Mimsy Were the Borogoves

Editorials: Where I rant to the wall about politics. And sometimes the wall rants back.

Vodka Economics

Jerry Stratton, February 22, 2012

It’s nice to every once in a while beat the big guys to the punch. The VodkaPundit “got this fantastic notion this morning, when I remembered an Econ 101 lecture given by Prof. Walter Johnson at Mizzou twenty-mumble years ago” that “corporations don’t pay taxes. Not one red cent. They never have and they never will”.

It’s a brilliant notion: Everyone is brilliant who agrees with me.

Stephen goes on to describe in detail how corporations never pay taxes:

Assume a perfect world—one with no taxes. When you’re done laughing and/or crying, please follow along.

Let’s say Corporation D is smart and lucky enough to show a profit—and in our perfect world, it doesn’t need to form any shelters to dodge any taxes. What does Corp D do with the money? It has several choices, including:

  • Hire more workers
  • Pay dividends
  • Increase pay and/or benefits
  • Deposit a rainy day fund
  • Invest in expanded production or merger

Now, perfect worlds never last, so let’s say some smart laddie gets himself elected President, sees all that money Corporation D made, and says, “Those greedy corporations need to pay their fair share!” And Congress goes along and imposes a 25% tax on profits. What happens next? That tax gets paid, all right.

It gets paid by the new workers who weren’t hired, by the retirees and mutual funds who got smaller dividend checks, by the employees who didn’t get a pay raise, by the banks who got smaller deposits to loan out, by the entrepreneur who couldn’t get a loan, and it’s paid by each and every one of us, in the form of reduced investment and lower economic growth.

Yes, Corporation D holds the receipt for taxes paid. But the money came out of our hides, not “theirs.”

I’d add (and he includes this in Professor Johnson’s example about rent) that “it gets paid by the people who buy their products and services”.

Corporations don’t pay taxes. Never have, never will. Corporate taxes are an invisible tax on workers and customers. They’re very hard to fight politically; it takes a courageous politician to call for ending this hidden tax; but every tax increase is ultimately paid by you and me: people who earn a wage and people who buy food, gas, and, when possible, fun toys. Every tax increase is ultimately paid for by workers and consumers. Remember that as Obama talks about raising taxes on dividends—or whatever “fair” tax increase he comes up with tomorrow to hide the taxes he wants to levy on you and me.

In response to No corporation pays taxes: Corporations don’t pay taxes. Their employees do, and their customers do. Every dollar that a company has to pay in taxes, that company must pass on to either their employees or their customers, if the company wants to stay in business.

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