Corporate Taxes Bought and Paid For By You…Yes, You (And Me Too)
Posted by Frankly Francis on December 21, 2009 under Social Issues/Politics | 
6 Comments to Read
Charles Adams, in the book, “For Good and Evil: The Impact of Taxes on the Course of Civilization” traces superior civilizations and comes to a universal conclusion: every civilization in recorded history taxes and regulates itself to death. While I think this should be intuitive, it really is a remarkable study.
Perhaps not the most tantalizing of subjects, but the message is far more encompassing than just business taxes. This is a positive message though – through easy simplification, we can live better.
We’re going to take a look at an issue that seems to get a lot of attention – “Evil corporations not paying their fair share of taxes!”
Unfortunately, it is misdirected, either unintentionally or as propaganda.
Here is the unequivocal truth: No matter how much a business may pay in taxes, those taxes are not paid for by the business – those taxes are paid for by the consumer, you and me.
Here’s a simple example that should provide a clear understanding of how this works. If you want to go into business, it requires money. Money has value. Investments require a return based on the risk associated with investment. The less risky the investment, the less the rate earned. Therefore, if you invest in an FDIC insured bank savings account you are willing to accept a lot less interest than if you invest in a start-up business.
So for the sake of example, let’s say that a business can get the debt/equity investment that it needs, but this requires a 10% net income level in order to do it. Assuming that the business has sales of $100 and expenses of $90, there is $10 of net income. Thus the 10% debt/investment requirement is satisfied. Everything is good or at least as good as it gets in the very scary world of being a business owner.
Now let’s assume that the federal & state governments tax the net income of this business at 20%. On the net income of $10, the business would have to pay $2 in taxes. This leaves $8, which is an 8% return and less than the 10% that the creditors/investors require.
The business has only one alternative – it must raise its prices to the consumer. But the consumer does not pay just the $2 in taxes that the business has to pay. Actually, the consumer now has to pay $2.86 more.
Here’s the math for those interested: Sales need to be $102.86. Cost of sales stays constant at $90.00. Sales less the cost of sales equals income before taxes of $12.86. Taxes on income before taxes at 20% equals $2.57. Net income is $10.29, which is 10% of sales of $102.86. Q.E.D.
Of course, the actual amount that the consumer pays is more than this because now the business has more costs. It must pay accountants for preparing tax returns and lawyers to provide tax guidance. Then there are the inevitable audits at the federal and/or state level for which the business incurs more costs. Each cost raises the price that you pay for the product. Getting the idea?
For those who truly care about the poor, note this: Taxes on business are much more devastating upon the poor than upon the middle or upper economic classes, but there’s so much blatant hypocrisy in this area anyways…
So, if we were to eliminate the taxes on businesses, the price that we pay, as consumers, would be less. We would reduce the cost of government regulation as well, so taxes would be reduced. We wouldn’t need so many lawyers, accountants, software and all the other related special (Selfish) interest money that goes into this area – those resources would be able to be better utilized for our overall economic good.
Would individual taxes need to go up as a result? I doubt it, but, even if they did, I do know this without question – taxes would not need to go up as much as the savings we would benefit from. We pay one way or another, but this way, we pay less.
Will such a logical thing happen? No. Government is going to get more expensive and more intrusive into our personal lives. I just had to provide an alternative while I still have the chance.
Frankly,
Francis
User Loser said,
The modern corporation is nothing but a legalized mob or gang with no morals or responsibilities. They are parasites with no other purpose than to enslave the masses with as little recourse for the masses as possible. Corporate types think they are clever but in reality they are too cute by far. As long as they are plundering merrily away it’s all good. But in the end it’s a race to the bottom and only the heartless wins.
Steve Headrick said,
Big business corrupt? Surely, you jest . . .
Government doing something that would directly benefit the people? I would suggest that you switch to scotch tape to wrap your Christmas presents, as the fumes from the glue have obviously intoxicated you past the point of reason . . . The term “Greedy Bastards” had to come from somewhere, and now they are proliferated throughout not only business, but our government, as well . . .
And, being the Winter Solstice, let me exten these ‘Politically Correct” wishes to you and yours:
Have A Fabulous (*),
And A Wonderful (**)!
* = Time period celebrating the anniversary
or birth of a hero or deity of your choice.
** = Anniversary of a specific
passing of time or event.
User Loser said,
Some great sage said that we have the best government you can buy. And boy howdy they proved the last few months on that healthcare bill.
User Loser said,
Fran sometimes I might get a little short and start screaming when we are supposed to use my words. So I will try to get this off my chest as calmly as I can. Are we agreed that the modern corporation exists to shield stockholders from risk? Corporate Personhood the concept is called. What frustrates me is when you try to sell me abrogation from taxes as a favor to me because the corporation is going to have to pay taxes and then pass the bill on down to me. I fervently disagree because you are making me the corporations slave or cuckold because I pay taxes and this fictional person doesn’t. Which places me in the dumbass world where I don’t want to be. How you as a libertarian can tolerate the violation and degradation of the corporal flesh and blood people putting the fictitious corporation as my superior because they are special and making a special position for capital where they get a leg up on me. If you shield the corporation from taxes it make them a special class of people and it’s just not fair. Strangely enough I feel to shield me from the corporation passing their taxes down to me isn’t doing me any favors it’s really just a nasty kind of favor because you are making me the bitch who pays twice without even seeing the bill. Put another way if the corporation doesn’t pay anything for the valuable abrogation from risk I wind up paying taxes for the corporation anyways even if it isn’t tangible I’m paying by letting the owner the shareholders not being responsible for their obligations if the company goes bankrupt if you follow what I’m saying. Whatever, Happy New Years
User Loser said,
By the way can you explain why I should care if a corporation has any profit? Do they care if I live or die? Do they care if I can put food on my family it is between them and their god whether they make a profit. But for me the enemy of the corporation it is significant if they pay a living wage and their taxes. Neither of which they want to pay but this is the real world where people are supposed to keep up certain standards of conduct or be pariahs, criminals or be considered insane. No if we are going to play games with taxes lets make the corporations pay all taxes…
User Loser said,
Which brings me to the enforcement end of things if the Corps. are paying all the freight then it behooves them to keep an eye on the other guy and it winds up creating an environment that keeps everybody honest at minimum cost to government and society in general. Nah let’s go back to the way the founders in their wisdom set things up with no individual taxes until you’ve got enough money to make it worth society’s while to collect em and simplify the average Joe’s life.
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