Businesses Don’t Pay Taxes

The title may sound confusing because if businesses don’t pay taxes then why do they file tax returns and employ all of those accountants? What I’m really talking about is where the burden of the taxation rests and the point is that individuals, not corporations, ultimately pay all taxes.

Increasing taxes on corporations means decreasing net income which means that either 1) shareholders (individuals) earn less on their investment, 2) employees earn less, 3) some employees lose their jobs, 4) consumers pay more for products or services, or 5) the company cuts costs and reduces the value to the consumer — or some combination of these. All of these options harm individuals not corporations. In fact there is no way to harm a corporation because a corporation is just the people who own it, work for it, buy from it, sell to it or are otherwise impacted in some way — all are individuals. In other words, punishing corporations is really punishing individuals.

Of the five options above it sounds easiest to choose #1 which is to let shareholders earn less. The problem is that these shareholders are mostly regular people, not Gordon Gecko or Thurston Howell III. Most “investors” are employees and small business owners with investments in 401-Ks and other retirement plans.

The bottom line is that raising corporate taxes hurts the American worker and takes money out of the pockets of regular people. None of the five options listed above enhances anyone’s job security or helps anyone get a raise.  In fact, the opposite is true.

So the next time you are listening to or participating in a debate about the level of corporate taxes you will be equipped to share the truth that taxes are really only paid by people and not companies.