Then you're smarter most of Cain's supporters. Most of them claim that prices would magically go down by 26%. Actually, depending on when you catch him Cain either says prices will go down 26% or he admits that there is a chance that they might not go down at all. All depends on who he is talking to.
What I said was it is equally stupid to argue, as you have, that corporations would pass NONE of the cost savings on to customers.
Why is that a stupid argument when past evidence and economic studies support it? Look no further than the 2004 tax holiday on foreign profits. Something like $360 billion in foreign profits brought home at a nominal tax rate - far more money than Cain's tax plan will save business in an average year. Did the 800 corporations who benefited use that money to lower prices? No. Did they use it to increase hiring? No. That money went to improve margins and raise stock prices. Countries in Europe went through a series of business tax rate cuts in the past decade. The U.S. cut its rates during the early Bush years. Did any of those result in companies announcing that they were cutting their prices? No. So why should we expect any other tax cut would cause different results?
Point being: every day the market provides evidence that lower costs can and do affect pricing.
Example please.
Let me provide a counter example. My company cut wages across the board a couple of years ago. The announced reason was the need to cut costs, even though the company was well in the black. Did those cost savings result in a reduction in prices we charged out client? No. Prices remained the same, costs went down, margins went up, all in violation of what you believe should have happened.
Come on. You know you can't equate any type of temporary tax provision with a permanent change.
Neither corporations nor individuals react the same way to temporary tax "holidays" as they do to permanent changes in tax law that they can rely upon and use as a basis for longterm decision-making and strategy.
That's one of the reasons the article you cited was not very useful: it was evaluating the effect of lowering corporate tax rates *temporarily* for the purpose of attempting a *short-term stimulus.*
I cited you to your own link, wherein the group evaluated the findings that a 10% cut in corporate tax rates (from 35 to 25%) could generate $60 billion in extra consumer spending.
The fact that you can find studies (if you can) to support the idea that a corporation NEVER passes on ANY of its cost savings to consumers doesn't close the debate.
As your own citation shows, there is evidence on the other side, yet you are continuing to make conclusory absolutist arguments as if that counterveiling evidence simply does not exist.
Further, as I thought I was pointing out previously, it's just nonsensical to claim anything in a dynamic process such as corporate pricing is all one way or the other. That's just not solid reasoning, and you don't need any papers one way or the other to figure that out.
You'd do well to concede the obvious -- that corporations may indeed lower prices in response to lowered costs -- and then make whatever arguments qualifying that you want to from there.
Um, because past performance is no guarantee of future results?
As I posted earlier, first, there is no comparison between the response to a temporary tax provision and permanent tax provision, on the part of either individuals or corporations.
Secondly, good grief! You're mired in more black-and-white thinking -- it's all corporations pass on "none" of their cost savings or they pass on "all" of their cost savings.
The fact is they pass on various amounts of their costs savings depending on an incredibly complex set of ever-changing variables that they evaluate as they go along day by day.
Logically, you could only claim corporations *always* respond to x (lower costs) with y (padding investors and not lowering costs at all -- or, for that matter, lowering costs and not padding investors at all) if you could prove that z (every complex factor that goes into a corporation's pricing decisions, earnings goals, etc. etc. ad infinatum) was static or *identical* in the situations you are comparing.
No way.
And even then there's the fact that corporations are run by human beings, and different human beings over time. These human beings have their own ideas about how to respond to cost cuts. They don't always make the same call the dude before them did.
Please stop with the absolutist arguments or I'm going to get miffed at you! ;)
NO. I have told you over and over again that I am not saying that prices will *always* go down when costs go down.
I am saying that they can and often will and that is true.
You have one example where cost cuts were not passed on to the customers. SO WHAT? How does that prove that corporations never pass on cost savings?
Are you really wanting to argue that prices are *never* affected by costs?
Probably the biggest factor in whether a corporation passes costs cuts on to consumers, and if so in what amount, is whether or not the corporation concludes that lower prices will drive sales volume high enough to make a sufficient profit.
In this economy, for example, there is, relatively speaking, very little demand for discretionary consumer items. This really isn't all that related to pricing; it has to do with a bunch of other things about the economy (such as not having a job or feeling crummy about your home losing 40% of its value). Therefore, lowering the price on certain goods or services may not increase sales anyway. So in that case, of course, a corporation may use cost cuts for something other than lowering prices.
OTOH, in an economy where that corporation's goods or services are still selling well as priced, the corporation also would be unlikely to use costs cuts to lower prices. Why? It's stuff is selling fine already and the corporation doesn't need to juice sales with lower prices. (Although it may decide it simply wants more profit! Yay!)
But when the conditions are such that lower prices will juice sales and increased sales are needed or desired — and this varies from sector to sector and by goods and services for sale — it just makes sense that corporations will lower prices.
Look at a consumer item that people enjoy buying, but expenditures for which they quickly adjust up or down depending upon pricing: the restaurant meal.
If Applebee’s, say, could start offering a whole slew of new low-priced specials, I do believe more people would go out to eat at Applebee’s. Because, good times or bad (maybe even more in bad times), people like to go out to eat and they absolutely will go out to eat if they can afford to do so.
If IHOP offered a $5.00 all-you-can-eat pancake buffet, I believe it would see a high sales volume.
The same calculus would take place across the real economy. And where lower prices would work to drive sales, lower prices would be put in place.