With recent news on businesses cutting jobs (unemployment raised to 6.1%) I thought it might be interesting to look at business taxes and how they effect us.  

Ultimately, business taxes are a scam.  The federal and state governments tax businesses under the ruse that this means you don’t have to pay as much out of your paycheck.  The truth is that businesses do not pay taxes.  They just pass them through to the consumer in the form of higher prices.

However, with the advent of free trade and the global economy, there are much greater ramifications for having a higher tax rate on businesses.  We have already established that a company paying a high corporate tax rate has to sell its products at a higher rate.  If another company can pay a lower tax rate in a foreign country and then import a competitive product with no taxes on imports they can sell the product for less and make the same amount of profit.  

I know you are probably thinking, “How does this effect the average joe worker?  Who cares about where the product comes from?”  Well we should all care.  When a corporation or even small business locates in an area they bring jobs.  Many times these are good paying jobs that are then supported by lower paying jobs.  This gives a community not only high earners but entry level positions so that young people move into a community and keep it revitalized.   A country, state, or municipality that keeps its corporate tax rate too high hurts the people who live there.  

A great example would be the merger of Daimler Chrysler.  When Daimler took over Chrysler the newly formed company had a choice about where to place its headquarters.  Because the U.S.A. has the second highest corporate tax rate in the developed world they chose to locate in Germany and save themsleve 17% in taxes per year.  As a result the U.S. lost out on having all those highly paid executives living in our country paying taxes.  We also missed out on all the vice presidents, middle managers, secretaries and low level employees that come with a corporate headquarters.  This also doesn’t take into account the jobs it would take to support all those employees (shopping malls, grocery stores, people to build roads and homes, etc.).  Through this example it can be easily seen that the big loser in this scenario was the average joe worker in the U.S. (not to mention the governement treasuries that lost out on all those tax revenues).

If we want to see our economy rebound in a big way we need to start putting the pressure on elected officials to, not just cut but, slash corporate taxes.  Someone promising to do that would have my vote in a heartbeat.