Corporate Tax breaks
"Tax break" is a fuzzy term, with no objective definition.
Personal tax example: My taxable wages already exclude some actual wages: my deposits to a "Health care Flex account"; the amount I put into my company's 401-K savings plan; the money my company pays directly to a health-insurance company on my behalf. The government is saying that if I spend my money a certain way, they will tax me less. Already, on the top line of my tax form, I've got three "tax breaks".
Continuing on, interest from municipal bonds is exempt from federal income tax. My dividends are taxed a bit lower. My investment income is broken into two parts: short-term gains and long-term gains, and I get a "tax-break" on the long-term gains. The interest I pay on my mortgage and on student loans gets me a deduction. Supporting a child gets me another deduction. My charitable donations earn me a deduction. Once again, the government is encouraging me to spend in certain ways, to have children, and to earn from certain sources. It's "tax-breaks" galore.
Flawed concept: "Tax breaks" are just part of the network of tax-rules. There is no objective benchmark or baseline from which we can measure. There is no "ideal tax" starting point, even approximately, that we can start with and say that any tax lower than that is a "break" and anything above is a "penalty".
Corporate tax breaks: Tax-breaks for corporations are no different. Just as the government encourages me to save or to spend on health-care or housing or education, similarly it might encourage a corporation to invest in machinery, to invest in solar energy, or a host of other things. The tax-rules are all man-made and arbitrary anyway.
Double taxation: In the U.S., large corporations pay tax as separate entities and cannot pass the net income back to their owners tax-free. If they do, the dividends are taxed. If they invest it internally, and raise the value of the company, the owners pay tax whenever they sell the shares at a profit. The rates are a bit lower, but this is still "double taxation". Viewed this way, any income tax the corporation pays is a penalty... an extra tax that comes from the arbitrary rule that it will be taxed twice. It follows that any "tax-breaks" to corporations aren't even breaks in the fuzzy sense: they merely reduce the double-taxation penalty.
Of course, "double taxation" itself is a fuzzy term that starts with the premise that citizens should pay a tax based on their incomes. This is an arbitrary rule, as are all the other tax-rules.
There is no such thing as a tax-break.
Personal tax example: My taxable wages already exclude some actual wages: my deposits to a "Health care Flex account"; the amount I put into my company's 401-K savings plan; the money my company pays directly to a health-insurance company on my behalf. The government is saying that if I spend my money a certain way, they will tax me less. Already, on the top line of my tax form, I've got three "tax breaks".
Continuing on, interest from municipal bonds is exempt from federal income tax. My dividends are taxed a bit lower. My investment income is broken into two parts: short-term gains and long-term gains, and I get a "tax-break" on the long-term gains. The interest I pay on my mortgage and on student loans gets me a deduction. Supporting a child gets me another deduction. My charitable donations earn me a deduction. Once again, the government is encouraging me to spend in certain ways, to have children, and to earn from certain sources. It's "tax-breaks" galore.
Flawed concept: "Tax breaks" are just part of the network of tax-rules. There is no objective benchmark or baseline from which we can measure. There is no "ideal tax" starting point, even approximately, that we can start with and say that any tax lower than that is a "break" and anything above is a "penalty".
Corporate tax breaks: Tax-breaks for corporations are no different. Just as the government encourages me to save or to spend on health-care or housing or education, similarly it might encourage a corporation to invest in machinery, to invest in solar energy, or a host of other things. The tax-rules are all man-made and arbitrary anyway.
Double taxation: In the U.S., large corporations pay tax as separate entities and cannot pass the net income back to their owners tax-free. If they do, the dividends are taxed. If they invest it internally, and raise the value of the company, the owners pay tax whenever they sell the shares at a profit. The rates are a bit lower, but this is still "double taxation". Viewed this way, any income tax the corporation pays is a penalty... an extra tax that comes from the arbitrary rule that it will be taxed twice. It follows that any "tax-breaks" to corporations aren't even breaks in the fuzzy sense: they merely reduce the double-taxation penalty.
Of course, "double taxation" itself is a fuzzy term that starts with the premise that citizens should pay a tax based on their incomes. This is an arbitrary rule, as are all the other tax-rules.
There is no such thing as a tax-break.
Comments
Post a Comment