Yes! Taxes can be raised on corporations.
I had a guy who wrote that if taxes were raised on corporations, they will simply pass on the tax increases to consumers. I disagree. The writer also suggested I didn’t know anything about economics in refuting this. So what I wrote about that is below.
“I think I understand economics quite well, thank you.
In the world of supply and demand, which is the world of competition, to pay higher taxes, businesses will reduce their expenditures and intensify competition as they seek more customers. This intense competition will result in lower prices.
That’s the way it was in the three decades after World War II when corporate tax rates were higher than nowadays, corporate profits were consistently strong, and inflation was low.
What you wrote suggests that there is no competition and that businesses can jack up their prices whenever they desire. I disagree and the historical record sides with me.
So from the point of view of anybody who believes we live in a competitive capitalist system, the point-of-view you have doesn’t seem logical.”
The man wrote back and said a few things about how I am incorrect and that raising the corporate tax rate would only result in higher prices. And once again his point of view is not logical. He wrote, “You imply that the only thing that made the 1950s prosperous was the corporate tax rate. As if the whole complex economy just has one knob, and if we just turn that one knob, everything will be great. There’s a zillion variables in the economy”
So I wrote back what is below.
“I agree with you on many points, especially the part about economics being a sub category of politics. Great book on that is “Why Nations Fail.” I also agree with you that there are many variables besides tax rates that help or hinder businesses in their successes and failures. However, I still think you’re incorrect about how all businesses will simply pass on their tax increases to consumers. They have tons of other options (“a zillion variables”).
For example, corporate profits are at record highs right now. So are retained earnings. It’s obvious corporations don’t need to raise prices or decrease shareholder dividends to pay higher taxes if they can simply take money out of their record retained earnings.
Many would probably do this rather than increase prices because the demand for goods and services is historically weak. In a competitive environment, raising prices would push more and more consumers out of the market, thereby decreasing the size of markets. Competition in shrinking markets would increase. Businesses wouldn’t want to do this because that would lower their already fat profit margins. And why bother anyway? What with record retained earnings.
And that’s another point. How can large corporations be engaging in fierce competition with one another and still make record profits year after year, and in an environment with weak demand?
The answer is that many markets are tightly controlled by oligarchs. They’ve already jacked up prices so high that major corporations are sitting on trillions of dollars. We’re paying for that, but maybe we can’t continue to pay for that forever.
So most corporations may simply pay higher taxes out of retained earnings, or they’ll use phony accounting methods to push profits to the Caymen Islands or Panama.
The point that I make above it obvious. It would be good for the middle class and for the economy if marginal corporate tax rates were raised significantly.