Friday, September 23, 2005

Politics: The Big Lie of corporate taxation...

"Taxing those evil fat cat multinational corporations" is a popular theme amongst the William Jennings Bryan-esque populists that infest the grassroots of both major American political parties these days. Unfortunately for them, it's a completely bogus idea.

"Corporate taxes" are a myth and a joke. For every $1 demanded of a corporation, they take $0.50 from their employee's salaries and get the other $0.50 by jacking up the price of their goods/services.

You can't tax a corporation; it's merely an indirect way of extorting more money from the taxpayers.

(Example: The government decides that it will fund the "Diapers For Needy Babies" program by taxing I.N.C. Inc.'s baby diaper division $1,000 dollars per year, since it is an evil big corporation. Where does I.N.C. get this extra $1,000? By waving a magic wand? No, by raising the price of its diapers by $500 and by laying off $500 worth of employees. Now you have more needy babies, and more expensive diapers.

Does this generate a net good for society?)


Marko said...

No, but it has a double benefit for the Congressdrones who thought up the program.

Net benefit A is to make the supporter of the program appear compassionate.

Net benefit B is the extra $1,000 in the government kitty that can now be budgeted to buy votes, in the form of subsidies, pork barrel items, or handouts. When those $1,000 change hands again, the politician then has a chance for a bonus recurrence of Net Benefit A.

Anonymous said...


Rope, tree, politician. Some assembly required.

wrangler5 said...

The "value" of corporate taxes is largely cosmetic and for the benefit of a portion of the political class. It is a useful prop for the class warfare that the left has waged against the successful since at least the New Deal.

In addition, the tax law can be a very convenient way for politicians to influence behavior without having to approprite funds to pay for it. Want people to buy more widgets? Put in a special tax benefit (credit, faster depreciation, etc.) for widget purchases.

Ravenwood said...

The third group is the corporation shareholders, who just like the employees and customers, are people.

Corporate taxes must be paid by one (or all) of those three groups of people.