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In reply to the discussion: Graphic: Who Pays Taxes [View all]DirkGently
(12,151 posts)19. Nope. Corporations do not just "pass on" all the taxes they pay. They can't.
This is an old bit of creative conservative economic theory to excuse cutting corporate taxes. As economists have long known, they can't do that though, because market forces will not allow it.
In the first place, almost no economists believe that the incidence of corporate income taxation falls on consumers. Most studies show that the actual burden of the tax is unequally divided between corporate shareholders, the corporation itself and the corporations employees but never consumers. In 1962, Arnold Harberger, a conservative University of Chicago economist and colleague of Milton Friedman did a careful study of the incidence (distribution of the burden) of the corporate tax and found that it fell largely on corporate shareholders in the form of lower dividends and stock value. Other studies show some ratio of distribution between labor and management, but it almost never includes consumers of the corporation's output. Another free market economist, Bruce Bartlett (a former Reagan adviser), explains why;
"...most people assume that the corporate income tax is largely paid by consumers of its products or services. That is, they assume that although the tax is nominally levied on the corporation as a whole, in fact the burden of the tax is shifted onto customers in the form of higher prices. All economists reject that idea. They point out that prices are set by market forces and the suppliers of goods and services arent only C-corporations, which pay taxes on the corporate tax schedule, but also sole proprietorships, partnerships and S-corporations that are taxed under the individual income tax. Other suppliers include foreign corporations and nonprofits. Therefore, corporations cannot raise prices to compensate for the corporate income tax because they will be undercut by businesses to which the tax does not apply."
"...most people assume that the corporate income tax is largely paid by consumers of its products or services. That is, they assume that although the tax is nominally levied on the corporation as a whole, in fact the burden of the tax is shifted onto customers in the form of higher prices. All economists reject that idea. They point out that prices are set by market forces and the suppliers of goods and services arent only C-corporations, which pay taxes on the corporate tax schedule, but also sole proprietorships, partnerships and S-corporations that are taxed under the individual income tax. Other suppliers include foreign corporations and nonprofits. Therefore, corporations cannot raise prices to compensate for the corporate income tax because they will be undercut by businesses to which the tax does not apply."
http://www.dailykos.com/story/2014/5/8/1297707/-Do-Corporate-Income-Taxes-Really-Get-Passed-On-To-Consumers-Another-Conservative-Zombie-Myth
Taxes are on profits, and profits are calculated at the end of a tax year by adding up all the revenue and subtracting all the costs. When a product or service is sold the company doesn't really know yet how much profit, if any, it will have at the end of the year, so it doesn't know what the tax will be, so how can it adjust prices? But if a company was able to just raise prices based on anticipation of profits, then the result would be that profits would be higher because of the higher price charged, which means taxes would be even higher, so the company should have raised prices even more, but that means the profit would be even higher, so they have to go back and charge more, but then ... I think you are starting to see how silly this idea of raising prices to cover taxes can get.
About those competitors -- if one company is doing well and therefore making a profit, and another company is not doing so well, and therefore not making as much profit, and the first company raises prices to cover the taxes on the profit, then the second company has a price advantage so the first company loses sales and isn't going to have a profit after all so they really should put the prices back down, but then the other company's price advantage goes away and they are making a profit again so they should raise prices but ... Hey, this just gets silly, too!
Companies do not pass on taxes to their customers. So don't fall for this tax trick, it's just silly.
About those competitors -- if one company is doing well and therefore making a profit, and another company is not doing so well, and therefore not making as much profit, and the first company raises prices to cover the taxes on the profit, then the second company has a price advantage so the first company loses sales and isn't going to have a profit after all so they really should put the prices back down, but then the other company's price advantage goes away and they are making a profit again so they should raise prices but ... Hey, this just gets silly, too!
Companies do not pass on taxes to their customers. So don't fall for this tax trick, it's just silly.
http://www.huffingtonpost.com/dave-johnson/tax-tricks---do-corporati_b_541709.html
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It's cheaper and easier for the govt to police a few corporations instead of millions of Americans.
grahamhgreen
Dec 2015
#6
You'd like the people who get millions in salaries to get it tax free?
muriel_volestrangler
Dec 2015
#15
id rather have the corporations collect them cause then if i decide not to buy their product
saturnsring
Dec 2015
#5
if their tax rate was 20% and no one bought anythng they had to sell who would pay their 20%
saturnsring
Dec 2015
#13
That's not really correct. Companies generally don't keep prices "low" out of the goodness of their
MillennialDem
Dec 2015
#33
That only applies in a cartel or monopoly scenario, and in the cartel scenario it only
MillennialDem
Dec 2015
#37
Yeah it is but you're a true believer and no amount of evidence will change your view
MillennialDem
Dec 2015
#39
Nope. Corporations do not just "pass on" all the taxes they pay. They can't.
DirkGently
Dec 2015
#19
So you agree no economists think corporate taxes are "generally" passed on to consumers.
DirkGently
Dec 2015
#54
Economists establishing corporate taxes aren't passed to consumers was probably "the best."
DirkGently
Dec 2015
#73
I assume the material in this post was written by an academic "economist".
former9thward
Dec 2015
#51
If you look closely, you can just barely make out the system "fix" that Bill Clinton made
Bucky
Dec 2015
#4
I would agree to eliminating all corp. taxes in exchange for no corporate campaign contributions
Yavin4
Dec 2015
#26
Those "market forces" are working well for the corporations...for us, not so much...
Bigmack
Dec 2015
#64
They'll just whine that the $4,000 per year is letting them keep their own hard earned money - which
MillennialDem
Dec 2015
#35
Do the corporations get tax breaks for expense of lobbyists and politicians on the payroll?
Tierra_y_Libertad
Dec 2015
#46