We often hear the liberals today claiming that we must raise taxes in order to pay down the national debt. They generally are quick to say that they don’t want to raise taxes on poor or on the middle class. They say that they plan to raise taxes on the rich and on corporations. After all, shouldn’t they pay their fair share? Or even more? The purpose of this article is to prove that corporations pay no taxes.
Now that I have your attention, let me explain how this is so. Corporations are economic entities and they do collect and remit many types of taxes, such as income, sales and use, employment, capital gains, property, and personal property. Many people stop right here and erroneously believe that corporations do indeed pay taxes. On the surface it seems that they are correct, but they are, in fact, wrong.
The basis on which corporations are taxed is profit. If a corporation earns a profit in any given tax year then it will owe taxes on the profit only. Corporations do not pay tax on gross revenues. As individuals, we pay taxes based on our adjusted gross income less personal exemptions and standard or itemized deductions. Don’t miss the difference here. If corporations don’t earn a profit then they won’t owe any taxes. Now let me explain how I can say that corporations don’t pay taxes, they only remit taxes.
Corporations need to make a profit to survive and if they don’t make a profit they will go out of business. We can all understand this point. Profit is basically calculated as revenue less expenses. Corporations view taxes as a cost, or expense, of doing business, just the same as they view other expenses such as office supplies, rent, and payroll. As such, when a corporation determines what it is going to charge for its goods or services it includes all the various taxes in its calculation. This means that corporations pass along to their customers the cost of the taxes they remit . The corporation actually functions as a collection agent for the governmental agencies to which it reports.
What does this mean to us? When our elected governmental leaders talk about raising taxes on the rich and on the evil and greedy corporations, they are actually talking about raising taxes on every individual citizen under their authority. Individuals pay the full amount of taxes charged by the government. They pay them directly through their own personal income tax returns, through their property taxes, through the sales tax on the items they purchase, and through the embedded taxes that increase the cost of the items they purchase. No corporation or business pays taxes. Those that claim they do are misinformed or are lying intentionally.
So when you hear politicians talking about raising taxes or closing loopholes you now know that you will pay for this. I suggest you vote accordingly in the next election and in every election to remove those who don’t understand this basic economic principle.