Taxed too much; Taxed not enough

In the United States, we have a problem with our taxes; and depending on where you are in the country socially (i.e. your job and social class), you probably understand the problem from a different perspective.  Republican candidates often say that taxes are too high, and they are stifling small businesses.  Democratic candidates claim that taxes are not high enough, or say that we need those taxes to pay for programs.  As usual, the problem is neither of those two things, but something much more complex and nuanced.

Generally speaking, taxes on businesses are very high, if you are actually paying them.  However, businesses get lots of opportunities to reduce their tax burden through exemptions and deductibles.  The problem is that often those deductions are frequently written in a way such that they only apply to the business of one or two very large businesses, so that small businesses are left with a heavy burden while larger ones have a much more manageable burden.  Even if big businesses always paid more (and they don’t – sometimes they don’t pay at all), being a bigger business makes it easier to pay taxes because you can reap the benefits of an economy of scale (In short, the more of something you make, the less you have to pay per item).

Then some companies and industries get enormous tax breaks, compared to others.  Delaware is a notorious tax haven state, one which in recent years actually has more corporations than people.  It should come as no surprise that, if two businesses are competing, but one of them pays 39% in taxes that is listed on the books while another pays nothing, one of those two businesses is going to do better.  We really need to share the burden more equally if we want to see competitive businesses prosper.

This is all without considering subsidies to businesses, and what their impact is.  We can’t honestly discuss taxation without also discussing subsidies, because it’s hard to say a company paid taxes if it also received money from the government.  In particular, in 2009 there was a stimulus package issued to help with the economic recovery after the collapse in 2008.  While it was supposed to help “the private sector”, most of that money ended up going to large businesses, rather than to the supposedly intended targets of the program.  Other subsidies, like corn, oil, or milk, distort our economy.  One of the reasons that food companies use unhealthy corn syrup instead of sugar cane is because the cost is artificially lower because of said subsidies on corn.  Part of what makes “green energy” non-competitive in the market is the way that gas and coal have artificially reduced prices coming from subsidies.  For some time, solar power has been enjoying government support, but in recent years they have seen that support withheld and removed.  When governments literally give the money away to certain small segments of the population but demand sums of money from others, those who benefit most are bound to be the ones that prosper.

So to summarize my point, the problem is not that we are taxed too much nor too little, but that the taxes are neither applied nor enforced justly.  We cannot pretend to live in a just country when we set unrealistic expectations for businesses, while making “exceptions” to be certain that some businesses can prosper.  Through the unequal application of taxes and subsidies, our whole economy is warped, and the very idea of “competitive markets” gets thrown out the window.

 

Supporting Links:

http://www.rawstory.com/2011/03/jon-stewart-gives-up-on-ge-tax-shenanigans/

http://www.govexec.com/oversight/2009/08/biggest-companies-rake-in-recovery-act-contracts/29693/

http://www.huffingtonpost.com/2012/07/02/delaware-tax-haven_n_1644006.html

http://taxfoundation.org/article/corporate-income-tax-rates-around-world-2014

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