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Corporations Don't Pay Taxes

Updated on August 9, 2009

We Pay Corporate Taxes

Before this gets started let me preface this with a few disclaimers. I am by no means a business magnate, nor an economics major. This is not an Obama-Bush thing, or Republican-Democrat thing; this is an anti-taxation thing. In fact, I invite all those that can produce a legitimate argument to challenge my logic to offer their insight. I don’t think it can be done.

The premise for this hub is based on the statement that corporations don’t pay taxes; we do. We, the citizens, bear the burden of taxation in this country, and no matter how it is spun we, the citizens, will feel any taxation levied against any entity in this country. We pay for it in the cost of goods, services, and job losses. Whether it’s disguised as minimum wage, corporate sanction, eco-tax, or any number of nifty, little titles our officials like to give them. They cost us, the consumer. I have included a quick and simple explanation to prove the point. Please feel free to substitute any type of taxation increase into the second paragraph. It all works the same.

Who Really Pays Taxes?

Margaret raises free-range chickens. She sells eggs at a road-side stand. She averages 100 dozen a day, priced at $1.50 per dozen. That means she earns $150 dollars a day, and $4,500 a month. Her livestock expenses amount to $3,500 dollars a month for feed, shelter, taxes, and vet bills, leaving her $1,000 profit to cover her other expenses.

The government decides to raise taxes by 5% and impose a 5% sales tax on produce. Since Margaret makes $4500 a month this 10% change means that Margaret must pay an additional $450 dollars a month. That means an extra $15.00 a day, or $.15 cents a dozen; driving the price of a dozen eggs to $1.65. Margaret (the business) doesn’t pay the tax, the consumer does. This isn’t corporate greed, this is business economics 101. Margaret still needs her $1,000 a month profit to pay her other expenses. This is the only way her business, and she, can survive.

Does this make Margaret an evil corporation for passing the cost of her taxes onto the consumer? No it doesn’t. All businesses must be profitable to succeed; whether it is money or community good. Without profit businesses fail. Every time a politician promises to tax a corporation, it leaves them two options. Figure out where to cut costs, or raise the price of the goods or services.

How Does a Business Cut Costs?

Where do businesses cut costs? Costs can be cut by streamlining production, or finding cheaper raw materials. Costs can be cut by reducing the quality of raw materials. But if those options are exhausted, or it will compromise the integrity of the product, where are costs cut? Labor is usually the next option. Employers can cut the number of workers, cut the amount being paid out (overtime, bonuses), or reduce benefits. All of the latter options affect the consumer. So when the government says it is going after big business by taxing, regulating, or otherwise punishing them for making money, it will eventually end up affecting the consumer; like it or not; believe it or not. But if you choose not to believe, then you are not being sensible or rational.

Lower Taxes Benefit Everyone

It has been shown time-and-time again that the best way to jump start any business is to free-up money for them to work with. Somehow it has been imagined that any profit a business makes goes right into the owner’s pocket. If you give a company a break, the owner folds it all up and puts it in his pocket. That’s not the case. Give a company a break, and stockholders benefit, bonuses for employees may increase, more workers may be hired, or the cost of goods and services may drop. Good business owners know that more money to work with is an opportunity to grow a consumer base by becoming more competitive. Being competitive could include increased marketing, lowering prices, or improving quality without raising costs. Lowering taxes, sanctions and penalties benefit the consumer, not just the business.

Good and Bad Business

There are always going to be poorly run businesses. The government cannot do anything about that. No amount of regulation and oversight is going the stop the ridiculously naïve from parting with their money, someone running a scam, or a business taking advantage of a situation. Recently, we have been inundated by media coverage of those behaving badly, but that is just a small percentage. Our economy is contingent on the continued existence of well-run, competitive and diverse industry. Let our businessmen do what they do best, and stop punishing them for being successful. Something to keep in mind while driving to your job; the one you probably owe to a successful businessman.


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    • nicomp profile image

      nicomp really 5 years ago from Ohio, USA

      'The largest actually get more from the gov than they pay.'

      So does "the 99%". That's kind of why we have a 15 trillion dollar deficit.

    • profile image

      Ashe 5 years ago

      I think you all miss the point, big business dont pay taxes. Yes the rate is 35%, most only pay a third of that. The largest actually get more from the gov than they pay. So their actually making a profit from the gov. You want fair taxing, great, start by actually making them pay first. Their still raising prices, laying off workers in america, going over seas, all the while making record profits and not paying their so called 35%.

    • nicomp profile image

      nicomp really 6 years ago from Ohio, USA

      I've had this argument with accountants, who still don't get it. They insist that because a tax form is filled out 'by a corporation' that the corporation is paying the tax. I need to use this hub as a reference.

    • beebong profile image

      beebong 7 years ago from UK

      sounds like non-sense,,,,,we all pay taxes thats democracy and capitalism!

    • Tom T profile image

      Tom T 8 years ago from Orange County, CA

      Well done! I love the simple example.

    • puppascott profile image

      puppascott 8 years ago from Michigan (As far as you know...)

      Hey K_W,

      I don't know why people have to relearn everything. Makes you wonder why we learn history if we aren't going to use it.

      Someone should put that quote on a T-shirt, with the appropriate substitutions of course.

      Thanks for the comment.

    • Kitchen_Witch profile image

      Kitchen_Witch 8 years ago from The Green Studio of Musings

      Well Said.

      You cannot spend your way into prosperity.

      I am reminded of the British Parlimentarian who said essentially

      "Prime minister Stop Spending. You are out of the Peoples money!

    • puppascott profile image

      puppascott 8 years ago from Michigan (As far as you know...)


      I agree that the states should control the taxes of their residents, but I believe the only fair tax, is in support of a military, infrastructure, and the general welfare (not to be confused with welfare), as it is outlined in the constitution.


      Why does something so simple have to be made so complex? Proof that the existence of common sense may be headed down the same path as the likes of leprechauns and sasquatch; It will only be seen, rarely, in cloudy pictures.


      Other than the lines on a highway, I can't think of many good examples where regulation has clearly averted disaster.

      Thanks for the comments.

    • hglick profile image

      hglick 8 years ago from Ronkonkoma, NY

      puppascott - excellent hub - We are a capitalistic society (still) yet the congress continues to punish big business because they (the congress) are not in favor of the free markets. Who gets punished in the long run through taxation? We Do

      There is no doubt that there is corrupt big business out there, but the honest businessman is afraid to grow his business today in fear of standing before those self righteous and arrogant fools on capital hill, who are 95% responsible for our worsening economy.

      The regulations on the banks and car companies along with the forcing of banks to offer subprime loans to a segment of society that couldn't afford a home brought our economy down.

      However, my question is this: If congress is the great overseer of all corruption and injustices in our society, who judges them, when they are corrupt (which is 90% of the time lately)??

    • profile image

      nazishnasim 8 years ago

      Superb analysis Scott. Esp. when the economy is contracting, burdening corporations with taxes only means further breakin the back of the consumers. The grass-root level does benefit through macro-schemes but increasing taxes comes at the bottom of the bottom.

      Great hub!

    • lxxy profile image

      lxxy 8 years ago from Beneath, Between, Beyond


      I'm all about the fair tax across the board. We also need to gut some of the ninny's in your government..the FCC and FDA are the first to come to mind.

      These types of activities should be handled state-by-state, as originally intended by your founders.

    • puppascott profile image

      puppascott 8 years ago from Michigan (As far as you know...)

      Thanks for your kind words.

      I think it's a simple concept; too bad so many people cloud common sense with emotions.

    • James A Watkins profile image

      James A Watkins 8 years ago from Chicago

      You are absolutely correct, kind sir.  Our corporate tax rate is 3 times higher than Ireland's (and many other countries).  In a global economy, this discourages corporations from headquartering here.  We should abolish the corporate tax—remember the stock holders are also taxed when they receive dividends or distributions; so whatever profits are not reinvested are going to be taxed anyway—and the economy would boom with new plants, new investment, oodles of foreign investment. 

      Great Hub!

    • advisor4qb profile image

      advisor4qb 8 years ago from On New Footing

      Nice hub. Good points.