Economics for Dummies or Presidents (But I Repeat Myself)
Student A rents an apartment from Landlord B. Landlord B pays the property taxes to Council C on his rental unit every year like a good, full-time, property-owning resident of Columbia, MO. Now, let's say Council C decides to raise property taxes on Landlord B. Does Landlord B simply eat the increase, or does he pass the cost along to Student A? Well, in higher rent or fewer services, yes, Landlord B will find a way to make Student A pay for the taxes imposed by Council C.
Student A does pay property taxes, even if Council C never issued them a receipt for it.
Similarly, just because someone does have a receipt for taxes paid, doesn't mean they're the ones who paid the taxes.
Assume a perfect world -- one with no taxes. When you're done laughing and/or crying, please follow along.
Let's say Corporation D is smart and lucky enough to show a profit -- and in our perfect world, it doesn't need to form any shelters to dodge any taxes. What does Corp D do with the money? It has several choices, including:
• Hire more workers
• Pay dividends
• Increase pay and/or benefits
• Deposit a rainy day fund
• Invest in expanded production or merger
That's not a complete list, but you get the idea.
Now, perfect worlds never last, so let's say some smart laddie gets himself elected President, sees all that money Corporation D made, and says, "Those greedy corporations need to pay their fair share!" And Congress goes along and imposes a 25% tax on profits. What happens next? That tax gets paid, all right.
It gets paid by the new workers who weren't hired, by the retirees and mutual funds who got smaller dividend checks, by the employees who didn't get a pay raise, by the banks who got smaller deposits to loan out, by the entrepreneur who couldn't get a loan, and it's paid by each and every one of us, in the form of reduced investment and lower economic growth.
Yes, Corporation D holds the receipt for taxes paid. But the money came out of our hides, not "theirs."
We have met the greedy corporation, and he is us.
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