Why is there a corporate Income tax?

Question

No business pays taxes. In fact when it's all said and done, no successful business really pays for anything. Everything is paid for by the consumer.

Let's say that the material and labor to make a shoe costs $5. Yes the cobbler has to pay that up front but when he sells the shoe he gets reimbursed by the purchaser. If he made a good shoe he can get reimbursed more than it cost him to make the shoe which allows him to use the excess money to buy food.

The cobbler knows he needs $100/wk to eat. He also knows he can sell 5 pairs of shoes each week. Therefore he charges a mark up of $20 making the total $25/shoe.

Now, if the government decides to tax the cobbler $2/shoe, will the cobbler just try to get buy on $90/wk for food? No, instead he just raises his prices to $27/shoe and his customers pay for his taxes as well.

So instead of having high prices and high taxes, why not have low prices and no taxes?

I wasn't clear. I wasn't meaning no tax at all. I just meant why not do away with corporate taxes?

Bookworm - Yes he would make more profit, but only until the guy down the street lowers his prices buy $1 (still higher profit than before) and takes his customers. He will, naturally respond by cutting prices to $26 as well (or lower) to get his customers back. The customer now saves money, and the cobller has an extra $5/week which is still taxed at the individual level.

Badgirl - So you really think that taxes are the government's only source of income? Pretty simplistic don't you think?

Ben - That's a good point. I think it's one of the selling points for the Fair Tax.

Mark D - Government loans are paid back with interest not with taxes, both hospitals in my city are privately owned, I have never used the TVA, EPA, SBA, REA, or medicare. I will not be drawing SSI when I retire. My children go to private schools. Most schools food services departments generate a profit from lunch money. I bought a ticket to ride the Amtrak. I pay money when I go to museums. I have no problems with tolls on privately owned and built roads.

So far as I can tell, the only thing taxes should pay for is police and military.

Answer 1

Voters are shortsighted and view corporations as unlimited sources of wealth. Of course, it ends up coming out of the pockets of the employees and customers. All taxes and all government spending (funded or debt-financed alike) tend to create inflation.

Answer 2

Because the corporation is considered to be an entity. And therefore has to pay income tax! It is as legitimate as the very idea "INCOME TAX"! However, the type, and rate, depend on the type of corporation! There are some corporation types, which pay litle or no income tax!

In my Corporation, I dont pay a salary to my officers, and i allot all earnings to the stock holders, and they pay the income taxes as individuals, and the company expenses,Including that breath of air i just took, are deducted, by the same formula! My officers are on expense accounts, of gigantic proportions, and this becomes a liability, and is totally deductible. Anyone not keeping his paperwork in order, pays the residual income tax out of his residual funds, which he got from not keeping his paperotrk in order! (it comes out of his pocket, and therefore no one ever meses up the paperwork)!

My corporation never makes a profit, the stock holders are (including officers), are in high tax brackets, but this is always offset by their expenses, (the expenses of the corporation)! Therefore, they pay high rates, but very small actual amounts, which are not much higher than just having a good job!

However, this many people paying this many taxes, still pay a large amount of taxes when they are accumulated together! This prevents the irs from double taxing my corporation, (which is a major downfall of most corporations), and my stockholders,(including officers), and my corporation also!

This is legal, and safe as a practice! After all, the word incorporation, means "no body" ), as the prefix "in-" is a negative, and the word corp means body, and ratio, is ratio, ans ration is ration, wherein that which has no body should have no liabilities! This, after all is the purpose for which ("incorporation") was created in the first place!

Am i correct?

I hope so, for my corporation is twenty years old, and functioning, at this time, with a massive stockholder population, eighty one officers, (including me). The corporation, has absolutely no liabilities,(i was once audited for an alledged violation of the corporation name copyright laws, and when i declared my countersuit, against a multi-billion dollar corporation, i was challenged to an audit of my paper trail timeline. I readily agreed as the timeline would prove my countersuit. The mega corporation, returned in three days. They had only one thing to say, as they stood there with their jaw on the floor, and their eyes as big as saucers. "HOW DID YOU DO THAT"?

My counter suit was proven there and then, without contest, and reparation was offered immediately for their own violation . They were using my corporate name, and they had made billions, doing it. I refused any remunerations, for their advertisements, and their actions had never hurt me, and had possibly even benefitted me. They remained in this name for two years, and then changed their name, and then a couple years later, changed it again. This corporation is "ING" wAS "ING DIRECT", AND BEFORE THAT WAS "ING INC"! This latter is has been the name of my corporation for twenty years. I won). But the point is their reaction, when they traced down my corporation, and it really was "INCORPORATE"! (NO BODY).

I hope this explains , the double taxation of corporations, and their stockholders, and how to moderate your corporation, to comply with the definition of the corporation type , for which you hold a license!

Dont let me tell you which configuration to have, this must meet the requirements of your own plans.

Answer 3

Congratulations. You have just disqualified yourself from public office forever.

Of course corporations do not pay taxes. The argument is that taxing corporations will ultimately tax profits which will come out of the pockets of rich shareholders. My retirement account is one of those rich shareholders (not my account individually, unfortunately).

Additionally, does taxing a product that is disproportionately purchased by the poor create a tax that is regressive? In most states we do not have a sales tax on food because it is a necessity and because those who are poor spend a greater percentage of their income on food. Should we not have a tax on corporations that produce only food products then? If we do, what about corporations that produce food products that are bad for us?

BTW double taxation is not the argument to pursue. That is how the government works . . .they tax the same money as often as possible. A corporation has asked to be a "person" under the law. If I spend my money with a sole proprietor, aren't they taxed again? And again when they spend it and again when they think about spending it LOL.

I can't disagree with Badgirl, I like the name too much!

Answer 4

Because there are fewer of them and they are the source of all money working it's way through the ecnomy - they are where the money is at.

Unless employees collect the funds coming into the company, they are not the ones really paying taxes and, even at present when they do through payroll tax deductions, it is the company that withholds and then forwards those funds to the feds.

It it really stupid to have more than 100 million people attempting to prepare tax returns under laws that constantly change when companies have people on their payroll who know those laws and the tax implications much better - in fact some of those people may have drafted the law or loophole in the first place.

The argument is more logical to have the personal income and other payroll taxes (social security, medicare, unemployment, etc.) eliminated in favor of just a gross receipts tax on corporate income.

Answer 5

Well, since a corporation is an "artificial" person, their income is subject to taxation, just like yours and mine.

Now, I see your logic, but there is assumption that if the income tax was lifted, prices for goods would drop. But I think that is wishful thinking. If people are used to paying $25 or $27 per pair of shoes, they will continue to be charged that and the cobbler would reap more profit. That is the way modern business works. Could the market drive prices down? Possibly, but there would have to be no collusion in the industry, like the big business trusts of the 19th century.

Answer 6

You're right, of course, about the fact that the consumers are ultimately paying any so-called corporatation tax.

But really, ...... pay no taxes? Do you really want to endorse the idea that the government should not have any revenue? Here is a speech, delivered in 1982 by South Carolina Democrat Senator Fritz Hollings.

A veteran came back from the Korean War and went to college on the GI Bill; bought his house with an FHA loan; saw his kids born in a VA hospital; started a hardware business with SBA loans and advice; got his electricity from TVA and, later, his water from an EPA project. His parents retired to a farm on Social Security, a farm on which they got their electricity from REA and their soil testing through USDA. When his father became very ill, the family was saved from financial disaster by Medicare and a life was saved with a drug developed through NIH research. His kids participated in the school lunch program, learned physics and math in high school from teachers retrained in an NSF program, and were able to go to college through the guaranteed student loans. He drove his car to work every day on the Interstate and moored his boat in a channel dredged by the Army corps of engineers. When floods hit his town a couple of years back, he took Amtrak up to Washington to apply for disaster relief, and, awaiting his meeting, he spent part of his day visiting the Smithsonian Museum and the Washington Monument.

And then -- after all that was said and done -- he sat down one day and wrote his Congressman an angry letter asking the federal government to get off his back, and he complained about paying taxes for all those programs created for ungrateful people who were getting a free ride.

Answer 7

Corporate income tax is the price you pay for the benefits of being a coporation. It also provides the opportunity to tax the same income twice. Personally, I would prefer to see a much smaller corporation income tax with corporation income being taxed to the owners of the corporation as is done now with Subchapter S corporations but that is not my call.

Answer 8

It is is part of the democrat web of lies so we believe we are over taxed and corporations should pay more. They don't tell you prices go up when this happens.

Answer 9

those who benefit the most from the economy, should be paying the most back into it.

also, corporations have fought for and won, the right of individuals.

Answer 10

Wow, congratulations, you're leaning a lot in that Economics 101 class.

Wait until the second week! It gets better!