By: Kevin Joseph – Senior – Entrepreneurship
Very often the talk about taxation is at the forefront of political discussion.
This should come to no surprise, as taxation is a very important topic because many Americans are obligated by law to pay them. Now, I may be stating the obvious here, but no one likes to pay taxes. I think it’s safe to say that a majority of Americans would rather keep their own hard earned money than give it to the government. However, we must not ignore the fact that sometimes our tax dollars are invested in services or programs that do in fact benefit us.
Overall though, there is nothing wrong with wanting to keep what you earned. However the mistake is that many Americans think that corporations should pay more taxes because they can afford it.
That way, they think, they can get away with paying fewer taxes while corporations pay more.
Are you sure?
This is the biggest mistake that middle class Americans make. We must ask a very important question: Who pays the corporate tax?
The answer is simple: People.
Your house can’t pay its property tax itself, so you have to. Likewise, a business can’t pay its corporate tax so the money must come from the citizens.
Buildings, houses, and cars, these types of things don’t have responsibility, people have responsibility.
Therefore, based on that logic, corporations don’t pay taxes, people do.
When you raise the corporate tax, you are not taxing corporations, you are taxing people. Three different groups of people to be exact.
When a company is taxed more it must look for money in some other function of their business to pay those taxes. Usually, the first place they look is to the employees.
They may decide to fire employees or cut their pay in order to free up capital to pay their taxes. Secondly, they might look at shareholders. A publicly traded company might seek to cut its dividend in order to afford these taxes.
Last and most importantly, the same people that want corporations to pay a higher tax are the ones that are most likely going to pay for it: Customers.
Companies raise the price of their products to meet corporate tax rates. You, the customer, are the one that is going to end up paying that burden. So corporations don’t pay taxes; shareholders, employees, and customers do.
We can break it down even further. Let’s say I own my own business.
In theory, my business makes $100,000 a year. The federal government corporate tax rate is 35 percent; therefore the government takes $35,000 from me. Simple math says I now have $65,000 remaining to invest in my company. This money is enough for me to add another truck, maybe a new salesman or a new product. Sounds productive. However, for the sake of the argument suppose now that the corporate tax rate is zero percent. I now have $100,000 instead of $65,000. I can now add three trucks, maybe five new salesmen or four new products. The problem here is that the U.S. has one of the highest corporate tax rates in the world. We don’t have to make it zero, but common sense says that we should make it fair.
The bottom line is that you are better at spending your money than the government is.
The more money you have in your pocket, the more you have to spend and reinvest in things that matter to you.
Let’s not cut the pie and hand out small pieces to different people.
Let’s make the pie bigger, because surely we will all benefit.