Corporate Tax Reality Check
What many do not realize is that corporate taxes are part of the company's cost structure and as such, corporations may be viewed as not actually paying taxes. Instead, corporations attempt to pass their tax assessment to the consumer through higher retail prices. However, foreign companies with lower corporate tax rates and / or lower labor rates tend to have a competitive advantage in pricing that in some cases results in US companies being forced to absorb their inefficient cost structure.
So, what does this mean?
1. If the corporation is able to pass 100% of its tax into its retail prices, the end consumer is the one who actually pays the "corporate" tax. This pass-through has no bias among economic classes which results in the poor shouldering a disproportionate amount of the "corporate" tax (wealthier individuals have a much higher savings / spending ratio)
2. If the corporation is not able to have 100% of its tax included in its retails:
a) Other internal costs will be reduced (i.e. labor reductions through pay increase limitation / freezes, higher production standards, changing to an overseas-based operation) and/or
b) Earnings will be decreased resulting in lower stock values and a higher capitalization rate (higher costs) for public corporations. These higher costs result in greater inefficiency.
c) Of course lower stock values / returns also have a significant impact upon a company's (and state's) ability to fund pensions through investments, insurance rates (including health care cost), and an individual's ability to retire, and many other issues.
These are just a few issues related to corporate taxes. In reality, there is an extremely complicated relationship between individuals and corporate entities but there is no denying that this relationship does exist. The old saying "What is good for GM, is good for America" is very much as true today as it was during the time of its origin.
