Corporate taxes drive economy….nah.

Posted again….a voice from 2006.

In Defense of Corporate Taxes

This may well have been the subject of a post by PGL. I apologize if I’m covering the same ground… my memory isn’t always the best.

Every so often, someone brings up the idea of eliminating corporate taxes. I haven’t heard it in a few months – no doubt we’re due for it. There are all kinds of justifications for it, but the big one seems to be: the individuals who own the corporation already pay taxes on it, so why should they be taxed twice – once when the corporation makes the profit, and once when it passes on the profits to the individual.

Except in special cases in which a corporation has only a handful of owners (and the accountants can correct me if I’m wrong), in which case the corporation is just a pass-through entity and only the owners pay taxes anyway, the corporation is a distinct legal entity. If you don’t believe me, see what happens if you try to withdraw cash from the bank account of a company in which you own shares of stock.

The fact that the corporation is a separate legal entity means that it has rights – including the right to keep your hands out of its bank account. Those rights are guaranteed by… the government. This is a service provided by… the government. It is separate from the services provided to the rest of us, guaranteeing our rights, for which the rest of us pay taxes.

People who argue that corporations should be exempt from taxes never seem to feel that corporations should be exempt from legal rights and guarantees which cost money to provide. Put another way, whether they realize it or not, they are arguing that corporations should be allowed to free ride upon the rest of us.

There an additional big problem that I can see with eliminating taxes on corporations…. how long would it take for the highest paid employees of any organization – namely those at the top, to cease being employees and become sub-contractors? Eliminating taxes on corporations would quickly make sure that Leona Helmsley’s world, in which only the little people pay taxes, would quickly come to pass. But I imagine for many that’s the point.

I’d like to wish a Happy New Year to my fellow Angry Bears, but I am especially grateful to the readers of this site for giving extending to us the privilege of reading what we write and for all the comments. I don’t use the word privilege lightly. Thank you, and may the next year be a successful one for you.

Update… I changed the first sentence in the last paragraph – as previously written, it was a bit ambiguous.

Posted by cactus at 9:51 PM 2006