Two-thirds of corporations pay no income tax... Let's increase that number!
Filed under: Tax
This week journalists and bloggers were lamenting the fact that a full two-thirds of United States corporations pay no income tax to our federal government. Boo-hoo.... They're apparently getting away with something horrible in the eyes of these writers.I see it completely differently. First of all, corporations don't really pay any income taxes at all. People do. Every time a company decides to sell something to you, the price depends on a lot of things, including how much it costs to make the item, how much profit the company wants to make, and how high the company's tax bill is. You, the consumer, end up paying the corporate income tax with higher prices. And you want more of that?
My second big problem with people demanding more corporate income taxes is the result that would have on U.S. businesses. Our country really doesn't need anything else to make us less competitive in manufacturing. The same people moaning about big businesses making too much money and not paying enough taxes are the same ones belly-aching about jobs going overseas.
Newsflash for you: More taxes here will mean more jobs going overseas. It's simple economics, and companies must turn a profit in order to stay in business. Take away their profits, and you take away their reason for existing.
The focus on corporate income taxes is misguided. Look at all the other tax money the government collects via the business these corporations do. They create jobs, which creates payroll taxes, and creates income to individuals which is taxed. It sounds like there's plenty of taxing going on, and adding another layer by demanding that more corporations pay more income taxes doesn't seem necessary.
Don't forget that taxes paid to the government don't really add to our economy. The government's job is not to see how much they can collect from citizens and spend as much as possible on unnecessary programs and mandates. Let taxpayers keep their money and decide what's important to them. There will be a far bigger benefit to our economy by letting taxpayers choose where to spend their money and by letting that money work through private businesses, which are historically far more productive and efficient than our government.
Don't forget too, that our tax laws are what they are. Corporations hire tax specialists who help them figure out how to legally pay as little in taxes as they can, which means working within the tax code to increase the amount of profit kept by the companies. Cheating on taxes is wrong, but staying within the legal limits while reducing the exposure to taxes makes good business sense.... Not just for the companies, but also for the consumers who rely on the jobs they create and products and services we need and want to buy.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
Reader Comments (Page 1 of 1)
8-16-2008 @ 3:52AM
Donnernv said...
Tracy:
This GAO study is very misleading. They include Sub-S and LLC corporations. They average reader does not understand K1s and the flow to 1040s instead of 1120s. 50%
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8-16-2008 @ 12:51PM
Linda said...
You're right. In a previous article on this same subject it was pointed out that Chris Edwards from the Cato Institute wrote that S corporations and LLCs pass their income and their taxes on to their owners who pay the tax on their personal returns. This is another example of media spin and hype fueling people's negative feelings about what they perceive to be big business. Most of these businesses, at least my clients, are mom and pop enterprises who make less that the average wage earner. I see no reason to be jealous let alone hostile.
8-16-2008 @ 11:49AM
Scott said...
Hi Tracey,
I agree that the solution is not higher or more complex tax codes. It is smarter taxes that meet our current spending and that doesn't punish accomplishment. Take a look at the Fair Tax Plan.
www.fairtax.org.
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8-16-2008 @ 1:38PM
Michael Nader said...
Tax breaks should only be allowed for corporations that produce and sell goods in the US. If a corporation is manufacturing or assembling outside of the US, their goods should not be duty free coming back to the US. Also under trade agreements goods coming into the US from other countries should pay a duty to equalize the manufacturing cost in the US.
No one helps us when we need it. Corporations have to learn that you can't sell your goods to people that are not working. Other countries well soon learn that fair trade means being FAIR.
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10-20-2008 @ 2:56PM
hogman said...
right. fairness and equality don't seem to be proper in this country. looks like greed is the answer for most.
8-16-2008 @ 5:13PM
brett said...
Wallet POP, You should read the write up that AOL did on this GAO info. They actually had someone look into it. Another BS story to get the gullable in an uproar. Most corps. pay no income tax because the income is passed through to the ownwers and paid at indivdual rates. Sub-S, LLC, personal service, etc. I saw this same story on CNN and another news service. And AOL was the only one to actually look into it. The GAO report was requersted by two DEMS to make corps. look EVIL. We the taxpayer paid so they could throw around some political BS.
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8-16-2008 @ 6:01PM
Bill in Scottsdale said...
Every time I hear a politician want to raise corporate taxes I think "pity the fools who vote for him". We pay the corporate tax. We need to lower the U.S. corporate rate significantly to be competitive internationally.
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8-16-2008 @ 6:38PM
Manuela said...
Only one limited article explaining how corporations pay taxes while the "news" media just reports whatever is going to get them ratings whether it is true or false. The Enquirer and The Star are looking better all the time as a way to get the news.
Yes, individuals pay taxes and a corporation is not an individual. Individual stock holders pay taxes on their dividends received. Business owners pay personal tax on the profits received.
Good article. It should be required reading for all those in middle school - FAT CHANCE.
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10-11-2008 @ 2:13PM
Stuart Spiegel said...
I like your article I used to believe that,but there are no jobs that these so called corporations are supposed to create.I live in a rich area in Michigan and there is new mansions being built right down the road.If you go Downtown Detroit its a shit hole,Why don't these rich people invest in the city they live in, that would create jobs and make Detroit a better city, that would attract people and create jobs to the city.They don't do this because the rich people in Michigan are from foreign areas and could care less about Detroit.For example La shish restaurant that was caught for sending money to the taliban.All that money they found in Iraq probably came from Michigan.Is there anything being done about this.Make these rich people that are foreign put 1% of there income into city projects to make Detroit better!
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