Corps don't pay taxes, they only pass them on...

[booley]

On another forum we've been argueing with a freeper who loves to make this claim..." kahn'ed-"Well of course in the first place no business pays taxes, they only collect them. "

Here's his explanation of how this works...

" Probably the simples way to explain it is to use a visible tax.
The sales tax is the most visible tax there is.
Lets say you live in Washington State and you check the price of some item and find it to be $1 dollar you go to pay for it and the cost is $1.08.
Even liberals can see the sales tax.
Now you go across the board to Oregon and find the same item for a dollar, you go to pay for it and the cost is $1.00, Oregon has no sales tax.
BUT!
Oregon does have an income tax of on average 10%.
So now you do some quick math and figure out the item cost you $1.10.
So you go on vacation to Mexico and while doing some shopping you find the same item you bought in Washington and Oregon sells for 10 cents America.
All taxes are paid for by the consumer of the goods and/or services.
He’s the only one who can’t pass on the tax. "

This guy also once made the assertion that taxing companies like Boeing that do tax shelters in the Bahamas would be like the US taxing a company for cars made and sold in Japan. Is it just me or does that anology make no sense?

This guy has been making this claim for a while. I admit i'm no economist but I can see a lot of flaws here. For one,sales tax and taxes on profits aren't the same. Not to mention, if the money taken out in taxes paid was added to the costs evenly and across the board as this guy is saying, then eventually the prices would expand to infinity.

If any of you are good with economics, feel free to add other flaws with this guy's argeument.

But my big question is, has any other freepers been making this claim? Is this just another rung down in logic and common sense that Cons have slipped too or is this guy an idiot even among his peers?

http://groups.msn.com/RushversusReality/rushvsreality.msnw?action=get_message&mview=0&ID_Message=151859&all_topics=0

[shoelace414]

1. Corportations pay all the taxes

because whatever I pay individually in taxes I can't use to buy things from a corporation.

[underpants]

2. Great article here

http://www.citizenworks.org/corp/tax/taxbreif.php

[Name removed]

3. Deleted message

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[thoughtanarchist]

10. Untrue.

Any business will do everything possible to pass on / or eliminate as much cost as possible -- regardless of tax.

Lowering corporate taxes does not create jobs or keep prices down. The last 5 years has been testament to that.

Raising corporate taxes may have SOME effect as far as cost-cutting measures...but not much that is not already being done. Corporations have 1 objective: Maximize profits. There is only so much cost-cutting you can do without negatively affecting revenue.

Business can only pass on so much to the consumer before products loose their competitive edge and sales will slump.

If only people paid tax, there would be no corporate tax shelters.

[booley]

11. uhh, that has problems as well

If they did not make enought in profit to cover the tax obligation plus leave enough for the owner(s) they would serve no purpose.

Except that tax obligation is set by thier profits. So what happens if a company makes no profit?

They can write off losses on thier taxes last I heard. In fact, I beleive that is a legitimate reason for a business to not pay taxes..becuase they consistently lose money.

And then you have a historical perpesctive. In the 40's, half of all revenue coming to the government came from taxes paid by corporations. yet obviously these corporations still made money.

And then you have the fact that the corps dodging thier taxes are making huge profits. They weren't struggeling before they were creating these tax havens and they certainly could pay thier taxes now and still make a profit.

I own my own business and I pay my taxes and yet I can stil make a personal profit to pay my bills. How is it that I can do what a multi-billion doller corporation can't?

The more I look at this, the more obviouse this is about greed, not any onerouse tax burden on corporations.

[BillZBubb]

12. Your post is rubbish

You don't have a clue about economics.

We only tax business PROFITS. Therefore, we can't just tax only business to raise the revenues. There aren't enough profits to allow that.

So, taking your example to ad absurdum we raise the business tax rate on profits to 100% to squeeze all the possible revenue out. All of the sudden all businesses become non-profit organizations. They don't raise prices, they don't try for profits instead they build equity with excess cash, but they don't go out of business. Government revenue falls to zero.

You are 100% wrong. Of course the statement "only people pay tax" is true, but it is also a red herring. The real issue is WHICH people. Geez.

[Name removed]

14. Deleted message

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[thoughtanarchist]

16. You responded to yourself...

are you arguing with yourself? I hope you understand you because you're not making any sense from what I can see.

:popcorn:

[booley]

17. ok, still see problems

Firstly You seem to be assuming that if a corporation is losing money, it's becuase of taxes. But the corportations most guilty of tax shelters and not paying taxes were making huge profits even before they started doing that. they didn't do this to protect thier ability to make a profit but the scale of thier profit margins.

You said " Corporations can PASS on the ABOVE taxes and still bump their prices high enough to make a profit ...."

But the operative words here are"... make a profit ". as another poster pointed out, passing along the costs of taxes don't necessarily lead to more profit in the long run. There is a ceiling at which this no longer works. And it doesn't take long to get there.

In fact, I can think a good few limits that would keep companies from doing what you claim, none of which you have really addressed.

For one thing, taxes on things like fuel, property, payroll ect aren't the same as profits. They usually remain even through out the industry as a whole (with some variation by region but other factors helps even this out). Also, as important, these are taxes on things the company needs to do business. Even as a trucking company pays fuel taxes, that fuel allows that company to make money. Plus the tax keeps the roads repaired, without which trucking companies couldn't make any profit at all anyway. Simply put, buying more fuel means paying more in fuel taxes. But it also means more jobs requiring that fuel which will earn money. Same with the other examples. property taxes means more offices, payroll means more employees doing work.

So even as a company has to pay a tax on goods and services it needs to do business, as long as the tax isn't greater then the profit from those goods or services, companies do not have to pass it on. They have a choice. Just becuase such taxes can be onerouse doesn't mean they always are,

Which brings me to what another poster pointed out, there isn't necesarily any financial benefit from passing along too much. As I said above, companies aren't avoiding taxes to safeguard profits but profit margins. The two aren't the same. Just becuase a company sees it's profit margins shrink becuase of higher expenses making thier product, doesn't necesarily mean they can't still make aprofit or that they have to pass that cost to the consumer.

For example...
Company A and Company B both make widgets. The widgets sell for 20 bucks. it costs 10 to make a widget. But fuel and parts increase the cost to 15. Company A increases it's widget price to 25 so they continue to make 10 profit.. Company B keeps it's widgets at 20 so they only make 5 dollers in profit.
But if you are buying widgets, which would you buy? One for 20 or one for 25? Who stands to make the most money in the long run?

Secondly, you seem to want us to beleive that taxes on operating expenses is the same as taxes on profits. But they aren't the same.

For one, the costs of fuel and mortgages on property ect can also be written off as business expenses. I am not an economist but even I know that. My accountant sure has reminded me often enough.

But you can hardly call a profit an expense.

And two, you still have the problem I mentioned about infinate cost increases. Like I said above, as you pay fuel taxes, you are also using that fuel to make money. You are taxed on how much fuel you use. You may be able to pass the costs on to the consumer to a point as the market will bear, or not since just buying the fuel is part of how you are going to make money. Since buying fuel is part of how a company makes money, it can swollow the cost as long as the taxes aren't too high.

But profits don't work that way. if you are taxed on your profits, the taxes are a percentage of your profits. If you increase the price of your product to cover the tax, and manage to get people to still buy your product..you haven't eliminated your tax bill. What you've done is increased the amount of profits that can be taxed. You now owe more tax. And so to counter that new tax amount, you would have to raise your prices again and (assuming people will still buy your product) you will have a hgher profit that can be taxed, meaning you will have to raise your prices again....

Very shortly into such a scenerio, something would have to give.

I am sorry but you really haven't proven your case at all. In fact, your examples don't even necessarily apply to the topic of taxing corporate profits at all.

There is also the moral /logical question of why should corporations be allowed to get away with this? I am unlikely to ever buy a single thing from Boeing. I don't buy a lot of jet planes. BUT when Boeing doesn't pay thier taxes that help support the infrastructure they require to stay in business, that money instead comes out of MY tax money.

Why should I pay for Boeing?

[mongo]

4. A grain of truth - taken to the absurd

Certainly sales tax is passed on to the consumer. We are required to collect it on behalf of the state, and in Ohio we get a small percentage of the tax for collecting it - as long as we pay the state on time.

But corporate income taxes are on net profits before any dividend is payed to the shareholders. So they are not paid by the consumer per say, but of course that is one thing companies keep in mind when determining a price for their goods/services.

This guy also once made the assertion that taxing companies like Boeing that do tax shelters in the Bahamas would be like the US taxing a company for cars made and sold in Japan. Is it just me or does that anology make no sense?

That totally makes no sense. My assertion on this - and a lot of regulatory and tax issues, is that taxing companies in the US, and not taxing companies who do most of their business and manufacturing in the US, but maintain an offshore HQ, is more about stifling competition than anything. The tax code gets structured so that the largest companies benefit, while making it hard or impossible for competition to enter the market.

[Viking12]

5. Yes, but corporations pass on the 'costs" of people that use a product

If you think about it, corporate taxes are the taxes that fit best with the "free-market capitalist" philosophy that taxes should be based on "user fees." We should make corporations pay taxes to capture the external costs of their products.

For example, corporations depend on the transportation infrastructure and should pay for it (simplified for illustrative purposes). If I choose to buy locally made and grown products, I shouldn't have to pay for costs of keeping shipping lanes open and harbors 'safe' from terrorists. The people that buy those products should pay for those 'luxuries.' Another example, carbon/energy taxes. The external environmental costs associated with the production of many goods should be passed on to the users of those goods.

Ultimately, however, the 'free-marketers' trying to sell this BS are trying to weasal out of their fair share. Their motto: "Profit is king, Let someone else pay in dollars or flesh."

[thoughtanarchist]

6. Flat earth school of economics?

Oregon does have an income tax of on average 10%.
So now you do some quick math and figure out the item cost you $1.10.

wha...?

There is no logical way to assert that a 10% income tax equates to a price increase of 10% on goods / services.

What you net is what you make after paying on your income. What you pay for goods is constant. Sales tax directly affects what you pay, but has no corrolation to what you earn.


The assertion that the cost of corporate income tax is ultimately passed on to the consumer is equally infantile. Were that the case, there would be no need for the army of corporate lobyists on K street pushing for more corporate tax loopholes.

Does the concept of supply and demand cease to apply because the goods are taxed? Are you really going to pay 38% more for that 6-pack just because Coors & co. has to pay their income taxes this year? shit no. If the price is too high, you'll do without or get the Pabst Blue Ribbon at a more reasonable price. Coors will suck it up because they cannot afford to loose the revenue and they cannot control the entire market. (as long as monolopy restrictions prevent control of the entire market, and loosening these restrictions is another function of K street)

When you see this intense a lack of economic understanding, there's not much chance you'll reach this guy.

[Squeech]

7. Funny thing about that

Corporate taxes have been cut periodically since the Reagan years. How come we don't see prices coming down? How come we aren't getting those savings passed through to us consumers? How come we see corporate profits climbing-- skyrocketing, these last few years?

[BillZBubb]

8. This is a very common right wing argument against corporate taxes

It's been around for a very long time and is often parroted by morons like Limpballs. As you pointed out, any analogy to sales taxes is weak, even absurd. Second, his chain of costs makes no sense. I won't talk about that because it is so lame.

As for the corporate tax itself:
One big flaw in this argument is the one thing the conservatives are always crowing about: capitalist competition.

If company A is making a profit on it's items because of a competitive advantage and company B is breaking even, company A has a TAX INCENTIVE to lower prices. It gets the added benefit that it can gain market share which will help it further lower costs (manufacturing learning curve and economy of scale). This also forces company B to improve it's manufacturing or go out of business.

Although company A lowers prices and thus gets lower OPERATING profits, it will not see a 1 to 1 loss in NET profits because it's taxes will be lower. Short term net profits will be decreased somewhat due to lower prices, but a lot of that is offset by tax savings at the bottom line. Eventually, it's profits will return to their old level because of manufacturing improvement.

Therefore, company B (and hopefully C, D, and E) keeps company A from passing on it's tax expense. So, unless all companies in the business have EQUAL profit margins, there is a built in limitation to passing on the tax bill. There is also an incentive to lower prices when profits get out of line with the industry.

[Inland]

9. I didn't pay taxes, I passed them to employer by demanding higher wages.

See how stupid that sounds?

Fact is, not every company is ABLE to pass on taxes. Some are already charging the most the market can bear.

The only way to tell how much is passed on and how much is borne is to draw out the supply/demand curves for the products. Only the products that are the least sensitive to price changes--like, say, tobacco and gasoline--can a producer pass on ALL of the price increases, and even that it is short term.

[dcfirefighter]

13. Partially True

In a competitive market, prices drop to the bare minimum to employ the means of production, labor, capital, management.

Companies exploit the market to obtain a non-competitive advantage, sometimes fairly, sometimes not. Being the first in a market is a fair advantage, lobbying for special status is an unfair advantage.

This advantage allows companies to sell their goods for above the cost to manufacture. This difference is Profit.

Corporate taxes are assessed on Profits, and theoretically, should not affect prices. However, even in a barely profitable company, there is a cost of compliance with the arcane tax code. In general most companies have some form of market advantage, and are thus profitable. In this case taxes on profits raise the profit maximising price of goods, as set by the company.

So, corporate taxes do raise prices, but not as much as lack of competition.

Additionally, those public infrastructure things like roads, etc., raise property values, generally far more than they cost to build and operate. Taxing somethings as a user fee tend to allocate their costs appropriately, allowing for competition to find the most efficient allocation. For example, if the externalities of coal-fired electricity were collected, industries that used 'green' electricity would tend to be more successful and garner a larger market share.

Taxes on government priveleges, assessed at market value, do not raise prices. This would include land titles, mineral rights, broadcast rights, and patent rights.

These rights enable their holders to a windfall profit without production.

http://www.landvaluetax.org/nopasson.htm

[Tactical Progressive]

15. Well, if corps don't pay taxes, then why are they complaining?

Yes, in answer to your question, this is one of the right-wing's standard demagogueries. The purpose is to get you incensed that you are paying even more taxes to the evil government than you already hated that you were. It works to rile the mindless but doesn't seem to much impress anyone else. Most people understand the one simple fact that if business wasn't paying it then they would have to anyway. How hard is that to understand?

And seriously, if "they don't pay any tax" they why are they bitching? Why don't they just laugh it off? Why don't they say "Sure!" with a big smile on their face when we tell them we're going to triple their taxes? I mean, they don't pay it anyway! Could it be because they know it's a bunch of bullshit?

The thing about taxes is that they are applied to all businesses, giving no business an advantage over another. It doesn't make any business less competitive by raising costs that their competition doesn't have. They all have to account for roughly the same tax surcharge. That may make every single product in the entire country "less competitive" in a sense, but then to run the country the money would have to come from someplace, so if it came right out of everybody's pocket first they would have that much less to buy everything so that the effect is the same. The point is that by being applied across the board any given company isn't disadvantaged relative to their market competitors.

The next time you hear this argument just say: If they aren't paying the tax anyway, then let's double it - they won't mind. Then when they bitch and scream you can point out how I guess they really are paying it whether you want to use pretend economics or not.

[TahitiNut]

18. Corporations are wealth redistribution systems.

They confiscate the lion's share of the value of labor and redistribute it to owners. But some "labor" is paid better than other "labor" - executive "labor." Thus we have a system which lowers 'earned' income (from labor) and increases 'unearned' income (from dividends and equities).

So, the reason the corporatists are eager to spread the half-truth of "corporations pay no taxes" is because taxes, like any corporate expense, reduce the size of the "free lunches" being eaten by the most-favored.

Corporations only pay income taxes on the net income, after paying for housing, clothing, food, recreation, and every-other-fucking-thing ... while human beings pay income taxes on their "taxable" income that places limits on what can be deducted from gross.

If workers were taxed like corporations, people who barely live paycheck-to-paycheck, if that, would pay absolutely nothing in income tax ... since they have no net income in the same sense as a corporation.

Fuck 'em.