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.
Article comments
— go to most recent comments1 - tro ll
...a couple of notions -
first your argument oversimplifies the pricing mechanism and overstates its flexibility - taxes can impact the bottom line
second you say 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.
but even were your argument concerning corporations correct you offer no description of how 'the rich' pass their taxes on to everyone else...you appear to conflate the issues presenting no argument against raising income taxes on the wealthy
...pretty foxnewsish
2 - Tom Shelton
Troll,
You said "first your argument oversimplifies the pricing mechanism and overstates its flexibility - taxes can impact the bottom line"
I can agree with the thought that my article overstates the flexibility of the pricing mechanism. It is true that in a capitalistic system prices can't always be raised to cover the costs associated with production. Because of competition prices are not always flexible.
In that environment, the corporations pass their costs to employees instead of customers in the form of lower wages or benefits or in the worst case scenario by laying off employees. I did not include this point in my article but I probably should have touched on it. I may edit the article to include this.
3 - Tommy Mack
The problem with this article is that it starts with a false premise in order to prove a fallacy. What it proves instead is that its author has no business interests or knowledge about corporate taxation, either federal or state. The assertion, “No corporation or business pays taxes” demonstrates such ignorance.
Tommy
4 - Tom Shelton
Tommy,
You said: "What it proves instead is that its author has no business interests or knowledge about corporate taxation, either federal or state."
Please enlighten me then.
For the record, I am an accountant and have been for about 15 years. I have done everything from monthly bookkeeping, consulting, tax preparation (federal and state corporate, individual, sales, personal property, payroll tax, etc) payroll, and year end tax planning. When I worked in public accounting I sat through hours of continuing education each year discussing the tax code and how to properly interpret it. I earned a Bachelors of Business Administration in college.
I don't claim to be an expert on every aspect of business or taxation but I have a better than average understanding of how business and taxation works in the real world. When I come across something I don't know I know where to find the answers. What are your qualifications to make the claim that I have no knowledge in this area? Again, please enlighten me........
5 - Leroy
Tom is wrong when he says ¨Corporations need to make a profit to survive¨. As long as you grow the ownership increases in value, whether that value is expressed in explicit publicly traded shares, or in the implicit values of shared ownership, and the corp will thrive. The smartest businessman I´ve ever known told me ¨the trick is not to make profit but to break even at ever higher levels¨.
Have you ever founded and owned a corporation? If you had you would know darn well that corps pay taxes.
6 - Tom Shelton
Corporations collect and remit taxes....they pass the cost of taxes along to either their customers or their employees.
7 - Tom Shelton
here is an article by economist Walter E Williams that basically makes the same points that I do only he does it better.
Politicians Exploit Economic Ignorance
8 - handyguy
Tom's articles are about cliched truisms of social conservatism and far-right libertarianism.
Marriage equality for same sex couples is an attack on 'the family.' Well, no, it's not, and Tom breaks no new ground in 'proving' this unprovable falsehood.
Corporations always pass along tax costs, penny for penny, to either customers or employees. Well, no, they don't. In particular, large, complex, successful corporations may have multiple ways of dealing with profit and loss.
If a company made a billion in profits and pays $200 million in taxes, do you think no company, ever, would just accept that as an $800 million profit? Or find some other cost savings besides prices or wages?
Corporations have thousands of profit items and expense items. They don't all end up in higher prices or lower payroll. This is absurd oversimplification.
As is often the case, especially in dunderheaded internet 'articles,' Tom starts with a conclusion that he 'knows' to be true because of ideology [or religious faith, which is also a form of ideology].
The facts can't possibly be at variance with what he 'knows,' so he rejects or bends facts to fit his preordained conclusion.
It may give him a way to pass an empty afternoon, but it proves absolutely nothing at all.
9 - Cannonshop
#8 and how many of those options come directly from manipulating tax-code and regulatory 'incentives', Handy?
Legions of accountants and Lawyers work long hours (not to mention lobbyists) finding ways to cut that 20% tax down for corporations, and 435 members of Congress are all too eager to help 'em in exchange for a portion of that gain coming to their campaigns next election.
Meanwhile, the customer and the wage-earner ends up footing the extra cost. a Corporate entity is not an individual, and it can, and does, pass costs on to someone else by whatever means it finds useful to do so.
10 - Tommy Mack
Tommy Mack Organization is a California certified Small Business (SB) that practices business management consulting. As its Director and owner, I am a business expert. Based upon what you state, Tom, you are a bookkeeper, not a Certified Public Accountant. Even if you were a CPA, you would be unqualified to give business advice because that is not a CPA’s job. Taxes are.
What you are attempting to do is put forth the specious argument for Fair Tax. Let me recommend the article I wrote on the topic earlier this month. You will find it enlightening.
Tommy
11 - Arch Conservative
Liberals love to grandstand on socking it to those evil corporations by raising their taxes which in turn causes the corporations to raise the price for their goods and services.
What's so f-ing hard to understand about that.
12 - Tom Shelton
If a tax is levied on a corporation, and if it is to survive, it will have one of three responses, or some combination thereof. One response is to raise the price of its product, so who bears the burden? Another response is to lower dividends; again, who bears the burden? Yet another response is to lay off workers. In each case, it is people, not some legal fiction called a corporation, who bear the burden of the tax. - Walter E. Williams
13 - Clavos
Lots of attempts to "debunk" Tom's premise (which is true) but none that actually prove he's wrong, just a lot of harrumphing and more than a little self promotion.
I am the sole proprietor of two small businesses. Neither pays direct taxes; we collect them and pass them on to the government (albeit resentfully and reluctantly), but our customers pay them when they avail themselves of our services and pay us for those services.
We make sure of that.
14 - Tommy Mack
The premise is bunk.
Tommy
15 - t roll
...when after a bit of back peddling the 'premise' following Williams turns out to be that the expense of corporate taxes is covered by workers and/or owners as such and/or consumers generally in some unspecified (politically determined) ratio there doesn't seem to be much to dispute
however this is not the premise that Tom presented in his article
16 - Leroy
Tom Shelton is blatantly wrong, and I? surprised that Clavos would support him.
The argument that corps pay no taxes is laughable to this person, who has co-founded a half dozen corps and owns two and is keenly aware of paying corp taxes and the impact on company pricing and operations.
By Tom Sheltons logic one could argue that no one pays any taxes, that all they do is pass the tax along to the next person in line, like a hot potato.
17 - Tom Shelton
The end consumer ultimately pays all taxes.
Leroy, who do you pass your taxes on to? Who is the next person in line for you?
18 - Clavos
...is keenly aware of paying corp taxes and the impact on company pricing and operations. (emphasis added)
Exactly.
19 - Clavos
The premise is bunk.
WOW! Keen insight and really strong, persuasive argumentation there, Tommy! Sure did git me to a-thinkin'!
So, obviously it's bunk that I pass along all taxes to my customers in both my businesses, eh? I'm either lying or don't know my own businesses, I guess...
20 - Tommy Mack
You are right, Clavos. There are two premises that are incorrect, not bunk.
Premise number one: “. . . they plan to raise taxes on the rich and on corporations” No one except Republicans and libertarians says that. It is a misrepresentation. What Democrats are saying is that it is time to eliminate the Bush-era tax cuts for the wealthy and largest corporations.
Premise number two: “. . . corporations don't pay taxes, they only remit taxes.” Therefore, “. . . the corporation actually functions as a collection agent for the governmental agencies to which it reports.” That is a gross misrepresentation. The provocative semantics come from the Libertarian tracts of Professor Williams that support the Fair Tax idea. It is an interesting argument that sounds good to many people and it confuses them.
You are correct that a business entity absorbs its overhead in determining a break-even point as the first step in its pricing determination. That overhead includes its taxes, payroll, rent, electricity, Internet access, loan interest and the rest of its expenses incurred as its cost of business (COB). Another COB is labor burden, which is wages plus SUTA, FUTA, FICA, and paid vacation time. To make a claim that correct pricing is somehow just remitting taxes as a tax collector “for the governmental agencies to which it reports” is confused and incorrect.
Tommy
21 - Dr Dreadful
Right, Tommy. Taking Mr Shelton's argument to its logical extreme, one might then argue that corporations also pay no wages, rent, utilities, interest or other expenses.
22 - handyguy
It's both amusing and frustrating the way the two sides of this argument talk right past each other.
Yes, all of the costs of doing business become factors in pricing. But it's not a penny-for-penny effect in every case. Service companies, retailers and wholesalers all have different sets of considerations.
Since Clavos's customers are rich, if he passes tax costs along to them, it's fine with me. And it's no reason to propose cutting his business taxes.
But what about, say, Wal-Mart, whose business model depends on offering the lowest prices? They're not going to raise prices to pay their corporate taxes, and their labor costs are already minimized. They have a very profitable business, even after taxes. If their taxes were eliminated tomorrow, would they lower prices? Pay their workers more? Or just deposit more into their bank accounts?
Businesses are taxed on their profits. The taxes don't cause that profit to turn into a loss.
And using any of this as a reason to justify ending corporate taxation is just ideologically driven hot air.
Many sensible politicians and economists favor lowering corporate tax rates and eliminating loopholes, so that all companies pay about the same rate on profits.
23 - Cannonshop
#22 the problem with ending loopholes is that it goes to the most common secondary purpose of the Tax code- to influence/control the actions of persons in the economy, rewarding those that the Party favours, and punishing those it does not.
(and it doesn't matter WHICH party-both Dems and Reps use exemptions and increases to punish or reward businesses, it's one of the most important functions of Lobbyists on K-street.)
Tax all corporations on the same level, no exceptions, and that strips a LOT of power used to influence behaviours away.
espl. behaviours involving donations to the party in control of the ways-and-means committee.
24 - handyguy
Some current loopholes make no sense at all. Subsidizing outlandishly profitable oil companies, for one.
Yes, all governments use the tax code to encourage/discourage certain behavior. And it is unlikely that all tax breaks will ever be done away with.
But the Republicans are arguing in favor of keeping all tax breaks whether they make sense or not, because getting rid of any of them constitutes 'raising taxes,' their all purpose bugaboo.
25 - Cannonshop
#24 of course they are, Handy. the GOP defends cuts/exemptions, the Democrats defend spending and increases. It's gotten so ridiculously polarized that they're both become caricatures of themselves.
Sometimes it's kind of fun to play the caricature up to the hilt, but sometimes, in more thoughtful moods, I look upon the both of 'em with a bit of despair-because even when the two 'compromise', the only thing compromised, is the public good and the future of my nieces.
The objective of both parties (and their highly packaged candidates) has devolved to power for its own sake.