To hear the liberal media and their loyal Democrat following talk about it, our budget issues could be solved by taxing corporations much more. But will that really solve our problems? Just the slightest bit of looking at the issue with an eye toward business shows it will not.
Corporations exist to make money for their shareholders. A corporation that does not continually bring in revenue (usually in ever increasing amounts year-over-year) finds its share prices drop, meaning the corporation itself drops in value. If the corporation does not increase its earnings, it will end up filing for bankruptcy.
It is, therefore, in every corporation’s best interest to reduce its operating costs–including tax liability–as much as possible. If that corporation can legally use the tax code to its benefit to pay no taxes (as General Electric is reported to have done), it means more profit it can report to “the Street” and its value will go up.
The liberals in this country think that if they could just tap into the vast profits of these mega-corporations our problems would be over. Democrats believe that if they could tax corporations so they could not escape paying high taxes, America could balance its budget and continue handing out “free” benefits to everyone (as long as they vote Democrat).
The problem with this scenario is that corporations will not pay more than a token amount of tax out of their profits. “What?” you say? That’s right. A corporation will not allow its bottom line to suffer and devalue the company. Any rise in operating costs — including a hike in actual taxes — will be passed on to the consumer in the form of higher prices.
I don’t know about you, but I already think I’m subsidizing the “poor” enough. I personally pay tens of thousands of dollars a year for social security, medicare, federal taxes, and so on. I already pay higher pharmaceutical drug prices so Pfizer and GlaxoSmithKline can reduce the price or give it away to those who can’t afford it. I pay higher utility bills to subsidize lower income families. I don’t also want to pay higher prices on every product I buy because the corporation who made it is now paying higher taxes to the feds.
In fact, raising taxes on corporations is actually a hidden “regressive” tax on all Americans–even those who would not have to pay taxes at all. Progressives (i.e., liberals) always whine about taxes that are “regressive,” meaning that lower income people feel greater effects from the tax than the more well-off do. (For example, a flat tax on a pack of cigarettes affects lower income people more than the “rich” because it is a higher percentage of their income.) Yet, it is those same liberals who want corporations to pay higher taxes and pass the cost along to consumers.
As if those reasons are not cause enough to keep taxes on corporations down, an increase in taxes will push more corporations to leave the United States. Businesses leaving our shores means less work for Americans and less tax revenue–both corporate and personal. Both of these results will cause liberals to call for more taxes and more “stimulus” to create jobs. The spiral will continue until the left realizes taxes are never the answer to any problem but are instead the cause of most problems.
Like the stimulus, the health care plan, and most of the other liberal ideas floating around Washington, increasing the corporate tax is purely a “feel good” plan that makes no sense. It sounds good because we all want to help others and get that warm fuzzy feeling from believing we helped, but increasing corporate taxes will not solve any problems. In fact, like most liberal schemes, in the long term more corporate taxes will end up doing more harm than good.