The Houdini Tax Trick

My argument is that if corporate taxes were eliminated, then there could be fairer price competition among businesses.

Courtesy: folsomprison.files.wordpress.

(CALGARY, Alberta) - Houdini was able to make an elephant disappear in a crowded theatre. How was he able to do it? Misdirection.

Misdirection is the primary process in our tax system and no one wants to explain it. I’ve tried more than once over the last thirty years, but the mainstream media (the little people who are the gatekeepers) will not touch it. Here it is.

A press release from The Oregon Center for Public Policy published elsewhere on this site (“Latest Revenue Forecast Shows That Even With Tax Increase, Corporations' Share of Income Taxes Still Lags” http://www.salem-news.com/articles/august282009/corporate_taxes_8-28-09.php) points out that corporations are apparently not paying their share of the tax burden. "The corporate tax increase is a modest but important step toward tax fairness," said OCPP executive director Chuck Sheketoff. "But in spite of the corporate tax measure, working families and small businesses will continue carrying the load for corporations."

Misdirection. Misdirection. Misdirection.

This is not a criticism of the OCPP statement, because they are simply repeating the same mythology that everyone else unthinkingly generates. But…

Businesses treat taxes as an expense just like they do wages and cost of material, etc. These are all totalled, then subtracted from the revenue/income to leave a net profit.

Net profit is always after tax and companies need a net profit in order to stay in business. This means that prices for goods and services are always adjusted to the so-called bottom line. If corporate taxes go up, then it follows like night follows day, that prices will also go up. If taxes go down then, theoretically, prices can also go down.

Here’s my point: ALL taxes are paid by individuals. There are no exceptions because any taxes that corporations appear to pay are in every case passed on to the customers of that business as part of the price for goods or services. Eat at McDonald’s? A few pennies of what you pay are earmarked for the taxes that McDonald’s as a corporation will pay. Except that you paid them.

I have long advocated for the elimination of corporate taxation. But I am not supporting the investors’ view that it’s about double taxation, i.e., the corporation is first taxed, then the investor is taxed on their dividends.

My argument is that if corporate taxes were eliminated, then there could be fairer price competition among businesses. Most important, though, would be a transparency in the tax collection. People would know absolutely that, as Sheketoff of the OCPP said: “working families and small businesses will continue carrying the load…” But the misdirection would be gone.

===============================================

Daniel Johnson was born near the midpoint of the twentieth century in Calgary, Alberta. In his teens he knew he was going to be a writer, which explains why he was one of only a handful of boys in his high school typing class—a skill he knew was going to be necessary. He defines himself as a social reformer, not a left winger, the latter being an ideological label which, he says, is why he is not an ideologue, although a lot of his views could be described as left-wing. He understands that who he is, is largely defined by where he came from. The focus for Daniel’s writing came in 1972. After a trip to Europe he moved to Vancouver, British Columbia. Alberta, and Calgary in particular, was extremely conservative Bible Belt country, more like Houston than any other Canadian city (a direct influence of the oil industry). Two successive Premiers of the province, from 1935 to 1971, had been Baptist evangelicals with their own weekly Sunday radio program—Back to the Bible Hour, while in office. In Alberta everything was distorted by religion.

Although he had published a few pieces (unpaid) in the local daily, the Calgary Herald, it was not until 1975 that he could actually make a living from journalism when, from 1975 to 1981 he was reporter, photographer, then editor of the weekly Airdrie Echo. For more than ten years after that he worked with Peter C. Newman (1979-1993), Canada’s top business writer (notably a series of books, The Canadian Establishment). Through this period Daniel also did some national radio and TV broadcasting with the CBC. You can write to Daniel at: Salem-News@gravityshadow.com