Along with more than $2 trillion in new government spending, President Joe Biden also wants to raise the corporate income tax (CIT) rate from 21% to 28%—that’s a 33% tax hike on corporations. He also wants to increase the tax on American corporations’ foreign profits to an effective rate of 26.25%—doubling it. More government spending, taxation, and regulation is destructive fiscal policy, especially when most Americans are still reeling from government-imposed shutdowns. Treasury Secretary Janet Yellen is simultaneously pushing for a global minimum CIT rate, implemented by an international cartel of sorts.
There is just one problem with the scheme: corporations do not pay taxes.
Corporations are people de jure but not de facto. As such, they cannot pay taxes because only people pay taxes. Sure, the money goes to the IRS from a corporate account, but where would that money have gone if the IRS did not take it? Or, the more accurate question is, to whom would that money have gone?
There are basically three possibilities.
First, the corporation could have paid its employees more in the form of higher salaries and benefits or hired more employees. Second, the corporation could have paid its owners (shareholders) more in the form of higher dividends, or invested in more capital or a stock buyback, all of which would elevate stock values of the shareholders. Third, the corporation could have used the money to lower prices for its products and services to be more competitive, essentially giving the money to its customers.
Shareholders, employees, and customers are the people who pay the CIT.
So even though corporations do not truly pay taxes, they still try to avoid them. That is because the tax will mean either fewer investors, fewer customers, a lower-quality workforce, or some combination thereof.
The easiest way for corporations to avoid taxes is to simply relocate.
In this way, countries compete for corporate headquarters. If one country raises its CIT rate too high, then businesses flee to another country with a lower rate, taking jobs, investment, and tax revenue with them. This is a basic example of competition in the marketplace, and it serves as a check against oppressive taxation.
What Sec. Yellen is proposing is nothing short of a cartel agreement, designed to squash this natural competition, and it will accomplish three things.
First, it will raise taxes on faceless corporations, a politically popular move since many people think it will not harm them. Second, it will provide government officials with increased funding to continue growing government programs. Lastly, these government programs will ultimately be paid for by the three groups mentioned above: shareholders, employees, and customers.
In other words, raising corporate taxes around the entire world is simply a way to fleece the public for additional revenue without people realizing their taxes are being raised. And that is exactly how the cartel wants it.