We often hear that corporations don't pay their fair share of taxes and that taxes on corporations should be increased. Usually the proponents of such ideas believe that life will somehow be better for the ordinary person or the needy if only the corporations would just pay up.
This notion ignores the fact that corporations don't pay taxes. Corporations pass the cost of taxes onto consumers. They also pass along the costs associated with paying taxes to the consumer - CPAs and lawyers aren't cheap.
It is a simple fact that the price of products and services paid for by the consumer include the taxes corporations pay. In addition to corporate income taxes, corporations are forced to act as agents of the government by collecting withholding taxes and sales taxes.
So, in addition to income and other taxes that are passed on to consumers, the associated costs of accounting are also passed on. These taxes and the cost of compliance with tax regulations are merely a cost of doing business - no different than rent, advertising or the telephone bill.
The people hurt most by corporate taxation are often the same people that the well-intentioned advocates of corporate taxation want to help with the booty collected from businesses - the working poor and the elderly. But, high prices cause people with low incomes or fixed incomes to struggle just to make ends meet.
Corporate taxation also has adverse effects on small businesses that must spend a higher percentage of their earnings for accounting services and who cannot afford high-priced tax lawyers to avoid taxes. This creates an unequal playing field where small business has a harder time competing with big business.
Big businesses are able to lobby for special tax breaks which serve to subsidize their profits while mom and pop businesses seldom receive any special breaks. Eliminating corporate taxes would create a more level playing field for businesses and put a lot of lobbyists out of business. This would invigorate small businesses and create job opportunities for the unemployed.
All Americans would benefit by eliminating corporate taxes. Businesses would be more competitive in several areas that would benefit consumers, employees and/or shareholders. Prices for goods and services could drop, small businesses could afford to hire more workers or pay current employees more, and shareholders could receive higher dividends - or any combination of these beneficial things.
Retirees relying on a pension fund or dividends would be more financially secure. The working poor would certainly benefit from higher wages and/or more affordable products and services. A job for someone who is unemployed is a wonderful thing. These are the benefits of freeing corporations from the taxes and costs of compliance.
The days of the greedy corporate CEO earning 300 times what his workers earn might even come to an end. Without the tax breaks and tax avoidance schemes available only to large corporations with good lobbyists and lawyers, small businesses would have a much better competitive advantage. The small local mom and pop shop, freed from the taxes that their larger competitors already avoid, might be able to give the big box boys a run for their money.
The small business owner, who would be thrilled to earn 3 times what his workers earn, would be better able to grow his business without spending countless hours filling out government forms. Under these conditions, the fat cat CEO who once relied on political cronies to toy with the tax code and create special advantages might face some serious competition.
Communities would benefit from eliminating corporate taxes and the resulting invigoration of small business. Profits from small business could be spent (or invested) locally instead of being shipped off to corporate headquarters in New York or China. Small businesses are the life-blood of communities and they generally create more new jobs than big business.
The ability of small businesses to compete with larger businesses on a level playing field could make a big difference in rural communities with a declining agricultural base and older cities with a declining industrial base. Many older cities might also wish to stop providing financial incentives to big business to attract them and instead cut property taxes. This might help bring back retail businesses lost to suburban malls by lowering the cost of doing business in urban areas.
The populist notion that big business should pick up more of the tab is widespread but does not help bring prosperity. Corporate taxation only fuels intense lobbying and donations to politicians. We complain when it seems that politicians serve the interests of big business, but the current system creates this situation.
In the end, big business gets tax breaks or subsidies while small business suffers under the tax system and consumers pick up the tab. The only real beneficiaries under the current system are government bureaucrats, politicians, and big business.
Help the poor and end corporate taxation.
This article contributed by Tom Blanton of Richmond, Virginia.