Clarifying stance on corporate taxes
To the editor:
I would like to thank Charles Francis for his thoughtful comments and questions on Feb. 7 regarding my op-ed on Jan. 31 recommending the elimination of corporate taxes.
I see now that I was not clear about which taxes I was suggesting be eliminated. For the record, I meant to be recommending the elimination of corporate income taxes, not payroll, fuel use, cigarette, or other similar taxes.
Corporations see taxes as a cost of doing business that are passed forward to consumers or backward to employees (and other costs of production) in the form of pressures to restrain those expenditures. In any event, corporations exist to provide return to owners (in the form of dividends, stock buybacks and profit-driven capital gains) and to lenders (in the form of interest and debt repayment).
In the case of fuel, cigarette and similar "use" taxes, they are passed along directly to the consumer. The incidence of payroll taxes (who pays) is less clear, but both consumers pay through higher prices and employees "pay" through additional wage and benefit pressures. The corporation will continue to be profitable or it will cease to exist.
While I share Mr. Francis' belief in a moral responsibility to pay taxes, my point was that corporations (that is, their shareholders) don't actually pay the taxes, at least, not to the extent believed, and certainly not when it comes to tax increases as proposed by the Democratic presidential candidates. They are passed along to others directly or indirectly, if not immediately, then over time. Furthermore, when taxes are passed along to consumers and employees, they become regressive taxes, taxes that take a larger chunk of income from those with less of it.
My suggestion was to place the incidence of corporate taxes on those who are in the best position to afford them as well as on those who would benefit directly from tax reduction (shareholders) while also eliminating the pernicious effects of tax compliance and avoidance. I believe this would achieve Mr. Francis' (and my) goals of placing the burden of taxes on those who benefit the most from the income source not to mention those who can best afford to pay them.
The author is an adjunct professor of finance and economics at the University at Albany in New York.
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