Timelordwho wrote:
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Sure, but it shrinks the actual profits from that increased demand by the same amount. This means that the choice to spend those profits simply putting more of the same good on the shelves begins to outweigh the choice to spend those profits making a new and better product.
Not quite. Since you can raise taxation on accumulated nonproductive wealth...
How do you raise taxes on the "nonproductive" wealth accumulation? Don't we run into the "let's just make the blockbusters" problem? That wealth accumulation *is* the investment money spent on new things that may or may not result in useful and valuable products down the line. Of course, we don't know which ones will result in useful things and which wont, so I'm not sure how you plan on creating a tax that will only hurt the wasteful investments, while keeping the funding for the useful stuff intact.
This is *exactly* why what you're proposing will result in a slow down of new/better products entering the market.
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You also aren't taxing R&D, by virtue of the fact that it's still in development and thus not producing taxable profits.
You're taxing the profits that end out in R&D budgets though. No matter how you structure your taxes you are reducing the total amount of money available for R&D. So any tax will cut into R&D budgets.
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As I said before, you also benefit from having higher demand for new products, meaning that once those new technologies reach the market, it is easier for them to become profitable.
And I already said before, that what actually happens is that you increase the incentive to make more of the same products instead of inventing new products. The demand is increased in terms of raw dollars, but the R&D money is reduced, and the profits to those who invest speculatively in those new products is reduced. Why on earth would I spend scarce profits researching some really new product, when I could focus on maxing out the quantity of existing products that I can sell to a captive audience with government subsidized spending dollars burning a hole in their pocket?
Look at the whole equation. Ask what you'd do if you were in each position. Don't just hope that what you want to do will result in the wonderful things you want to have happen.
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Those profits /are/ taxed at a higher rate, but I see that as fair, since they have been given the additional structural support and are profitable.
I think you're dancing around this. What exactly would we tax more to put that extra demand money in consumers hands? Would we raise taxes on the sale of goods to the same people you handed the extra money to? Or would you raise taxes on capital gains? Raise taxes just on big business profits?
You're being vague and then jumping around from one possible method to another in order to avoid the problems inherent in each of them. No matter where you take the money from, you will induce a negative effect on the market. It'll vary, but it'll be there. And in each case, it offsets the extra demand to some degree, and in some cases causes additional unforeseen consequences as well.
Examine each option completely. You'll find that this ideal solution doesn't really work when you go through the whole process.
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As a rule, it lowers the risk of already risky ventures, while lowering the reward of fundamentally safe ones. This alleviates on of the main reasons a company would pull back from this type of investment.
I'm frankly not sure what you're talking about here. Instead of repeating assumptions about what will happen, could you explain exactly what you are advocating and then take the time to explain *why* a given result will occur? Because it seems like you're speaking in incredibly broad generalities and then just listing off a set of benefits, but I don't see any logical connection between what you are talking about and the benefits you claim will occur.
Edited, Dec 22nd 2010 5:21pm by gbaji