Sunday, July 27, 2014

Show Me a Company That Pays Taxes

The most idiotic statement I heard the other day was from President Obama stating that these "Business Inversions" going on, were a way for business to avoid paying U.S. taxes. Show me ANY company that pays government taxes. There are NONE! The tax is added on to the price of the product and THE CONSUMER PAYS THE TAX.

Basically a corporation makes widgets at a reasonable price, or goes out of business. There are all sorts of taxes the corporation has to collect and turn into the government. If the government decides it wants 26 percent of the company’s earnings and call it taxes, so be it; it is a cost of business and is factored into the price of the final product. So when you buy a new American car, built for 20K the selling price has a 26 percent markup just for the tax --- figure $25,200 with GM’s tax added in. Then figure profit for dealer and producer and the price hits $30,000 also envision all of the car parts from suppliers paying the same government tax. And add that on to what the car company has to pay to acquire parts to produce the vehicle. When done this way, the buyer has no clue to as to what goes into his 10 percent sales tax tacked on to his purchase price— he is paying tax on taxes already paid by the auto producer and his suppliers.

The President and Congress express the need for tax reform, and big business has figured out what that means, there won’t be any. Moving your mouth is not the same as rolling up your sleeves and picking up a shovel. This country wasn’t created because of religious freedom and voting rights, it was created over unjust taxation. People were tired of paying the King of England tribute taxes with no visible benefits. Obama thinks that it is our patriotic right to pay taxes. We fought a war to fix that 200 years ago and it looks like we are facing the same problem again.

All governments are incredibly stupid when it comes to taxes. The Great Depression of the 1930’s was greatly exacerbated by municipalities using the logic; “If we raise taxes, we will increase the amount collected.” People couldn’t pay the taxes and gave the city their keys to the property. The net effect, the tax revenues collected, dropped drastically. The politicians didn’t comprehend the cause and effect of what they had done, but that mattered little, they didn’t get reelected, so there was no lesson learned. The tax rate on the rich at one time was almost 90 percent and when the government dropped it down to 20 percent, there was no change or decrease in tax receipts, the rich now had more places to invest without being penalized. Changing the rate on the rich, in no way affected the amount collected. You can be stupid and poor forever, but you can’t be rich and stupid for very long.

The cost of running a business in the USA is chasing manufacturing off shore. Taxes are only one item; there is Obamacare, Social Security, unemployment insurance, workers comp and liability from ambulance chasing lawyers.

This country was settled by people voting with their feet. Corporations are now considered people, and they seem to be voting with their feet. Why do I get the feeling that the political logic doesn’t fit here? The real question that needs to be asked, is this: Why does government need more money to fix what isn’t broken, and at the same time, need less money to fix what is broken?

Common sense suggests that if it works in the USA, it will work a hell of a lot better in another country at half the price. Why does that seem like the wrong answer, but the right conclusion?


Joseph Oppenheim said...

No need for taxes when a nation can enslave workers, take land by genocide and treat women as chattel.

Jim in San Marcos said...

Hi Joseph

I'm confused. If we are a nation that has the highest standards of human decency, who are you referring to?

Joseph Oppenheim said...

America, as it was founded.

We improved, over time. Unfortunately, greatness costs money.

A nation can be judged by how well it treats its most vulnerable.

I admit it's a dilemma. Don't want to raise taxes on wealthy people/corporations to help fund social programs? Even when the wealthy do best when poverty is low.

I do think the US began its downward slide in 1968, with some blips up for hope, especially during the 90s....budget surplus, national debt projected to be paid off in abt 15 years, poverty reduced from abt 11.9% to 8.6%.

dearieme said...

You can't tax companies since they are only legal abstractions, not consumers. So any company tax is paid by some combination of shareholder, employee or customer.

It's the elementary distinction between the accounting convention of who signs the cheque (check) and the economic question of whom the incidence falls on. It falls on thee.

Jim in San Marcos said...

Hi dearieme

I agree. But I skipped over a part that makes things a bit mis leading. the US system is like a hidden VAT tax, which is able to tax people who pay no income taxes. I have no problem with that, but when a President wants to increase the tax business pays, your looking at a dentist that thinks that he can handle hemorrhoids from his end.

I'm not sure where we go from here, but I hope our next President will be able to ride a horse and kick some ass.