Are Corporate Income Taxes Passed onto Consumers?
I would like for this post to be a place to debate this topic. There was a time where I thought that passing on taxation to consumers made sense to me. As I made the assumption that taxes were a cost associated in overhead. But is it really overhead? Or is it exactly what corporate income taxes are supposed to be? And that is an “after profit tax”. It is important to understand that distinction.
Would it be wise for a company to add expected tax payments into a cost of a good? If another company doesn’t care about “after profit taxation” then they could easily undercut a company that attempts to add that expected cost into their product or service cost structure. That would then allow the competition to obtain more valuable market share and stronger revenues to capture more ad revenue and market penetration. Most executives would fire their accounting staffs if they made the blunder of adding that cost into their pricing.
Let’s also take into consideration the fact that many businesses only pay taxes via individual tax rates as sole proprietors or partnerships and other corporation set ups. I don’t have the percentage of businesses who pay taxes in this way but I do recall it being the majority of small businesses in this country, please correct me if I am wrong. So if corporations that pay “after profit incomes taxes” have to compete with people who pay no corporate income tax, then it would be disastrous for them to include that tax in their cost structure as it would price them out of the market.
Now I am not arguing that corporations should pay higher taxes, as I believe that taxation for revenue purposes are obsolete. But I can’t stand when this argument is made because it makes zero economic or logical sense. What seems more illogical is that we are so quick to tax individuals who are the consumers of products and services that the companies provide and yet not quick to tax corporations who are now hoarding trillions in profits that could be used to increase wages and hiring. So maybe the burden of taxation should shift from individuals to corporations?
As most who read this blog can attest to, I think taxation should be used as a redistribution tool and a punitive tool to help the consuming portion of our economic base consume more, so don’t let this be an argument for government revenues but an argument to reverse the tax structure to benefit business, by increasing their consumer base, and benefiting the lower classes to save and pay off debt more.