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Corporations do not pay taxes, they collect them


When liberals add new taxes on corporations they often say they are taxing the “evil rich” corporations to avoid putting the burden of supporting the government on the backs of the citizens. This is happening today as federal spending advocates seek to produce more federal income to support their flagrant spending habits.

Corporations set the prices for the goods and services they produce so that the money they collect exceeds the cost of those goods and services. In this way the corporations are able to make a profit and stay in business. Unlike the government, if corporate revenue did not exceed expenses and they made no profit they would soon disappear.

So when a corporation has increased expenses from an added tax it necessarily raises its prices to maintain its profitability. Since all corporations are equally taxed, their compensating price adjustments do not put any of them at a competitive disadvantage with their peers. However, if other countries do not raise corporate taxes, local corporations could be at a competitive disadvantage in the world marketplace. The U.S. corporate tax rate of 35% is the highest in the developed world.

The corporation thus becomes the tax collector. The effect on the citizens is the same; they just pay the corporation instead of the Internal Revenue Service. The corporate tax does give the citizens some added flexibility. They can choose not to buy the taxed products or services.

It is similar to the local sales tax. The state levies a sales tax on restaurants requiring them to pay a percentage of their sales, and the restaurants add the sales tax to the patrons’ bills. The restaurant becomes the tax collection entity. Since all restaurants do the same thing none are at a competitive disadvantage with the others. But if a nearby state has no or a lower sales tax, the restaurants could lose business to establishments in the nearby state.

The people who tell you they are sparing you the burden of paying for your government by instituting a corporate tax instead of an individual income tax are either naïve or dishonest.

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