The Spectacle Blog

Taxing Business, Taxing All of Us

By on 6.30.09 | 6:51AM

The Obama administration wants to tax "business."  Actually, the administration currently is pushing at least three significant business tax hikes.  And that doesn't count whatever might emerge from health care "reform."

But Fortune's Geoff Colvin helpfully reminds us that when you tax business you actually tax people.  Which means all of us.

Writes Colvin:

The White House therefore proposes charging all American companies full freight -- the whole difference between their overseas taxes and the U.S. corporate rate -- on all their profits as soon as they're earned, no matter where. This measure, in their minds, would bring jobs home.

...

That's Obama's first proposed business tax increase. Another would require companies to account for their inventories on a first-in-first-out (FIFO) basis rather than a last-in-first-out (LIFO) one -- an eye-glazing change that's highly significant. In an era of rising costs, to assume that you're selling your oldest inventory rather than your newest increases reported profits and thus taxes, even though nothing real has changed. If inflation turns worse, as many analysts predict, FIFO would force companies to pay real taxes on phantom profits as the value of goods gets inflated while they sit in inventory.

The third business tax hike would be the new levy on carbon emissions. Regardless of the form it takes -- a cap-and-trade system or a carbon tax -- and despite the good reasons for it, it's still a tax, money out the door for which a company gets nothing.

The problem with sticking it to business in these three major ways is that, ultimately, business doesn't get stuck. Tax-wise, a company is just a bunch of incorporation papers; all taxes are paid by people -- customers, shareholders and employees. And guess who would bear most of the burden of these tax increases? It's the U.S. employees of the companies being taxed.

Research has shown that when business taxes are raised by a dollar, 70 to 92 cents comes out of employees' pay. When workers wake up to that fact, they may decide this is one time they don't want the White House beating up on business.

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