When the topic is economics I tend to keep my mouth shut; I know that I don’t know. But there is one question that has, from time to time, been a bother to me: why do corporations pay taxes?
I can understand citizens paying taxes: there are certain goods — defence, transportation infrastructure, garbage collection — that we all benefit from, and we contribute money with which those goods can be acquired. It seems to me that the fairest sort of tax is a flat tax — the same number of dollars from each citizen goes into the pot — although few people advocate that, and maybe for good reasons that I haven’t thought of.
But it is odd to me that individuals, who are already paying taxes, should pay more taxes — that is, corporate taxes — just because they have decided to work together on something. What is the rationale for that (apart from a simple cash grab by the government)?
Anyway, I air these half-baked thoughts today because I came upon an article, at Public Discourse, which advocates abolishing corporate income taxes. The author, Thomas Haine, gives a few reasons why doing so might cause problems — reasons I, naturally, had not thought about — but concludes that they are not insurmountable. Indeed, he thinks abolishing such taxes would be a bi-partisan winner, at least at a grassroots level. (Politicians, I understand, are rarely in favour of tax reductions.)
It is all very interesting, in a perplexing and foggy kind of way, and I wish I had a clue as to whether it made any sense.