With the May 1 resurgence of Occupy demonstrations (well, maybe riots is more accurate) come renewed calls for corporations and “the rich” to pay more taxes, to pay their “fair share.” News stories report that some corporations such as Apple, and locally Microsoft, Amazon and Boeing are actively working to reduce the amount of taxes they pay. Personally, I am shocked, shocked to hear that big corporations are using perfectly legal methods to reduce their tax liability… just like every other American filling out their 1040 form.
Wealthy men like Warren Buffett are held up as examples of how the rich should pay more taxes, when in reality he is a better example of how to use the tax code to your benefit.
Warren Buffett amassed his huge fortune in part by taking advantage of the financial damage caused to solid family-owned corporations by inheritance taxes, and has kept it largely untaxed by taking his income only through a limited amount of capital gains, and deferring the rest of his profits. If he was truly interested in paying more taxes, his corporation wouldn’t be fighting the IRS claim that they owe a billion dollars in back taxes.
The Chinese have an old saying that clever laws make clever criminals. It is certainly true that our current immense tax code makes for clever tax attorneys. Where does this byzantine collection of tax breaks and loopholes originate? They are created by legislatures eager to curry favor with their voters by attracting and retaining businesses in their area. At what point does a tax break designed to promote economic growth become a loophole for tax evaders?
What is inescapable is the fact that governments are in competition for corporations, both between the states and internationally. There are very real benefits to the people of a community to having a large corporation locate there. Capital investment and good paying jobs raises the standard of living throughout the community. Likewise, government at all levels shares in the prosperity, with a higher tax base and corresponding taxes.
In a free market, just as private sector businesses compete for customers by offering better prices and services, so must governments compete for businesses (and individuals as well). The ultimate check on a government’s unrestrained taxes and regulations is to just move somewhere else (see California and New York as examples). But for some, there is a shortcut to government being an efficient competitor; pass laws restricting the rights of corporations to operate freely.
An example of this is the proposed Seattle Initiative 103. The initiative grandly promises to be a “community bill of rights” for the city: to end corporate personhood, limit corporate election spending and lobbying, and outline worker’s rights. Unconstitutional on its face, this initiative seeks to restrict the rights of corporations, subordinating them to governmental control.
What this illustrates best is a fundamental political difference that exists today. America has historically been a place where individuals could band together and form a corporation, a commercial venture whose sole purpose is to profit its members. This is entirely appropriate; no one would run a small business year after year that didn’t pay you for your effort; a corporation that doesn’t make profits is no different. But today’s liberals believe that corporations must be re-purposed as a captive source of tax revenues, jobs, health benefits and community charity. While clothed in noble intentions, what that view translates to is this: Corporations (and the people that they represent) exist only to further the state’s ends. What they earn belongs to the government, which then determines what they are “allowed” to keep.
This is why our Constitution protects corporations as it does individuals; if you have no right to your collective labor, you have no right to your individual labor. What is another word for a person who has been stripped of the right to reap the reward from their own labor? Slave.
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