What is the correct corporate tax rate?
By Joe Joyer
Now that the incessant political debate over taxes has temporarily abated, perhaps, this is as good a time as any to come to terms with certain economic realities relative to corporate tax rates.
These realities are totally and completely independent and uncaring of political discourse be it Democrat argument or Republican argument. It is independent and uncaring of conservative, liberal or socialist argument.
So, here is the bold reality of corporate tax rates: Corporations do not pay taxes, only individuals pay taxes. For this reason, corporate tax rates should be 0 percent.
How is it that corporations do not pay taxes? The reasons are really quite simple. A tax to a corporation is just another expense by another name i.e. tax. It is money out the door that a corporation will set about recovering. It has several means of doing so.
First, it can raise prices on its products or services to recover the tax, provided that competition is not such that will work to discourage a price increase. But that is not the only method that can be and is used by corporations to cover any imposed tax, i.e. expense. If it cannot raise prices, it will look to reduce expenses to offset that the imposed tax. That inevitably leads to reducing hours worked by employees, or reducing wages of employees, or even to the laying off employees. The individuals in those categories will have just paid the tax, even though they may not recognize that fact.
Further, corporations can curtail any further hiring because of an imposed tax. Those persons who might have otherwise have been hired, just paid the imposed tax. Although, this is more difficult to get ones arms around, that does make it any less true.
Of course, corporations can use any combination of the above-cited actions to offset any imposed tax and often do.
One last statement regarding this subject is to cite Newton’s third law of physics – for every action, there is an equal and opposite reaction.
Joe Joyer lives in Oxford, Miss.