Richard Rubin, of The Wall Street Journal, thinks reforming these is not a straightforward proposition. To an extent, he’s right, as business and personal income taxes have become increasingly intertwined with each successive tax reform since Reagan.
The links between corporate and individual taxation inevitably lock policy makers in intractable disputes about popular deductions and the question that divides the parties most bitterly: is the US collecting enough money from wealthy individuals?
But this entangling, or more correctly, the concern about the entangling, simply overcomplexifies the problem.
It’s an easy thing to do conceptually, if political will is lacking, to reform business taxes. Keep in mind a single, core fact: businesses don’t pay very much of their tax bills already. Business taxes are just another cost center, whose value in large part is paid by the business’ customers in the form of higher prices that are set to recover, at the least, a significant fraction of that cost. Customers pay much of those business taxes.
The framing provides the answer. Cut through the Gordian business/personal income tax knot by eliminating the business tax altogether. This, aside from eliminating the tax pass-along to already taxed individuals, also eliminates disputes about popular deductions, credits, and so on: they go away with the taxes.
This also removes the non sequitur of whether business taxes are hitting the wealthy sufficiently. That question becomes focused on the personal taxes where it belongs and thereby brought into sharper relief.
“Customers pay much of those business taxes.”
Please clarify what part of “business taxes” are not paid by the consumers?
Consumers provide all of the funds for businesses to pay their taxes. Every single dollar.
No pricing is perfectly elastic. Some portion of every cost is absorbed by the business.
Eric Hines
“…absorbed by the business.” Falacy. All business income arrives via consumers purchasing the goods and services of the business. The consumer pays not only all of the taxes, but also all of the wages, capital equipment, buildings, land, health care….everything.
What about income from investors you may argue? Investment “income” that goes to a business in reality is merely a loan, in exchange for a portion of a businesses profits.
Why stop there? It all originates from the sweat of the worker’s brow.
Eric Hines
I am wondering why you would make such a statement considering the scope of the point I am arguing, i.e. the source of the money which meet the tax obligations of a business. If you wish to discuss heterodox value notions, I’m up for it, but first please provide either an acknowledgment of my point, or a logical argument in refute.
I am wondering why you would make such a statement considering the scope of the point I am arguing, i.e. the source of the money which meet the tax obligations of a business.
Your argument is a minor quibble on the point of my post. Leaving that aside, your scope–the origin of the money which meets tax obligations–is quite broad. That money originates as compensation for a worker’s work. Every single dollar.
Eric Hines
If my argument is a “minor quibble” it should be very easy to either concede or refute my point; you seem unwilling to do either. In truth, it is not a minor point: it provides insight to your fundamental grasp of economics and business accounting principles. If consumers only pay the majority of a business tax liability, pray tell where does the money for the minority share come from? A hole in the ground? Money tree? Or what?
You do seem to want to debate the origin of the consumers money. I have no idea why you raise this point; what possible difference could it make to the issue of business taxes as to how the consumers money is created?
However, your insistence that “every single dollar” comes from “a workers work” is absurd; please save that for your posts to Jacobin. There are myriad ways a consumer can generate income; work is but one of them.
please save that for your posts to Jacobin.
Your self importance is amusing.
Your inability to see the argument is your problem, no one else’s.
Eric Hines
An unsurprising summation.