We Pay Their Corporate Taxes For Them

Walter Williams has written a good piece about the hidden taxes we pay due to the fact that businesses pass all corporate taxes on to the consumer in the form of higher prices.  Essentially we are paying the corporate taxes when we purchase the product.  Legislators have designed the taxing process this way to hide some tax collection, making it less offensive to the citizenry.  We are fooled into thinking someone else, in this case big business, is helping us out by sharing the tax burden.  It seems more equitable this way.  No one follows the money to see that in the end, we are still paying all the taxes. What if there were no corporate taxes, and the tax liability were presented directly to the citizen taxpayer?  For one thing, products would be much cheaper.  The trade off is that we would have a higher personal tax bill.  What would be the consequences of such a change in the way our moneys reach Washington?  The net difference to our wallet would be nil.  Washington still gets the same amount of money, regardless of the route it takes to get there.  Well, if there is no financial incentive to John Q. Taxpayer, what would be the benefits to such a revision to the tax code?

  • Cheaper prices means our products would be more competitive overseas.
  • Lower taxes would mean that companies would not move offshore to escape them.  More jobs stay at home.
  • Lower taxes are an incentive to foreign capital to come here, creating more jobs for our citizens.
  • The resulting higher personal taxes would give us a more honest evaluation of the costs our government places upon us, and would inspire greater personal interest and oversight into what they doing with our money.

I suggest that all corporate taxes should be eliminated, ending the hidden tax ruse,  so that we might see what the true cost of our government really is to us.  An accurate depiction of the bottom line may lead us to examine our government’s appetite and reevaluate its diet.  To be fair to everyone, I suggest that a consumption tax, perhaps a national sales tax, should replace the income tax.  That way, the consumer who actually buys the product or service would have to pay the tax.  Furthermore, those who choose to invest their income rather than consume, would have more money unencumbered by taxes, to invest.  More investment is good for the economy.

Such financial honesty policy applies to other areas as well, and would be beneficial for us to adopt.  For instance, health insurance.  Are we really so naive as to believe that the insurance company is paying for our health care?  Of course our premiums are paying for it — plus the insurance company’s overhead and profit, fraud, over testing, frivolous emergency room visit abuse, the doctor’s fancy car, and much, much more.  If we eliminated health care insurance on a national basis and paid our own bills directly, health care costs could be reduced by as much as 75%.  That’s huge!  (But this is a subject for a future post.)


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