Friday, March 25, 2011

Tax the Corporate Bastards?

When you do, here’s what happens.

The link will take you a article (I’m going to miss the Grey Lady) about GE.  GE didn’t pay any U.S. taxes last year; indeed, it got a bit over $3 billion back from the Feds for 2010.

Here’s the part that struck me: “Over the last decade, G.E. has spent tens of millions of dollars to push for changes in tax law….[T]he most lucrative of these measures allows G.E. to operate a vast leasing and lending business abroad with profits that face little foreign taxes and no American taxes as long as the money remains overseas.”

U.S. tax structure causes G.E., and certainly other foreign and multi-national companies, to invest overseas, employee people overseas and keep the money from the investments and work overseas.  Capital investment and jobs that could be here aren’t because we see corporations as marks.  Bastards you say?

“’G.E. is committed to acting with integrity in relation to our tax obligations,’ said Anne Eisele, a spokeswoman. ‘We are committed to complying with tax rules and paying all legally obliged taxes. At the same time, we have a responsibility to our shareholders to legally minimize our costs.’”

She’s right about that boldfaced statement.  Despite what the Supreme Court says in Citizens United about corporations, they, unlike Soylent Green, aren’t people.  Corporations are legal fictions that make raising capital easier and less risky for their owners, people – the shareholders.  The managers are charged with maximizing profit.  If staying out of the U.S. is the “price” of profit, so be it.

What would happen if we started treating corporations as what they are, not people?  Well, we of course wouldn’t tax them; but, they aren’t paying much in the way of taxes now are they?*  We would be giving them an incentive to stay at home with their capital and jobs.  Guess what that means?  They are buying more American goods and employing more American people.  American goods mean American companies that make a profit for their shareholders, people, Americans who pay taxes.  And those American workers not in the leisure classes pay taxes too.  And invest in 401(k)’s and SEPs which invest in corporations’ stocks – profits for corporations mean retirement for people.

Instead of no taxes and capital and jobs overseas, you have capital, jobs and taxes here in the good old U.S.A.

*And though I’ve said it before here, probably too many times, corporations don’t pay taxes.  (I’m in a boldfacey kind of mood today.)  They tack the cost of taxes on to the price they charge people, and then pass it on to the government.  You pay the taxes that corporations remit to the government.


The Curmudgeon said...

Another illustration of my working hypothesis that the Republicans are entirely in thrall to Big Business (and, even without NBC, you don't get much bigger than GE) while Democrats are ignorant of business but inclined to the general view that 'bigger is better' so that they tend to go along with whatever the behemoths want.

But are you suggesting that corporations pay NO income tax (because they don't anyway) and then we can keep more money onshore and in the economy? The corporations might be just dumb enough to go for this -- and it would potentially result in a flood of capital.

You may be on to something....

Bill the Engineer said...

"Corporations, unlike Soylent Green, aren't people." What a great line!

Jeni said...

For as much as I understand about corporations, taxes, shareholders and such, your line of thought makes perfectly good sense to me. But then on the other hand, considering all of the above again, maybe I just don't understand near enough about this stuff.

Dave said...

Sorry for the delay in commenting on your comments - my domain server decided last week to send all of my Emails to the spam server in the cloud and I just figured it out today. I thought no one, clients included liked me anymore.

Thanks Bill.

Jeni, I don't understand much of it either, which brings me to Curmudgeon's question: I am proposing just that - don't tax corporations. I got the return of offshore business from reading a book called The Fair Tax that proposes it as good result of getting rid of income tax all together and instituting a national sales tax.

j said...

Based on your logic you don't pay taxes either. You just tack the cost on to your hourly rate and pass it on to the client.

Tax code is comprised of two parts:
- social engineering
- cronyism

Dave said...

Can't disagree J. The only difference between me a real live corporation is that I only get taxed twice, once on what I charge, less expenses and again on the money I pay to real live corporations which they pass on. Real live corporations and their owners "pay" three times, the extra they tack on to pay taxes, the taxes their owners pay on their profits and the taxes they pay for other companies' extra charges for the taxes they pass on.

I'd just like a bit more transparency, and I would hope a bit less cronyism and pay it all in one charge on what I spend, the dreaded and not understood Fair Tax.