Ending the myth of corporate taxes

By Neal Boortz

Politicians are good at perpetrating frauds … especially if the success of the fraud serves to increase the power of politicians. Among some of the more dangerous frauds swallowed by a naive American public are (a) the concept that America is supposed to be a democracy, (b) Social Security, and (c) the idea that businesses and corporations actually pay taxes. We gather here today to destroy one of those myths.

One of the points of contention over the new Homeland Security legislation was a section that forbade any Homeland Security Department contracts or purchases with American corporations that have moved overseas in order to escape our draconian corporate tax structure. The harsh reality is that a corporation owes its primary duty to its shareholders, not to the tax collectors. Corporations are not in business to fund governments. If it makes financial sense (and it does) for some corporations to move out of this over-taxed country, well … they should start packing.

Stand by for something you probably don’t know. If a corporation based in France, England or Germany has operations in the United States, that company will not pay taxes in its home country for profits earned here – they will pay taxes here, where the money is earned, but not at home. But – and it’s a big “but” – if a company based in the United States operates overseas, that company will pay taxes here on the overseas profits.

So, now even those of you who vote for Democrats can see why an American company might move their headquarters somewhere else. Yes, they’ll still pay taxes on the profits from their operations in the U.S., but not on those operations overseas. This means that these once-American corporations can now compete with other foreign corporations on a level tax playing field! It’s just plain good business sense and it makes shareholders happy.

Democrats have been having a field day with these corporate moves. The left knows that the average American doesn’t have a handle on the tax laws that make these moves sound business practice. They just know what the mainstream media tells them … and that is that American corporations are moving overseas to escape paying income taxes.

There’s another thing that Americans don’t know, and that is that corporations – domestic, foreign or otherwise – don’t pay taxes anyway! They collect taxes and pass them off to government. To expand on that a bit, corporations collect taxes from customers, employees or shareholders and hand the plunder over to the politicians.

There’s a simple explanation here that will do for most of you. The rest, including the occasional Democrat who has stumbled across these words, will have to read on.

Simple explanation: Only wealth can be taxed and individuals hold all corporate or business wealth. Therefore, only individuals can be taxed.

For those of you educated in government schools, we move on to an amplified explanation.

When you purchase a share of stock in a corporation, you are purchasing a share of the net worth of that corporation … a share of its value. You and the other shareholders are the owners. When that corporation earns a profit, that profit belongs to you and to the other shareholders. The majority of the shareholders determine how that profit is to be spent. It can be spent on research, development or expansion, for instance. The profit can be used to hire more employees, or to give some employees a raise! The profit can also be distributed to you and the other shareholders as a dividend.

Remember, though, that the first claim to that profit lies with the Internal Revenue Service. The corporate taxes must be paid, and for every single dollar that is paid in corporate income taxes, that is one dollar that is not available for other purposes. It’s a dollar that is not used to give an employee a raise, to hire a new employee, to purchase equipment from another business, or to be paid to shareholders as a dividend.

To be sure, you may have to trace this tax dollar down through several businesses before you find the individual who actually paid the tab. If the profit a corporation planned to use to purchase a delivery truck goes instead to taxes, you will be able to trace those tax dollars to the employees, owners and shareholders of every company involved in any facet of the manufacture of that truck – right down to the small company that makes the little switch that makes the light in the glove compartment come on.

Now … just maybe … the next time you hear someone say something like “We’re paying enough taxes, I think they should just raise taxes on all those corporations out there,” maybe you can wade in with a bit of the insensitive truth. Careful, though. If that person was educated in a government school you may find the situation hopeless.