Thoughts on Corporate Taxation


            The first time I heard the “corporations don’t pay taxes” argument, it was proposed – with a dismissive chuckle – by Paul Harvey.  His seemed to wonder how anyone could be so stupid as to expect the very rich to provide a fair share of the nation’s income.

            That said, there is some truth to the theory.  Businesses can raise prices to cover the cost of taxes – unless, of course, they have genuine competition.  In that case, a competitor may decide to absorb the cost of the taxes in order to take customers from the business that refused to do so, gambling that increased volume will make up for low unit prices.  That is, if the business actually has any real competition.  In this age of merger-mania, many of the largest do not.

            In any event, Congress long ago decided that corporations should pay taxes on their profits, before distributions are made to shareholders, and no Congress since has seen fit to rescind those laws.  Instead, special interests have peppered the tax code with a zillion little dodges that allow something like 65% of all corporations to avoid paying any taxes at all.  And their owners and stockholders also enjoy lots of loopholes through which they too avoid paying anything like the percentage of their income that the law specifies.  When it’s said that only individuals pay taxes, it should be specified that only salaried individuals who lack access to these loopholes truly pay their fair share.

            But most Americans don’t realize the extent to which the law is being evaded, because the corporate income tax continues on the books and most of us are gullible enough (as Paul Harvey correctly observed) to assume they are being collected – because it’s the law!

             Another commentator would have us believe that the real estate bubble was caused by Democrats insisting that minorities ought not be discriminated against in the real estate market.  But one doesn’t need a real long memory to recall Bush extolling the virtues the “ownership society”.  It makes at least as much sense to blame conservatives who pushed home ownership because they thought owners would be more stable and would therefore lean more toward conservative political positions. 

            In fact, both parties share responsibility for the wave of deregulation that, in turn, has encouraged the financial sector to cast caution to the winds in an effort to make as much money as possible as soon as possible.  If a government allows a banker to take unwise chances, and the banker does so, it can hardly be the fault of only the government.  If the banker then misleads a prospective borrower, its takes a real stretch to identify the borrower as the only guilty party.


One Response to “Thoughts on Corporate Taxation”

  1. Tax Evasion Is Illegal, Tax Avoidance Is Not « Unicoipolitics’s Weblog Says:

    […] quote comes from another contributor to this blog (click here to read the post). He is replying to a previous post of mine in which I made the case that all taxes ultimately are […]

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