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Networked Blogs
Aug
12
Most US companies avoid taxes
Filed Under taxes
The often trotted out solution to our economic difficulties is to raise taxes on corporations. It sounds great to people who are tired of paying high prices for fuel, groceries and other items.
However, the truth is that corporations will never pay taxes since they will always pass along the expense to their customers, go out of business or move overseas to some place with a more favorable tax climate and regulatory environment such as London.
A news report shows what most people have known for a while — most corporations don’t pay US federal income tax.
Raising more taxes on corporations will never work when it is possible to structure transactions to legally avoid taxation.
Maybe a flat tax is the solution that would raise more revenue for the government, while reducing tax liability for most American taxpayers.
Of course, it will never pass muster with those in power in Washington because it is too simple and easy. That’d put too many tax professionals and attorneys out of business.
Comments
4 Responses to “Most US companies avoid taxes”
You know, Chris, I never really thought about that. Very interesting, and eye-opening.
Hi Dan,
While I figured that many businesses didn’t pay taxes because of use of loopholes and application of the tax law, I didn’t realize that so many were able to break free from the IRS.
It seems like the only businesses that get hit are the small businesses that are a cornerstone of the American economy.
I will take the opposite direction here gentlemen and suggest that corporations should not pay any income taxes. They are owned by shareholders who receive dividends if they make a profit. Those dividends can be taxed, since they are income to the shareholder. Why should we tax twice? Tax the dividend, in an S-Corp this is a moot point, but in a C-Corp this would be a big benefit to corporations … an incentive to invest and grow!
In addition though I would suggest a flatter tax as Chris mentions. Perhaps even the total elimination of income taxation and increase in some kind of consumption tax. This would encourage savings. This would discourage spending till we drop. This would encourage people to take risks, and get the government off the backs of small business altogether.
Some have suggested a gradual move over perhaps as long as 20 years from property tax and income tax heavy government to sales and consumption tax, little by little every year. The problem of course is that government can’t seem to control itself, as Buzz points out so often. That of course is the best reason to do what Mitch did when he limited property taxes to 1,2 and 3 percent of market based assessment value. I’d like to see the 2 and 3 caps brought gradually lower as well, squeezing local and state government to cut their budgets and only deliver essential services.
Hi Steve,
It’s interesting to hear from you since you have a business — unlike many of us who are employees. (I’m in a hybrid situation since my wife is self-employed, so we always know exactly what’s being paid to the IRS because there’s no withholding).
I does make sense that corporations shouldn’t be taxed for the reasons you mention — the double taxation issue is a huge one.
I spotted the story and immediately thought about how it is easy politically to say that big corporations — such as oil companies, etc. — need to pay more taxes. However, the reality is raising taxes on a business will only end up in higher prices for the customer who ends up paying same, or the business goes under.