5 ms·

One thing that confuses me in discussions of corporate taxes: Because taxes are incorporated into the price of all products sold (COGS), all taxes are paid by t

One thing that confuses me in discussions of corporate taxes: Because taxes are incorporated into the price of all products sold (COGS), all taxes are paid by the customer in the end. Seems very inefficient to me, let's just get on with a wealth tax (forget income or VAT (aka flat-tax)).

jellicle 10y ago
Products sell for what the customer will pay, no less, no more. Studies show that taxes tend to come out of the owner's share - they're paid by the owners of the business. If people are paying $1 for hamburgers today, and the owner gets a tax cut, will hamburgers be sold for less? Doubtful.
- Tinyyy 10y ago
  If all hamburger producers get a tax cut, then some of them will be able to reduce their prices, so hamburgers will be sold for less.
- sjy 10y ago
  Can you cite some of those studies? The effective incidence of corporate income tax is controversial. With internationally mobile capital and immobile labour, a source-based corporate income tax theoretically has no impact on shareholders and results in lower wages for domestic workers, an observation supported by some empirical studies [1]. [1] Mirrlees et al, Tax by Design (2011), p 438, citing Hassett and Mathur (2006) and Arulampalam, Devereux, and Maffini (2007). You can get a PDF at http://www.ifs.org.uk/publications/5353 http://www.ifs.org.uk/publications/5353.
wmgries 10y ago
I passionately disagree with the concept of a wealth tax, unless it's only on new wealth (also known as income), because otherwise you're taxing money that has already been taxed. Money should only be taxed once. All of that said, I strongly agree with your first point. People pay corporate taxes through: 1) higher prices for products and services, 2) less employment, 3) lower returns on investments (a lot of people have 401Ks). Corporate taxes just obscure a person's tax burden.
- adamlett 10y ago
  I see the argument again and again that money should only be taxed once. I don't understand it. It seems like such an arbitrary principle. Why should money not be taxed more than once, if the result would be a wealthier and fairer society?
- Matumio 10y ago
  Money is circulating, thus the concept of taxing it only once seems a bit silly. We could argue endlessly who is really paying which taxes. E.g. if you tax income you are really just obscuring the fact that you are taxing the company who is paying this income, but the company will rise prices accordingly, so it's actually a hidden tax on consumption, etc.

jellicle 10y ago

Products sell for what the customer will pay, no less, no more. Studies show that taxes tend to come out of the owner's share - they're paid by the owners of the business. If people are paying $1 for hamburgers today, and the owner gets a tax cut, will hamburgers be sold for less? Doubtful.

Tinyyy 10y ago
If all hamburger producers get a tax cut, then some of them will be able to reduce their prices, so hamburgers will be sold for less.
sjy 10y ago
Can you cite some of those studies? The effective incidence of corporate income tax is controversial. With internationally mobile capital and immobile labour, a source-based corporate income tax theoretically has no impact on shareholders and results in lower wages for domestic workers, an observation supported by some empirical studies [1]. [1] Mirrlees et al, Tax by Design (2011), p 438, citing Hassett and Mathur (2006) and Arulampalam, Devereux, and Maffini (2007). You can get a PDF at http://www.ifs.org.uk/publications/5353 http://www.ifs.org.uk/publications/5353.

wmgries 10y ago

I passionately disagree with the concept of a wealth tax, unless it's only on new wealth (also known as income), because otherwise you're taxing money that has already been taxed. Money should only be taxed once. All of that said, I strongly agree with your first point. People pay corporate taxes through: 1) higher prices for products and services, 2) less employment, 3) lower returns on investments (a lot of people have 401Ks). Corporate taxes just obscure a person's tax burden.

adamlett 10y ago
I see the argument again and again that money should only be taxed once. I don't understand it. It seems like such an arbitrary principle. Why should money not be taxed more than once, if the result would be a wealthier and fairer society?
Matumio 10y ago
Money is circulating, thus the concept of taxing it only once seems a bit silly. We could argue endlessly who is really paying which taxes. E.g. if you tax income you are really just obscuring the fact that you are taxing the company who is paying this income, but the company will rise prices accordingly, so it's actually a hidden tax on consumption, etc.