Who Pays Taxes? Burger King Revisited

8/29 – APOLOGY & PARTIAL RETRACTION:  I missed the little buttons at the bottom of the page that showed there was another page to the essay. Oops. It doesn’t just end after asserting the contrary, which is a large part of what set me off. In the second page, the author does make something like arguments to support his position. They are all political arguments – it’s Politico, after all – not based on economics or the reasonable actions of people in response to taxes. He names names about who he’s arguing with. So, today, for once, *I’m* the guy who is wrong on the Internet. 

Sorry about that. 

That said, the major criticism – that the author uses the mantle of reasonableness to gussy up what is essentially an appeal to partisan fervor – that stands. 

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Looking out for more outrage over Burger King’s move of its headquarters to Canada, to enjoy lower Canadian corporate taxes, found this:

Why Corporate Taxes Are Good for You

The author presents the argument against corporate taxes* thus:

The main argument against taxing corporations is that the burden of all taxation ultimately falls on individuals and that because of the uncertainty involved in establishing which individuals bear the burden of the corporate tax, ordinary voters are misled into thinking the tax does not fall on them. This uncertainty makes the corporate tax popular among politicians, because they can benefit from the fiscal illusion that its burden falls on “the corporation”—rarely a sympathetic victim—while in reality it is imposed on the voters. Corporations may be people, per Mitt Romney, but they don’t cast ballots—at least not yet.

The most revealing part of the essay is that last line: “- at least, not yet.”  Since this argument is clear, logical and convincing, we need to move the field of discussion from rational arguments to emotion in order to have a chance of “winning”. Therefore, the author inserts a subtle scare line, trying to conjure the image of a evil corporations out-voting us, tasking our most cherished right and using it against us! Oh, the outrage! 

Except nobody anywhere has ever seriously suggested corporations get to vote. 

He continues: 

Better, opponents of the corporate tax argue, not to tax legal entities at all.

While no doubt there are people who argue this, it is a bit of a straw man: all you’d need to do to keep companies from moving their headquarters for tax reasons is to keep our taxes in line with those of other countries that provide a similarly attractive business environment. Taxing corporations is not unacceptable. Blaming corporations for trying to minimize their tax burden is irrational. 

In addition, they (that ‘they’ again – who?) claim (a statement of fact is called a ‘claim’) that the revenue from the existing corporate tax is relatively low in developed countries (typically less than 10 percent of total revenue) and it can easily be replaced by raising individual taxes by a small amount (by, according to the argument presented above, revealing corporate taxes for what they are: taxes on individual customers and stockholders). Finally, they add that the corporate tax is very complicated and the transaction costs of trying to avoid it—all those fancy accountants (those lying corporations and their fancy accountants! It’s just like how we lying individuals can’t figure out the 1040 form and its myriad schedules and forms – we’re evil and lying when we say it takes us hours and often profession help to get them filled out to the IRS’s satisfaction.)—impose significant losses on the economy. Inversions are seen as a result of the United States having an overly burdensome corporate tax regime, which drives businesses and jobs overseas. (um, yeah.) 

None of these arguments is convincing (because no arguments are convincing – that’s why this entire article is an appeal to emotions dressed up in reasonable-sounding rhetoric. Hegel and Marx live!). There are three reasons why the corporate tax should be retained: At $300 billion per year, it is a significant revenue source that cannot easily be replaced (that $300B is paid by individuals now – it’s just conveniently out of sight); it preserves the progressivity of the individual income tax by preventing the rich from parking their income in corporations (this is class warfare gibberish – it is intended to confuse. I’m at a loss as to what it even might mean); and it enables Congress to regulate corporate activities more effectively (What? Is this a protection racket? No need to answer that. What he means here is that, by making corporations hire scads of people to spend their lives complying with government tax laws, the government finds out, via all those forms, what companies are up to. And that’s a reason to tax them?).

And the essay ends! What? Your entire argument hangs on three bald, nonsensical assertions? And we lemmings can be counted on to nod sagely in unison at what you say, because you’re on out team and we’ve been well-schooled to do so? 

Yea. And it works. 

Disclaimer: I’m one of those highly paid experts who help corporations legally minimize their tax burdens. In my defense, when I support making tax laws simple and transparent, I’m arguing against my own self interest – I’m arguing in favor of making taxes so straight-forward nobody would need guys like me. Don’t think I’m being heroic – there’s a better chance I’ll walk on the moon that that the tax laws will get simple in my lifetime. 

* Aside: I’m not against taxing corporations. I’m against pretending that taxes don’t have unintended consequences, and blaming taxpayers for behaving rationally.

BTW: Posted a similarly themed comment at Politico. Let’s see where that goes.