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Taxing businesses at all has been objected to as double taxation: the business is taxed, then the residual profits are distributed to shareholders, who are taxe

Taxing businesses at all has been objected to as double taxation: the business is taxed, then the residual profits are distributed to shareholders, who are taxed. It isn't a fringe idea: in 2015, many of the Republican candidates in the running for President stated they thought making corporate tax rates 0% would not only "boost the economy", it would essentially remove all tax laws from the books, greatly simplifying things. Superficially it sounds reasonable. But it isn't. The US military spends $700B+ every year, often times very pointedly protecting the interests of US businesses. The state department has untold people spending billions more opening markets and making trade favorable for US businesses. By and large, the benefits to individuals is an afterthought -- what is good for US business is good for US citizens is the thinking. Large swaths of the government function is spent optimizing conditions for business activity. So, to get to the point: why should I pay higher tax to protect the business interests of Grumman, and GE, and farmers, and Apple, etc? Apple derives far more benefit and far more directly than I do. Why aren't they paying their portion of the taxes to support it? If part of the cost of doing business is running overseas bases so we can exert influence, that cost should be built into the business expenses as taxes, instead of being externalized to John Q. Public. The answer is, of course, the super wealthy have captured government and a large part of the media which promotes their interests.

nybble41 7y ago
> So, to get to the point: why should I pay higher tax to protect the business interests of Grumman, and GE, and farmers, and Apple, etc? You'll end up paying those taxes regardless. When companies are taxed directly then those taxes are baked into the prices of everything they sell, just like every other business expense. This functions like an inefficient and regressive sales tax except that, unlike normal sales taxes, buyers don't see it as a separate line-item on the bill.
- tasty_freeze 7y ago
  Thank you for replying instead of simply downvoting. That isn't true. If the assertion is that if Apple has to pay $10B/year more in taxes, than they will raise the price of their products $10B/year and keep a fixed profit, that assumes there is complete price elasticity. In reality, they might raise the price of their products some, but that is fine -- the people who use the products and benefit from the government's expenditures to promote Apple's business interests are exactly who should be paying for them. I don't buy Apple products, so I shouldn't be subsidizing their products via taxes. As for calling it a regressive tax, the costs of production of the product should be built into the product price. If it is abnormally low because Apple isn't paying their share of taxes, that is a market distortion. It is regressive if you only stop at first order thinking. Apple's prices would go up, which hurts some consumers, but they would also be paying significantly more in taxes, which helps consumers. Let's pick another example. Would it be OK with you if the government decided to donate $5B/year of crude oil to Exxon? Hey, it would make Exxon's bottom line look great. I don't think anyone (except Exxon) thinks that would be right, yet that is exactly what is being done in kind: Exxon not paying much/anything in taxes, and $B spent every year globally to keep the supply of oil flowing. (As for $5B, I just picked a number out the air).
  - nybble41 7y ago
    > If the assertion is that if Apple has to pay $10B/year more in taxes, than they will raise the price of their products $10B/year and keep a fixed profit, that assumes there is complete price elasticity. No, I'm not assuming that. The quantity sold will decrease, of course, if the price increases. That is a hidden cost paid by prospective buyers who must now do without the good, complementing the more visible cost paid by those who continue to purchase the good at the higher price. A company's profitability (ROI), on the other hand, is relatively fixed—in the end all investments tend toward zero economic profit, or equivalently a level of accounting profit equal to the opportunity cost of the investment, assuming even a moderately competitive market. Higher-than-average profitability invites competition, while on the opposite side if profitability is low then investors put their money elsewhere and the business closes. There is some variation due to factors like brand recognition, other natural or artificial monopolies, and risk, but generally speaking a corporate tax won't be paid from the company's bottom line as most people imagine. There just isn't much flexibility in that area to begin with. > Exxon not paying much/anything in taxes, and $B spent every year globally to keep the supply of oil flowing. This is not a subsidy to Exxon, it's a subsidy to the people consuming oil-based products. If you want to stop subsidizing oil, fine; but that is a completely separate policy decision from where to levy the tax. Anyway it's not like you're proposing to tax Exxon specifically for the cost of keeping the oil flowing, which would defeat the point of the subsidy. A corporate income tax would spread that cost across all products, even ones that have nothing to do with oil, and be paid primarily by people who spend most of their earnings on corporate-produced goods (i.e. not the rich, who tend to spend a larger share on investments).
    - tasty_freeze 7y ago
      On the first point, the company I have worked for for the past 15 years has had wildly different ROIs during different phases of its life. Assuming that ROI is a fixed quantity will lead to a wrong conclusion. On the second point, yes, free oil to Exxon will lower the price of gas, and that is a benefit to the consumer. But you assume 100% of that benefit is given to the consumer. In reality, corporations keep as much of the profit as they can and either keep it in their war chest, acquire assets, or distribute it to shareholders.
tempestn 7y ago
You might be interested in the concept of tax integration. Tax laws are generally designed to take this issue into account.

nybble41 7y ago

> So, to get to the point: why should I pay higher tax to protect the business interests of Grumman, and GE, and farmers, and Apple, etc? You'll end up paying those taxes regardless. When companies are taxed directly then those taxes are baked into the prices of everything they sell, just like every other business expense. This functions like an inefficient and regressive sales tax except that, unlike normal sales taxes, buyers don't see it as a separate line-item on the bill.

tasty_freeze 7y ago
Thank you for replying instead of simply downvoting. That isn't true. If the assertion is that if Apple has to pay $10B/year more in taxes, than they will raise the price of their products $10B/year and keep a fixed profit, that assumes there is complete price elasticity. In reality, they might raise the price of their products some, but that is fine -- the people who use the products and benefit from the government's expenditures to promote Apple's business interests are exactly who should be paying for them. I don't buy Apple products, so I shouldn't be subsidizing their products via taxes. As for calling it a regressive tax, the costs of production of the product should be built into the product price. If it is abnormally low because Apple isn't paying their share of taxes, that is a market distortion. It is regressive if you only stop at first order thinking. Apple's prices would go up, which hurts some consumers, but they would also be paying significantly more in taxes, which helps consumers. Let's pick another example. Would it be OK with you if the government decided to donate $5B/year of crude oil to Exxon? Hey, it would make Exxon's bottom line look great. I don't think anyone (except Exxon) thinks that would be right, yet that is exactly what is being done in kind: Exxon not paying much/anything in taxes, and $B spent every year globally to keep the supply of oil flowing. (As for $5B, I just picked a number out the air).
- nybble41 7y ago
  > If the assertion is that if Apple has to pay $10B/year more in taxes, than they will raise the price of their products $10B/year and keep a fixed profit, that assumes there is complete price elasticity. No, I'm not assuming that. The quantity sold will decrease, of course, if the price increases. That is a hidden cost paid by prospective buyers who must now do without the good, complementing the more visible cost paid by those who continue to purchase the good at the higher price. A company's profitability (ROI), on the other hand, is relatively fixed—in the end all investments tend toward zero economic profit, or equivalently a level of accounting profit equal to the opportunity cost of the investment, assuming even a moderately competitive market. Higher-than-average profitability invites competition, while on the opposite side if profitability is low then investors put their money elsewhere and the business closes. There is some variation due to factors like brand recognition, other natural or artificial monopolies, and risk, but generally speaking a corporate tax won't be paid from the company's bottom line as most people imagine. There just isn't much flexibility in that area to begin with. > Exxon not paying much/anything in taxes, and $B spent every year globally to keep the supply of oil flowing. This is not a subsidy to Exxon, it's a subsidy to the people consuming oil-based products. If you want to stop subsidizing oil, fine; but that is a completely separate policy decision from where to levy the tax. Anyway it's not like you're proposing to tax Exxon specifically for the cost of keeping the oil flowing, which would defeat the point of the subsidy. A corporate income tax would spread that cost across all products, even ones that have nothing to do with oil, and be paid primarily by people who spend most of their earnings on corporate-produced goods (i.e. not the rich, who tend to spend a larger share on investments).
  - tasty_freeze 7y ago
    On the first point, the company I have worked for for the past 15 years has had wildly different ROIs during different phases of its life. Assuming that ROI is a fixed quantity will lead to a wrong conclusion. On the second point, yes, free oil to Exxon will lower the price of gas, and that is a benefit to the consumer. But you assume 100% of that benefit is given to the consumer. In reality, corporations keep as much of the profit as they can and either keep it in their war chest, acquire assets, or distribute it to shareholders.

tempestn 7y ago

You might be interested in the concept of tax integration. Tax laws are generally designed to take this issue into account.