Corporations and Taxes

According to the Supreme Court corporations are people. I very much disagree as our politician are now even more bought by the highest bidder.

If they didn't pay taxes more CEOs would just funnel money from the business to use as personal expense that they would never have to pay taxes.

but CEO pay taxes on their income. So if a corporation didnt pay taxes and gave the CEO a big check. That check is taxed. Right or am I wrong?

Oregonian wrote:

but CEO pay taxes on their income. So if a corporation didnt pay taxes and gave the CEO a big check. That check is taxed. Right or am I wrong?

tycobb is pointing out that the corporation could pay expenses on behalf of the CEO rather than salary that the CEO then uses to pay his/her expenses. in some cases this could work under existing law, and in some cases it is done now.

there are a number of good reasons why corporations should pay taxes. tax rates and specific rules are a different matter entirely.

corporations are legal entities that are separate from their owners. they have separate legal liability (an owner of a corporation that sells defective, dangerous products is usually not liable legally for the corporation's actions). they own property separately from their owners (a shareholder in a corporation cannot force the corporation to distribute a piece of property or an amount of cash to him/her - assuming that shareholder lacks control of the corporation).

so for these reasons, the legal fiction that a corporation is a separate person seems reasonable in the tax context and a separate tax makes sense.

it also makes sense as a means of preventing rampant evasion of the individual income tax. if you allowed corporations to have no tax liability, but retained the rules that do not require shareholders to recognize income from a corporation until the corporation pays a dividend, then well advised taxpayers could set up corporations that would hold all of their active and passive investments. and independent contractors would have their wage income paid via a corporation.

if you're still following, this means indefinite deferral of income for anyone that chose to route income (investment or wage) via a corporation.

now this result could be changed by requiring all corporations to be taxed as partnerships currently are taxed. if could also be changed in a more complex way by continuing to tax corporations but allowing a tax credit for the corporate level tax when corporations pay dividends to shareholders.

the former would not be workable for publicly traded corporations. it would simply not be possible to determine the proper allocable share of income for potentially millions of shareholders in a given year, some of whom may have owned shares for less than a day.

the latter is more possible, but it wouldn't work for tax exempt shareholders (think pension funds or retirement accounts) or many foreign shareholders.

finally, also remember that most small businesses do not pay a corporate level tax. instead, they are organized as partnerships, "S corps", or LLCs.

This is the truth that you need to understand: 'Corporations do not pay taxes. Small Businesses do not pay taxes.'

They are a collection agent for the Gov. The money they receive from sales is collected from those who buy the product or service. So, in reality, you, the buyers,are paying the taxes. If the government ratchets the taxes upward, does the corporation pay for it out their magnanimity?...No!!! They raise the price of the product to cover the expected impact of the tax. So, again, YOU are the one paying the tax.

Do you feel better?

When did running become about corporations and taxes?

DaveW wrote:

When did running become about corporations and taxes?

When you posted. :)

Another way to look at it is that the IRS has a revenue target to try and keep up with expenses.

If corporations did not pay taxes then the difference would have to be made up by individuals in the form of higher taxes.

Corps could have more money to pay higher salaries to offset the higher taxes so the net is the same.

It's all a shell game.

Except of course Corporations are pretty much people under the law. They have rights to privacy and can donate money to political campaigns.As far as not consuming, your nuts. Have you not noticed how much corporation use the legal system, the highway system, natural resources (FCC makes wireless companies possible), and so on?The big problem with corporate taxes is that the big companies can all avoid it (see google for a prime example) which means that all the revenue comes from medium sized companies that aren't big enough to play the games.

I agree. I think we need more focus on directly taxing the people who own the corporation. Not the Corporation directly. Especially since corporations can just move about the globe to get the best tax and regulatory system for them. But you do need to tax corporations some or else it just becomes a place to hoard money tax free. I think a flat 15% tax rate its pretty sensible.

Oregonian wrote:

Question:

Why do corporations pay taxes?

Google's paying taxes at 2.4% a year, but let's go on...

The way I see it, corporations is not a person.

The courts don't agree with you. Corporations have freedom of speech and other rights.

If they use it to grow the corporation then good because they might need more employees. If they give it to shareholders then it gets taxed then.

Or I could set up my own little personal corp, funnel all my income through it, and only take out what I need to live. Since everything else would be tax free-- I could let it grow until I retired-- delaying paying taxes for years.

But taxes for roads and social services and things that people use, like us, corporations do not use that. for example, "A CORP" does not use a road, social security, unemployment and so on.

You've never seen a corporate-owned truck on a road? Plumbing in an office? A corporate employee who was educated in a public school? C'mon...

Even social programs like unemployment insurance benefit corps. Do you really think that Ford and GM want to compete with the unemployed who are selling their cars so that they can eat food?

LLCs do not pay taxes. The share holders of the LLC pay taxes on the revenue produced, even if a distribution is not taken by the shareholders.

4runner wrote:

Oregonian wrote:

Question:

Why do corporations pay taxes?

Google's paying taxes at 2.4% a year, but let's go on...

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One of the reasons Google is so successful. taxes are a huge burden on us companies in the global marketplace.

ever wonder why the are so many goddamn churches in america. churches operate tax free. sure the clergy are taxed but all revenues (donations, tithing) are tax fee. quite a scheme those crafty christians run.

I've often thought about creating a religion as a tax shelter for myself. They get to avoid real estate taxes too, which changes the economics of that sort of investment pretty radically.

Corporations only nominally pay taxes (they write the check to the IRS) - the actual burden of corporate taxes is borne by individuals in the form of lower pay to employees, higher prices to consumers and lower returns to shareholders.

[quote]NaderVoter wrote:

I agree. I think we need more focus on directly taxing the people who own the corporation. Not the Corporation directly.

Don't we have a personal income tax? I'm pretty sure we do.

You could say that about any taxes. Without personal income taxes, corporations could pay people less. A corporation that is making more money doesn't pay employees more. It pays enough money to keep the employees it wants happy. Companies like Google and Apple do not pay more than their less successful competitors. Similar prices are set by the market not the corporation. Taxes will change what corporations are profitable to run.

fwiw wrote:

Corporations only nominally pay taxes (they write the check to the IRS) - the actual burden of corporate taxes is borne by individuals in the form of lower pay to employees, higher prices to consumers and lower returns to shareholders.

Because coporations have wealth, and politicians want to get their theiving hands on it.

fwiw wrote:

Corporations only nominally pay taxes (they write the check to the IRS) - the actual burden of corporate taxes is borne by individuals in the form of lower pay to employees, higher prices to consumers and lower returns to shareholders.

exactly, the corporate tax is priced into the goods sold. if another corporation operates in a lower tax environment the corp can charge lower prices for equal goods. this is the competitive advantage and a huge burden for companies in a high tax environment.

fwiw wrote:

Corporations only nominally pay taxes (they write the check to the IRS) - the actual burden of corporate taxes is borne by individuals in the form of lower pay to employees, higher prices to consumers and lower returns to shareholders.

Almost to the end of the first page before we get an answer from someone who understands economics. Thank you fwiw.

To the OP, as fwiw pointed out ALL taxes paid by corporations are simply a pass through from real people. Corporate taxes are nothing more than another government imposed distortion to the economy.