Corporations and Taxes

NaderVoter wrote:

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.

This is the real reason to get rid of corporate taxation. We're going to see a race to zero over the next couple of decades, and it's only to our advantage to get their first.

The problem of using corporations to avoid paying personal taxes is something the IRS is equipped to cope with.

CEO of a small company wrote:

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?

If that is the case, then why not have corporations/businesses pay all the taxes. There are a lot fewer corporations then people so it would be easier to collect - saving a bunch of money.

Sure prices would go higher but we would also not be paying as much tax (assuming this only covered federal taxes) so that would or should at least even out.

Here is the thing, technically corporations pay taxes, but only if they make a profit. The OP said that money made by the corporation should go to reinvestment, and if the corporation manages their expenses correctly, this is what happens.

There are so many different tax incentives (depreciation and such) for corps to reinvest that it is easy to write income down to zero.

I work in a job where i see corporate tax returns on a daily basis and rarely see a return where taxes are owed.

I know this is a very simplistic explanation of how it works, but trust me, most corporations don't pay taxes, even on a nominal level.

I totally agree. This country's obsession with tax rates is really kind of weird. There is talk all the time about tax rates but little talk about what that tax rate is being applied to. A corporation's net income and their taxable income can be very different things.

asdfasdfasdasdfasdfasdfa wrote:

Care to cite some evidence for this? A corporation doesn't pay an employee out of profits. Prices are not set by the profit desired by the company. I am thinking your 1/3 which is good for a baseball player.

Besides think how many people those corporate income taxes employ. How many people do you think Google needed to hire to get their tax rate down below 5%?

Corporations pay future employees out of profits. If a company doesn't make a profit, or has the profit reduced, where does the money come from to hire somebody? Corporations exist to make money, not to serve as employment agencies. If my profit is reduced more than I want by taxes, then I might be able to make more money by:

1. Reducing current employee pay or future raises.

or

2. Not hiring more workers.

or

3. Laying off current workers.

Pricing decisions definitely take desired profit into consideration. When corporations are pricing products they aren't considering the product in isolation, they're comparing it to alternative investments. If I have an alternative investment that pays 10% and I'm comparing it to selling widgets I can make 11% on, then I'll sell the widgets. But if taxes knock the widget profit down to 8% my choices are:

1. Raise the price of the widgets enough to get my profit back to 11%.

or

2. Don't sell widgets at all, put my money into the alternative investment, and lay off all the widget makers (once again corporate taxes affect employees).

And obviously, taxes reduce the amount of profit paid to shareholders.

So I just showed you how corporate taxes affect an employee (a person) through lower pay or lack of employment, a consumer (a person) through higher prices or scarcity of product, and a shareholder (a person). Without these 3 groups of people a corporation is nothing more than a piece of paper. A piece of paper doesn't pay taxes.

I'll ignore your comment about Google hiring people just to lower their tax rate unless you really want me to make fun of it.

Employees are generally considered an expense-- taken out before profit is calculated. In other words-- a corp makes 100$ selling widgets but has to pay an employee 100$ to sell the widgets.

Profit is zero but the employee still gets paid.

The tax rate has no impact whatsoever on investment decisions within single jurisdiction. Both the profit at 10% rate of return and the profit at the 11% rate of return are taxed.

Don't get me wrong-- corps can switch jurisdictions-- but in-jurisdiction decisions are completely unaffected by tax rates.

And obviously, the lack of the services provided by government reduces the ability of corporations to earn a profit.

It's so the government can the blood from people who work. Keep in mind about 38% of people don't pay ANY income tax.

Any one who has and IRA or 401k or pension plan is a stockholder even if they don't realize it. The first time they tax you is when the company earns the money it's taxed. Then when the stockholders receive dividends they are taxed again. Any capital gains are taxed. Then when you die they tax you again collecting estate taxes.

I disagree with your analysis. I am running my corporation. I hire employees when they make me money. If I don't need an employee, I fire him. If I have more work than the current employees can handle, I hire more. As far as raisies, I pay as little as I need to to keep the current employees.As far as pricing, if the corporation could charge more for a product it would. Price is not set by cost+profit. It is the highest number that consumers will pay.Taxes might make some business unprofitable but their are a lot of low return business out there. They make it up with volume.Please make fun of my google comment. You might want to read my sentence again (i.e there is no just in it) before you make an idiot out of yourself. Or do you believe that google has zero lawyers and accountants whose job it is to make sure what they are doing is legal?

eojtlc wrote:

I know this is a very simplistic explanation of how it works, but trust me, most corporations don't pay taxes, even on a nominal level.

income tax for 2009:

exxon- $15 billion

wal mart- $7 Billion

procter & gamble $ Billion

income tax for 2008

exxon - $36 billion

wal mart - $7 billion

Procter & Gamble - $4 Billion

these are just the first three companies I looked up. most corporations do place taxes. also, consider the taxes on dividends.

in the citizens united case this year, 5 republican-appointed justices overturned centuries of precedent and contradicted the 4 democrat-appointed justices serving on the supreme court. talk about activist judges... double taxation is the price corporations pay to have certain liberties and protections that are denied to human citizens, such as limited liability (although many states do offer LLCs, the federal government does not), antitrust exemption in many industries, legal mandates that citizens be customers, "too big to fail" fascist intervention, and mitigation of criminal acts to civil suits

america is a wholly owned subsidiary of corporations

A company that continuously makes $0 cannot continue to hire people. In fact it will layoff people or reduce pay in an attempt to make a profit. A company that isn't making money can't expand. Taxes make this harder.

Tax rates for different investments are not the same even within the same jurisdiction. There's also no reason why a corporation has to operate in only 1 jurisdiction. Thus, as you pointed out, they can get different rates in different jurisdictions for different investments.

What does government services have to do with taxes on shareholders? The Federal Government is roughly $11 trillion in debt. Obviously there is no connection between services and taxes. Also, elimination of corporate taxes wouldn't necessarily lower tax collections. With this impediment to wealth creation removed, tax collections might actually increase.

asdfasdfasdasdfasdfasdfa wrote:

I disagree with your analysis.

Please make fun of my google comment.

Besides think how many people those corporate income taxes employ. How many people do you think Google needed to hire to get their tax rate down below 5%?

You can disagree with it if you want, but it's not my analysis. It's the analysis of a Noble Prize winning economist. Read some Milton Friedman or Thomas Sowell.

As for your Google comment:

"Damn it Sergey, we're making too much money this year. Our tax rate will be 6%!"

"That's OK Larry. Just hire another guy for $10,000,000 to surf porn all day. That should get us down to 5%"

Google hires people, to increase profits, not reduce them.

Blowing.Rock Master wrote:

[

Corporations pay future employees out of profits.

Profits are what's left over after employees have been paid.

Future employees should be paid out of future revenue.

If future employees are paid out of current profits then the company will not last.

Now profits can be invested to grow the company which could lead to additional employees and higher salaries.

Oregonian wrote:

Why do corporations pay taxes?

Corporations don't pay taxes. They collect taxes from individuals on behalf of the government.

When the Government imposes tax on corporations, the corporations raise prices in order to maintain profitability and to survive.

The end consumer pays the tax because he and only he buys the final product or service.

In addition to raising prices to overcome the taxation costs, the corporations can and do : outsource oversees, lay people off and cut environmental corners.

Obviously I was way too subtle for you. To get the tax rate under 5%, Google hires lawyers and accountants. With no corporate tax, those people would be not be working at Google. Or if that is too still too complex for you, if there was no personal income tax, how many people wold HR Block employ?All taxes distort the market and provide incentives and disincentives that might not be what you want. There is no evidence that the corporate taxes are any worse than other taxes in that way.

Blowing.Rock Master wrote:

asdfasdfasdasdfasdfasdfa wrote:

I disagree with your analysis.

Please make fun of my google comment.

Besides think how many people those corporate income taxes employ. How many people do you think Google needed to hire to get their tax rate down below 5%?

You can disagree with it if you want, but it's not my analysis. It's the analysis of a Noble Prize winning economist. Read some Milton Friedman or Thomas Sowell.

As for your Google comment:

"Damn it Sergey, we're making too much money this year. Our tax rate will be 6%!"

"That's OK Larry. Just hire another guy for $10,000,000 to surf porn all day. That should get us down to 5%"

Google hires people, to increase profits, not reduce them.

You would hire more people to lower taxable income unless the tax rate was 100%. In other words Google is worse off hiring somebody who does not produce. Spending more money to lower taxable income on a project that won't have future benifit is a losing situation.

Corporations don't pay taxes....you do. The costs of taxation are built into every product you buy and every service you purchase. The fair tax ( National Consumption Tax with elimination of personal and corporate income taxes) is the only way to fix this problem. It a great idea so there is no way the government will ever do it.

tycobb wrote:

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.

There are still laws against what you claim CEOs would do.

Heck even if a CEO gave himself a lavish office bathroom, he would be hiring people for the job and buying materials. That creates jobs and tax revenue.

I am a fairtax fan (www.fairtax.org).

X-Runner wrote:

Future employees should be paid out of future revenue.

If future employees are paid out of current profits then the company will not last.

So if you take a new job with a company that is hiring you to work on a new project that won't show a profit for several years would you be willing to wait for that future profit in order to be paid? No? Well if the company isn't making a profit now that they can reinvest into your money losing job where do you expect your pay to come from?