Sunday, May 30, 2010

I couldn't say it much better myself

This is one person I wouldn't mind being Prime Minister - even if he is from Quebec*

From the perspective of corporations, taxes are an additional cost of doing business. If you increase their taxes, to remain profitable they will have to find ways to lower other costs, or to increase revenues.

How does a corporation do this? One way is to reduce the returns to its owners and investors. In that sense, it becomes the equivalent of a capital tax, or a capital gains tax. It is not the corporation that pays the tax, but rather its owners and investors. And since capital is mobile, there is a limit to how much you can tax it. The result, as with the capital tax, is that we end up discouraging capital accumulation and investments in Canada.

Another way for corporations to shift the burden of their income tax is to increase the price of what they produce. In that sense, it becomes the equivalent of a tax on consumption. It is the consumers who pay it, not the corporation.

A corporation can also decide to cut down on its factors of production by laying off workers, reducing their wages, investing less in new equipment, or buying fewer inputs from its suppliers. Once again, in the end, it is real people who will pay the tax, either the company’s workers or the workers of other companies that do business with it.

No comments:

Post a Comment