Corporate Taxes, Why?

[Vol8188]

@Thunder Good-Oil and I were discussing the need for corporate taxes in an unrelated thread. I know many of you support corporate taxes, but I do not understand why.

Mods if you could move our original posts it would be appreciated. Sorry for the inconvenience.

Here's the last message between myself and Thunder for reference.

 

[Vol8188]

@Thunder Good-Oil IDK if it's true or not that every large country taxes businesses. But that's not really the topic.

The question is why is it necessary? Other countries do it, isn't a great justification. You seem to fear that companies will never take money out of the business. If so, that's a good thing. We should want people to invest in their business. But the truth is everyone has to live and that requires money.

So how can I just incorporate and then never pay taxes? Unless I'm misunderstanding that seems to be your fear

 

[Thunder Good-Oil]

If taxes on businesses didn’t exist and 100% of the burden was on individuals then employees would cease to exist. Everybody would become an independent contractor and income would be shifted to the 0% taxed business. More than half of the tax revenues come from individuals - most of that from wages and salaries.

 

[Vol8188]

If taxes on businesses didn’t exist and 100% of the burden was on individuals then employees would cease to exist. Everybody would become an independent contractor and income would be shifted to the 0% taxed business. More than half of the tax revenues come from individuals - most of that from wages and salaries.

You've still not addressed the question. Let's use your hypothetical:

If 100% of the population were to start corporations tomorrow and never take their money out of their corporation, how would they survive?

My point is simple, they need money. In order to get money, they have to take money out of their business. When that occurs, it is taxed.

 

[Thunder Good-Oil]

In order to generate tax revenue mechanisms must be in place to measure the source. Businesses measure their income through accounting, so it’s not a reach for governments to collect their needed revenue using that system.

 

[Vol8188]

In order to generate tax revenue mechanisms must be in place to measure the source. Businesses measure their income through accounting, so it’s not a reach for governments to collect their needed revenue using that system.

That still didn't answer the question. Your fear that no one will be taxed, is it warranted or unwarranted? How do I live without money?

 

[Thunder Good-Oil]

You've still not addressed the question. Let's use your hypothetical:

If 100% of the population were to start corporations tomorrow and never take their money out of their corporation, how would they survive?

My point is simple, they need money. In order to get money, they have to take money out of their business. When that occurs, it is taxed.

Their businesses would own their houses, vehicles, and furnishings. Vacations would all be rigged to be training seminars paid for by the businesses. They might even provide meals and 100% of healthcare. The reason that some salaries are in the tens or even hundreds of millions is to take advantage of tax codes. Individuals can survive with basic needs only requiring low 5 figures or even high 4 figures.

There must be a balance between the two primary sources of government revenue (individuals and corporate tax) in order to keep the money flowing to the treasury.

 

[Thunder Good-Oil]

That still didn't answer the question. Your fear that no one will be taxed, is it warranted or unwarranted? How do I live without money?

The untaxed business that you own will loan it to you.

 

[Vol8188]

The untaxed business that you own will loan it to you.

And how will I pay that loan?

 

[Vol8188]

Their businesses would own their houses, vehicles, and furnishings. Vacations would all be rigged to be training seminars paid for by the businesses. They might even provide meals and 100% of healthcare. The reason that some salaries are in the tens or even hundreds of millions is to take advantage of tax codes. Individuals can survive with basic needs only requiring low 5 figures or even high 4 figures.

There must be a balance between the two primary sources of government revenue (individuals and corporate tax) in order to keep the money flowing to the treasury.

Money would flow to the treasure without corporate income taxes. The states without corporate income taxes still have revenue.

If the business owns their home, vehicle, etc they have to pay leases on those items. This notion that you can live for free as a business owner is unfounded in reality.

 

[DonjoVol]

If you want to get rid of the corporate tax for a business then get rid of the income tax for the employee. However if there is no corporate tax then it's reasonable for people to expect prices to immediately go down and for employees salaries to go up.

Also if a corporation were to fail then there should be no more bailouts from the government. Let's also get rid of federal student loans and let states or the institutions themselves handle any loans.

 

[Vol8188]

If you want to get rid of the corporate tax for a business then get rid of the income tax for the employee. However if there is no corporate tax then it's reasonable for people to expect prices to immediately go down and for employees salaries to go up.

Also if a corporation were to fail then there should be no more bailouts from the government. Let's also get rid of federal student loans and let states or the institutions themselves handle any loans.

What does you paying taxes have to do with corporations? You believe if you started a corporation you should be taxed on your income from the corporation and taxed on “corporate profits”?

Why should you pay more?

 

[DonjoVol]

What does you paying taxes have to do with corporations? You believe if you started a corporation you should be taxed on your income from the corporation and taxed on “corporate profits”?

Why should you pay more?

I'm going to be nice and suggest you go back and read my post again. Then let's discuss what I highlighted. Thanks.

 

[Vol8188]

If you want to get rid of the corporate tax for a business then get rid of the income tax for the employee. However if there is no corporate tax then it's reasonable for people to expect prices to immediately go down and for employees salaries to go up.

Also if a corporation were to fail then there should be no more bailouts from the government. Let's also get rid of federal student loans and let states or the institutions themselves handle any loans.

I want to expand on my precious response a bit.

Your notion of fairness seems highly skewed. You’re claiming because you pay taxes so should corporations but the reality is every member of that corporation pays income taxes.

So why should they pay an additional tax that you don’t pay? Or should we add an “employee” tax for you?

 

[DonjoVol]

I want to expand on my precious response a bit.

Your notion of fairness seems highly skewed. You’re claiming because you pay taxes so should corporations but the reality is every member of that corporation pays income taxes.

So why should they pay an additional tax that you don’t pay? Or should we add an “employee” tax for you?

I said if we get rid of the corporate tax then we should get rid of the income tax for the individual. I'm not sure if I can be any more clear in the statements I made.

By the way. Employees aren't slaves to business owners and corporations.

 

[Vol8188]

I said if we get rid of the corporate tax then we should get rid of the income tax for the individual. I'm not sure if I can be any more clear in the statements I made.

By the way. Employees aren't slaves to business owners and corporations.

You're missing the point, intentionally. You're pretending as if the owners of corporations are not taxed. Every employee within a corporations pays corporate taxes. You're wanting to give them an additional tax that you don't personally pay and you're using the idea of fairness "I pay and so should they!" as your reasoning. Yet, you don't pay a corporate or employee tax.

So why should they pay extra taxes you don't?

When have I claimed anyone is a slave to business?

 

[McDad]

If taxes on businesses didn’t exist and 100% of the burden was on individuals then employees would cease to exist. Everybody would become an independent contractor and income would be shifted to the 0% taxed business. More than half of the tax revenues come from individuals - most of that from wages and salaries.

Not so fast my friend. ICs must meet IRS-ldefined parameters. Not all (not even most) employees would qualify for IC status.

 

[Vol8188]

If taxes on businesses didn’t exist and 100% of the burden was on individuals then employees would cease to exist. Everybody would become an independent contractor and income would be shifted to the 0% taxed business. More than half of the tax revenues come from individuals - most of that from wages and salaries.

Independent contractor's do not pay corporate taxes.

 

[McDad]

Independent contractor's do not pay corporate taxes.

Not necessarily. An IC can have a corporation and contract with a company through that corporation. If there is profit, the IC's Corp is subject to Corp taxes.

 

[Vol8188]

Not necessarily. An IC can have a corporation and contract with a company through that corporation. If there is profit, the IC's Corp is subject to Corp taxes.

Sure, but his point seemed to be the idea that if you just named yourself an independent contractor and corporate taxes did not exist, you'd be able to avoid taxes. That's not true. You'd still have essentially the exact same tax liability as any other IC, correct?

The example you're talking about seems to be that the corporation will have a tax liability but the contractor may be getting paid a % and the taxes may take away from that. If so I get that and agree. But it's a different thing.

 

[McDad]

Sure, but his point seemed to be the idea that if you just named yourself an independent contractor and corporate taxes did not exist, you'd be able to avoid taxes. That's not true. You'd still have essentially the exact same tax liability as any other IC, correct?

The example you're talking about seems to be that the corporation will have a tax liability but the contractor may be getting paid a % and the taxes may take away from that. If so I get that and agree. But it's a different thing.

I'm not sure why he came to the IC workaround. The IRS has criteria by which they decide who is an IC and who is an employee. Even if you call yourself an IC, the IRS can assign employee status and thus tax the payroll you recieve. It's an old attempt to dodge payroll taxes.
An IC will have taxes too. Even as a sole proprietor IC, the net will be subject to self employment tax.

 

[Vol8188]

I'm not sure why he came to the IC workaround. The IRS has criteria by which they decide who is an IC and who is an employee. Even if you call yourself an IC, the IRS can assign employee status and thus tax the payroll you recieve. It's an old attempt to dodge payroll taxes.
An IC will have taxes too. Even as a sole proprietor IC, the net will be subject to self employment tax.

True but those aren't really equivalent to corporate taxes are they? I always thought of the self employment tax as your social security and Medicare that your employer would normally pay?

 

[McDad]

True but those aren't really equivalent to corporate taxes are they? I always thought of the self employment tax as your social security and Medicare that your employer would normally pay?

Correct. As a self employed person, you're paying your med, fica, ss and then matching as the business payroll.
That amount is not the same as corporate tax.

 

[McDad]

...my point in adding to the thread topic is to help with clarity in the discussion. I don't believe it is true to say we must have Corp taxes or employees would all be ICs.
Also, dont see how all ICs avoid Corp taxes on their end if they are structured as a corp which is providing IC services to another company.

I own a C-Corp which provides IC services to another company. I pay Corp taxes on the net, also pay F&E tax for TN.

 

[DonjoVol]

You're missing the point, intentionally. You're pretending as if the owners of corporations are not taxed. Every employee within a corporations pays corporate taxes. You're wanting to give them an additional tax that you don't personally pay and you're using the idea of fairness "I pay and so should they!" as your reasoning. Yet, you don't pay a corporate or employee tax.

So why should they pay extra taxes you don't?

When have I claimed anyone is a slave to business?

Where did I say any of that? Please go back and read my post again so we can have a logical and reasonable discussion. I know that can be a difficult task on this forum sometimes.