Posted by
Playful Walrus on Tuesday, August 12, 2008 12:52:28 PM
A Congressional report that says most companies in the US do not pay federal income taxes is making the news. Jennifer C. Kerr, Associated Press writer, reports.
"It's shameful that so many corporations make big profits and pay nothing to support our country," said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich.
Senator Dorgan is either 1) a complete idiot when it comes to economics, business, and finances, or 2) he’s counting on you to be a complete idiot in those areas.
First, I’ll let others explain what is going on here.
An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.
"Half of all business income in the United States now ends up going through the individual tax code," Edwards said.
You see, people immediately think of a corporation like ExxonMobile when they hear this story, but in reality, most companies are simple legal entities set up by an individual, a couple, or a small group of people; they are paying taxes on all of the money the company makes via their personal income taxes. Your favorite band could be such a company.
It said companies may escape paying such taxes due to operating losses or because of tax credits.
If a company is losing money, good luck taxing them. And tax credits are things that Congress set up in the first place. It always amazes me when politicians complain about people have the audacity to play by the rules that they themselves set up.
About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.
Assets? Well if they own property they are no doubt paying property taxes. Or if those assets are things like machinery, they paid taxes on the purchase of the machinery, or the parts they used to make it.
Regardless, we get this:
"It's time for the big corporations to pay their fair share," Dorgan said.
Who decides what is “fair” anyway? Beware when a politician says such things.
Guess what the dirtiest little secret of all is? Corporations don’t really pay taxes at all. Corporations are comprised of 1) investors/owners (like shareholders… people like you and me and anyone who has an IRA or 401(k); 2) employees. So guess what happens when an corporation is taxed? Either the 1) the investors pay with smaller dividends or reduced capital; 2) the employees pay through a smaller bonus or delayed raises or even pay cuts; 3) the customers pay through higher prices; 4) a combination or all of the above.
So don’t let the politicians fool you. The only people who pay taxes are individuals like you and me – anyone who resides in the U.S., earns income in the U.S., invests in companies in the U.S., buys anything in or from a business in the U.S. If taxes are raised or "loopholes" closed, it means you and I will be paying more.