[B5geek]

"Profit" is very easy to hide. Income, not so much. The difference is 'net' vs 'gross'.

The horrid nature of current tax law is geared towards lawyers and accountants being creative. The system is geared to reward con-men and punish the honest.

A flat-rate tax system based on income might be more effective but the real danger is the tax-breaks that companies get. I see this all the time with Ford/Chrysler/GM. "We will build a factory in your city/state/county if you give us X-billion in tax breaks."

My thoughts: You want to sell your product don't you? In Canada we had a law called "The AutoPact" [1] which basically said that for every 3 cars that you sell in Canada, 1 must be built here.

Corporate welfare will always be a greater hindrance to tax-coffers then personal welfare will ever be.

Why are we paying companies so they have the privilege of taking our money?

[1]http://en.wikipedia.org/wiki/Canada%E2%80%93United_States_Au...

[evanpw]

Unfortunately, taxing gross income instead of profits simply won't work for corporate taxes. The cost of doing business varies wildly between industry, or even between different business models in the same industry. You'd end up putting low-margin industries out of business, and taxing (e.g.) software companies almost nothing.

It's a hard problem that doesn't lend itself to simple solutions.

See: http://www.bloombergview.com/articles/2014-07-16/we-don-t-ne...

[ajross]

Actually one of the strongest arguments against corporate taxation is the corruption/tax-break angle. Big organizations are always going to be able to lobby more effectively than small ones or individuals.

A reasonably fair personal income tax or VAT can be implemented reliably (and has, in virtually all of the industrialized world). A fairly distributed corporate tax is nearly impossible (again, the existence proof being its absence basically everywhere). No matter how well the statutes are written, a big enough entity will be able to lobby the government into changing the law to its benefit.

[tonyedgecombe]

I have thought for a while it would be better not to tax businesses at all, instead tax individuals when they draw funds from the business, either as dividends or salary.

I'm not sure how you could get from here to there though.

[zanny]

But then you use the same loophole where you write all your personal expenses off as business write offs, except its even worse because you can tax exempt everything under the pretense of it being a business purchase.

The real proper tax is a transaction tax. Not a flat sales tax or anything, just whenever money changes hands between entities (personal or institutional) in exchange for goods or services (including you paychecks, which are an exchange of your time for money) you get flat taxed on that.

The exception to this is capital gains, since those are not really transactions, just money you are making for owning some form of the means of production. You would definitely want a strict yet simple progressive tax on that, to curtail wealth concentration of the pandemic nature we see happening today. Rather than tax brackets, they should just use a linear function with no capital gains below the happiness threshold up to, say, (now these numbers are fudged and should be researched) 100% tax on capital gains over 1000 times that threshold.

[dredmorbius]

I agree with you up until capital gains.

Those are in fact transactions, at least when they're realized, and are supported by a huge class of apparatus of the State, from property laws to courts to communications infrastructure, and more.

[3pt14159]

Transaction taxes are inefficient because they punish market makers that build books across active, volatile markets with low average yields.

[tonyedgecombe]

In the UK we already have rules that stop that sort of thing, for instance if you use a company owned vehicle for personal use you have to pay tax on that. You also have the fact that these avoidances are local so are easier for the tax authority to stop.

[ajross]

Really it doesn't matter where, specifically, you draw funds from. Taxing corporations makes their products more expensive. Taxing individuals reduces their purchasing power in the economy, which is sort of the same thing. Taxing all transactions with a VAT is the cleanest expression of this idea, the government basically ends up being (by definition) a fixed size relative to the economy.

A VAT or sales tax has the advantage of efficiency and ease of implementation. A personal income tax can be made more progressive and socially fair more easily. Most western governments have settled on some mix of these for the bulk of their revenue.

[tonyedgecombe]

I don't disagree, I wasn't arguing about VAT or sales tax, rather corporation tax which international companies seem able to avoid but their smaller competitors end up paying.

[dsfsdfd]

Exactly, this is why you need to make lobbying a criminal offence. Seriously, jail time. Money must not be allowed to buy political power.

[ajross]

Congress shall make no law [...] abridging the [...] right of the people [...] to petition the Government for a redress of grievances.

Yes, we're talking about a UK law, but the principle remains valid. "Lobbying" is just the advocacy for the government to do something. Most of the time it's a good thing, because governments on their own tend not to have many good ideas. Making that illegal in general is (quite literally) isomorphic to living in a totalitarian regime.

I suspect what you really mean is that lobbying by "bad people" should be illegal. Well... good luck defining that in statute. You say banana and I say banana.

Let's say you have a horse-and-buggy paratransit company (call it "Unter" for short) that you think is a great idea. But it turns out that existing cities have dumb, ancient laws that disallow horse-drawn carriages. But your users love your service and everyone agrees that it's a great idea. So you call up a legislator to pitch them on the idea of updating the law.

...and end up in jail, because you're a "corporation"?

[jxjdjr]

I think what he means is money should not buy you the ear of government. Using it for this purpose should be illegal, otherwise you no longer have a system where one vote buys you one unit of power, you instead have a system where one unit of wealth buys you one unit of power. Which in some people's opinion, is fascism.

[ajross]

Buying the ear of government with money already is a crime, though. "Lobbying" is regulated already, and certainly does not involve bribery. The problem is far deeper and more complicated than that.

You aren't going to drive much social justice if you paint your enemies as cartoon characters.

[rayiner]

A flat-tax based on gross income would be unworkable. Wal-Mart has an operating income of $27 billion on $476 billion in revenues. A 5% flat-tax on gross would wipe out almost all of their profit. Apple, in comparison, has $52 billion in operating income on $182 billion in revenues. A 5% tax on their gross would leave them paying less than what they pay today.

I recommend that everyone read up on the basic mechanics of the U.S. income tax: http://www.amazon.com/Chirelstein-Zelenaks-Taxation-Concepts... (this book is very approachable, and quite short). Things that seem like "creativity" if you're not actually thinking, actually fall out from the mathematics of what you're trying to tax: gains in wealth over time. Things that seem like unnecessary complexity arise naturally in response to the challenge of sampling a continuous function (the value of assets) at discrete points (yearly, or at the time of sale).

The bones of the tax code are pretty elegant. It's complex, but it's complex because accounting is itself very complex. But nobody argues that the complexity of GAAP is a form of corporate welfare. Yes, there's nonsensical cruft layered on top in the form of tax breaks, but those are actually pretty simple in comparison.

[humanrebar]

Your main point is that there will be winners and losers no matter the tax system. That's a given. There is a point to be made that an abrupt and radical change in the tax code would be a net negative, but I don't think anyone is arguing for that.

If a tax code becomes simpler and some businesses are no longer viable, why should I care? So Wal-Mart doesn't make sense anymore? So iPhones should be more profitable than they are now? I'm not sure why I should care about that.

[rayiner]

It's not a choice between two arbitrary systems with different winners and losers. It's a choice between one system that makes sense (taxing net income), and another system that's mathematically and rationally indefensible (taxing gross income).

It's the classic programmer's dilemma: do you implement the complex algorithm that gets the right answer, or the simple one that gets the wrong answer?

[humanrebar]

I still don't buy your logic. How is a transaction tax (sales tax) practically different than a gross income tax?

I'm all for simpler algorithms, but assuming that's our goal, I'm not sure all this discussion about income taxes isn't starting from the wrong point. We should be looking for taxes that are relatively easier to enforce, like property taxes.

EDIT: Yeah, I looked it up: http://en.wikipedia.org/wiki/Gross_receipts_tax

There's drawbacks to that sort of scheme, but it's certainly feasible. After all, individuals pay taxes on their adjusted gross revenue (income).

[rayiner]

One is a tax on consumption, the other is a tax on income. One is applied to only the final sale, while the other applies at every sale in a production chain. One can never result in a company owing more tax than it makes in profit, the other can. Note that sales taxes that do apply at every step of the production chain (VAT taxes), have the same problem of computing net versus gross: the tax is applied to the difference in value between the outputs and inputs at each step.

Yes, one way to avoid the complexity of implementing a proper income tax is to tax something other than income. But there are reasons we tax income rather than consumption or property. Consumption taxes are regressive--poor people carry more of the overall tax burden. Property taxes have the undesirable characteristic that they often require you to pay money you don't have in cash. Just because your house doubles in value doesn't mean you have the cash to pay double the property taxes on it. Except in certain cases involving inheritance or gifts, income taxes don't force you to sell property that increases in value just to pay the tax on it. Also, with property taxes you run into complexity in defining "property." You'll either draw arbitrary lines (land is property, but stock isn't), and distort the economy as people invest more in untaxable property, or run into trouble valuating intangible property like stock ownership and IPR.

There's a reason why every developed nation has settled on income taxes. The basic principle is something people can get behind. The existence of society and government helps you gain wealth, so it seems reasonable to people to tax a percentage of that gain in wealth. Moreover, people keep track of changes to wealth even without the tax regime (modern accounting predates the modern income tax by centuries), which makes income taxes relatively easier to administer.

[humanrebar]

Do you care to address the interesting part of what I linked?

  A gross receipts tax is similar to a sales tax, but it
  is levied on the seller of goods or service consumers.

...I'm thinking this is a distinction without a difference, which is really my point. They're both transaction taxes. And a fair gross income tax rate would probably be set lower than a fair tax on profits since the amount of taxes paid per business should probably be roughly the same, at least on average.

Will some low-profit and no-profit businesses have problems? Sure, but I'm not sure why they shouldn't have to contribute to the general fund just like all the other businesses. If their business models aren't sustainable while paying taxes, I'm not sure why I should be upset. What we have now is overly complex (deducting losses from previous years) and amounts to a subsidy for losing money.

[charlesdm]

That's quite an ignorant answer.

At the basic level, corporations should be able to operate and turn a profit, regardless of whether they're low or high margin. That shouldn't even matter in a discussion, since both high and low margin businesses create jobs, and are a good thing for the economy. Some businesses just need bigger scale, but that doesn't make them worse businesses.

Yes, they're avoiding taxes, but a lot of these companies are still highly profitable without the tax avoidance aspect of it. That's just the 'icing on the cake', and I'm pretty sure if they didn't, some (activist) shareholder could probably force them to do so. This is the world we live in. In the end, tax is just another corporate expense.

This tax problem can't be solved without significant international cooperation, and I'm a big fan of simplifying the tax code of countries globally.

[humanrebar]

> At the basic level, corporations should be able to operate and turn a profit, regardless of whether they're low or high margin.

Nobody has a right to the profits they are accustomed to. Buggy whip manufacturers have no right to make a living. And businesses that require exotic tax exemptions to exist might fall in the same category. Again, I think it's more fair to gradually phase out current tax schemes and phase in new ones so the economy isn't shocked by a massive rule change, but I don't see why any business has the right to broadly fix the current tax rules in place forever.

And, at the end of the day, any tax increases will be (and are) passed on to end consumers. It's not as if gas stations go out of business because their expenses go up (oil prices, credit card fees, etc.). They raise and lower their prices to accommodate price changes. And longer term, they adjust their business models as well.

All that being said, I don't even really care about gross vs. net taxation. I just believe this line of thinking doesn't add up.

[tptacek]

The comment you're responding to is appealing to efficiency, not to entitlement and proprietary rights to profits. The problem with turnover taxes is that they're inefficient, not that they're immoral.

[gioele]

> In Canada we had a law called "The AutoPact" [1] which basically said that for every 3 cars that you sell in Canada, 1 must be built here.

In our world of online services, how do you that? For every three subscriptions I sell to somebody in Canada, what should I do exactly?

[ekianjo]

So what's the direct effect of that Law ? Expensive cars?

[scott_karana]

Actually, I suspect the law was in place more to entrench existing Canadian factories than promote new ones. (eg, 1 or more of the 3 cars were already made in Canada)

The bridge between Windsor, Ontario and Detroit, Michigan is likely the most-travelled on the continent, carrying 25% of US-Canadian trade, and $13Bn of assets, mainly due to the large auto industries of both countries.

(The US domestic brands are predictably huge, and there's also Magna, the 3rd largest part supplier in the world http://en.wikipedia.org/wiki/Automotive_industry_in_Canada)

[dlss]

That and a lack of consumer choice :p for example, my google searches didn't find mention of a Canadian Tesla factory.

[rtpg]

I think the law is specifically for cars, hence "AutoPact".

[freehunter]

Yeah, it sounds like this is specifically geared around a disincentive for moving jobs out of the country. I couldn't see anything like this being applied in the digital world, since it's not as easy to move your offices out of Toronto of Vancouver to Mexico or China as it is to move your factory.

[eggnet]

It is literally impossible to charge corporations on income instead of profit.

Let's walk through an example. I call a plumber to replace a water heater, which they provide. They charge me retail for that water heater. Plus sales tax. Now of course, they have to charge me corporate income tax for that whole amount. Including the sales tax, by the way, because that's income.

The hilarity doesn't end there. The plumber bought the water heater from the manufacturer. Let's assume that was at some discounted rate, maybe a 20% discount off of retail. Ok, so 80% of the retail value of that water heater is income to the manufacturer. They have to pay corporate income tax on that whole amount now. But wait, corporate income tax was already paid for 100% of it by the pluming company.

We're still not done. It turns out that water heaters are a commodity and there isn't much margin in the business. They already can't afford to pay the corporate income tax, but it still gets better. All the manufacturer does is assemble the parts. They buy the parts from other companies, and some components go through multiple companies. At each step, each of those components was income for the manufacturer or assembler of the part.

Basically you end up triple taxing or more, the various parts of the system.

Believe it or not, it gets worse!!!

An astute observer would notice that the easiest way to avoid as much corporate tax as possible is vertical integration. In other words, if the plumber, water heater manufacturer, and all of the subcontractors and sub-manufacturers involved all worked for a single giant corporation, they'd only have to pay corporate income tax once on the water heater and all of the components within it.

In short, companies would be forced to move to countries that did not implement corporate taxes. Companies that are unable to do that would be forced to combine into as few companies as possible to avoid corporate taxes.

Remember, taxes discourage the behavior that is being taxed. Corporate income tax discourages the transfer of money between corporations. That just means there would be fewer, larger corporations. And of course, more expensive goods and services. Assuming the entire world implemented corporate income tax simultaneously. Without that, there would just be massive shifts of businesses away from countries with corporate income tax.

[BerislavLopac]

Actually, this problem has long been solved by VAT.

[eggnet]

The OP specifically is advocating for something without loopholes that just looks at top line revenue.

VAT is absolutely not that.

I was illustrating how impossible it is to just look at top line revenue of a corporation.

Also, if by solved you mean prevents double taxing through a production pipeline then sure. But it boils down to a sales tax which in general is regressive compared to typically progressive income tax.

[BerislavLopac]

Yes, I meant the former. I didn't mean the latter since that's your conjecture (three in fact: 1. VAT boils to sales tax; 2. sales tax is regressive; 3. VAT is regressive) that I don't necessarily agree with.

[flexie]

The devil is in the details but the principle of taxing money where it is made is sound.

Taxing revenue instead of profits could be a solution for example by shifting all the tax to the VAT (and then having a single VAT rate in the EU). Then Apple and Google would start paying back on the property rights, patent rights, copyrights, trademark rights, infrastructure, rule of law and well educated consumers they enjoy in Europe.

[netcan]

This might sound reasonable on paper but in reality it's a pretty big deal. Taxing corporate profit (however ineffectively) is very different from taxing consumption like VAT does.

Inasmuch as the tax gets passed on to companies, it can push teetering companies out of business. A company with no profits 9for real) pay no corporate tax. Second, corporate taxes are more or less like capital gains tax, in many cases a capital gains tax on foreign citizens that own shares in that company. Taxing the rich is hard. Taxing the poor is relatively fruitless and morally questionable. This is why a lot of the burden (as a percentage of income) falls on the middle class, who are easiest to tax. A VAT is a "flat" or moderately regressive tax. To replace corporate tax revenues with more VAT, poor and middle class people would have to pick up the share currently paid by rich people and foreigners.

The current tax systems with the various types of taxes are evolved to maximize tax revenue, and to a certain extent GDP. A fairer system that "costs" the tax office 5-10% of their revenue is off the table. Most kinds of taxes are maxed to the point where raising them would either (1) not actual produce more taxes^ (2) produce immediate political reactions (3) harm the overall economy too much.

When you are super-optimzed for one thing, its' hard to optimize for something else, like fairness.

^EG, if the high marginal income tax is 50%, increasing to 70% will not realist in a 40% increase in revenues from that tax bracket because the incentive to earn (declared) income goes down.

[jiggy2011]

A single EU VAT rate would be very harmful because no gov would be able to boost consumption by reducing VAT rate, it would also force small business to collect VAT as soon as they sell their first product.

[ajross]

What exactly would be the argument for allowing individual small governments to play with their economies like that? The risk analysis gets completely skewed by the fact that the EU implicitly backs the economy anyway. That just sounds like a recipe for another Greece.

[jiggy2011]

The EU implicitly backs Eurozone countries because it has to, the UK is not a Eurozone country. The UK should definitely be able to control it's own taxes, the only alternative is fiscal union.

[ajross]

Sorry, I heard "Single EU VAT" and assumed you were talking about the Eurozone. Unifying taxation in the absence of unified monentary policy makes no sense to me anyway, so sure: I agree then. :)

[sokoloff]

Respecting the concept of sovereignty would be my primary argument.

[Silhouette]

I'm not sure how your conclusion follows. Why would having a single shared VAT rate imply that you couldn't have a minimum threshold before VAT registration is required?

If anything about VAT is going to cause grief for small B2C tech businesses in Europe, it seems more likely to be the changes affecting them from 1 January 2015 precisely because the VAT rates in different European countries are different.

[pcrh]

VAT is explicitly a tax on consumers, not corporations.

[3pt14159]

Taxing profit is silly because you care about the "pointer management" that companies do, which requires things like costing QA done in another country. It is far easier to just tax property, sales, dividends, personal income, and capital gains than it is profit. Roughly in that order too.

[thomaskcr]

To be fair -- taxing profit does encourage companies to spend their money.

Also, taxable personal income and capital gains are taxes on profit -- I don't understand how that's easier. Any money spent on personal needs is taxable (see "The Situation" who tried to say tanning was a company expense) regardless of whether a person or company spends it. You're also able to write off business expenses whether you're a company or a person just the same too. Income tax is really a tax on profit, not total income. It just happens that people tend to have mostly profit (since they save their money or spend it on personal needs) and for most close to 100% of their income is taxable so they assume big bad corporations are getting some advantage they aren't entitled to which isn't really true at all.

[_delirium]

> Income tax is really a tax on profit, not total income.

If you run a business, that's largely true, as your sole-proprietor income tax is calculated very similarly to how business profits is calculated. But individuals who earn their income via employment (which is most of them) more often pay a tax on their income rather than profits. Some expenses are deductible, but many of the most common ones are not. For example, commute expenses are typically not deductible [1], even though they are probably the most frequent cost incurred solely as part of earning income. Work clothes are also often not deductible: they are only deductible if they are both formally required by the company, and of a kind that is dissimilar from non-work clothing. So e.g. buying a suit for interviews and/or meetings is not deductible, even if you only bought it for and only wear it for income-earning purposes (I have personally never worn my suit in a non-work context). It's also difficult to deduct the cost of a computer, even if your field is computing and you use it mainly for work and skills development (though it's possible in some cases, if the employer formally requires you to have one at home and doesn't provide it).

[1] "You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work)." http://www.irs.gov/publications/p17/ch28.html

[3pt14159]

I'm generally not a fan of income tax, since I think it creates a bunch of problems and economic inefficiencies, like the middle class cleaning their own houses while there is a sizeable unemployed section of the economy, but the huge difference between corporate profit and personal income is that a person has citizenship (generally), has to live somewhere, cannot expense the majority of his or her purchases, and cannot be financially controlled by a foreign entity with differing laws.

Yes it does create problems like "is driving to work a work expense?" but those problems are generally solved.

[AndrewKemendo]

The fact that they wrote it as profit rather than revenue tells me that the people drafting it were either on the Banker's doll such that it is just window dressing, or the legislators are criminally inept.

The incentives to give back don't exist unless you take a chunk of the money before it can be put back into their own pockets. Not that I think this should be done this way, but it's silly to think they are going to be able to recover significant profits from these banks.

[hkmurakami]

Well, those practices for manufacturing have carried over into tech datacenters with all the kickbacks FB/Goog et. al. are getting from States like Iowa (iirc).

[known]

http://wh.gov/iCfVS

[pasbesoin]

When, in naval-gazing films and TV, an entertainer character insists on x % of "gross" revenue, this is why.

There've been many articles and posts cited on HN that go into the tortured, and very profitable, machinations of entertainment industry financing and accounting.

Some argue towards making such finance, e.g. taxes, simple to the point where it can't be gamed. The tradeoff is that finance is used as much if not more so than overt legislation, to steer policy, investment, and ultimately -- imperfect as they are -- outcomes.

I'm not saying simplification is wrong. But keeping your system intact while you do it, is... well, not as simple as it might seem.

But there is a lot of potential benefit. How much further would clean(er) energy be, if we weren't propping up carbon fuels to the tune of billions in subsidies every year (including a substantial part of e.g. the U.S. military budget)? Would the Mid-East be quite such a mess, if no one was continually pouring money into its weapons systems and dictatorships?

Anyhoo, I typed way more than I intended.

When an outfit is doing fantastically well, to all appearances, yet the profit is missing, then start looking at / going after the gross. They have to pay their way, just like everyone else. Perhaps all the more so, the more they insist upon being a "corporate person" with "personal" rights (e.g. speech, et al.).

----

P.S. As an actual person, with a few policy-minded exemptions aside, I am taxed on my gross income. Not my net. (E.g. I don't get to deduct my groceries, nor my auto insurance, nor...) (Although, state sales tax in the U.S. does vary by state and is often, when lowered, meant to lessen the regressive nature of said tax for low income earners with respect to essential goods -- you gotta eat.)

Home owners get to deduct mortgage interest, while renters get no such break even though a significant chunk of their rent may effectively be paying the interest on the landlord's mortgage for the property. Pushing home ownership in the U.S. as a policy that apparently veered into the extreme, providing lots of marginal loans as raw inputs into the financial machinations that propelled the 2008 Great Recession.

Anyway... I'm taxed against my gross income. There's no magic rule that says businesses can only be taxed against their net. It's all policy -- not natural law. And when they game the system beyond all measure, they should expect that, sooner or later, policy will be changed.

The problem is in good part that, if they can make it later enough, they become another "too big". They've captured their regulation.

[judk]

You are taxed on your net (Adjusted Gross Income, minus deductions). That's what deductions and exemptiona are for.

[pasbesoin]

I get to deduct a select subset of expenses. And if I try to claim I am living from year to year with a negative net, the IRS is going to want to know how this is possible -- in detail.

At one point, I personally rolled up the annual corporate net profit for over a billion U.S. dollars of gross revenue. It came out to (for various reasons I won't go into, here) circa 4 million. That's a much larger percentage of expense than I get to deduct in my personal life.

I realize this is a simplistic example. But when things start to get this extreme, we need to take a look at who is paying the taxes that benefit whom? Is this anywhere close to in balance and each "entity" paying their own way?

Paying their own way not just on principle, but because if they aren't, they may have a distorted and "inefficient" (I might chose the word "destructive") business model.

Should we in the U.S. really have to e.g. provide food stamps and other benefits out of tax revenue -- which has increasingly shifted to come primarily from individuals rather than businesses -- to Wal-Mart employees?

And many of the investment entities and their management that benefit in outsized measure from such... subsidization, are ostensibly paying a 15% rate -- before they whittle this down even further.

It's harder to compete with the "big boys", when you are facing an entirely different cost structure. Not just economies of scale, but finance and policy of scale.

[ams6110]

Why are we paying companies so they have the privilege of taking our money?

Companies don't pay taxes. Ever. Their money comes from customers buying their products and services. If they are not taxed, they can offer a lower price to the customers. If they are taxed, that simply means higher prices for customers.

Ultimately, individuals always pay the taxes.

[mikeyouse]

> If they are not taxed, they can offer a lower price to the customers.

This assumes the owners are targeting some set return rather than pricing their products at whichever point the market can bear, which is a giant, unsubstantiated assumption.

If GM was paying an effective 5% tax rate, which was then cut to 0%, do you honestly think they would lower prices? Yes, I know the theory that Ford would get the same benefit, then lower their prices in competition, but history has repeatedly shown that this is unlikely to result in a price war. Informal collusion is fairly easy to maintain and it's unlikely that the marginal loss in sales from a 5% price premium would be enough to offset an additional 5% booked straight to profits.

[DanBC]

Your argument fails when we see Starbucks selling expensive coffee while avoiding tax.

Starbucks does not avoid tax to give me a good deal. Starbucks avoids tax so that Starbucks can make more money.

[vixen99]

I don't think it does. Any sensible business avoids tax i.e., minimizes its tax bill. If it gets up to what are perceived as evident shenagans to do this, governments can change the law (as has been announced today in the UK) and consumers can decide if they still want to do business with the company. 'Don't drink their coffee' would be the advice re Starbucks, would it not? Good deals usually but not always add up to good business which equates with making more money. If Starbucks offer a lousy deal then presumably they'll either have to change the deal or go down. Plenty of other places to drink coffee.

[Amezarak]

> If they are not taxed, they can offer a lower price to the customers. If they are taxed, that simply means higher prices for customers.

Conversely, if employees were not taxed, they could work for lower salaries. Individual taxation simply means higher labor costs for businesses.

Corporate taxation is part of a complicated system. It's easy to isolate it and say that companies don't pay taxes because they simply pass the costs onto consumers but the same argument can be made the other way, because they're both part of an integral whole.

[ja30278]

It boggles my mind that otherwise intelligent people have a hard time grasping this simple concept. Taxes are simply another cost of doing business, especially if they are applied to whole categories.

Even if they are applied to specific companies (to favor domestic companies, for instance), then they still have largely the same effect, since they allow the domestic competitors to compete in the market inefficiently, raising prices on the consumer.

[mikeyouse]

It's easy to understand that taxes are simply a cost of doing business, but intelligent people disagree that prices would decrease with any certainty if taxes were cut.

Companies don't set prices for products to achieve some specific return, they set prices at the highest point the market can bear. Cutting their tax rate doesn't have any impact on the greater market, so it's unlikely that prices would move at all. The more likely outcome is that owners and shareholders would see higher profits -- which definitely isn't a bad thing, but it's a very different proposition than a general price decrease for consumers.

[dredmorbius]

"If they are not taxed, they can offer a lower price to the customers."

Falsehood. Prices are set by market supply and demand, not tax rates.

A tax may change the quantity of goods or services provided. The price, however, is set by the intersection of the supply and demand functions.

Basic market economics.