Rant Warning... Again
Ok, this is another thing that really makes me mad about the left. One of their most effective strategies is to say that they will lower taxes on the poor and middle class and shift more of the burden onto the wealthy and "corporations." Here's why this is bogus: News Flash- There is no such thing as a tax on a corporation. Only individuals are taxed- either as owners of corporations, workers in corporations, or buyers of products from corporations. Any tax hike on a corporation ultimately effects individuals-owners, workers, consumers.
Example:
Joe owns company A that makes widgets. His gross income before taxes is $1,000,000. Currently Joe makes an after tax profit of approximately $650,000 (in a 35% tax bracket). He sells 100 of his widgets for a profit of $10,000 a piece. So currently a buyer of Joe's widget is effectively paying $3,500 in taxes.
If Obama gets elected he wants to raise Joe's tax bracket to 39% making his income $610,000 all things remaining equal. Joe is a businessman and is taking risk. It is good and right for Joe to make a profit. Joe now has a decision to make, either he will:
1. Take the pay cut and continue making 100 widgets per year and selling them for $10,000 each (this will not happen).
2. cut the pay of his workers or the quality of his materials by $40,000 and continue to sell the widgets for $10,000 each, in which case he will continue to make $650,000.
3. raise the price of his widgets by $400 each- still making $650,000.
4. do some combination of options 2 and 3 (this is most likely).
It is unlikely that Joe will take a pay cut, because every other producer of widgets doesn't want to take a pay cut, and doesn't have to. They just pass the increased cost along to workers or consumers, because that's what every other widget producer will do (assuming market forces work to drive the price to equilibrium, so that they get rewarded appropriately for the amount of risk they are taking).
Now, under Obama's plan the workers of corporations, or the consumers of corporations pay the taxes. Joe's widget's now cost $10,400 meaning you pay $3,900 in taxes instead of $3,500 in taxes, or the worker's pay has been cut so that the profit remains.
The reason politicians get away with this is because in figuring tax increases they don't take into account the effect of corporate taxes on the individual. Obama can say that his tax plan will reduce taxes on 95% of Americans, and it will reduce income taxes, but it will have an offsetting increase on embedded taxes in the products we all buy, thereby raising the tax burden across all classes of society.
I guess my point is, don't be fooled by the lure of the corporate tax, it is a myth, and a ploy used by politicians to buy your vote. Think about what this means for Obama and company. There are only two possibilities (if you can come up with a third please let me know):
Either they know the corporate tax is a sham and they peddle this to the unsuspecting American people, or they don't know their basic economics and are doing this with genuine motives. They are either conniving, or innocently ignorant.
I'll leave that decision to you,
JB
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