Corporations pay zero income tax.
Corporations send checks to Uncle Sam. But the checks simply reflect the additional revenues that the corporations must collect from consumers in the form of price adders required to fund those checks. If you’ve never thought about corporate taxes in this manner, now would be a good time to start. Every time some glassy-eyed, angry-faced progressive talks about taxing companies, they are covering up the undeniable fact that, in the words of economists Brian Wesbury and Robert Stein, all corporate taxes…
…are hidden because the incidence of these is ultimately paid by consumers and shareholders, and may come in the form of price increases for the things we buy, or lower values on our assets.
So thank tax-loving progressives for making products more expensive than necessary. Indeed, with a 35% corporate tax rate, America is one of the highest business tax nations on earth. And the corporations aren’t the ones paying the taxes. We are–the consumers.
And if Wesbury and Stein are right, things may get much worse.
Sadly, if some politicians get their way, this one positive feature of Tax Day could go away. A growing chorus, which now includes former Fed chairman Paul Volcker, argues that a European-style value-added tax is necessary to close the deficit–either in addition to the taxes we already pay or as a partial substitute for the tax system that already exists.
But the VAT is a hidden tax. Under a VAT the extra cost of the tax will be embedded in the prices we pay as consumers, which obscures the price we as individuals are forking over to support government. With a VAT, there will be no annual day, no moment, when we have a chance to reflect on the enormity of the amounts being expropriated.
Taxed at both ends–that’s what Americans will be if Obama and Washington progressives get their way. Rather than do the responsible thing–cut spending by 50% or more–they’ll just tack 25% or more onto everything we buy and skim the proceeds into the U.S. Treasury to spend on handouts and other big government programs.
The VAT is even more insidious than corporate taxes.
And what happens in every country with a VAT is that the hidden nature of the tax means it consistently moves higher. How do you pluck a chicken? “One feather at a time” is the answer. With a VAT, there is less squawk per feather, so more feathers will be pulled, generating even more money for government. Because it’s a hidden tax, it is a very effective tax.
Let’s see where this can lead.
In their book, Nudge, Richard Thaler and Obama regulatory czar Cass Sunstein talked about the “soft paternalism” of government “nudging” the people to do what government wants the people to do. Ludwig von Mises Institute’s David Gordon reports that the authors recommend “paternalistic ‘nudges’” to block people from “certain choices.” From Nudge:
Libertarian paternalism is… relatively weak, soft, and nonintrusive… because choices are not blocked… or significantly burdened. If people want to smoke cigarettes, to eat a lot of candy, to choose an unsuitable health care plan, or to fail to save for retirement, libertarian paternalists will not force them to do otherwise… A nudge… is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives.
Gordon describes how Thaler and Sunstein deem it okay to change the “default position” on organ donorship so people’s organs are automatically confiscated after death. Quite a nudge. For an analysis of the use of “behavioral economics” by progressives to control the people read my article: “Manipulation as policy: how Obama’s transformational coalition plays ‘We the People’ for suckers”
Anyone who thinks that D.C. nudgers won’t use selectively higher taxes on products and services to “nudge” Americans away from companies unfriendly to progressive policies has a bridge-for-sale with their name on it. How about a super high VAT on talk radio advertising air time, or on non-union companies’ products, or on private school tuition? Think that these things couldn’t happen? I’ve got a really nice bridge I’d like to discuss with you.