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Comment by bobcostas55 | Hacker News Reader

This is obviously fallacious, just consider the extreme case of 100% taxation. At the macro level the only source of investment funds is income that does not go to consumption. Lower the expected rate of return through taxation, and the result is inevitably a shift from investment to consumption. At the individual firm level it's obvious that taxation lowers the NPV of the firm's available projects - they are obviously not going to respond by investing more.

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Well starving could be considered just a 100% diet rate. Clearly that would be catastrophic so any claim that dieting is beneficial is obviously fallacious and in fact we would be better off eating more.

Looking at behavior in the extreme case is only valid if behavior scales smoothly up to that limit.

You're mixing corporate income taxes an personal income taxes. Corporate income taxes are good because the business wants to avoid paying taxes so it will devise more ways to invest in the company. This is where investment capital will be coming from.

Why is investing in mostly flat or negative return projects assumed to be a net-good?

It's generally assumed a corporation would be more interested in positive returns on it's investments. Seems like if a company stops investing in positive ROI projects, it won't grow, and then won't survive as long? I haven't thought about it much, but I think on a macro scale even a negative return project still circulates that money back out, in the form of salaries or materials or something, but that may be a naive thought.

Obviously there are ways to break that, like tax evasion, but hopefully there are other ways to deal with that.

But you're operating on the assumption that companies always have positive investment opportunities available.

This is not the case, and in the event such an opportunity is available, companies would pursue it regardless of the tax environment, because making some money net of tax is better than no money whatsoever.

What such a policy would actually do is incentivize a massive mis-allocation of capital while simultaneously resulting in lower tax revenues. I fail to see how this makes anyone better off.

Long ago someone pointed out that the lower and middle class make the mistake of confusing money and power. As often as the rich get caught in tax dodges, much of the 'currency' that flows is only loosely denominated in dollars. We don't tax the cost of changing someone's mind.

At 100% tax rate I would expect that pattern to be magnified. As a board member, I'd use my success to hire or partner with anybody I had the slightest positive feeling for, until there is just enough money left over that I don't have the biggest target painted on my forehead.

So basically a non-profit. That's why non-profit managers sometimes have huge wages.

The extreme case of drinking water is drowning, which gives us about as much guidance for health policy as "what if we went full Marx" does for tax policy.

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