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Thursday, August 18, 2011

You Can't Tax A Corporation

There was an amusing incident, where Romney debated a heckler regarding taxation of corporations. Both Romney and the heckler were misinformed.

A corporation is an abstract fictional representation. You can't tax a corporation any more than you can tax Santa Claus.

A "tax on corporations" is actually a tax on the people who use the corporation. You can tax the shareholders. You can tax the CEO. You can tax the employees. You can tax the customers.

You can't tax the corporation itself.

Any tax on a corporation will be realized the people who make up the corporation.

If you tax shareholders, then you're pushing down the stock market.

If you tax the CEO 10% more, he might just pay himself 10% more. After all, he has a monopoly.

If you tax the employees, then the people are working harder for less salary.

If you tax customers, then people are paying higher prices.

In the current economic system, large corporations have an oligopoly/monopoly. If corporate taxes are raised, the cost will merely be passed on to customers as higher prices.

Corporate tax rates only really matter when corporations compete with unincorporated individuals. In that case, higher corporate tax rates make it easier for individuals to compete with large corporations. In the present, it's effectively illegal to compete with established large corporations.

Most State costs are a regressive tax on individual business owners. For example, regulatory compliance costs are a huge regressive tax.

You can't tax a corporation. A corporation is an abstract fictional entity. When corporations have a monopoly, any tax is passed on to customers via higher prices. Corporate tax rates only matter when corporations compete with unincorporated individuals. In the present, the State economic system makes it almost impossible for an individual to compete with an established corporate monopoly.

1 comment:

Anonymous said...

> You can't tax a corporation any
>more than you can tax Santa Claus.

You have a lovely turn of phrase!

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