Here is an idea: Let’s end taxes on corporations. Yes, I mean it —zero taxes for the big businesses of America. By now, some readers’ noses are completely bent out of shape. What? Are you crazy? Let corporations escape paying their “fair share”? How outrageous. Free them from their civic duty? Obscene. This would be […]
Here is an idea: Let’s end taxes on corporations. Yes, I mean it —zero taxes for the big businesses of America.
By now, some readers’ noses are completely bent out of shape. What? Are you crazy? Let corporations escape paying their “fair share”? How outrageous. Free them from their civic duty? Obscene. This would be a gift to greedy capitalists.
Before we get too churned up and burned up, let us look at a few realities. One is that corporations do not pay taxes. They really do not. Because they pass along the cost of taxes to others.
Corporations shift the cost of taxes to customers, by raising their prices. They also pass the cost of taxes along to workers, by holding back pay raises and benefits. And, taxes also hurt future workers, when the corporations facing them scrub plans for new plants and expansions — or by moving plants abroad.
Companies also pass along the cost of taxes by squeezing suppliers — who, in turn, squeeze their workers, to make up their losses.
Businesses also recover the cost of taxes by donating less to charities and contributing less to employee pension plans.
This is not fancy economic theory. This is everyday reality. Evidence of this is all around us.
Two years ago, Congress cut tax rates for corporations — from 35 percent down to 21 percent. In theory, this should cause companies to do the opposite of what they do when tax rates go up.
Well, they have. For instance, wages are up. Average hourly wages now run about 3.2 percent higher than a year ago. The pay of low-wage workers is up the most.
Corporations have hired more workers and created more jobs. Everywhere in the economy, we see more jobs and workers. This has forced some companies to pay workers more money. As have increases in the minimum wage.
Companies also poured 24-percent more into pension plans the first year after the tax cuts.
Meanwhile, corporations are hardly raising prices. Various indexes show only modest price rises, while some show virtually none.
After corporate tax rates came down, corporations also contributed 5.4 percent more to charities in 2018. Charity experts predict businesses will increase their gifts by many millions more this year and next.
Corporations have also been pouring money into new plants and expansion efforts. They have not blown the barn doors down. But many are clearly waiting for the smoke to clear from the trade battle with China.
If we want to reverse these trends, we need only to raise tax rates on corporations again.
Instead, we have every reason to cut our tax rates to zero for corporations. Because corporations are conduits, they simply pass taxes along to other players in the economy.
If we ended federal taxes on companies, we would probably begin to attract firms from around the world. What an alluring prospect for businesses: American soil, American workers, and zero corporate taxes.
From Tom…as in Morgan.
Tom Morgan writes about political, financial, and other subjects from his home in upstate New York. You can write to Tom at tomasinmorgan@yahoo.com, read more of his writing at tomasinmorgan.com, or find him on Facebook.