Corporate Taxes Dropping Down

Corporate Taxes

Corporate Taxes

United States achieved the merit of having the highest corporate tax rate of any country in the world yesterday. But it doesn’t seem to be a merit worth celebrating, considering the wobbly state of U.S. economy. The reason U.S. got here is because politicians have exploited voters’ false belief that businesses pay taxes. Businesses undoubtedly hands over tax money to Uncle Sam, but are you aware of where the money ultimately comes from? Well, it comes out of your pocket. And there are only three ways a corporation can come up with the money it needs to pay a corporate tax: It can raise the price of its product; it can pay its workers less; or it can pay the tax out of its profits.

So, if the businesses raise the price of its product, it’s us who pay the tax; if the businesses pay its workers less, its workers pay the tax. And if the businesses pay the tax out of its profit, the stockholders pay the tax, and before you start equating “stockholders” with corporate fat cats, remember that over half of Americans own stock.

Ways Businesses Pay Their Taxes

Ideally, in each of the cases, ordinary people shoulder the burden of paying taxes. And this isn’t just an undisruptive transfer of money from one group to another. It’s a vicious circle. When businesses pass the tax on to consumers in the form of higher prices, consumers cut their purchases and so the businesses cut back on hiring. Jobs start vanishing. When businesses pass the tax on to workers in the form of lower wages, workers earn less money, and thus they cut back on their spending, which means that they buy less stuff from businesses and, again, businesses cut back on hiring and the jobs start vanishing.

Similarly, when businesses pass the tax on to stockholders in the form of lower dividends and capital gains, stockholders see their retirement portfolios stagnate and so they cut back on their spending in an attempt to bolster their retirement savings. More importantly, budding young entrepreneurs lose some of the incentive to take on the risk and headache of starting new businesses and nurturing new ideas. Again, jobs start vanishing. But, the jobs that appear are jobs that produce things the government wants, while the jobs that disappeared produced things that the rest of us wanted.

The effective corporate tax rate, that’s the actual amount of taxes businesses pay parted by their incomes, has fluctuated from 20 percent to 45 percent since 1959. When the effective corporate tax rate was above 30 percent, the federal government’s tax revenue equaled about an 18 percent of the economy. And even when the tax rate was below 30 percent, the federal government’s tax revenue equaled about an 18 percent of the economy. So, it didn’t matter whether corporate taxes were high or low, the government took the same 18 percent of the economy.

 

Richard Meryn
Richard Meryn, Associate Editor Industry Leaders Magazine (www.industryleadersmagazine.com)

Leave a Reply

Your email address will not be published.

Recent Posts

Broadcom bought VMware to Expand Its Footprint in Software

Broadcom bought VMware to Expand Its Footprint in Software

After the deal is finalized, VMware shareholders will elect to receive either $142.50 in cash or 0.252 Broadcom stock for each VMware share. Under the deal, Broadcom will also take
22 hours ago
Epic Games CEO Tim Sweeney Condemns App Store

Epic Games CEO Tim Sweeney Condemns App Store

Sweeney adds, “The problem here is a classic monopoly tie. You start with hardware. Apple makes smartphones and they profit from their smartphones — and they deserve to. But th
1 day ago
An Unexpected Bolt: Fintech Unicorn Bolt Issues Lay off Notice

An Unexpected Bolt: Fintech Unicorn Bolt Issues Lay off Notice

The New York Post reported that the Bolt layoff will see restructuring across US, Canada and Europe. They expect that roughly one-third of the entire workforce will be impacted by
1 day ago
Beeple Getting Hacked Resulted in His Followers Losing Over $438,000 in Crypto

Beeple Getting Hacked Resulted in His Followers Losing Over $438,000 in Crypto

Two tweets were posted using NFT artist Beeple’s account. The first one promoted an exclusive collection with Louis Vuitton. The second tweet announced that Beeple would soon rel
2 days ago
Microsoft Selling Metaverse to Kawasaki: It’s A Whole New World

Microsoft Selling Metaverse to Kawasaki: It’s A Whole New World

Microsoft’s corporate vice president of mixed reality, Jessica Hawk, recently told CNBC that the metaverse will change how people function across a variety of devices and platfor
2 days ago
Cryptocurrency Market Updates: Bitcoin Could Hit $500,000 Per Coin

Cryptocurrency Market Updates: Bitcoin Could Hit $500,000 Per Coin

On March 15, Novogratz went so far as to predict that the Bitcoin future price will reach half a million dollars per coin by 2027. He made this statement at the Bitcoin 2022 confer
3 days ago