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Corporations Aren’t Supposed To Pay Taxes – Voluntarily

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An idea is making the rounds these days that corporations and wealthy individuals should be good citizens and agree to pay higher taxes. Those advocating that idea are ignoring basic facts about the nature of a corporation. Individuals are free to make the choice to be good citizens and to put the good of the community ahead of their own selfish interests, but corporate management is actually not allowed to make such generous choices.

The purpose of a standard for profit corporation is to maximize the return on investment of its shareholders. That’s it. That’s management’s only job. While there are many complexities in management’s job, such as trading off short term profits versus long term profits, there is only one metric for how well management is performing: profits. Corporate management has a fiduciary responsibility to its stockholders, and could face legal action if they advocate any “good citizen” behaviors on the part of the company that do not maximize corporate profit.

In order to maximize profits, management must always make these choices, constrained only by the law, and in very rare cases, by public outrage.

1. Minimize any taxes paid. Minimize all forms of tax from income to real estate to payroll.

2. Minimize salaries and health care benefits while retaining the minimum number of minimally competent employees.

3. Minimize the net cost, after considering the out-of-pocket costs of accidents and other incidents of product safety, worker safety, and environmental protection.

4. Minimize retirement, sick leave, disability and similar costs.

5. Oppose all forms of collective bargaining.

6. Use all legal means available to achieve the above, including lobbying all levels of government, cutting special deals, making massive contributions to political campaigns, and funding various advocacy and “attack” groups which further their purposes.

It may appear from the preceding description that corporate executives are, in some way, “bad,” but they are not. They are doing the job that they were hired to do, and in most cases, they are doing that job very well. The issue is about understanding what role everyone plays in society.

Consider this analogy with the roles in a courtroom criminal trial. The defense attorney has only one job: to advocate for the acquittal of the defendant. It is not his job to determine the guilt or innocence of the defendant. Moreover, it would be irresponsible for the defense attorney to present a less vigorous defense because he believed his client to be guilty. In fact, he could be disbarred for making that choice. Likewise, the prosecutor has only one job: to advocate for the conviction of the defendant, without regard for his opinion of the guilt or innocence of the defendant.  In a similar fashion, it is a corporate executive’s duty to do his best to minimize taxes, salaries, benefits, and such, regardless of his personal feelings about the rightness of any specific action. Think of corporate management as the prosecutor, but who is the defense attorney? The advocate for the people can only be the people, and their duly elected government, if they choose that government wisely.

Individual citizens, not corporations, elect the lawmakers. Yet the government in America at both the federal and state level has overwhelmingly abandoned the interests of the people in favor of the special interests of big business. How could this have happened? How have the American people been tricked into electing a government which serves the special interests of big business rather than their own interests, the interests of the people? The answer, in one word, is advertising. Corporations are masterful at advertising, and advertising is overwhelmingly successful at manipulating people. Not only can corporate advertising get people to buy products and services they have no need for, political and pseudo-political advertising paid for by big business can get people to vote for candidates who do not serve the best interests of the people.

Are you surprised that America’s largest corporation, General Electric, paid no taxes in 2010? According to the New York Times, General Electric paid zero dollars in taxes on corporate profits of $14.2 billion while claiming a tax benefit (loophole) of $3.2 billion. The even sadder news is that the General Electric case is not special, it is fairly typical of what big business gets away with in the United States.

Until voters begin to recognize the extent to which they have voted against their own best interests, America will continue to subsidize big business while laying off teachers.

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About Jonathan Lockwood Huie

  • Your factual and accurate assessment of American business presents the basis for understanding the purpose of the Republican Party, which is to protect and defend business interests in return for money and favor. They may not appreciate your candor, but so-be-it.

    The problem this presents is that large corporations depend on debt financing and deficit spending, to which elements of their Republican party benefactors are so loudly objecting. The GOP’s ill-conceived threat to the nation’s credit and finances is not in corporate America’s best interests.

    Business is not loud. To use an expression, competent management does not make noise in the rice paddies. Deals will be cut by Republican polls because it will be in their best business interests to do so.


  • Glenn Contrarian