Should We Tax Corporations?
A corporation is an entity created by law which is allowed to operate within certain guidelines. A corporation like Amazon has no life other than as a vehicle for the shareholders, its owners, to participate in a business enterprise.
In the media, we hear Amazon made over $10 billion in profit on $239 billion in revenue. The media also hammers away at the fact Amazon will pay no income-tax on this massive profit. No one is claiming Amazon illegally evaded paying taxes rightfully due. They are merely saying there is something wrong with a system which lets it happen.
These critics ignore the fact, since 1995 Amazon consistently lost money and they only became profitable in the last few years. But now Amazon is turning a profit, they’re proclaiming loud and long it’s wrong for them to not pay any income-tax.
While it’s true Jeff Bezos and his ex-wife own 16% of Amazon’s shares, the majority of Amazon shares are owned directly or indirectly by many of us. CNN Business published the following:
Institutional investors hold a majority ownership of AMZN through the 58.15% of the outstanding shares they control.
- Mutual fund holders 32.25%
- Other institutional 25.90%
While Jeff Bezos is the founder of Amazon and has amassed a $40 billion fortune, he doesn’t control the company. Like other corporations, Amazon’s shareholders control the company by a simple majority vote. If Mr. Bezos upsets 50.1% of the shareholders, he will be removed and replaced.
Investors purchase stock for 2 reasons:
- They hope the price of the stock will increase
- They hope the company will pay them dividends each year
Shareholders of corporations want these corporations to use the profits they make in one of several ways:
- Pay down corporate debt
- Expand production
- Make acquisitions of companies which will add to the company’s profitability
- Distribute some or all of its profits to the shareholders (Dividends)
Who would be affected by taxing Amazon? It would be the shareholders. If Amazon paid income-tax at the 21% corporate rate, they would owe Uncle Sam $2.1 billion, leaving $7.9 billion in the corporation.
Assuming Amazon didn’t need to use the remaining $7.9 billion to pay down debt, expand production or make acquisitions, it could declare a dividend and distribute the $7.9 billion to its shareholders. The shareholders would then pay individual income-tax on the dividends they received. Assuming an average rate of 20%, then the $7.9 billion would generate an additional $1.58 billion in individual income-taxes.
This means investors in Amazon would receive only 59% of the amount Amazon earned. While this is not an incorrect result given the present law, it does show how shareholders who receive dividends are only receiving between 50% to 60% of the earnings of a corporation.
If Amazon chose not to distribute the profit but used it for their business, this would presumably result in an increase in the value of its stock. Many investors would prefer this because if the Amazon shares increase in value, they will pay tax at capital gains rates, which are about one-half of the rate levied on ordinary income.
Of course, if Amazon had the full $10 billion to use and not just $7.9 billion, and they used it wisely, their stock value would increase even more.
These examples illustrate a corporate tax levied against Amazon is actually being paid, directly or indirectly, by the shareholders. Again, a corporation is really just its shareholders doing business under a corporate name and many of us, directly or indirectly, are Amazon shareholders.
The FAIRtax Change
Once The FAIRtax is enacted:
- Amazon and other corporations would have no corporate income-tax to pay and its owners would have no personal income-tax to pay
- If the $10 billion earned by Amazon was distributed to the shareholders, the shareholders would receive the entire $10 billion, and then they would pay The FAIRtax only on the amounts they used to purchase new goods and retail services for personal use
- Instead of spending an enormous amount of time and resources trying to find ways to reduce their tax liability, corporations would be free to make the best decisions for their business and their shareholders
- A corporation would no longer keep money it doesn’t need for foreign operations offshore because it could bring their money back to the U.S. and pay no income-tax
- Large corporations based in other countries are also controlled by their shareholders and their officers would be fired if they didn’t move their corporations to the U.S. and thus save the foreign taxes they would otherwise pay
- As one of the early FAIRtax Congressional supporters used to say, “Pass The FAIRtax and the “great sucking sound” you hear, will be all of the assets leaving foreign countries and rushing to the U.S.”
Conclusion
Most basic concepts are really simple. Keep your word is a simple concept. You do what you say you will do.
This simple concept has been greatly modified by some people. They say keeping your word isn’t absolute and by the time they list all of the exceptions, this simple concept no longer means the same thing.
Taxation is a simple concept. It’s the government extracting the money it needs to operate from the people it governs. If the purpose of the tax is just to fund government operations, it can be a very simple tax.
However, if the purpose is for revenue, profit to “The Ruling Class” and control of the people, then it cannot be a simple tax.
“The Ruling Class” has found taxes are a good way to punish those who disagree with them, and to reward those who obey and pay tribute to “The Ruling Class”.
The corporate-income-tax is a great example of this. Instead of telling corporate leaders their purpose is to produce great products which will allow a lot of money to be passed to their shareholders, “The Ruling Class” says:
- The purpose of the corporate income-tax is not just to collect revenue for the government, but for us to control what you do, and to ensure you operate in a way we think is best--because even though we have never run a business bigger than a lemonade stand, we DO know best
- If you make money, we will tax it, first at the corporate level and then again at the shareholder level
- We will reward you not for making better products, but by turning your business operations into something that follows our complicated rules
- We will also reward you if you pay us for special benefits that can make your operations more profitable than other businesses, even if your products are not as good
- If you pay us enough, we will actually make more rules and regulations so your smaller competitors can’t comply and then you can then acquire them for much less than they are worth
Ultimately, all of us understand the more people there are creating and receiving income, the more an economy will grow. The more money people have, the more they can use for consumption and the better lives everyone will have.
No one likes being dependent on someone else. We all like the ability to direct our own lives. Independent people who can provide their own support are much less likely to “value” or “need” “The Ruling Class” and their minions.
The purpose of taxation is to fund what's needed for the public good, so it must be collected in the simplest way doing the least damage to the economy!
Like Willie Sutton said when he was asked why he robbed banks? His answer, “That’s where the money is”. “The Ruling Class” loves the income-payroll-tax-system for the same reason. There is an immense amount of money to be made from selling tax favors to corporations who have the money to pay for them.
The people who are profiting from the system aren’t the people who are creating products that enhance our lives, but are parasites who are living off our efforts. To continue to survive, these parasites need to keep the present income-payroll-tax-system in place.
Isn’t it time to remove the parasites and go to a sane tax system? If you agree, then go NOW to Fairtax.org and join with us!
It's time we demand NOW the solution benefitting everyone! Pass The FAIRtax—the only "Fair tax"?
The author George Bernard Shaw said these words in a play he wrote, You see things; and you say “Why?” But I dream things that never were; and I say “Why not?”
Isn’t it time for us to ask, “Why not?”
President Trump, “Embrace the FAIRtax, the only Fair Tax the only fair tax and the only real tax reform! Stand up to the Swamp. They will oppose you anyway because they see you as a threat. What have you got to lose?”
The truth is the truth. Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
Take Back America Again! Pass The FAIRtax Now!
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Read Evasion Study Summary
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This week's Episode #196 - "A Goldmine of Misinformation"
How can two very educated people be so misinformed about the FAIRtax? The FAIRtax Guys’ attention was drawn to a 10 year old discussion on the Hugh Hewitt radio show from April 2009. Mr. Hewitt was discussing with his co-author, Hank Adler, their book, "The Fair Tax Fantasy". I won’t say they got it all wrong — but close to it.
One is an accounting professor, the other a law professor and apparently they are imprisoned by the current tax code. It will be obvious to you, as it's to The FAIRtax Guys, dealing with the intricacies of the income-tax for many years has blinded them to any other form of taxation.
For instance, they lamented the loss of the home mortgage interest deduction. And of course, the home mortgage interest deduction goes away. What happens to housing under The Fair Tax…?” Why can’t they see deductions go away because there is nothing to deduct them from when the income-tax is eliminated!
And there is the very predictable claim it’s really a 30% tax, not a 23% tax. They totally missed the point an inclusive tax rate used with The FAIRtax is exactly the same method used with the current income-tax.
Come on man, Be fair!
The good thing about a collection of misinformation is it's instructive and helps us learn how The FAIRtax really works and how much we need REAL tax reform which is only offered by The FAIRtax.
As always, the AFFT is looking for volunteers to help their efforts. Watch or listen to see if there is some small way you can help.
There’s always more in FAIRtax Power Radio such as a reminder of the promotional items available now at Our Store and a review of Jim Bennett’s Grassroots Corner Report.
What Can Each Of Us Do?
Call the local and DC offices of your Representative and 2 Senators. Use the following script:
- I am sure Representative ____ or Senator ____ is in favor of everyone obeying the income tax laws.
- After they assure you their boss is not in favor of anyone breaking the law, ask if they are aware of the Cebula study showing $9 trillion of evaded income-payroll taxes over the next 10 years.
- Since most will say they don’t believe their boss has seen the study, drop off a copy, email a copy or click Read Evasion Study Summary and copy/paste the link into an email.
- Say you are going to call back in a week and ask what the Representative or Senator is going to do to stop this evasion.
- In a week, call back and ask specifically what the Representative or Senator is going to do to enforce the law.
- They probably will say their boss believes simplifying the income tax will handle the problem.
- Explain, when people evade income taxes, they are also evading the 15.3% payroll/Medicare tax and state income tax. So, it’s unlikely they are going to pay 30-40% when they were paying 0% because they have already decided it’s okay to cheat.
- Say, the only way to reduce evasion is to increase by tens or hundreds of thousands the number of comprehensive IRS audits done each year.
- Point out Evaders do not self-identify by putting an “E” on their income tax return.
- 80% of the people likely to be audited are trying to comply, but they will be forced to endure these IRS audits as well.
- Ask if the Member is in favor of this?
- If they say no, then ask again how the Member proposes to stop people breaking the income tax laws.
- Then explain the way to handle evasion without unleashing the IRS audits is The FAIRtax.
- If you meet with your Representative or attend a town hall and ask these questions, you will be even more effective.
American's Big Solution - The FAIRtax Primer America Needs
Hard to believe but there still are people who have not heard of The FAIRtax. For those people, America’s Big Solution provides a starting point in their study of The FAIRtax and is meant for any age.
America’s Big Solution is an introduction to The FAIRtax written by Terry Tibbetts, author of “A Spartan Game: The Life and Loss of Don Holleder”, with help from Ron Maiellaro, President The Florida FAIRtax Educational Association. You can buy an electronic version for only $2.99 for the Amazon Kindle, the Barnes & Noble Nook and Apple iOS. You can purchase a print copy at the same Amazon link above for $9.25.
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Yours In Liberty!
Steve Hayes
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