SavingFreakonomics — Corporations Do Not Pay Taxes
I have been meaning to get this off of my chest for a while. So many people I talk to do not understand how businesses work. They think that businesses are by nature evil. The larger they get the more evil they are. So large corporations are like the devil incarnate. For this reason many politicians have made friends of the working class by promising to tax corporations instead of individuals. The problem with this mindset is that corporations do not pay taxes. How can this be? Well, a business looks at taxes as just another cost of doing business. So if the tax rate goes up they don’t just eat it and keep everything the same. Instead they raise the price of the good or service they offer. Eventually this works its way down to the consumer in the form of higher prices. So in reality the individual is still paying the tax. The estimates vary slightly but the amount of taxes that are embedded in the goods and services we buy is somewhere around 22%. That’s just crazy. The high rate of corporate taxes also causes business to not want to put their headquarters inside the US. When Daimler and Benz merged, instead of putting the headquarters in the US, they decided to locate in Germany. Why? It saved them 17% per year in taxes. This advantage allows them to have a more competitive price on their vehicles. On top of that the US does not get the high paying jobs that go along with having corporate headquarters inside our borders. So the next time a politician talks about raising corporate taxes we need to get on to them for being dishonest for how that effects everyone.
