Amusingly, I invented a new social insurance that takes a tax that doesn't adjust year after year. I learned from Social Security's mistake: mine has a tax structure which necessarily draws revenue with increasing purchasing power. In other words: if you keep the tax rate the same, the tax revenue grows faster than inflation year after year.
As consequence, the program pays larger benefits over time without raising the taxes feeding it. It's not like Social Security where you say, "Hey, let's raise the Social Security payments by 15% along that lower end to get the elderly out of poverty!" "Oh that's great! Hmm, we'll have to increase the FICA tax yet again, perhaps to 15% this time." "Yes, and we'll have to raise the cap to take more of that tax from more income, suppressing wages while increasing the tax wedge and raising prices." You just sort of wait and watch it outpace cost-of-living adjustments on its own.
The fun part is I break another well-known, century-old, repeatedly-proven axiom in the process:
"a deficit-neutral stimulus package is an oxymoron: if the plan does not raise the near-term fiscal deficit, then it has not expanded net expenditures in the economy and will not lead to new jobs." (Mishel, et al)
I designed a deficit-neutral stimulus.
The short list is:
I designed the policy to mathematically guarantee a deficit-neutral stimulus heavily localized to recessions. As shown above, that's axiomatically-impossible.
The policy is an egalitarian social insurance and targets those areas of greatest need due to its mathematical construction. Egalitarian social insurances are inefficient because they poorly target need and instead wastefully distribute economic resources where there is less need (I didn't completely escape this; I only caused it to target by nature with perfect program efficiency, but not to target with perfect program efficiency of the theoretical ideal social insurance).
The policy increases its buying-power benefit--payments increase faster than inflation--and doesn't use tax raises or deficit spending in doing so. Typically, social insurances and welfare programs bloat: they stop working well, and then we raise taxes to shore up the budget.
The policy acts as a foundation under other social insurances, and so increases their efficiency. Those are more-targeted (unemployment, SNAP, WIC, HUD, etc.) and remain due to the above partially-violated axiom. The cost of running social programs diminishes over time due to this policy--it even lowers the cost of Social Security's OASDI program.
As you might gather from that last one, taxes would come down, all other things equal: the cost of other programs falls, so taxes also fall.
There's a compound tax effect: the program creates economic efficiency in such a way that there is greater taxable income for the same population, so you're able to supply the same services to that population for lower tax rates. That means we can lower taxes without cutting services due to secondary effects.
There's another compound tax effect: accounting the benefit as a sort of tax refund creates what amounts to a negative income tax. Beyond the threshold, income taxes are of course lower than current. There's no corresponding tax increase at the upper end because of an efficiency issue in our current fiscals which I took advantage of: this program is hugely expensive, but something else was so broken I was able to fix it and hide the expense in the noise. It pretty much looks like a tax cut; if you start with no social programs (and without their associated taxes), it's a major tax increase.
Because the benefit rises faster than inflation but the tax rates don't, there's no long-term impact on the rich (the tax rate isn't rising and the benefit is fractional compared to their incomes and taxes), whereas the poor and middle-cla
In the case of Amazon, the primary target (the bill was written so as to target Amazon specifically, which might actually be a violation of the 14th Amendment to the United States Constitution), the measure would have taxed from an employment base created from money coming from outside: Amazon sells all over the nation, and flows money into Seattle. The labor wedge, thus, is somebody else's problem, and the measure would have been good for Seattle in terms of tax revenue without all of those nasty downsides of labor wedges.
For the same reason, Amazon can get up and move two towns over and absolutely destroy Seattle's economy by cutting the economic feeding tube. This is why we are, at times, nice to really, really, really huge businesses: the symbiotic relationship forms a one-way dependence.
The Federal government doesn't have to worry about business getting up and leaving because that's not feasible. You can't do business in the US without being in the US somehow. There are all kinds of tax games and outsourcing and such, and that's fine: someone always capitalizes on the labor here anyway, so we're not too concerned with all businesses fleeing the US en masse exodus. States have similar power, although businesses can move state more easily than nation; it is, of course, disruptive either way.
Washington constitutionally prohibits state income tax. They only allow all kinds of regressive taxes. There's your real problem.
Yes, and the whole legal basis is fine and dandy; the response is a big fine and some other action; and people are all in a huff because they think sanctions are some sacred cow.
The WTO and UN should put economic sanctions on the list of things that will get your leaders arrested and tried for war crimes. Extending from a reasonable legal response to a huge moral response against ZTE is like calling for the death penalty for a person who murdered a child rapist during the rape of a child: your moral foundation sucks.
Economic sanctions are just the systematic murder of poor and middle-class--including their children--while pretending to keep your hands clean. They're not fundamentally-distinct from charging into villages and shooting 10-year-olds with flamethrowers.
The whole "national security" thing was a bunch of crap. They suggested ZTE could possibly put some kind of malicious espionage software on their phones--not that they, Huawei, or Xiaomi have done any such thing, but they could. Meanwhile CISCO routers are made in China and make up major government infrastructure....
Another company with greater interest in the product can pay developers to work on the product; otherwise the product is not very useful and not worth paying a development team (so dies), or is simply so useful that an army of developers with interest in the product will each pass only incidental code changes into it and still drive further development.
In the latter case, if Oracle tries to control the product, someone will read Robert's Rules and then set up their own organization to manage the forked git repository for the version people really want instead of Oracle's crap.
The effective tax rate is influenced by three things: a result of subsidy credits; an accounting fiction (in the case of depreciation); and tax avoidance (by incurring taxable income outside the tax jurisdiction, then reasoning that it's income even though it's not reported).
Dividends can only be paid by way of actual, tax-accountable income: if you repatriate money which was shifted to avoid taxes, it counts as newly-accrued income and is taxed 35%. If you pay the income to shareholders directly, it's counted as regular income and taxed 39.6% (and also draws some attention from the SEC, as this is not legally accountable as dividends).
The effective tax rate on money used to pay dividends--on that specific pile of money--is always the corporate income tax rate, no more and no less. The money that's supposedly not taxable income is also not distributable income, or was previously taxed as income because it was tied to an expense which follows a depreciation schedule and is considered to occur over several years instead of when the money is spent.
in any case, the tax rate is no longer 35%.
This will change soon enough, and the last taxes paid were 2017 taxes. Repeal and replace the TCJA is a major tax reform topic and will happen with any other change, so pre-2018 tax law is currently the relevant conversation.
I don't see the problem. Is it the deferred tax that bothers you?
No, it's that holding the stock lets you manipulate money held in corporate bank accounts to your own benefit, which means you never receive income yet you get to spend millions of dollars.
Things like access to yachts, company cars, first class air travel, etc. would need to considered benefits like salary.
They already are; however, because the marginal cost of an individual's use of the yacht club's resources is a fraction of the cost of the yacht itself, the individual incurs only a marginal amount of income.
your yacht club example can happen today, with costs written off as entertainment expenses and whatnot
Only for the marginal costs. The profits incurred to buy and sell yacht clubs and by the operation thereof, which would be taxed at 0% under your system, would be taxed at the corporate income tax rate under the current system.
I contend will be easier when the government doesn't need to fight GE's accounting and lobbying departments and instead is just fighting Joe Millionaire's accountant.
GE's accounting and lobbying departments are all smoking cubans on a company yacht while drinking some expensive champagne. Joe Millionaire's accountant is having an easier time covering Joe Millionaire's assets from taxation. All of these people have large taxable incomes, but not on the scale of the now-well-sheltered-in-place untaxable incomes they're manipulating with their shareholder power. They're all applauding the 0% corporate income tax rate.
Currently, dividends are taxed as profit (was 35% in 2016), then taxed again when paid to shareholders as capital gains (15%), bringing the total to a 44.75% tax rate.
This is misleading on four counts. The effective tax rate was not 35%, and dividends are often paid independently of profit.
The tax rate was 35% and dividends are paid out of profits. Dividends paid are never deductible from taxes. Corporations can hold the money in a bank account for a little while and pay dividends in loss years; however, the corporations must eventually make profitable income, retain that income as reportable income in the United States, pay taxes on that income, and so forth.
No, depreciation doesn't change that: you simply don't have the income (you spent it) to distribute when you buy things, even if you don't really "spend" the money for tax purposes until later (that means you've already paid taxes on those expenses and no longer have the money on hand).
The specific money paid as dividends are always exposed to the full corporate income tax marginal rate.
For instance, GE only recently reduced their dividend despite many consecutive losses. And even now, they still pay a dividend.
Because GE already made that money and paid taxes on it long ago at a 35% marginal rate.
You also leave capital gains out of the argument, and you are using last year's significantly higher tax rate.
I specifically said they pay 35%, then pay capital gains (15%) again on what's left after paying 35%.
Good on them - their stock price will likely reflect their cash hoard and you get them on capital gains.
You wouldn't get them on capital gains until the shareholders sold stock. Being shareholders, they can use their stock as voting rights to direct Apple to buy other companies with the tax-sheltered money held by Apple, and none of this ever gets taxed.
Again this is misleading. It has only worked that way for short-term capital gains. Long term capital gains are taxed at a lower rate.
I used the 15% long-term capital gains rate compounded on the 35% corporate income tax rate.
That's an absurd statement - it would go to zero... there would be no taxes for corporations to avoid. Individuals would need to do all of the avoiding, and they do not have a giant accounting department at their disposal - nor do they have the same number of lobbyists to carve out tax exemptions.
The individuals wouldn't be exposed to higher tax liability, and the billions and billions of dollars of income being held in accounts currently subject to tax when earned would be subject to no tax. That is: they wouldn't be subject to taxes paid by the corporation OR by any other person.
What shelter? Presumably rich people want to do things with their money? Tax it when it comes out of the corporation.
Nope! You hold stock (don't sell it and you don't pay capital gains) and you say, "Hey, board members, let's all vote to buy that yacht club over there!" Then you own a yacht club, a bunch of yachts, and can go boating. You don't pay one red cent in taxes through the whole transaction.
What you do, you organize a holding company as an LLC taxed as a C-corp, and you make the yacht club a member. Then you sell that yacht club to the rich folks who own Apple and Google, and your LLC holds the money so you don't have to pay income taxes on it. You can then buy yourself a smaller yacht club start-up and wash, rinse, repeat. 0% tax rate for C-corp so hooray, no taxes ever again!
That's OK, we're giving up trillions in uncollected taxes now, held overseas.
Pass-through won't stop that because that's done by not legally incurring accountable income in the home nation. The US doesn't have a law that says, "This income is not taxable." The business says, "We spent this money" and "we received this money", and they either buy from outside companies (an expense, not income to the business, thus lowers their profits) or they assign a sale in another nation to a company in Ireland (that money never appears in the accounting books on US soil, at all).
So all of the money currently not being taxed would remain untaxed under your system.
tax avoidance is real
Well, yes.
You even described several excellent bizarre maneuvers that would go away if there was no corporate tax. Depreciation would be become a GAAP quirk and would have no tax consequences at all, with no games to play.
Not true. Depreciation isn't a bizarre maneuver; it's part of Corporate tax law: it is illegal to report that you spent $1M on a $1M machine. You have to report that over several years, or else you get the living fuck fined out of you by the IRS. The SEC then penalizes you for securities fraud.
They can pay dividends, which you tax as income
Currently, dividends are taxed as profit (was 35% in 2016), then taxed again when paid to shareholders as capital gains (15%), bringing the total to a 44.75% tax rate.
Under your passthrough system, dividends are taxed at 39.6% at most. Further, if they don't pay dividends--if they put that cash in a box like Apple does--they pay 0% taxes, instead of the 35% they pay normally (in 2016).
Apple's effective tax rate under your system would be vanishingly-small.
People can sell their shares in a corporation, which you tax the profit on.
That's how the law has worked for the past century or so.
tl;dr: Nothing you describe would reduce tax avoidance; and the mechanism of eliminating corporate income tax would provide a much better tax shelter at 0% tax rate here in the US with which rich people could increase their wealth (by having the business buy other businesses, securities, etc.) without ever paying taxes. The top 1% would cease paying 40% of the taxes and instead pay around 5% of the taxes.
The Dividend is a unique solution. It's similar to a Universal Basic Income and a social insurance (like Social Security Retirement Pensions, Disability Insurance, or Unemployment), as well as to a Keynesian stimulus (that $300 check you got back in 2009 when Obama signed a huge stimulus into law to halt the recession).
It's not global, but national; yet the protections against damage from structural change and the maximization of gains from such structural change allow us to take full advantage of global trade and labor movement. This is fundamental in Nordic nations, and is studied extensively.
This is not true - my accounting would become easier since all of my dividend income would become simple income
A pass-through payment for a corporate entity isn't simply the corporation granting you income under contract; you are legally entitled to that income based on your ownership in the company, and the conditions of your income are reported by your partnership in the company. You would have to report Form K-1 to the IRS along with Form 1099-S to describe your share of ownership in the partnership and your income thus derived.
I've had that arrangement before, when I owned CLMT. I handled it by simply not reporting that income to the IRS, since it was like $40 and the IRS does not care (it costs them too much to individually prosecute); my tax software didn't handle it, I didn't understand it the first time, and so I sold all of that stock and skipped it again the next year. I understand it now, but to hell with that. I received the forms well-after I filed my tax returns, too, so they were completed correctly to the best of my knowledge when I sent them in.
Note that the IRS did get some kind of report from the company, so has documentation suggesting I didn't report some small income, and so could come find me and ask; it just costs way too much to bother.
Here's the rub: if it's all passthrough with thousands or millions of shareholders and everyone's little $1,000 or $5,000 holding generating $200 of dividends goes unreported, that's potentially billions of untaxed incomes, and a large cost to collect. It's also a lot of sunk cost in tax filing preparation across the nation for all these individual filers.
Corporate tax rate in the US was 34% or higher last year. Tax paid was around 24%. The delta is what I'm calling loopholes.
Well, you're wrong.
When a corporation purchases a $1M machine, they have a $1M asset. That means if you sell $10M of product, spend $9M on wages and materials and corp-to-corp services, and spend $1M to buy a machine (or office furniture), you don't report $0 profits; you report $1M--you're -$1M cash, +$1M machine.
Now, there's depreciation. Call it a Schedule F 10% per year depreciation down to 10%. That first year, you don't really report $1M profits; you report $0.9M, because $0.1M (10%) goes to depreciation of your machine: it's worth 10% less. Now you have to pay taxes on $0.9M, even though you had $10M of revenues and made $10M of expenses. Fortunately, owner equity is probably up there at this point, so you probably have cash on hand (shareholders are the people who put that cash there to start with) to cover your 35% x $0.9M tax owe.
The next year, you make $10M revenue and spend $9M again. This time you don't buy a machine; yet your machine depreciates by 10% of its original value again. Your machine is now considered $0.8M "in the bank" (it's an asset). Again: you have $1M of profits--this time unspent--and you report $0.9M.
In your first year, you might have a profit of $0(!), and your taxable earnings are $0.9M(!!). In your second, you have a profit of $1M, and your taxable earnings are $0.9M again.
In that second year, you had a 35% CITR, $1M of profits, and paid 31.5% of your profits as taxes. That's 35% of $0.9M.
In both years, you paid $315,000 in taxes, even though in the first year you had less than that in profits.
So, you can obviously see this isn't cheating. The tax rates look strange because they are. Don't ask me wtf to do in that first year; I honestly don't know, because I am not a corporate tax expert and when I did it I was using a different corporate structure than the usual C-Corporation and actually reported negative income and the Government paid me thousands of dollars.
You might enjoy reading up on full expensing, a policy which gets a lot of debate a
I'd rather we abolished corporate taxes altogether and made all profits pass-through.
Many companies have millions of shareholders, and reporting those complex taxes are difficult. Your personal investment portfolio would become this nightmare accounting demon.
Also: Apple and Microsoft take 20% profit margins. Apple keeps around $10 billion of that every year in an Apple-Inc.-owned bank account instead of distributing it to shareholders. That's money that wouldn't be subject to taxation under your rules.
without corporate tax law the available loopholes are significantly reduced
Well, typically, the US Corporate Income Tax (up to 2016) has been a 35% flat rate (this has varied some) for all corporate net profits, with an adjusted minimum tax of 20% (if your deductions bring your tax burden to below 20% of your pre-deduction taxes, you have to shift those deductions back up to 2 years and carry them forward up to 20).
So, for example, Apple doesn't pay a 48% CIT, but rather 35%. Adidas, which has a 5% profit margin, also pays a 35% CIT, rather than 16%.
Note that the auto industry has a net margin of about 2% and the auto parts industry has a net margin of about 5%
GM has a typical 5-year average around 3.6% and Ford around 4.1%. Many industries average 8%-10%. Apple and Microsoft average 20% net operating profits.
You're talking about periods where technological progress happened rapidly, and the economic processes which recover were overloaded. Military-industrial complex isn't helping to rebuild the economy; it's actively harming it: wars create economic stress and make us poorer. Oh, they create jobs, sure; the problem is those jobs are just making things that never reach folks--if 10% of your economy is making military materials, then 10% of your labor goes to things that don't actually benefit you, rather than to things like food or cars or video games. In other terms, it's like working to produce 36 hours's worth of stuff in 40 hours of work--technical progress is producing 40 hours's worth of stuff in only 36 hours of work.
Technical progress happens constantly. It causes structural change: 12,000 lay-offs here, 10,000 lay-offs there, a coal mining town decays into a ghost town, and so forth. You lose 0.01% or 0.05% of your employment, gain wealth all over the place, and nearly everyone is better off. It's so tiny that the economy reacts to the greater purchasing power by purchasing more and creating job demand--it's the same rational process that sets prices in the first place with the new change that another competitor has entered the market or the other ten thousand people in your market are able to lower their prices and draw your customers away, and so forth.
Basically, it's a paper cut here and there, and you heal.
An industrial revolution is not a paper cut, but a hole being blown in a major organ. Assuming your economy survives (it usually does), it's going to be a wreck for quite a while.
Now, you should have noticed something above: this structural change may collapse a coal mining town or a factory town, and then create a dozen powerful information technology cities on the other side of the nation. The people over here are poorer and the jobs are going to the people over there; we're all better off as a whole, not as individuals: almost every individual is better off, and a few individuals are the sacrifice.
Because we're all better off as a whole, the winners in this transaction can compensate the losers and still be better off. This is accomplished through social insurances: unemployment, disability insurance, retirement pensions, food stamps, housing assistance, economic stimulus, the like. This applies not just to technical progress, but to trade and immigrant labor which draw down prices around the whole of the nation yet necessarily cause the displacement of some small number of jobs along the way.
The MIC is a waste and creates nothing but poverty. It serves the important function of national defense; if it expends wastefully by accomplishing little with much spending or by building beyond what is ever necessary, it is harming our economy. It should just be defense: an efficient, well-oiled economic machine which achieves its purpose with the least cost achievable.
If you want to protect against unemployment and poverty, you need three things.
The first is structural wage distribution. Make the minimum wage 1/4 of the GNI-per-adult--$10.20/hr in 2018 if 40 hours per week is defined as "full time"). When the minimum wage falls, the opportunities for employment rise; yet the capacity to survive and to support an economy without assistance by such employment falls, and so local economies struggle and decay. The need for social insurances (welfare) increases, causing tax costs or inadequate service and thus collapsing of economies. A sudden, large minimum wage raise creates an unemployment shock; steady growth controls the growth of job opportunities and, thus, the growth of population and labor force. Setting minimum wage to never fall and to never be below a certain portion of the per-working-age-adult income (e.g. 1/4) creates a wage income structure with a defined bottom.
The second is social insurances to protect against structural change and individual microeconomic events. These i
That's called technical progress. If a worker from 100 years ago could produce 6 donuts per hour, and a worker today can produce 60 salted caramel designer cupcakes per hour, and people are buying 60 confections per hour, how many workers do we need 100 years ago? How many today?
The answers are 10 and 1. I hope you like that donuts cost $1 and the average income is $58,000/year, instead of donuts being $1/dozen and the average income is $480/year.
I suggested tying corporate income tax rates to corporate net operating profits so that huge-margin price gougers end up paying high taxes and low-margin corporations pay very little.
There's no fucking way you'll make it in politics if you're THIS fucking combative to people who would otherwise be in the exact same political camp.
tl;dr: Imports from China have made all Americans--especially the poorest--wealthier and increased the number of American jobs in total. Gini coefficient is caused by internal structural policy, not trade. Growth is not somehow covering up loss; the things you claim are loss are a major cause of America's growth.
Basically, everything you're saying is wrong, and either the opposite is true or there's no relation between the things you're claiming and what's actually happening.
shut up and READ a little bit. And if you DO read any of this, give comprehension a try. Seriously, this is TWICE.
I did read. I thought. I considered objective reality.
I was insulted the first time.
That's because you said something and I told you you're categorically wrong. You've believed strongly your whole life that the sky is a brilliant shade of gold; I pointed up and said, "That... is blue." It can't not be insulting. I'm accusing you of being ignorant and lacking knowledge of the world.
Let me explain this to you in simple, brief terms by an example.
If we ceased to import Men and Boys's Cotton Trousers and Pants from China and instead made and sold those same products in American factories, the cost in terms of wages to produce those would go up. The direct employment from this manufacturing in China would be around 178,000 American workers; however, with the cost increase, American consumers would be able to purchase only enough sufficient to support 58,000 American workers involved in domestic production.
Out of 158 million workers, that's.037%.
That's at the same quality. For the American pants to be of higher quality, the cost would be higher, affordability would be lower, and fewer jobs would be created.
A minimum-wage American worker now works 1.8 hours to buy pants; under this scenario, the worker works 3 hours instead. This 67% increase applies across the board: for a worker who works 0.6 hours to buy those pants, that person now spends 1 hour's wage on the same pants.
First result: 99.96% of Americans are poorer. The ones most impacted would be the poorest, by the way.
Because of this, Americans purchase fewer pants or fewer things which aren't pants.
With less purchasing, fewer trucks are driven to ship goods. Fewer retail cashiers, inventory specialists (unloading trucks), and other such support can be employed. The numbers for these are actually calculated by the cost differential between Chinese- and American-made pants.
That loss comes out to be around 92,000.
58,000 jobs created, 92,000 jobs lost
Second result: 34,000 fewer American jobs in total.
you need to learn to simply AGREE with other people when they're agreeing with you. There's no need to start an argument over semantics or disagree with someone simply because they said the same thing in the wrong way.
I can't agree with you when you're wrong.
You're saying the trade deficit is causing loss of wealth which is being offset by growth--a ridiculous statement because hemorrhaging wealth in that way would cause negative growth and a declining capacity to support jobs and population.
Thricely I say unto thee: OUR ECONOMY IS GROWING ~~MORE~~ THAN THE HALF TRILLION WE SEND TO CHINA We can afford it.
See this statement? It's rooted in ignorance. This is you saying something that has no basis in reality. I explained why this is (it has to do with labor: you're trading time), although only in a brief statement buried in a wall of text.
I'm saying that by importing cheap goods from China, we make the American poor and middle-class wealthier and create thousands of American jobs.
that graph shows DOES appear to show that it shows that you're full of shit. I was confused about why you were showing it to me. People getting laid off, money going overseas.
Sorry, let me explain the graph.
Do you see the green line? That's the unemployment rate. The red line is our trade balance--lower means deficit (more imports than exports).
Notice that, at a nearly $200 billion trade deficit in 1987, we have 5.5% unemployment.
Notice that, at a nearly $800 billion trade deficit in 2005, we have 5% unemployment.
The increase in deficit doesn't increase unemployment
You're thinking of getting the Democratic Nominee elected.
A handful of oligarchical elites in the Democratic Party select the nominee they want. Then the Party stages a campaign to get that person nominated in the Primary. The Democratic voters are told they're voting for who they want to represent them in Congress or as President; meanwhile the Democratic Party is working to ensure that anyone except who a few hundred elites want to nominate is thoroughly-crushed.
They even go to candidates who are gaining too much headway in a primary against their favored candidate and suggest the challenger drop out of the race and let the Democratic Party decide who is going to be the next in line for the throne.
Ostensibly, we the people are going out to nominate by our votes who we want, and anyone can become a candidate and campaign for that position. In reality, leadership makes that decision and then works to ensure the only one whose campaign matters is the one they select. The Iowa Caucus isn't even a primary: generally, whomever is selected by the Party Caucus in Iowa has a huge lead, and is the anointed next President should the party win in November.
The Democratic Party even has Superdelegates for the Presidential Election. Superdelegates ensure that, should the People vote for someone else, the Democratic Party can step up and countermand the Primary and nominate their hand-picked candidate. Ostensibly, it's because people are stupid and will vote for a candidate who can't win the General election, and so the very-much-smarter Democratic leadership needs a way to pat us all on the head and go let mommy and daddy handle the adult stuff and pick the right candidate.
The voters chose wrong. We fixed it. See?
That's one of the things we're trying to change by replacing all of these people. As you can imagine, it's...difficult.
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Man, crooks make millions of dollars and I just want to be a Congressman and make poverty go away.
Amusingly, I invented a new social insurance that takes a tax that doesn't adjust year after year. I learned from Social Security's mistake: mine has a tax structure which necessarily draws revenue with increasing purchasing power. In other words: if you keep the tax rate the same, the tax revenue grows faster than inflation year after year.
As consequence, the program pays larger benefits over time without raising the taxes feeding it. It's not like Social Security where you say, "Hey, let's raise the Social Security payments by 15% along that lower end to get the elderly out of poverty!" "Oh that's great! Hmm, we'll have to increase the FICA tax yet again, perhaps to 15% this time." "Yes, and we'll have to raise the cap to take more of that tax from more income, suppressing wages while increasing the tax wedge and raising prices." You just sort of wait and watch it outpace cost-of-living adjustments on its own.
The fun part is I break another well-known, century-old, repeatedly-proven axiom in the process:
"a deficit-neutral stimulus package is an oxymoron: if the plan does not raise the near-term fiscal deficit, then it has not expanded net expenditures in the economy and will not lead to new jobs." (Mishel, et al)
I designed a deficit-neutral stimulus.
The short list is:
I designed the policy to mathematically guarantee a deficit-neutral stimulus heavily localized to recessions. As shown above, that's axiomatically-impossible.
The policy is an egalitarian social insurance and targets those areas of greatest need due to its mathematical construction. Egalitarian social insurances are inefficient because they poorly target need and instead wastefully distribute economic resources where there is less need (I didn't completely escape this; I only caused it to target by nature with perfect program efficiency, but not to target with perfect program efficiency of the theoretical ideal social insurance).
The policy increases its buying-power benefit--payments increase faster than inflation--and doesn't use tax raises or deficit spending in doing so. Typically, social insurances and welfare programs bloat: they stop working well, and then we raise taxes to shore up the budget.
The policy acts as a foundation under other social insurances, and so increases their efficiency. Those are more-targeted (unemployment, SNAP, WIC, HUD, etc.) and remain due to the above partially-violated axiom. The cost of running social programs diminishes over time due to this policy--it even lowers the cost of Social Security's OASDI program.
As you might gather from that last one, taxes would come down, all other things equal: the cost of other programs falls, so taxes also fall.
There's a compound tax effect: the program creates economic efficiency in such a way that there is greater taxable income for the same population, so you're able to supply the same services to that population for lower tax rates. That means we can lower taxes without cutting services due to secondary effects.
There's another compound tax effect: accounting the benefit as a sort of tax refund creates what amounts to a negative income tax. Beyond the threshold, income taxes are of course lower than current. There's no corresponding tax increase at the upper end because of an efficiency issue in our current fiscals which I took advantage of: this program is hugely expensive, but something else was so broken I was able to fix it and hide the expense in the noise. It pretty much looks like a tax cut; if you start with no social programs (and without their associated taxes), it's a major tax increase.
Because the benefit rises faster than inflation but the tax rates don't, there's no long-term impact on the rich (the tax rate isn't rising and the benefit is fractional compared to their incomes and taxes), whereas the poor and middle-cla
In the case of Amazon, the primary target (the bill was written so as to target Amazon specifically, which might actually be a violation of the 14th Amendment to the United States Constitution), the measure would have taxed from an employment base created from money coming from outside: Amazon sells all over the nation, and flows money into Seattle. The labor wedge, thus, is somebody else's problem, and the measure would have been good for Seattle in terms of tax revenue without all of those nasty downsides of labor wedges.
For the same reason, Amazon can get up and move two towns over and absolutely destroy Seattle's economy by cutting the economic feeding tube. This is why we are, at times, nice to really, really, really huge businesses: the symbiotic relationship forms a one-way dependence.
The Federal government doesn't have to worry about business getting up and leaving because that's not feasible. You can't do business in the US without being in the US somehow. There are all kinds of tax games and outsourcing and such, and that's fine: someone always capitalizes on the labor here anyway, so we're not too concerned with all businesses fleeing the US en masse exodus. States have similar power, although businesses can move state more easily than nation; it is, of course, disruptive either way.
Washington constitutionally prohibits state income tax. They only allow all kinds of regressive taxes. There's your real problem.
How about we get rid of the Berne Convention?
The implication is he can make better profit on new than used.
I guess we need some kind of infrastructure to handle this. New business venture?
Yeah, I was a huge AMD fan when AMD was better.
Cyrix was also better; however, Intel sued them, lost, and destroyed their capital holdings in the process, sending them out of business anyway.
tl;dr it's an obvious conflict-of-interest.
Yes, and the whole legal basis is fine and dandy; the response is a big fine and some other action; and people are all in a huff because they think sanctions are some sacred cow.
The WTO and UN should put economic sanctions on the list of things that will get your leaders arrested and tried for war crimes. Extending from a reasonable legal response to a huge moral response against ZTE is like calling for the death penalty for a person who murdered a child rapist during the rape of a child: your moral foundation sucks.
Economic sanctions are just the systematic murder of poor and middle-class--including their children--while pretending to keep your hands clean. They're not fundamentally-distinct from charging into villages and shooting 10-year-olds with flamethrowers.
The whole "national security" thing was a bunch of crap. They suggested ZTE could possibly put some kind of malicious espionage software on their phones--not that they, Huawei, or Xiaomi have done any such thing, but they could. Meanwhile CISCO routers are made in China and make up major government infrastructure....
Another company with greater interest in the product can pay developers to work on the product; otherwise the product is not very useful and not worth paying a development team (so dies), or is simply so useful that an army of developers with interest in the product will each pass only incidental code changes into it and still drive further development.
In the latter case, if Oracle tries to control the product, someone will read Robert's Rules and then set up their own organization to manage the forked git repository for the version people really want instead of Oracle's crap.
Git Version Control File System
The effective tax rate was not 35%.
The effective tax rate is influenced by three things: a result of subsidy credits; an accounting fiction (in the case of depreciation); and tax avoidance (by incurring taxable income outside the tax jurisdiction, then reasoning that it's income even though it's not reported).
Dividends can only be paid by way of actual, tax-accountable income: if you repatriate money which was shifted to avoid taxes, it counts as newly-accrued income and is taxed 35%. If you pay the income to shareholders directly, it's counted as regular income and taxed 39.6% (and also draws some attention from the SEC, as this is not legally accountable as dividends).
The effective tax rate on money used to pay dividends--on that specific pile of money--is always the corporate income tax rate, no more and no less. The money that's supposedly not taxable income is also not distributable income, or was previously taxed as income because it was tied to an expense which follows a depreciation schedule and is considered to occur over several years instead of when the money is spent.
in any case, the tax rate is no longer 35%.
This will change soon enough, and the last taxes paid were 2017 taxes. Repeal and replace the TCJA is a major tax reform topic and will happen with any other change, so pre-2018 tax law is currently the relevant conversation.
I don't see the problem. Is it the deferred tax that bothers you?
No, it's that holding the stock lets you manipulate money held in corporate bank accounts to your own benefit, which means you never receive income yet you get to spend millions of dollars.
Things like access to yachts, company cars, first class air travel, etc. would need to considered benefits like salary.
They already are; however, because the marginal cost of an individual's use of the yacht club's resources is a fraction of the cost of the yacht itself, the individual incurs only a marginal amount of income.
your yacht club example can happen today, with costs written off as entertainment expenses and whatnot
Only for the marginal costs. The profits incurred to buy and sell yacht clubs and by the operation thereof, which would be taxed at 0% under your system, would be taxed at the corporate income tax rate under the current system.
I contend will be easier when the government doesn't need to fight GE's accounting and lobbying departments and instead is just fighting Joe Millionaire's accountant.
GE's accounting and lobbying departments are all smoking cubans on a company yacht while drinking some expensive champagne. Joe Millionaire's accountant is having an easier time covering Joe Millionaire's assets from taxation. All of these people have large taxable incomes, but not on the scale of the now-well-sheltered-in-place untaxable incomes they're manipulating with their shareholder power. They're all applauding the 0% corporate income tax rate.
Currently, dividends are taxed as profit (was 35% in 2016), then taxed again when paid to shareholders as capital gains (15%), bringing the total to a 44.75% tax rate.
This is misleading on four counts. The effective tax rate was not 35%, and dividends are often paid independently of profit.
The tax rate was 35% and dividends are paid out of profits. Dividends paid are never deductible from taxes. Corporations can hold the money in a bank account for a little while and pay dividends in loss years; however, the corporations must eventually make profitable income, retain that income as reportable income in the United States, pay taxes on that income, and so forth.
No, depreciation doesn't change that: you simply don't have the income (you spent it) to distribute when you buy things, even if you don't really "spend" the money for tax purposes until later (that means you've already paid taxes on those expenses and no longer have the money on hand).
The specific money paid as dividends are always exposed to the full corporate income tax marginal rate.
For instance, GE only recently reduced their dividend despite many consecutive losses. And even now, they still pay a dividend.
Because GE already made that money and paid taxes on it long ago at a 35% marginal rate.
You also leave capital gains out of the argument, and you are using last year's significantly higher tax rate.
I specifically said they pay 35%, then pay capital gains (15%) again on what's left after paying 35%.
Good on them - their stock price will likely reflect their cash hoard and you get them on capital gains.
You wouldn't get them on capital gains until the shareholders sold stock. Being shareholders, they can use their stock as voting rights to direct Apple to buy other companies with the tax-sheltered money held by Apple, and none of this ever gets taxed.
Again this is misleading. It has only worked that way for short-term capital gains. Long term capital gains are taxed at a lower rate.
I used the 15% long-term capital gains rate compounded on the 35% corporate income tax rate.
That's an absurd statement - it would go to zero... there would be no taxes for corporations to avoid. Individuals would need to do all of the avoiding, and they do not have a giant accounting department at their disposal - nor do they have the same number of lobbyists to carve out tax exemptions.
The individuals wouldn't be exposed to higher tax liability, and the billions and billions of dollars of income being held in accounts currently subject to tax when earned would be subject to no tax. That is: they wouldn't be subject to taxes paid by the corporation OR by any other person.
What shelter? Presumably rich people want to do things with their money? Tax it when it comes out of the corporation.
Nope! You hold stock (don't sell it and you don't pay capital gains) and you say, "Hey, board members, let's all vote to buy that yacht club over there!" Then you own a yacht club, a bunch of yachts, and can go boating. You don't pay one red cent in taxes through the whole transaction.
What you do, you organize a holding company as an LLC taxed as a C-corp, and you make the yacht club a member. Then you sell that yacht club to the rich folks who own Apple and Google, and your LLC holds the money so you don't have to pay income taxes on it. You can then buy yourself a smaller yacht club start-up and wash, rinse, repeat. 0% tax rate for C-corp so hooray, no taxes ever again!
That's OK, we're giving up trillions in uncollected taxes now, held overseas.
Pass-through won't stop that because that's done by not legally incurring accountable income in the home nation. The US doesn't have a law that says, "This income is not taxable." The business says, "We spent this money" and "we received this money", and they either buy from outside companies (an expense, not income to the business, thus lowers their profits) or they assign a sale in another nation to a company in Ireland (that money never appears in the accounting books on US soil, at all).
So all of the money currently not being taxed would remain untaxed under your system.
tax avoidance is real
Well, yes.
You even described several excellent bizarre maneuvers that would go away if there was no corporate tax. Depreciation would be become a GAAP quirk and would have no tax consequences at all, with no games to play.
Not true. Depreciation isn't a bizarre maneuver; it's part of Corporate tax law: it is illegal to report that you spent $1M on a $1M machine. You have to report that over several years, or else you get the living fuck fined out of you by the IRS. The SEC then penalizes you for securities fraud.
They can pay dividends, which you tax as income
Currently, dividends are taxed as profit (was 35% in 2016), then taxed again when paid to shareholders as capital gains (15%), bringing the total to a 44.75% tax rate.
Under your passthrough system, dividends are taxed at 39.6% at most. Further, if they don't pay dividends--if they put that cash in a box like Apple does--they pay 0% taxes, instead of the 35% they pay normally (in 2016).
Apple's effective tax rate under your system would be vanishingly-small.
People can sell their shares in a corporation, which you tax the profit on.
That's how the law has worked for the past century or so.
tl;dr: Nothing you describe would reduce tax avoidance; and the mechanism of eliminating corporate income tax would provide a much better tax shelter at 0% tax rate here in the US with which rich people could increase their wealth (by having the business buy other businesses, securities, etc.) without ever paying taxes. The top 1% would cease paying 40% of the taxes and instead pay around 5% of the taxes.
No, I didn't.
The law of the land is a corporation with 20% profit margin pays 35%. One with 5% pays 35%. Tax rates are independent of net profit margins.
The law I suggested is a corporation with 20% profit margin pays 48%. One with 5% pays 16%. Tax rates are based on net profit margins.
What I suggested has never been the law of the land anywhere.
The Dividend is a unique solution. It's similar to a Universal Basic Income and a social insurance (like Social Security Retirement Pensions, Disability Insurance, or Unemployment), as well as to a Keynesian stimulus (that $300 check you got back in 2009 when Obama signed a huge stimulus into law to halt the recession).
It's not global, but national; yet the protections against damage from structural change and the maximization of gains from such structural change allow us to take full advantage of global trade and labor movement. This is fundamental in Nordic nations, and is studied extensively.
It's really weird being an economist because you basically just have to sound like one to qualify. Economists are well-aware of this fact.
This is not true - my accounting would become easier since all of my dividend income would become simple income
A pass-through payment for a corporate entity isn't simply the corporation granting you income under contract; you are legally entitled to that income based on your ownership in the company, and the conditions of your income are reported by your partnership in the company. You would have to report Form K-1 to the IRS along with Form 1099-S to describe your share of ownership in the partnership and your income thus derived.
I've had that arrangement before, when I owned CLMT. I handled it by simply not reporting that income to the IRS, since it was like $40 and the IRS does not care (it costs them too much to individually prosecute); my tax software didn't handle it, I didn't understand it the first time, and so I sold all of that stock and skipped it again the next year. I understand it now, but to hell with that. I received the forms well-after I filed my tax returns, too, so they were completed correctly to the best of my knowledge when I sent them in.
Note that the IRS did get some kind of report from the company, so has documentation suggesting I didn't report some small income, and so could come find me and ask; it just costs way too much to bother.
Here's the rub: if it's all passthrough with thousands or millions of shareholders and everyone's little $1,000 or $5,000 holding generating $200 of dividends goes unreported, that's potentially billions of untaxed incomes, and a large cost to collect. It's also a lot of sunk cost in tax filing preparation across the nation for all these individual filers.
Corporate tax rate in the US was 34% or higher last year. Tax paid was around 24%. The delta is what I'm calling loopholes.
Well, you're wrong.
When a corporation purchases a $1M machine, they have a $1M asset. That means if you sell $10M of product, spend $9M on wages and materials and corp-to-corp services, and spend $1M to buy a machine (or office furniture), you don't report $0 profits; you report $1M--you're -$1M cash, +$1M machine.
Now, there's depreciation. Call it a Schedule F 10% per year depreciation down to 10%. That first year, you don't really report $1M profits; you report $0.9M, because $0.1M (10%) goes to depreciation of your machine: it's worth 10% less. Now you have to pay taxes on $0.9M, even though you had $10M of revenues and made $10M of expenses. Fortunately, owner equity is probably up there at this point, so you probably have cash on hand (shareholders are the people who put that cash there to start with) to cover your 35% x $0.9M tax owe.
The next year, you make $10M revenue and spend $9M again. This time you don't buy a machine; yet your machine depreciates by 10% of its original value again. Your machine is now considered $0.8M "in the bank" (it's an asset). Again: you have $1M of profits--this time unspent--and you report $0.9M.
In your first year, you might have a profit of $0(!), and your taxable earnings are $0.9M(!!). In your second, you have a profit of $1M, and your taxable earnings are $0.9M again.
In that second year, you had a 35% CITR, $1M of profits, and paid 31.5% of your profits as taxes. That's 35% of $0.9M.
In both years, you paid $315,000 in taxes, even though in the first year you had less than that in profits.
So, you can obviously see this isn't cheating. The tax rates look strange because they are. Don't ask me wtf to do in that first year; I honestly don't know, because I am not a corporate tax expert and when I did it I was using a different corporate structure than the usual C-Corporation and actually reported negative income and the Government paid me thousands of dollars.
You might enjoy reading up on full expensing, a policy which gets a lot of debate a
I'd rather we abolished corporate taxes altogether and made all profits pass-through.
Many companies have millions of shareholders, and reporting those complex taxes are difficult. Your personal investment portfolio would become this nightmare accounting demon.
Also: Apple and Microsoft take 20% profit margins. Apple keeps around $10 billion of that every year in an Apple-Inc.-owned bank account instead of distributing it to shareholders. That's money that wouldn't be subject to taxation under your rules.
without corporate tax law the available loopholes are significantly reduced
Describe the loopholes.
Well, typically, the US Corporate Income Tax (up to 2016) has been a 35% flat rate (this has varied some) for all corporate net profits, with an adjusted minimum tax of 20% (if your deductions bring your tax burden to below 20% of your pre-deduction taxes, you have to shift those deductions back up to 2 years and carry them forward up to 20).
So, for example, Apple doesn't pay a 48% CIT, but rather 35%. Adidas, which has a 5% profit margin, also pays a 35% CIT, rather than 16%.
Note that the auto industry has a net margin of about 2% and the auto parts industry has a net margin of about 5%
GM has a typical 5-year average around 3.6% and Ford around 4.1%. Many industries average 8%-10%. Apple and Microsoft average 20% net operating profits.
You're talking about periods where technological progress happened rapidly, and the economic processes which recover were overloaded. Military-industrial complex isn't helping to rebuild the economy; it's actively harming it: wars create economic stress and make us poorer. Oh, they create jobs, sure; the problem is those jobs are just making things that never reach folks--if 10% of your economy is making military materials, then 10% of your labor goes to things that don't actually benefit you, rather than to things like food or cars or video games. In other terms, it's like working to produce 36 hours's worth of stuff in 40 hours of work--technical progress is producing 40 hours's worth of stuff in only 36 hours of work.
Technical progress happens constantly. It causes structural change: 12,000 lay-offs here, 10,000 lay-offs there, a coal mining town decays into a ghost town, and so forth. You lose 0.01% or 0.05% of your employment, gain wealth all over the place, and nearly everyone is better off. It's so tiny that the economy reacts to the greater purchasing power by purchasing more and creating job demand--it's the same rational process that sets prices in the first place with the new change that another competitor has entered the market or the other ten thousand people in your market are able to lower their prices and draw your customers away, and so forth.
Basically, it's a paper cut here and there, and you heal.
An industrial revolution is not a paper cut, but a hole being blown in a major organ. Assuming your economy survives (it usually does), it's going to be a wreck for quite a while.
Now, you should have noticed something above: this structural change may collapse a coal mining town or a factory town, and then create a dozen powerful information technology cities on the other side of the nation. The people over here are poorer and the jobs are going to the people over there; we're all better off as a whole, not as individuals: almost every individual is better off, and a few individuals are the sacrifice.
Because we're all better off as a whole, the winners in this transaction can compensate the losers and still be better off. This is accomplished through social insurances: unemployment, disability insurance, retirement pensions, food stamps, housing assistance, economic stimulus, the like. This applies not just to technical progress, but to trade and immigrant labor which draw down prices around the whole of the nation yet necessarily cause the displacement of some small number of jobs along the way.
The MIC is a waste and creates nothing but poverty. It serves the important function of national defense; if it expends wastefully by accomplishing little with much spending or by building beyond what is ever necessary, it is harming our economy. It should just be defense: an efficient, well-oiled economic machine which achieves its purpose with the least cost achievable.
If you want to protect against unemployment and poverty, you need three things.
The first is structural wage distribution. Make the minimum wage 1/4 of the GNI-per-adult--$10.20/hr in 2018 if 40 hours per week is defined as "full time"). When the minimum wage falls, the opportunities for employment rise; yet the capacity to survive and to support an economy without assistance by such employment falls, and so local economies struggle and decay. The need for social insurances (welfare) increases, causing tax costs or inadequate service and thus collapsing of economies. A sudden, large minimum wage raise creates an unemployment shock; steady growth controls the growth of job opportunities and, thus, the growth of population and labor force. Setting minimum wage to never fall and to never be below a certain portion of the per-working-age-adult income (e.g. 1/4) creates a wage income structure with a defined bottom.
The second is social insurances to protect against structural change and individual microeconomic events. These i
That's called technical progress. If a worker from 100 years ago could produce 6 donuts per hour, and a worker today can produce 60 salted caramel designer cupcakes per hour, and people are buying 60 confections per hour, how many workers do we need 100 years ago? How many today?
The answers are 10 and 1. I hope you like that donuts cost $1 and the average income is $58,000/year, instead of donuts being $1/dozen and the average income is $480/year.
I suggested tying corporate income tax rates to corporate net operating profits so that huge-margin price gougers end up paying high taxes and low-margin corporations pay very little.
There's no fucking way you'll make it in politics if you're THIS fucking combative to people who would otherwise be in the exact same political camp.
tl;dr: Imports from China have made all Americans--especially the poorest--wealthier and increased the number of American jobs in total. Gini coefficient is caused by internal structural policy, not trade. Growth is not somehow covering up loss; the things you claim are loss are a major cause of America's growth.
Basically, everything you're saying is wrong, and either the opposite is true or there's no relation between the things you're claiming and what's actually happening.
shut up and READ a little bit. And if you DO read any of this, give comprehension a try. Seriously, this is TWICE.
I did read. I thought. I considered objective reality.
I was insulted the first time.
That's because you said something and I told you you're categorically wrong. You've believed strongly your whole life that the sky is a brilliant shade of gold; I pointed up and said, "That... is blue." It can't not be insulting. I'm accusing you of being ignorant and lacking knowledge of the world.
Let me explain this to you in simple, brief terms by an example.
If we ceased to import Men and Boys's Cotton Trousers and Pants from China and instead made and sold those same products in American factories, the cost in terms of wages to produce those would go up. The direct employment from this manufacturing in China would be around 178,000 American workers; however, with the cost increase, American consumers would be able to purchase only enough sufficient to support 58,000 American workers involved in domestic production.
Out of 158 million workers, that's .037%.
That's at the same quality. For the American pants to be of higher quality, the cost would be higher, affordability would be lower, and fewer jobs would be created.
A minimum-wage American worker now works 1.8 hours to buy pants; under this scenario, the worker works 3 hours instead. This 67% increase applies across the board: for a worker who works 0.6 hours to buy those pants, that person now spends 1 hour's wage on the same pants.
First result: 99.96% of Americans are poorer. The ones most impacted would be the poorest, by the way.
Because of this, Americans purchase fewer pants or fewer things which aren't pants.
With less purchasing, fewer trucks are driven to ship goods. Fewer retail cashiers, inventory specialists (unloading trucks), and other such support can be employed. The numbers for these are actually calculated by the cost differential between Chinese- and American-made pants.
That loss comes out to be around 92,000.
58,000 jobs created, 92,000 jobs lost
Second result: 34,000 fewer American jobs in total.
you need to learn to simply AGREE with other people when they're agreeing with you. There's no need to start an argument over semantics or disagree with someone simply because they said the same thing in the wrong way.
I can't agree with you when you're wrong.
You're saying the trade deficit is causing loss of wealth which is being offset by growth--a ridiculous statement because hemorrhaging wealth in that way would cause negative growth and a declining capacity to support jobs and population.
Thricely I say unto thee: OUR ECONOMY IS GROWING ~~MORE~~ THAN THE HALF TRILLION WE SEND TO CHINA We can afford it.
See this statement? It's rooted in ignorance. This is you saying something that has no basis in reality. I explained why this is (it has to do with labor: you're trading time), although only in a brief statement buried in a wall of text.
I'm saying that by importing cheap goods from China, we make the American poor and middle-class wealthier and create thousands of American jobs.
that graph shows DOES appear to show that it shows that you're full of shit. I was confused about why you were showing it to me. People getting laid off, money going overseas.
Sorry, let me explain the graph.
Do you see the green line? That's the unemployment rate. The red line is our trade balance--lower means deficit (more imports than exports).
Notice that, at a nearly $200 billion trade deficit in 1987, we have 5.5% unemployment.
Notice that, at a nearly $800 billion trade deficit in 2005, we have 5% unemployment.
The increase in deficit doesn't increase unemployment
You're thinking of getting the Democratic Nominee elected.
A handful of oligarchical elites in the Democratic Party select the nominee they want. Then the Party stages a campaign to get that person nominated in the Primary. The Democratic voters are told they're voting for who they want to represent them in Congress or as President; meanwhile the Democratic Party is working to ensure that anyone except who a few hundred elites want to nominate is thoroughly-crushed.
They even go to candidates who are gaining too much headway in a primary against their favored candidate and suggest the challenger drop out of the race and let the Democratic Party decide who is going to be the next in line for the throne.
Ostensibly, we the people are going out to nominate by our votes who we want, and anyone can become a candidate and campaign for that position. In reality, leadership makes that decision and then works to ensure the only one whose campaign matters is the one they select. The Iowa Caucus isn't even a primary: generally, whomever is selected by the Party Caucus in Iowa has a huge lead, and is the anointed next President should the party win in November.
The Democratic Party even has Superdelegates for the Presidential Election. Superdelegates ensure that, should the People vote for someone else, the Democratic Party can step up and countermand the Primary and nominate their hand-picked candidate. Ostensibly, it's because people are stupid and will vote for a candidate who can't win the General election, and so the very-much-smarter Democratic leadership needs a way to pat us all on the head and go let mommy and daddy handle the adult stuff and pick the right candidate.
The voters chose wrong. We fixed it. See?
That's one of the things we're trying to change by replacing all of these people. As you can imagine, it's...difficult.