Democrats generally favor tax increases. The last time a Democrat ran for president on a platform of cutting taxes, I was spending my days dressed up as Bat Masterson and struggling to learn long-division. So that you won’t question my mental health status, please understand that the year was 1960 and I was seven!
Of course, raising taxes is never popular. So Democrats almost always resort to class envy to advance their agenda of higher taxes. They are going to cut taxes for most Americans and only raise taxes on the filthy rich (defined in this year’s political debates as those making more than $250k annually ) and on greedy corporations. Don’t worry, average, hard-working Americans, you will not be affected.
For this post, let’s look at the idea of raising taxes on corporations. Imagine that a tax increase on corporations is implemented. One or more of the following effects will occur.
First of all, a company can simply pay the tax and accept a lower profit. With a lower profit, the company is worth less and the value of the company’s stock decreases. The net result is that individual stockholders have paid the tax.
The second thing that a company could do with a tax increase is to pass it on to consumers. This is inflationary and it means that consumers pay the tax through higher prices.
The third and final option for a company hit with a tax increase is to reduce expenses. This allows them to maintain profitability without raising prices. Since the biggest expense for most companies is wages and salaries, this is a logical place to look for savings. Even if wage and salary cuts are not made directly, expense reductions in other areas ultimately translate to unemployment somewhere. A company might, for example, reduce its advertising budget and this affects employment in ad agencies and various media outlets. Thus, in this third scenario, employees ultimately pay for the tax increase through reduced or stagnant wages and/or layoffs.
Lower profits, rising prices and job losses are the inevitable result of corporate tax increases.
A call by politicians for higher corporate taxes is really a call for a declining stock market, rising prices and increased unemployment – and all three impact average, hard-working Americans.
Now Democrats claim to be concerned about declining stock market values and unemployment and high prices for food and energy. Yet they are pursing policies that will create everyone of these problems.
According to Democrats, risky lending practices in the financial sector have caused recent stock market declines and impacted the 401ks of average Americans. Democrats claim that they will protect you from this sort of thing yet higher corporate taxes will create the same effect.
When oil spiked at close to $150 a barrel, Democrats rushed forward to blame manipulative oil speculators and greedy oil companies for a callous disregard of the impact on the budgets of average Americans. But a higher corporate tax is also a cost increase to a corporation and just as likely to lead to increased prices.
Unemployment has risen to 6.1% and Democrats blame this on the policies of the Bush administration and again claim to be terribly concerned about how this impacts the everyday American worker (forget the fact for the moment that unemployment averaged 5.1% for the eight years of the Clinton administration and has average the same 5.1% during the eight years of Bush). Well, empirical studies show that increasing taxes usually lead to job losses.
It appears to me that Democrats are only concerned about stock market declines and escalating prices and loss of jobs unless they are the ones causing them!
Of course, I’m not saying that Democrats want people to be hurt by stock market declines or increases in prices and unemployment. They don’t. But the danger of Democrat style liberalism is that it wants to be judged by its good intentions rather than its actual outcomes.
When Democrats tell you not to worry about tax increases because they are only going to be paid by others, rich corporations in this case, they remind me of the woman in England in WWII. She said that she would not be impacted by the bread shortage because all her family ate was toast! When the bread of corporations is sucked up in higher taxes, there will be no toast of rising profits, lower prices and abundant jobs that benefit all Americans.
The United States should eliminate all corporate taxes since such taxes are ultimately borne by individuals. Calling them corporate taxes simply disguises their true nature.
Great post, Uncle Mike! One of my major frustrations with this whole political process is the “real” story behind the rhetoric. It seems to me that if the average American had a good working knowledge of these issues, they would be able to see past things that simply sound good on the surface.
The idea that anybody making 250K or more a year is “rich” is almost laughable to me.
Make it more than $2-$3 Million per year, and it would make a little more sense to call these people and small businesses “wealthy” (aside from the fact that I still don’t believe ideologically in that position of higher taxes on the “5%” who make up an already disproportionate amount of the tax burden).
All good points. Here’s an additional one…
Let’s say (for argument sake) that we did decide taxing corporations is a good idea (I know this is hard for you Dad, but let’s just pretend). Maybe they found some way to not have all those things happen that you said. Well, there would STILL be a problem with taxing corporate profits in this economy…what corporate profits? There are quite a few businesses right now taking some pretty significant losses. And in the world of corporate tax, corporations are allowed to carry back and carry forward both operating and capital losses to offset previous or future profits. Now, corporations do not exactly get tax refunds, but this loss offset could possible make corporations’ tax liability $0 for the next 20 years, even of they show good profits later on. And if the government is expecting these corporations to pay for their big (and when I say “big” I mean “huge”) government programs and there is no money, who will pay? They will have to tax someone. As my wise cousin already mentioned, they are already going to tax the “rich,” so that really only leaves “main street,” the people they are promising to help.
The same concept holds true with the plan to increase the tax on capital gains…what capital gains? Do you know anyone who has any capital gains right now???
Democrats make it sound like we have to get this money from somewhere (who better than the “evil” corporations that have so defined what America stands for) but we don’t. Simple answer: don’t spend my money. Don’t create a plan that requires a lot of money when no one has any (especially to do things that are better left for Americans to do on their own).
And who owns the big corporations? The shareholders, AKA you and me, and almost anyone with a 401K. So whose profits are corporate profits? Same group of people. Who is really paying corporate taxes? You guessed it.
And then the corporations pay dividends to the shareholders from the money left after those taxes have been paid.
Then what? Yep. The shareholders (you, me, anyone with a 401K) get to pay taxes on those corporate profits a second time.
Shame on those greedy corporations–er, I mean shame on the greedy government! And shame on voters for failing to see through the sham argument. Sounds like a scam to me.