Tuesday, August 12, 2014

Why No Corporations Pay Taxes

I mentioned to an attorney recently that corporations never pay taxes. She looked surprised and said, "Well, of course they do."

I replied in the contrary; they did not pay any taxes.

She looked perplexed and said she was certain that corporations paid taxes.

Again, I assured her that no corporation had ever paid any taxes.

Befuddled, she looked at me and said, "Well, in law school, I was taught that corporations use government resources and that was why they have to pay taxes."

I explained to her that if her law school professors had taught her that, they were mistaken.

She insisted, once again, that I was wrong about this, so I decided to explain.

Every corporation benefits three groups of people. First, they benefit the consumers who use the company's products and services. Next, they benefit the employees who earn their livelihood working for the company. Finally, they benefit the shareholders who invest in the company's stock.

And when the government "taxes" a corporation, they're taking the money from the consumers, employees and investors who are associated with the company. Real estate doesn't pay real estate taxes. Cars don't pay car taxes and corporations don't pay corporate taxes. Only people pay taxes.

Exactly how the cost of taxes is shared between the investors, employees and consumers is a difficult question. But if you buy things, work for a company or have a retirement plan that owns stock, you are paying corporate taxes.

Corporate taxes are not very transparent. Many people are happy to "stick it to corporate America" without realizing they're taxing their own retirement plan.

. . .which is one more reason that replacing all income taxes, corporate and personal, with a national sales tax would make this a better country.
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