Wednesday, May 29, 2013

Should Corporations be taxes part deux

I have been taken to task for suggesting that federal taxes on corporations are probably unnecessary and counter productive. It was suggested that corporations should shoulder their share of the cost of the utilities and services they use. That this may be true depends on who is providing these services.

If the federal government, the sovereign, provides the service, such as an interstate highway, then there is no connection between taxes and the expenses. The sovereign issues the money it needs to provide and maintain the services. It has no need to acquire the money first, in fact it really can’t. The only reason it may need to plan a tax is to control the price of goods and services it needs or to lower an overall demand problem.

If, however, it is a local agency, such as a state, city, etc. that provides the service the scenario changes completely. Why? Only the sovereign and issue money; all other entities are users and cannot issue the national currency. Therefore if they wish to pay for the maintenance, they must acquire the money first, either by taxing, borrowing, or a federal grant.

The necessity of taxing corporations at the federal level is open to question because the functions that federal taxes fulfill  is totally different than taxes imposed by agencies below the federal level. At these lower levels tax revenue goes directly to pay for the goods and services that these agencies provide and, therefore, corporations, like everyone else should pay to offset what they use.

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