Should companies pay taxes?

[canvasbck]

There is another tax system (that I am in support of) in which the "hidden" taxes placed on companies goes away.

http://www.fairtax.org/site/PageServer" onclick="window.open(this.href);return false;

[PappaGun]

If companies pay no tax (which in theory, I like, but less than people paying no tax) that money will come from somewhere (someone) else.
Tax revenue is a balloon; if decreased in one area, it increases in another.
Part of the answer is to reduce expenses. The feds need to follow Texas' example on this.
The current corporate rate is too high and the tax laws too hodge podge.
It seems obvious to me that if you want to increase business activity you reduce taxes to stimulate spending.
The dems have admitted that by extending the Bush tax cuts and have said that a recession is no time to increase taxes.
A much reduced corporate tax rate, then repatriation of over seas profits would stimulate the economy more than any stimulus and without government!
I saw a blurb yesterday in WSJ.
If before the stimulus we had been told that we will spend a trillion dollars and from that we promise 8.8% unemployment and a 1.8% GDP by April, 2011, the response would have been obvious.

[sjfcontrol]

There is another tax system (that I am in support of) in which the "hidden" taxes placed on companies goes away.

http://www.fairtax.org/site/PageServer" onclick="window.open(this.href);return false;

For those interested, read "The Fair Tax Book" by Neal Boortz.

[canvasbck]

If companies pay no tax (which in theory, I like, but less than people paying no tax) that money will come from somewhere (someone) else.
Tax revenue is a balloon; if decreased in one area, it increases in another.

While this is true, the place that corporate taxes would be shifted to under the fairtax would be to consumers. Corporate taxes are also shifted to consumers under the current tax structure in the form of higher prices to offset the expenses paid by the company to the govt.

I'm about to over simplify, but bear with me. Many product prices are set by a desired return on investment (ROI) by a given companies business plan. In other words a company that seeks a 20% profit margin will not only pass down taxes that they incur, they will also have a 20% "markup" on the expense that was incurred through taxes. So we ,as consumers, pay not only the companies taxes at the cash register but also a profit margin attached to the expense that they incured.(I hope I phrased this so it makes sense).

The advantage to a consumption based tax, such as the one proposed by fairtax.org, is that those currently avoiding taxes such as illegal aliens, drug dealers, robbers, even strippers and other businesses that deal in cash only would then be paying taxes that they are avoiding now. Under that plan, even criminals would help "fill the balloon" and lessen the tax burden that is currently only being filled by those who pay their taxes.

[PappaGun]

Yeah, I like the flat tax in theory.

Too much like the VAT though.

And the VAT gives me shivers.

I need to be convinced.

There has to be a down side. Like so many things, it all sounds too perfect.

What's the downside?

[Paragrouper]

If companies pay no tax (which in theory, I like, but less than people paying no tax) that money will come from somewhere (someone) else.
Tax revenue is a balloon; if decreased in one area, it increases in another.

While this is true, the place that corporate taxes would be shifted to under the fairtax would be to consumers. Corporate taxes are also shifted to consumers under the current tax structure in the form of higher prices to offset the expenses paid by the company to the govt.

I'm about to over simplify, but bear with me. Many product prices are set by a desired return on investment (ROI) by a given companies business plan. In other words a company that seeks a 20% profit margin will not only pass down taxes that they incur, they will also have a 20% "markup" on the expense that was incurred through taxes. So we ,as consumers, pay not only the companies taxes at the cash register but also a profit margin attached to the expense that they incured.(I hope I phrased this so it makes sense).

The advantage to a consumption based tax, such as the one proposed by fairtax.org, is that those currently avoiding taxes such as illegal aliens, drug dealers, robbers, even strippers and other businesses that deal in cash only would then be paying taxes that they are avoiding now. Under that plan, even criminals would help "fill the balloon" and lessen the tax burden that is currently only being filled by those who pay their taxes.

I saw a pretty good cartoon (G-Rated mind you) that hits the point on taxes on businesses. http://www.creators.com/editorialcartoo ... -asay.html

There are alot of advantages to taxing consumption versus income (profit)--one of my favorites is that is greatly simplifies and process and cost of collecting taxes--further reducing the overall tax burden and cost to us.

[sjfcontrol]

Yeah, I like the flat tax in theory.

Too much like the VAT though.

And the VAT gives me shivers.

I need to be convinced.

There has to be a down side. Like so many things, it all sounds too perfect.

What's the downside?

Firstly, it's the FAIR tax, not the flat tax. The flat tax is an income tax. The fair tax eliminates ALL income tax in favor of a single " sales" tax on every product and service at the point of the original sale to the consumer. That is also the difference between the Fair tax and a VAT tax, which is added to the price of the product at each stage of production.

[PappaGun]

Yeah, I like the flat tax in theory.

Too much like the VAT though.

And the VAT gives me shivers.

I need to be convinced.

There has to be a down side. Like so many things, it all sounds too perfect.

What's the downside?

Firstly, it's the FAIR tax, not the flat tax. The flat tax is an income tax. The fair tax eliminates ALL income tax in favor of a single " sales" tax on every product and service at the point of the original sale to the consumer. That is also the difference between the Fair tax and a VAT tax, which is added to the price of the product at each stage of production.

Sorry. my mistake on the terminology.
But what is the downside?

[WildBill]

Without taxes a government can not exist. People and companies who make money need to pay taxes. How much they pay and what it is spent on are the only points of contention.

[Oldgringo]

Without taxes a government can not exist. People and companies who make money need to pay taxes. How much they pay and what it is spent on are the only points of contention.

Well said, WildBill . It can't be more simple than that.

[sjfcontrol]

Sorry. my mistake on the terminology.
But what is the downside?

Frankly, I don't see much of a downside when compared with what we have today. I suppose the answer really depends on who you ask.

If you're politician, there is a HUGE downside -- they would lose much of their power to control through confiscatory taxing policy.
If you think that the tax code should be used as a mechanism for wealth confiscation and redistribution -- you're out of luck.
If you in a currently untaxed service industry (a medical doctor, for example), your will now collect taxes on your services.
If you're a washington lobbyist whose function is to deflect tax policy to the benefit of your group, you're out of business.
If you're an accountant that makes most/all of your money generating tax returns, or an IRS employee that processes those returns, you'll have to find some other way to make a living.

Remember, it replaces not just the Federal Income Tax. but ALL income-related taxes, including personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.
The website does a decent job of describing it, but to really understand what it proposes, you really should read the book.
It's not expensive, and it's a fairly easy read. There is a sequel, too, ("FairTax: The Truth, Answering the Critics").

[Jumping Frog]

Without taxes a government can not exist. People and companies who make money need to pay taxes. How much they pay and what it is spent on are the only points of contention.

The current system penalizes successful businesses and rewards incompetent businesses. If you tax based on net income, consider these scenarios:

Successful Business A is growing at 13% per year, has $100 million revenue, at $100k revenue per employee implies 1000 employees, 20 million pretax income, pays 7 million fed tax. This leaves 13 million for reinvestment into growing the company, which means 130 new hires next year. Leave the $7 million in fed taxes with the company so the company now has a 20% sustainable growth rate, and is hiring 200 people next year.

Incompetent Business B also has 100 million in revenue, break-even business has no profits, no employment growth, and pays no taxes.

Our stupid tax code penalizes the most successful businesses when it should be helping them to be even more successful so they employ even more people and create more wealth.

A sales tax oriented system would have both Company A and Company B collecting the same taxes from their customers so at least it does not penalize the successful and reward the incompetent.