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Corporations Pay no Taxes; All Taxes are Paid by Individuals

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.

Taxation

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.

About Tom Shelton

  • Glenn Contrarian

    Cannonshop –

    Your head will probably explode when you read this, but OSHA generally SAVES businesses money.

    Read that again – OSHA generally SAVES businesses money.

    How’s that? Take hardhats, for instance. Or ground fault circuit interrupters. Or safety harnesses. Or handrails. The cost of ONE death due to one of these causes – including litigation and settlement – is generally MORE than what it would cost to implement the applicable safety standard throughout most companies.

    Wanna gripe about the EPA? Have you been to a third-world country where environmental standards aren’t enforced at all? Where people live shorter lives because of the pollution? You don’t think this has a definite effect on the bottom line of businesses in those countries?

    You include the NRLB – but IIRC it’s that same board that’s helping to protect the jobs of Boeing workers here in Washington state (maybe including yours) since they wanted to open up that plant out east to build 737′s. The decision – whether you agree with it or not – was made due to agreements made with one of the Boeing unions…which means that if the union had lost the battle, you might be out of a job…or looking at transferring over to the east coast.

    And speaking of unions – and OSHA and the EPA – here’s ONE case that puts all three in perspective. Remember the Upper Big Branch coal mine explosion that killed twenty-six miners last year? Remember all the safety regulations that were ignored in this NON-union mine? Not long ago the news came out that 24 out of the 26 dead miners showed that they had black lung disease at least to some extent. In UNIONIZED mines, the percentage is less than ten percent.

    But why the hell should the Massey coal mining company worry about unions and OSHA and the EPA…’cause all they do is enforce useless and expensive regulations and waste taxpayer money, right?

    Just something to think about.

  • zingzing

    cannonshop–i went to china once. it was a good time. but i could stare directly into the sun. and even if it was a sunny day, there was no sunny day. next time you have a sunny day, (and i’ve lived in washington as well, so i know they’re rare, but i also know they’re in season,) and it’s brilliant, thank your god you don’t live in china. thank the epa.

  • zingzing

    and cannonshop, get back to me on that patriot act shit, or i’ll fucking hound you, as i am doing now.

  • http://www.sanctification.wordpress.com Tom Shelton

    Glenn,

    You said: “I will no longer blame Reagan for allowing our industrial base to dissipate like toilet paper in a dishwasher. I will still blame him for convincing America that “government is the problem” – it’s not and never was.”

    Constitutional government is not the problem. I will agree with that but what we have today is not Constitutional government. What we have today is what the founding fathers feared would happen and took great pains to warn us about. They implemented checks and balances to insure that what we have today did not develop but here we are anyway. Government is the problem and people know it. That is why Reagan’s message resonated with so many people.

    I will read the Cato Institute report you linked to at some point today but for now it is time for me to do my morning Bible reading.

  • zingzing

    “What we have today is what the founding fathers feared would happen and took great pains to warn us about. They implemented checks and balances to insure that what we have today did not develop but here we are anyway.”

    how wonderfully vague. how utterly meaningless.

  • Glenn Contrarian

    What we have today is what the founding fathers feared would happen and took great pains to warn us about.

    And who gave us Citizens United? The conservatives. Tom, you need to be pointing your anger at those who have essentially turned our government into an oligarchy, who believe in travesties like “corporate personhood”.

  • http://www.sanctification.wordpress.com Tom Shelton

    Glenn,

    I am not familiar with Citizens United but I looked at their website. I don’t know about others but what they say on their about page sounds very good to me. It says

    “Citizens United is an organization dedicated to restoring our government to citizens’ control. Through a combination of education, advocacy, and grass roots organization, Citizens United seeks to reassert the traditional American values of limited government, freedom of enterprise, strong families, and national sovereignty and security. Citizens United’s goal is to restore the founding fathers’ vision of a free nation, guided by the honesty, common sense, and good will of its citizens.”

    What is wrong with any of that? Also, I don’t understand how returning government to its Constitutional role equates to instituting an oligarchy. How does Citizens United or any other conservative organization advocating limited government equate to instituting an oligarchy?

    I think it is the liberals who have been responsible for attempting to turn our government into an oligarchy. They are the ones who are always advocating and attempting to implement policies and laws that seek to consolidate power in Washington. I recognize that many Republicans are also guilty of this and should also be held responsible but remember that Republican does not necessarily equal conservative.

  • http://handyfilm.blogspot.com/ handyguy

    A suggestion, Tom: read a newspaper once in a while. Read several. Keep yourself informed.

    Citizens United refers to a Supreme Court decision which basically removed the few remaining limits on corporate political spending. So if the interests of rich companies conflict with the interests of ordinary citizens, guess who gets the advantage of bigger [gigantically bigger] political donations? Hint: not ordinary citizens.

    You have swallowed someone’s propaganda about ‘the liberals’ whole. Corporate interests are not always your best friends, believe it or not.

  • zingzing

    quick question about that decision… if say, a corporation made a commercial, would they have to say something like “mcdonalds and its corporate offices (but probably not its workers) would like to endorse xx republican, because republicans kinda smell like beef, but aren’t really too,” or would they be able to remain anonymous?

    if they had to identify themselves (even if they just gave political donations), i think any major corporation would think twice about pissing off half their customers. i dunno.

  • http://handyfilm.blogspot.com/ handyguy

    The big growth is in ‘SuperPACs’ like Karl Rove’s CrossRoads groups, and the Koch brothers’ Americans for Prosperity. Lotsa anonymous donors. Any attempt to require that donors identify themselves will not fly before the 2012 election.

    Donations directly to a candidate or party are still all supposed to be transparent and public.

    That’s my understanding anyhow. Perhaps others have additional info.

  • http://www.sanctification.wordpress.com Tom Shelton

    handyguy

    I have looked up a review of the case. It said “The Court struck down a provision of the McCain–Feingold Act that prohibited all corporations, both for-profit and not-for-profit, and unions from broadcasting electioneering communications. An “electioneering communication” was defined in McCain–Feingold as a broadcast, cable, or satellite communication that mentioned a candidate within 60 days of a general election or thirty days of a primary.”

    Personally, I think this was a good decision. Political speech should not be restricted in any way and the struck down provisions did just that.

  • http://handyfilm.blogspot.com/ handyguy

    Political speech [mostly, not entirely, TV ads] costs money. So the people [and companies] with more money get to buy more political speech. The people and companies with the most money do not necessarily have the best interests of the other 300 million Americans [including you] at heart.

    [As you noted earlier, companies are interested in increasing profits -- and probably not so interested in whether pollution makes kids sick or whether certain policies exacerbate poverty.]

    This certainly bothers “the liberals.” I don’t understand why it doesn’t bother you.

  • zingzing

    “Political speech should not be restricted in any way and the struck down provisions did just that.”

    so then… should gov’t organizations (like, say, the social security or medicare office,) be able to make political ads against those that would want to privatize it?

    remember, you said “in any way.”

  • http://handyfilm.blogspot.com/ handyguy

    Ha, that won’t happen, zing, but there will be liberal equivalents of CrossRoads and Americans for Prosperity next year. It will be interesting to see how that plays out.

    Mostly it has been public employee unions doing the liberal political ad spending the last several years….surely someone will get some corporate money going.

  • Glenn Contrarian

    Looks like Tom is a classic case of a “low-information voter” since he doesn’t realize that what Citizens United did was to open the floodgates of corporate money, to enable corporations to spend as much money as they want in order to influence elections.

    He doesn’t realize that this decision enabled FOREIGN-owned corporations to use unlimited funds to influence America’s elections. Not that that ever stopped foreign-owned Fox News….

    He doesn’t realize that this flies in the face of a full century of legislation and court decisions.

    He doesn’t realize that Citizens United further enshrined the idea of “corporate personhood” in America’s legal traditions.

  • http://tmackorg.com/ Tommy Mack

    “Low-information voters” recite mantras rich with factoids and falsehoods in the hopes that if their statements sound as if true and are recited enough, they will become true. You cannot engage such people in an argument and keep them on point. Faced with facts they change the topic. The debt ceiling turns into the War Powers Act or Citizens United. Ultimately, Ronald Reagan gets quoted or inaccurately referenced. But it is their self-righteousness and propensity for name-calling that confirm their ignorance of an issue.

    Tommy

  • Cannonshop

    #51 my point, Glenn, was that you can have extensive regulation, OR you can have high business taxes, when you have both, you don’t have a competitive marketplace anymore, you have the few who can afford to pay congress for the exemptions, or who can afford to pay the vig in fines, or the ones whose operations those regulations were custom-written to preserve.

    Big Government LOVES Big Business, and the relationship is mutual-Big Business can afford heavy regulations and the necessary clout to protect itself from taxes, while Big Government hates competition in teh marketplace as a competitive market is difficult to control.

    For government, it’s all about control. the proof is in the Feds allowing the McDonnell-Douglas/Boeing merger, the various oil-distributor mergers of the ’80s and ’90s, the recent Telecom mergers, and the buyout-to-prevent-liquidation of General Motors, the 785b$ Bush bailouts, and the over-800b$ Obama bailouts of the biggest banks in the U.S., and the whole concept of “Too big to fail”-something that antitrust was supposed to prevent. (oh, and the entire lack of antitrust enforcement aside from the Clinton shakedowns of Microsoft, too…)

    It’s all about power, and more specifically, about witholding power from people ‘outside the club’.

  • Glenn Contrarian

    Cannonshop –

    #51 my point, Glenn, was that you can have extensive regulation, OR you can have high business taxes, when you have both, you don’t have a competitive marketplace anymore

    Tell that to Germany.

    Cannonshop, among OECD nations we have the second-highest nominal corporate tax…but we have the second-LOWEST effective corporate tax. This was NOT the case before Reaganomics came along…and our corporations (as unionized and as regulated and as taxed as they were) did just fine in the 1950′s through the 1970′s, thank you very much.

    And as I’ve pointed out before, corporations do NOT pass on all taxation to the consumer…because every successful corporation, every successful business charges no more and no less than what the market will bear…and this fact is completely independent of the taxes they pay.

  • Cannonshop

    #68 you miss the part, Glenn, where a business is required to make a profit, or it goes out of business. Germany gets around this the way most European (continental europe) gets around it-massive subsidies, Trade Barriers (protectionism) and a lack of smaller competitors, and if your values swing that way, you probably DO think it’s a good idea.

    It’s just not a HEALTHY idea unless the concept of Corporate Welfare turns you on.

    y’see, Glenn, they get those taxes BACK in teh form of direct subsidy and protection of markets. (Of course, it also helps that Germany hasn’t had to pay for its own defense for the last sixty years or so. THAT bill’s been carried on the back of the American Taxpayer.)

  • gbuddha2012

    another game of semantics that proves corporations are or are not people depends upon the amount of taxes willing to be paid

  • gbuddha2012

    most businesses don’t make profits in this country… the ones that do have very generous exemptions and writedowns that make them look less profitable than what they really are. most businesses are very clever in disguising revenue especially if they deal in cash or barter

  • gbuddha2012

    big business hides their profits overseas, small business does it in a shoe box…

  • Igor

    Cannon is naive: “…way most European (continental europe) gets around it-massive subsidies, Trade Barriers (protectionism) and a lack of smaller competitors,…”

    Excessive subsidies and protective tariffs are actionable under WTO rules, and that has been very effective in promoting Free Trade.

    The oil companies, Exxon, Chevron, Valero, paid no corporate taxes last year, mainly because of the Foreign Tax Allowance (FTA), which allows them to take foreign taxes not as a deduction but as a credit, which is far more valuable. That’s the main vehicle by which money is sucked out of the US treasury by foreigners. We ought to change it.