With all the talk now-a-days about corporate tax rates and corporations such as GE not paying their "fair share" I thought it might be good to bring up a bit of logic to explain to people why corporations should not be taxed and also how even if you tax a corporation at 90% they will STILL not pay any taxes, not really anyway.

So here is how it works and if you are looking for a long read, sorry, this topic is just too simple. It all boils down to Corporations

Ok, so lets make an example corporation, lets call it ExampleTech. Now ExampleTech makes widgets which each cost $10. They have come up with the pricing by figuring out their overhead (cost of existence) and judging the market for what people are willing to pay for the product. What is mis-understood it seems by most the people calling for higher taxes on ExampleTech is the fact that ExampleTech treats taxes as overhead. That's right, the taxes charged to ExampleTech are put into the pricing.

The fact is, ExampleTech is always going to make a profit, they have to or they will not be in business so when higher taxes threaten the profit that ExampleTech is projected to make from selling their $10 widgets they have two options

Option A: Keep the widgets at $10 and make less money.

or

Option B: Raise the price of the widget to $11 and make the same or more money.

It is not hard to figure out what ExampleTech will choose to do. It is also not hard to understand now why I say that Corporations (or any business really) never actually pay taxes as it is as simple as putting the tax into the price. When taxes on business is raised this really is simply a tax on the consumers or in other words, people. This is not to say that business doesn't feel the pain of high business tax. This only illustrates how tax is simply overhead forcing prices higher and ultimately directly paid by the consumer.

So raising taxes on wealthy corporations may seem like a good idea at first but really only raises taxes on consumers as business simply passes the tax along into the price of their product making products more expensive and the distance between wealthy and poor even greater. Like most things in politics, for every action taken, hundreds of un-intended consequences arrive.

This is what makes involuntary taxes so dangerous.