Why should for-profit corporations pay taxes?

[Boojatta]

Why not simply tax dividends and capital gains at or near the rate at which wage income is taxed?

[SharonAnn]

1. Because the law says so. After all, a corporation is a person.

[Boojatta]

2. I'm interested in what the law should be, not what should be if the status quo prevails.

[FreakinDJ]

15. Laws Reflect the Morals of a Society - Is it Good to Move Jobs OUT of America

ask your self that question and then question the Corporate Tax Structure

[RUMMYisFROSTED]

3. End of thread.

:applause:

[GodlessBiker]

4. And what if a company doesn't pay dividends? Its corporate profit is never taxed?

[JoePhilly]

8. Ding Ding Ding!!!

Some one else was making the same claim the other day .... must be a new meme.

He said he had GE stock and he paid taxes on the dividends ... not knowing that GE gave 14 cents in dividends per share, when their profit was $1.24 per share.

[GodlessBiker]

10. And Apple pays no dividend. I hear their profits have been pretty good of late.

[Boojatta]

12. Shareholders would pay taxes on capital gains.

Are the shareholders another topic? They are, after all, merely the owners.

[GodlessBiker]

14. And what if the company makes a profit and the price of a share goes down?

Capital gains are not connected to profit at all. Sometimes when a company makes a profit, its stock price goes up; sometimes it goes down (perhaps the company didn't make as much profit as everyone expected or people are selling because they think they can make more money elsewhere).

Capital gains are another topic as they are much different than dividends.

[Hannah Bell]

5. taxing dividends & profits isn't taxes? i don;t get your point.

[Boojatta]

23. Another participant in this thread wrote: "Capital gains are not connected to profit at all."

Do you agree?

[Hannah Bell]

31. answer my question first.

[Boojatta]

32. In the OP, I simply asked two questions. I didn't make a claim, assertion, or "point."

Dividends and capital gains are kinds of income that a shareholder receives. Such income is taken into account in determining how much income tax a shareholder is required to pay.

A for-profit corporation is a legal entity that is separate from its shareholders. A corporation might itself pay taxes on its profits.

[KT2000]

6. Corporations use taxpayer

supported infrastructure and other amenities such as education, police, etc.

Should the US taxpayer subsidize the for-profit corporation's use of infrastructure and services?

[freshwest]

34. A vital point that is never addressed...

[Fire Walk With Me]

7. You've incorporated, haven't you.

[GodlessBiker]

11. LOL!

[northernlights]

9. maybe because they use up vast amounts of public services and infrastructure

from roads, water (eg Nestle, not satisfied with its current Poland Springs plants in Maine, it sues one small village after enough trying to force them to give up their local water too, in exchange for a few minimum wage jobs), etc. To sucking up vast resources such as energy (bought "on the cheap" thanks to wars we are forced to finance and fight). Not to mention the many corporations that do *not* pay a living wage, forcing their employees onto public resouces such as food stamps (Walmart famous for this). And how many of them depend on private security forces, versus the public police for protection? Fire protection?

[Boojatta]

13. I apologize for not specifying that I was talking specifically about income taxes.

It sounds as though you are talking about taxes on real estate property.

[northernlights]

17. Nestle/Poland Springs income is based on selling Maine's water

When Walmart employees don't earn a living wage, their food stamps are not paid for by property taxes.

Property taxes don't support the military. They also don't support the DOT.

[TorchTheWitch]

51. profit is income

Of course tax should be paid on profits - it's income. Shareholders also should be taxed as the money has changed hands. Anytime money changes hands a tax is involved. A company collecting their profits (income) pays out from that profit employee wages which are taxed as the money has changed hands and became the income of the employees just as the company doling out shareholder incomes from the profit is also income requiring taxation.

[TomClash]

16. Limitation of liability

The exist because they shield shareholders from losing more than whatever they invested.

Give up that perk and there's no need for corporate taxation because there wouldn't be any corporations.

That perk is why they get taxed.

[Boojatta]

18. What's the connection between limitation of shareholder liability for a corporation's actions ...

and a shareholder paying income taxes on dividends and capital gains at rates comparable to the rates paid on wage income?

For example, dividends are received by a shareholder and are then in the possession of the shareholder, who has an obligation to report the income. That obligation arises regardless of how well or poorly the corporation is performing financially. The shareholder has an obligation just as an independent entrepreneur who shines shoes has an obligation to report income paid by customers.

Moreover, there is an obligation to not only report income, but to pay any applicable income tax on income.

[GodlessBiker]

20. What's the connection? If the shareholders own the corporation, then they should all be personally

liable for all of the corporation's debts, no? If the corporation goes bankrupt, creditors should be able to come after shareholders for money due and owing, just like creditors come after us for our assets if we declare bankruptcy.

Wait, you say. You don't want shareholders to be any more liable than the value of their investment in the shares of stock of the corporation. If the corporation goes bankrupt, creditors should not be able to come after shareholders for money the corporation owes; all the shareholder should lose is the value of his or her stock. Well, that privilege will cost you. The cost is a tax on corporate profits.

As others have said, if you don't want a tax on corporate profits, but only on the moneys which pass through to the owners of the business, then don't incorporate. Of course, each owner will then be personally liable for all of the debts of the business.

[Boojatta]

21. "Well, that privilege will cost you. The cost is a tax on corporate profits."

A cost to an abstract entity like a corporation isn't a problem for wealthy shareholders. On the contrary, many shareholders may benefit from the arrangement. For example, if a corporation theoretically pays taxes at a higher rate than the shareholder, then the shareholder may receive a refundable tax credit for the difference between what the corporation theoretically paid in taxes (per share, multiplied by the shareholder's number of shares) and what the shareholder would have paid on that income.

[GodlessBiker]

24. There are very few things that are problems for wealthy shareholders.

You know, the better argument, it's a loser but it's still better, is that corporate profits should be taxed only once. Either through a corporate income tax for those profits which do not flow through to the shareholders (i.e. dividends) or through a tax on the dividends which shareholders receive.

But I think you expect a corporation to be able to shield its owners from liability for the debts of the corporation for free. And, I'm sorry, that arrangement costs society, as failed businesses are unable to pay their debts and creditors are unable to go after the owners of the corporation for those debts. A corporate income tax is one way society tries to mitigate that damage.

Another way to look at it is this - why can't we each form our own little corporation and shield our personal selves from any debts our corporation incurs (rent, credit card, car, boat, school, etc.)? Can you see the cost to society that this would be? It's an unusual thing that a corporation gets to shield its owners from its debts, and that privilege does not come without a cost.

[Boojatta]

25. Why not earmark taxes that corporations pay on their profits ...

specifically to reduce the total of all debts that corporations do not and cannot pay?

[GodlessBiker]

28. You go try that. People are already incensed that GE paid no corporate taxes ...

and that was when there is a corporate tax rate out there.

You just go ahead and convince people that corporations should pay no taxes on their profits. Good luck.

[Boojatta]

26. It's a privilege for shareholders, not a privilege for a corporation.

As I already indicated, that privilege may have associated with it a "cost" that is actually another privilege for shareholders.

[TomClash]

22. You asked why a corporation pays taxes

And I gave you the answer.

There is no connection between limitation of liability and tax rates. Rates on cap gains/dividends should be the same or higher than the rates on wages.

[Boojatta]

38. "There is no connection between limitation of liability and tax rates."

There is evidently at least one conflict of opinion between you and a participant in this thread who doesn't happen to be me.

[Boojatta]

46. This situation motivated me to create a new thread in another forum ...

Two people who are asserting conflicting claims might completely avoid discussion with each other merely because their attitudes are in harmony.

[FormerDittoHead]

19. Why not just eliminate corps altogether and let the investors take responsiblity for its actions?

Corporate tax is paid in exchange for ADDED GOVERNMENT PROTECTION that people don't enjoy.

If I'm a non-incorporated plumber, electrician, etc. and do something wrong, say someone gets injured for life, not only can they sue me for my tools and plumbing truck, but they can sue me for my house and part of my future wages, take money from me for the rest of my life and even my estate when I die.

If I'm incorporated though, the GOVERNMENT PROTECTS ME from the liability of my own mistakes!

If I'm running a non-incorporated retail store, and I buy all my inventory on credit (very common) but with the sales I pay the rent, pay my employees, pay for other things, but then run out of money and go out of business, those vendors can sue me for my house, my car, etc.

If I'm incorporated though, the GOVERNMENT PROTECTS ME from that liability.

[Gormy Cuss]

27. GE, I don't know that they do. n/t

[JoePhilly]

29. They paid 14 cents a share in dividends against $1.24 profit per share. They kept the difference.

[Justina For Justice]

30. Because They Use Our Government Services.

Corporations use our fire and police protection, as well as our roads and airports. Why should they not pay taxes for using federal, state and local community services?

[RC]

33. The simplest answer is the best answer.

[Boojatta]

36. The simplest answer is often a wrong answer.

Instead, consider the simplest answer that makes sense.

[Boojatta]

35. Corporations pay taxes on profits.

The operations of a corporation generate revenue. The operations may consume government services. There could be no profit, and the operations would nevertheless consume government services. Perhaps it would be more appropriate for corporations to pay fees for services than for them to pay income taxes on profits.

[spanone]

37. why should for profit citizens pay taxes?

[WinkyDink]

39. Why shouldn't they?

[MadHound]

40. Because they use our infrastructure and common resources at a rate higher than individuals,

And benefit proportionality more from them. Therefore it is only fair that they pay their fair share for maintenance, repair and upgrades.

[highplainsdem]

41. +1,000

[Boojatta]

42. What if it's much less or much more than their fair share?

The operations of a corporation typically generate revenue and consume government services. However, high revenues could be associated with high profits, medium profits, low profits, breaking even, low deficits, medium deficits, or high deficits.

[MadHound]

43. Key word in that answer, profits

My profit, as a human being, comes from selling my labor. The amount of government or communal resources I use in receiving that profit is relatively minimal when compared to a corporation. Take roads, just as an example. For me to receive, say a hundred thousand dollars annual profit, I travel back and forth to work in a small car or scooter. However corporations employ heavy trucks on our road infrastructure, causing more damage and speeding the need for repair and replacement.

An individual uses less resources to generate a profit than a corporation does, for the simple fact that all an individual has to do is sell their labor. A corporation has to use resources in order to make a product to sell, advertise that product, distribute it, finance it, etc. in order to make the same amount of profit.

Not to mention that corporations simply make more profit than an individual does, or even a collection of individuals. Thus, they have to use more common infrastructure and resources than an individual.

And let us not forget that it is individuals like us who collectively subsidize those corporate profits in many cases with our tax dollars.

[W_HAMILTON]

44. Any for-profit business should be (and usually is) taxed on its profits.

It's essentially an income tax, which most everyone pays. That's a no-brainer.

Your question would better be phrased as, "why do shareholders have to pay taxes when their corporations already paid taxes," and the answer to that question has already been answered by a few others in this thread.

[Boojatta]

45. Do you get to subtract your commuting costs from your employment income ...

to determine how much of your employment income is taxable? If not, then perhaps an individual's income tax is payable on something analogous to revenue rather than analogous to profit. Of course, there are also many complicated loopholes in the system for computing income tax payable by an individual. However, under those complicated loopholes there seems to be a simple system of taxing revenue rather than profit. Needless to say, in switching from taxing corporate profit to taxing corporate revenue, the tax rate could be significantly reduced and the overall effect of the change could be revenue neutral.

Do you see any potential problems that could arise from the policy of taxing corporations based on their profits? For example, if taxes on profits are lower elsewhere, then a corporation may have an incentive to relocate to a jurisdiction with a lower rate of tax on profits, disrupting a given community by ceasing to employ people in that community.

In practice, the wealthy have enough political influence to ensure that, after all loopholes are taken into consideration, they pay lower tax rates on their income than the middle class pays on its income. Thus, it is futile to try to tax the wealthy by taxing corporate profits. It makes more sense to recognize that luxury consumption is made possible by expensive inputs to production of luxury goods and services, including inputs provided through government services and government infrastructure. Taxing revenue would give corporations a strong incentive to include the tax load in the prices of their products and services.

[tpsbmam]

47. You're taking the Rethug route and shifting the tax to individual

investors instead of the corporation paying taxes. You know, not all investors are jillionaires. Half of American households own stocks either directly or, more commonly, through mutual funds. 2010 saw LOTS of Americans cashing out of the stock market due to economic fears, but still 57% of 401(k)s are invested in the stock market. Do you really want to penalize these people with increased taxes while you're absolving corporations of any tax responsibility?

http://www.nytimes.com/2010/08/22/business/22invest.html

[Boojatta]

48. Kick

[Swede]

49. Dividends and capital gains are related to securities and stock.

It has nothing to do with the profits a company generates by selling stuff.

[Boojatta]

50. To pay dividends, where does a company get money from?

[white_wolf]

52. In my mind for-profit corporations shouldn't even exist

beyond worker co-ops.

[daleo]

53. Well, they are people, aren't they? (legally speaking)

And people have to pay taxes. If they want the benefits of being a person, they have to accept the responsibilities.