So, how are corporate taxes paid by employees, and wouldn't that be a disincentive to work for that corporation?
I'll explain in a moment. And yes.
How are corporate taxes paid by customers, and wouldn't that be a disincentive to buy from that corporation?
I'll explain in a moment. And yes.
If shareholders pay corporate taxes, wouldn't that be a disincentive to buy stock?
Yes.
Also, how is it that they are paid dividends?
Dividends are a portion of profit not reinvested in the company that is paid to shareholders. Profit that will diminish or disappear if it goes towards paying taxes.
Beatnik,
Let's make up a hypothetical situation.
You are in charge of HypothetiCorp.
Your yearly costs are:
Materials: $750,000.
Wages: $500,000.
All other expenses: $250,000.
Total costs: $1,500,000.
Your yearly sales total $2,000,000.
So, your total net profit is $500,000. Not too shabby.
HypothetiCorp has run for several years in a hypothetical tax-free environment. Everyone is currently happy. The employees are receiving a decent wage, the customers are receiving a decent product at a decent price and the investors are receiving a decent profit.
Now, the government steps in and tells HypothetiCorp that as a corporation they must pay a tax rate of 34% on their net profit (I'm not certain that I'm figuring this correctly, but this
is just an example), so from $500,000 we subtract $170,000 leaving us with $330,000 in profit.
So, you, as the CEO of HypothetiCorp have to answer a question: Who really pays that $170,000?
Do the investors lose 34% of their dividends?
Do the employees lose 34% of their salaries?
Does the company raise prices for the consumers on their products by 13%?
Does the company buy 23% cheaper materials, thus decreasing the quality of the product?
No matter how you cut it, one or more groups of individuals pay the tax - employees, shareholders or customers. Never the mythical, faceless "corporation" that everyone seems to think produces milk for free.
And please follow the wikipedia link to find this sentence:
Corporate tax in the United States is a tax on the taxable income of a C corporation or an entity taxed as a C corporation.
If that's true, then corporations pay taxes on income as well. They probably red-tape themselves into a situation where it is minimal or zero, but you can't pretend like corporate income taxes don't exist.
Those taxes exist, but as I showed above, whenever taxes are levied on a corporation, they are always paid by individuals ... employees, shareholders and/or customers.