Should Corporations Pay Taxes?

[August1991]

For this question, I'm going to defer to a Quebec blog:

Je vais me concentrer sur un seul des innombrables sophismes économiques véhiculés par notre ami blagueur: la notion qui veut que les entreprises paient de l'impôt, et que si elles ne le font pas, ce sont des individus qui vont devoir en payer plus, comme s'il y avait un vase communiquant entre les deux.

Cette croyance s'accorde avec le fait que dans la mythologie gauchiste, l'entreprise est une sorte de monstre abstrait qui réside en dehors de la société réelle. Au mieux, ce monstre crée de la richesse mais tente de la garder toute pour lui, et il faut donc le forcer à la partager par des impôts élevés; et au pire, il dévore la richesse créée par le vrai monde, ce qui justifie qu'on l'extermine.

Link

Google translation:

I am going to focus on one of the countless economic fallacies conveyed by our friend joker: the concept, which requires that the companies pay the tax, and if they do not, they are individuals who are going to have to pay more, as if there were a vase communicating between the two.

This belief is consistent with the fact that in the leftist mythology, the company is a kind of abstract monster who resides outside the company real. At best, this monster creates wealth but tries to keep it all for him, and should therefore be forced to share it with high taxes, and at worst, it devours the wealth created by the real world, which justifies that 'It kills.

Translated Link

Taxes on corporate profits are in line with the idea of young ignorant (male) Leftists around the world who believe that wealth is obvious and easy. "I'm young and strong and capable, so let's share the wealth and make the rich pay."

Corporate taxes are in fact double taxation. Despite what Leftists claim, corporations don't really exist and they're certainly not "persons" - despite what US corporate law pretends. If corporations make profits, they pay the profits to individuals. These individuals should be taxed when they receive dividends - but governments should not tax corporate revenues.

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For those that care, I post this to show in a small way the thinking of many people in the francophone world. With luck, Stephen Harper's majority passes through Quebec.

Edited March 8, 2008 by August1991

[Brain Candy]

I think instead their should be strict financial penalties for outsourcing or producing excess pollution. Hell it might be even more effective by just offering significant benefits to companies that refrain from these things

Edited March 8, 2008 by Brain Candy

[jdobbin]

For those that care, I post this to show in a small way the thinking of many people in the francophone world. With luck, Stephen Harper's majority passes through Quebec.

Perhaps Dion can point out the position of the Liberals is to cut corporate taxes deeper than the Tories proposed. I guess that will put your Tory majority in perspective.

If that doesn't work, perhaps the Liberals can point out how the Tories spend like drunken sailors.

[Topaz]

I think instead their should be strict financial penalties for outsourcing or producing excess pollution. Hell it might be even more effective by just offering significant benefits to companies that refrain from these things

I like to see companies take back their own garbage, recycle their products and try to get rid of some of the plastic packages. Autos bought here should have to be made here and maybe other manufacturing products.

[xul]

Governments tax a corporation for the reason that a corporation usually is treated as an independent individual in economic activity not by it producing contamination, because it is not that a corporation with high income would make more pollution. A software company maybe should have the same income as a power plant, but it produce less pollution than a powerplant.

That a corporation is treated as an individual means the shareholders of the corporation are treated separately from the business and will not need to take the full responsibility. For example, if a person held $10 share of a corporation and the corporation went into brankruptcy, the renter would only take the share from him not his all property whether how many debt the corporation would owe from others. The government tax shareholders' income just for them does not take the full responsibility of the corporation.

And I'm not sure but I think the dividends would have been deducted from the taxable income of a corporation when government taxed it, so it is not a double taxation.

Edited March 8, 2008 by xul

[msj]

Corporate taxes are in fact double taxation. Despite what Leftists claim, corporations don't really exist and they're certainly not "persons" - despite what US corporate law pretends. If corporations make profits, they pay the profits to individuals. These individuals should be taxed when they receive dividends - but governments should not tax corporate revenues.

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For those that care, I post this to show in a small way the thinking of many people in the francophone world. With luck, Stephen Harper's majority passes through Quebec.

Corporate taxes have been adjusted in the past number of years in order to reduce and even eliminate the double taxation aspect.

You are, not surprisingly, behind the curve.

A small business corporation is normally in a better position by, in effect, arbitraging the differences in corporate tax rates, personal tax rates and the use of various other tax rules than a sole proprietor or partnership (unincorporated) is.

So, my business corporation may earn $200,000 net before tax and pay income tax at 15.5% for total taxes of $31,000. The remaining $169,000 can be paid to me as a dividend for which I will pay $36,400 in tax. So, the $200,000 in net income leads to $67,400 in combined taxes.

If I was a proprietor and earned that $200,000 as net business income then I would pay $69,100 in income tax plus $3,980 for CPP for a total of $73,080.

Of course, I could take out a lesser dividend and leave the remaining money inside the company for it to use (or perhaps invest, but that eventually leads to more complicated tax rules as the cash piles up). This means I have some choice as to how much tax I will pay and when I will pay it.

Clearly, we see how the use of a corporation can lead to deferral of taxes.

It can also be a good way to avoid paying into the CPP system if one chooses (or, better still, to choose when to pay into the CPP system - pay in until your late 50's or early 60's and then take 5+ years off which will not have any impact on the pension you would receive while saving you $4,000 per year in CPP payments).

Given this kind of flexibility, and the applicable tax rates, clearly the small CCPC (Canadian Controlled Private Corporation) and its shareholder(s) are not looking at double taxation as any kind of problem.

Now, large businesses, otoh, still have issues regarding double taxation:

For example, Big Co. earns $2,000,000 net before tax. Pays tax of ~$653,000. This leaves $1,347,000 that it pays out as an eligible dividend to its single shareholder (for simplicity) who then pays $244,500 of tax. So, total tax is $897,500.

Once again, compare this to if this guy held onto his business as a proprietorship: $860,000 in taxes.

Of course this is a simple analysis - if Big Co. was a public company that was widely held by individuals in their non-registered investment accounts then it is entirely possible for the double tax effect to be eliminated (eligible dividends do lead to negative personal marginal tax rates for people who have taxable income less than about $35,000. Yes, it is possible to earn $1,000 in actual dividend from, say, the RBC and see your taxes go down by $149 which is like having a negative marginal tax rate of 14.9%).

As the federal government continues to decrease corporate tax rates (and provinces follow suit) double taxation will be whined about less and less in the future.

Ok, I guess I really should say that those of us who know something about taxation will whine less and less.

One more thing - I should have presented my numbers above only for the federal taxes and avoided provincial ones at all (BC rates were used). The reason being that it is, with the exception of AB, the provincial corporate tax rates that are standing in the way of pure corporate integration more so than the federal rates.

[kuzadd]

corporations can pay taxes, regardless of their status as individuals or whatever.

They benefit from all the taxes collected, that provide us with our services, roads, educated workers, healthy workers , endless corporate hand- outs, I mean hand ups.

Why the new walmart in my city got all sorts of goodies that my taxes paid for , roads, hydro ,sewers, plowing of the streets, street maintenance, enabling their employees to get to work, customers to get to the corporate store, or workplace, enabling manufacturers etc, to ship their products

therefore, they can pay taxes since they benefit from them!

because they are corporations means zip!

[eyeball]

Abolish corporate taxation

Okay, abolish human taxation if that's the case. We're people too, just like corporations.

Edited March 9, 2008 by eyeball

[msj]

corporations can pay taxes, regardless of their status as individuals or whatever.

Your terminology is wrong: you mean businesses should pay taxes whether they are corporate entities or individuals for legal and tax purposes.

I agree so long as incorporated businesses do not pay more tax than if they were operated (and taxed) by an individual in a proprietorship or as a member of a partnership.