return in exchange for lower liquidity. I pointed out that this meant, paradoxically, that dividends 'should' be disbursed disproportionately within a share class, since it's harder to liquidate a large share of stock in a hurry without lowering the share price along the way.

Yes, because they are not identical.

You then claimed that the two scenarios - holding a high volume of JoeCorp and holding a low volume of JoeCorp - were simply incomparable. I found that absurd, and said so, challenging you to explain why. When that failed to provoke anything resembling an adequate answer,

Because they are not identical. I'm sorry if you don't find that "adequate," but it's the truth.

I asked you to come up with an example of anything more similar to holding JoeCorp stock than...

... holding JoeCorp stock.

Different classes of the same company's shares, convertible bonds, depository receipts, Joe Corp's shares listed on another exchange, private equity. You're not reading. I know my not providing the answer to your question directly, but instead rephrasing my sentence really threw you off, but come on, you're a big boy, you can read.

[Tahar Joblis]

I never said anything about voting versus non-voting stock. Please reread my post if you are confused.

It was a very direct question, and you were talking past it rather than answering it. Re-read it if you're confused. Psst... voting vs non-voting stock is a prime example of a way that different classes of stock issued by the same corporation are differentiated. Different classes of stock issued by the same corporation rarely possess such a significant liquidity difference as large volumes of the same type of stock possessed.

Now, again. We're fixing an arbitrary example corporation, JoeCorp. First, nothing that is not a JoeCorp stock or JoeCorp related derivative will share the same link to JoeCorp's financial health, rendering it highly dissimilar. (Strike most of your nominations right there). This is an element that can be used to hedge against risk or shifts in market share, or (opposite) put all my eggs in the same basket, increasing the expected variance of my wealth.

Now, in order for me to experience a liquidity issue with one class of share and not another (your first nomination on your list that even looks remotely relevant to the question), that's going to mean either that one type of share exists in much larger volume, or I own one of them in much larger volume. Having one small class of shares and one large class of shares generally means you have a small volume of high-weight voting shares and a large volume of low-weight voting shares (non-voting or nearly non-voting, in other words)... meaning, in other words, that I have a liquidity issue in that I'm trying to unload this large share of highly influential voting stock.

However, the fact that it's highly influential voting stock means something for its return aside from the fact that it's from a share class with a low volume, so I'm not seeing how this is any more similar than larger and smaller volumes of the same class of stock, which only differ intrinsically in terms of their liquidity.

I get the distinct feeling that you are confused.

The only thing that's confusing is how you can manage to be as repetitious as you are without being even internally consistent in your attempts at argument.

If you follow the thread of conversation back, it gets even more ridiculous. Here's what it started with. You said that shareholders 'should' demand higher return in exchange for lower liquidity. I pointed out that this meant, paradoxically, that dividends 'should' be disbursed disproportionately within a share class, since it's harder to liquidate a large share of stock in a hurry without lowering the share price along the way.

Yes, because they are not identical.

So you do think that return per share should be larger on larger holdings of the same class of stock. Making this absolutely clear for anybody else reading this conversation, that's what you just said "yes" to in your reply to the quoted above.

Which, frankly, is pretty far out there in terms of regressiveness.

[Eugene Zolo]

http://www.nytimes.com/2010/04/14/business/economy/14leonhardt.html?src=me&ref=business

But the modifiers here — federal and income — are important. Income taxes aren’t the only kind of federal taxes that people pay. There are also payroll taxes and investment taxes, among others. And, of course, people pay state and local taxes, too.

Even if the discussion is restricted to federal taxes (for which the statistics are better), a vast majority of households end up paying federal taxes. Congressional Budget Office data suggests that, at most, about 10 percent of all households pay no net federal taxes. The number 10 is obviously a lot smaller than 47.

So stop bitching about how 47% of American's don't pay taxes, perhaps income taxes, but there are other federal taxes, not to mention state and local taxes as well.

In addition, the argument that the wealthy are paying for the entire burden is ridiculous:

There is no question that the wealthy pay a higher overall tax rate than any other group. That is an American tradition. But there is also no question that their tax rates have fallen more than any other group’s over the last three decades. The only reason they are paying more taxes than in the past is that their pretax incomes have risen so rapidly — which hardly seems a great rationale for a further tax cut.

While they are paying for a good chunk of it, their income has grown the fastest, and their tax rates have dropped significantly.

The income tax is the tax which provides the government with more revenue than any other tax, followed by Social Security Tax, and Corporate income tax. In terms of federal taxes the tax revenue the government gets from taxes like sales tax doesn't come close to what it gets from income tax which gives the federal government almost half its revenue ($1.25 trillion out of a total $2.66 trillion). So yes people have every right to be infuriated that almost half of the country doesn't pay the main tax from which the government gets its revenue. You talk about how those people still pay local and state taxes and that's great and all, but do you know who else pays local and state taxes? The 53% who pay income tax. Its nice to know that only 10% (or 30 million) Americans are complete leaches. So yea your people should stop bitching, because the 47% that don't pay the federal governments largest tax do pay other taxes, wait no, only 37% pay other taxes is ridiculous.

[NotnotgnimmiJymmiJ]

I never said anything about voting versus non-voting stock. Please reread my post if you are confused.

It was a very direct question, and you were talking past it rather than answering it.[ Re-read it if you're confused. Psst... voting vs non-voting stock is a prime example of a way that different classes of stock issued by the same corporation are differentiated.

I wasn't talking about non-voting vs. voting shares. I was talking about more liquid and less liquid classes of shares.

Different classes of stock issued by the same corporation rarely possess such a significant liquidity difference as large volumes of the same type of stock possessed.

Simply not true.

Now, again. We're fixing an arbitrary example corporation, JoeCorp. First, nothing that is not a JoeCorp stock or JoeCorp related derivative will share the same link to JoeCorp's financial health, rendering it highly dissimilar. (Strike most of your nominations right there). This is an element that can be used to hedge against risk or shifts in market share, or (opposite) put all my eggs in the same basket, increasing the expected variance of my wealth.

Now, in order for me to experience a liquidity issue with one class of share and not another (your first nomination on your list that even looks remotely relevant to the question), that's going to mean either that one type of share exists in much larger volume, or I own one of them in much larger volume. Having one small class of shares and one large class of shares generally means you have a small volume of high-weight voting shares and a large volume of low-weight voting shares (non-voting or nearly non-voting, in other words)... meaning, in other words, that I have a liquidity issue in that I'm trying to unload this large share of highly influential voting stock.

However, the fact that it's highly influential voting stock means something for its return aside from the fact that it's from a share class with a low volume, so I'm not seeing how this is any more similar than larger and smaller volumes of the same class of stock, which only differ intrinsically in terms of their liquidity.

I get the distinct feeling that you are confused.

The only thing that's confusing is how you can manage to be as repetitious as you are without being even internally consistent in your attempts at argument.

You're arguing against a hypothetical that I never proposed. You seem to do this a lot. Pretend I said something I never did, and then write 10 paragraphs about it.

If you follow the thread of conversation back, it gets even more ridiculous. Here's what it started with. You said that shareholders 'should' demand higher return in exchange for lower liquidity. I pointed out that this meant, paradoxically, that dividends 'should' be disbursed disproportionately within a share class, since it's harder to liquidate a large share of stock in a hurry without lowering the share price along the way.

Yes, because they are not identical.

So you do think that return per share should be larger on larger holdings of the same class of stock. Making this absolutely clear for anybody else reading this conversation, that's what you just said "yes" to in your reply to the quoted above.

Which, frankly, is pretty far out there in terms of regressiveness.

Oh man, you totally got me. Everyone reading this thread knows it. You won the internets! Be proud.

Either that or I just stopped paying much attention since the second half of this thread.

So, let me see if I understand your question correctly. Why are 200 shares of a stock different from 1 share of a stock? The question answers itself. It is worth 200 times as much, it has 200 times the return, and it has 200 times the risk.