Why increase taxes on corporations? Those who believe corporate taxes should be increased believe they are “sticking it to the man” by increasing the taxes on “the man’s” company. But what actually happens? Is “the man” the one who pays, or do the costs of extra taxes get shifted to others?
Here is what happens when taxes or bureaucratic requirements on corporations increase.
- Some companies will engage in shady tax avoidance schemes. Others will lobby for preferential tax treatment, corrupting the legislature with money and making tax laws more complex and unfair, and further encouraging lawbreaking by means of bad laws.
- Usually, if a company’s taxes increase, the company raises prices. Therefore the customers of the company spend more.
- If a company can’t raise prices to cover the additional taxes, it will cut expenses by reducing the employer contribution to worker IRAs or 401Ks, and by cutting medical and other benefits.
- If the company needs to further cut expenses, it may lower its dividend, thereby damaging its stock price, which hits the retirement accounts of company employees and others.
- If a company can’t raise prices and cut expenses enough, it will further cut expenses by firing middle-class employees, or by going to cheaper, non-US suppliers.
- If firing employees doesn’t make enough of a difference, the company moves to another country with a more favorable tax structure and fires US employees and US suppliers
- If the corporation is operating on the edge already, it may simply go out of business, firing everybody and ceasing to pay taxes entirely.
- Finally, it is possible (but highly unlikely except in the fantasy worlds inhabited by leftists who still have not understood that Marxist/Leninist systems are always inhuman, cruel, murderous and evil) that corporate officers and board will cut their own draw or pay.
No matter what level of taxation exists, these are the results. Taxation of productive companies reduces the number of jobs and the prosperity of stockholders and productive workers in a nation, and it enriches the government bureaucracy.
h/t: Dennis Prager.