People tend to get sucked into the fallacy that corporations can pay taxes, and then complain that they don’t pay enough in taxes. Whether they claim this happens because of off-shore incorporation, sleazy accounting practices or whatever, this fallacy is, ultimately, damaging to Mr. & Mrs. Hard Working US Citizen.
Any business, from the Mom & Pop down at the corner to the Multi-Mega-Mart in the 'burbs to the globe-spanning conglomerate, exists to make money. As evil as that sounds, it is the way economies run in a capitalist society. To make money, the business must show a profit. Too many quarters without a profit and the business is bankrupt.
A business incorporates for a variety of reasons, but one of the benefits of incorporation is the issuing of shares in the company, or “Stock.” A publicly-traded company has to answer to its shareholders, who expect a fair return on their investment in the corporation. Some investors are happy with steady growth of the company, others invest to reap “dividends” from the continued solvency of the business.
An incorporated business may engage in any type of economic activity, such as manufacturing, oil and gas exploration, financial services, et cetera. They may provide goods and services to another corporate entity, or directly to consumers, or both. Good accounting practices keep the company in the black. All expenses related to the goal of the company must be offset by the income derived from the sale of the goods and services. Raw materials, labor, energy, transportation, real property, capital improvements, machinery and taxes are all expenses the corporation must account for to remain solvent. An increase in any one of the myriad categories of expense must be matched by an increase in the price the company charges for its product.
If the government chooses to increase the level of taxation on all businesses in a particular industry, they will pass those costs on to whomever their customer base is; either another corporation or individual consumers. If it is another business, they, in turn, must pass along the increase in costs to remain profitable, until it eventually comes down to a consumer. Here, the buck, literally, stops. Mr. & Mrs. Hard Working US Citizen cannot simply “pass on” the increase in their costs of doing business. Would that it were different, but even with “Cost of Living Adjustments”, or COLAs, the spending power of the average wage-earner is constantly being eroded.
Most (if not all) wage-earners cannot simply go to their employer and increase their salary to match the inflated cost of living. They may ask for a raise, or, if represented by a Union, have COLAs and other increases written into their contract. But ultimately, it is the individual wage slave who pays the costs of all businesses, whether buying a car, grocery shopping, heating and cooling the house, using a phone—we are the foundation upon which the economy is based.
Many politicians capitalize on the notion that “Those big corporations aren’t paying their fair share!!!1!!” and whip the citizenry into a lather to impose onerous taxes on those “dead loads” to “pull their weight.” With a disingenuous flourish, they sign new tax laws to bring those selfish behemoths to heel. With a wink to the affected industries, they know full well that the increased costs will merely be passed along until Mr. & Mrs. Hard Working US Citizen ends up paying the tab.
And to further rub salt in the wound, the Income Tax Brackets are not indexed to inflation. What this means is, even if you get a pay raise or COLA to match inflation, if it pushes you up to a higher bracket, you end up paying an increased rate of taxes, and consequently, take home less money.