The big business tax myth

[spectrumc01]

I have heard this arguement every time someone mentions taxing big business, "If you tax big business all they do is pass the tax onto the consumer, so we really shouldn't tax them." This statement and variations of it, used to make sense until I actually thought about it.

It seems to me that the consumer has X amount of money to put into the economy. It we raise taxes on them they have less money to put into the economy. So not taxing the consumer keeps more money flowing into the economy.

If we tax big business, and they in turn raise their prices, we as consumers have a choice of weather or not to purchase their products. So the raising of prices due to taxation does not get passed on to the consumer because we have a choice of wether or not to patronize them.

I myself would rather tax business and have a choice of where to shop than give business a pass and assume the tax. Good business will adapt and overcome, bad business will go bankrupt and disappear, but isn't that how capitalism is supposed to work? The strong survive and the weak die off.

 

[Quantum Windbag]

I have heard this arguement every time someone mentions taxing big business, "If you tax big business all they do is pass the tax onto the consumer, so we really shouldn't tax them."

Who said we shouldn't tax big business?

This statement and variations of it, used to make sense until I actually thought about it.

I haven't seen much evidence of you thinking yet, why start now?

It seems to me that the consumer has X amount of money to put into the economy. It we raise taxes on them they have less money to put into the economy. So not taxing the consumer keeps more money flowing into the economy.

If we tax big business, and they in turn raise their prices, we as consumers have a choice of weather or not to purchase their products. So the raising of prices due to taxation does not get passed on to the consumer because we have a choice of wether or not to patronize them.

I myself would rather tax business and have a choice of where to shop than give business a pass and assume the tax. Good business will adapt and overcome, bad business will go bankrupt and disappear, but isn't that how capitalism is supposed to work? The strong survive and the weak die off.

You just proved you are not thinking.

Taxes do not just go on one single business, they go on all of them, and we, as consumers, have to buy from somebody. The only way we can choose not to patronize them is if we simply stop buying anything. Believe it or not, that is actually worse for the economy than the alternative.

 

[Toronado3800]

The tax on big business should be well thought out. Just a plain earnings tax seems to chase them elsewhere now that we are in a global age for example. Tax things you dont want in your country higher, give tax breaks for good acts like tuition reimbursement programs.

 

[Wiseacre]

I have heard this arguement every time someone mentions taxing big business, "If you tax big business all they do is pass the tax onto the consumer, so we really shouldn't tax them." This statement and variations of it, used to make sense until I actually thought about it.

It seems to me that the consumer has X amount of money to put into the economy. It we raise taxes on them they have less money to put into the economy. So not taxing the consumer keeps more money flowing into the economy.

If we tax big business, and they in turn raise their prices, we as consumers have a choice of weather or not to purchase their products. So the raising of prices due to taxation does not get passed on to the consumer because we have a choice of wether or not to patronize them.

I myself would rather tax business and have a choice of where to shop than give business a pass and assume the tax. Good business will adapt and overcome, bad business will go bankrupt and disappear, but isn't that how capitalism is supposed to work? The strong survive and the weak die off.

Your logic is just a little fuzzy. If you raise the taxes on businesses there are 4 basic options for each business.

1. Raise prices. If they are in competition with foreign companies, this hurts them. Or if they are a small company competing against large ones, the economies of scale hurt them too cuz the big guys can maybe not raise their prices as much as the small guys might have to.

2. Cut costs somewhere else. Automate something, change the business model, reduce somebody's hours worked or lay people off and try to get by with fewer people. Or outsource something or even move your entire operation offshore.

3. Eat the cost. For some maybe making $475,000 instead of $500,000 is no big deal. Depends on the situation though, in some cases they decide not to make the sacrifice.

4. Go out of business. Maybe temporarily until the business climate improves in some way.


There's a reason why nobody else around the world wants to have high business taxes. It drives existing businesses away and discourages new businesses from coming here. I don't think you end up with as much additional revenue as you might think and your economy generally takes a hit. I'd rather reduce or eliminate business taxes to stimulate the economy and create more jobs and increase consumer spending. Business tax revenue is only about a couple hundred billion/yr, I'm thinking we'd more than make up for that in personal income taxes and FICA taxes.

 

[Quantum Windbag]

The tax on big business should be well thought out. Just a plain earnings tax seems to chase them elsewhere now that we are in a global age for example. Tax things you dont want in your country higher, give tax breaks for good acts like tuition reimbursement programs.

Taxes should only be used to raise revenue for the government, not to shape social policy.

 

[Toronado3800]

The fear of leaving too much money in the hands of businesses is they do less for the economy than a healthy middle class.

Microsoft having a hundred million extra dollars means they will buy a yacht for the board room members and sue a small company out of existence.

The middle class having a hundred million extra dollars sells six thousand Camry's. Damn Camry's. Well something that normal ppl need is the point. This creates demand. Demand is the vacuum businesses are drawn to.

 

[Toronado3800]

The tax on big business should be well thought out. Just a plain earnings tax seems to chase them elsewhere now that we are in a global age for example. Tax things you dont want in your country higher, give tax breaks for good acts like tuition reimbursement programs.

Taxes should only be used to raise revenue for the government, not to shape social policy.

A difficult fight you will have removing them tax breaks for day care, education, IRA's and the like.

I really think your view is idealistic. Somewhat of a Star Trek futuristic utopian view. If humans did not need taxes and police to keep them nudged towards doing what is right socialism would work. It doesn't. Regrettably human nature is what it is.

Ideally I do agree with you Quantum but in practice I am too jaded.

 

[Quantum Windbag]

The tax on big business should be well thought out. Just a plain earnings tax seems to chase them elsewhere now that we are in a global age for example. Tax things you dont want in your country higher, give tax breaks for good acts like tuition reimbursement programs.

Taxes should only be used to raise revenue for the government, not to shape social policy.

A difficult fight you will have removing them tax breaks for day care, education, IRA's and the like.

I really think your view is idealistic. Somewhat of a Star Trek futuristic utopian view. If humans did not need taxes and police to keep them nudged towards doing what is right socialism would work. It doesn't. Regrettably human nature is what it is.

Ideally I do agree with you Quantum but in practice I am too jaded.

Going back to the days when taxes were used to raise revenue is going forward in time?

 

[FireFly]

We need to tax business, earnings, employees, stocks & dividends some. Most of their income is from overseas so it would not hit the consumer here as hard. BUT we must not tax higher than other countries or the business will leave this country. We must walk the tight-rope & get our fiscal house in order.

 

[spectrumc01]

Businesses are leaving, they are all ready outsourcing overseas, and their headquarters have been moving offshore to avoid taxes. GE paid no taxes on their earnings, Wall street has been giving bonuses left and right, and yet job growth is still almost stagnant. Business has a certain part of the population buffaloed into believeing that if they are taxed they will pick up and leave this country. If that is the way they feel then let them go, they obviously are not loyal to the United States or its belief system. Let's see if other governments are as quick to send in the military to protect them, while they rape and pillage third world economies. Everyone bitches about Europe being socialist and how turning into a socialist country would be bad for the US. If it is as bad as they say why would business move over seas in the first place? Unless....

 

[Quantum Windbag]

Businesses are leaving, they are all ready outsourcing overseas, and their headquarters have been moving offshore to avoid taxes. GE paid no taxes on their earnings, Wall street has been giving bonuses left and right, and yet job growth is still almost stagnant. Business has a certain part of the population buffaloed into believeing that if they are taxed they will pick up and leave this country. If that is the way they feel then let them go, they obviously are not loyal to the United States or its belief system. Let's see if other governments are as quick to send in the military to protect them, while they rape and pillage third world economies. Everyone bitches about Europe being socialist and how turning into a socialist country would be bad for the US. If it is as bad as they say why would business move over seas in the first place? Unless....

You still stuck on that GE paid no taxes thing?

It turns out that a Fortune/ProPublica team has also been working on a story about GE taxes. The upshot: GE lobbies a lot on tax provisions, which isn't very surprising. Many of those tax provisions involve their worldwide distribution of income. Like virtually all companies, GE strives to take its income in forms and jurisdictions where it will be subject to the least tax, and since GE is very large and profitable, it has a lot of resources and flexibility to devote to this tax.

However, it seems that the New York Times was simply factually incorrect on the claim that wound up in its headlines: that GE paid no US taxes in 2010, and gained a "tax benefit" of $3.2 billion. The company paid estimated taxes all year, and seems to have some tax liability for the year, though no one right now knows how much. Including GE. Frankly, the company probably won't know for several years, as large companies essentially have branch offices of the IRS in their headquarters, and their tax bills are the subject of lengthy negotiation.


Much of the confusion seems to be due to a technique that the New York Times has become very fond of: comparing financial accounting results to tax accounting results, and assuming that differences between financial accounting income and tax accounting income represent some sort of tax chicanery.

Yes, GE Paid Taxes in 2010 (We're Pretty Sure) - Megan McArdle - Business - The Atlantic

It seems that GE actually overpaid their taxes, and is (probably) getting a refund. Imagine that.

 

[kaz]

If we tax big business, and they in turn raise their prices, we as consumers have a choice of weather or not to purchase their products. So the raising of prices due to taxation does not get passed on to the consumer because we have a choice of wether or not to patronize them.

First, if you took an economics class and understood supply and demand better then it would help you understand this better. But the things to point out here are it's worse then corporations not passing it on. Just a couple:

1) Investors have to get a certain risk adjusted return for their investment. When taxes go up, companies stop producing products that are marginally getting that return, which costs jobs. You said you're thinking about it, did you think about that?

2) The most efficient companies make the most money and pay the most taxes, the less efficient make less and pay less tax, so you're harming those who do the best job.

3) Corporate taxes are applied to those with operations in the US versus importers. We tax US companies and foreign companies with US operations, so they help drive production offshore. Don't we want it onshore?

4) Raising taxes does raise prices, which means people can buy less (econ 101 and the supply and demand curve), which causes companies to need to raise prices, which results in job cuts.

In the end, corporate taxes incent everything we don't want to happen. Well, that would be everything but punishing the successful.

 

[Mad Scientist]

Although I am not a "business" I own rental property in California. Two years ago California levied an "out of state home owner rental tax" on me (about $75 a month) so you know what I did? I increased the rent by that amount. See how that works?

Plus I'm getting back about $500 from California this year even though I don't live there. I bet if I created my own Limited Liability Company (LLC) and followed the tax laws in that, I could get even more back!

Whadya' think?