July 31, 2008

New Tax Foundation YouTube Video on Corporate Taxes

A humorous new Tax Foundation YouTube video titled “Dream Job” addresses the problem of the United States’ high corporate tax rate.

While Americans pay close attention to individual tax rates, many tune out when the conversation turns to business taxes. This is a mistake. The tax climate for business should be important to all Americans, regardless of whether they actually own businesses themselves. Businesses pass their tax burdens on to their customers, employees, and shareholders. In fact, Tax Foundation research shows that in 2005 the average household paid $2,757 in business taxes.

Anybody who owns stock in a company stands to lose if higher tax rates reduce that company’s earnings growth. Additionally, basic economics tells us that a corporation forced to pay high taxes must offset that cost by taking one of three courses of action. Charge higher prices, although competitive pressures can limit this option. Pay less in profit to investors, but investors’ funds are nimbly re-invested elsewhere when profits dip. Finally, the company can pay lower salaries, give less generous employee benefits, or hire fewer people. In the increasingly dynamic economy, it could also mean that businesses relocate to places where the tax climate is more inviting.

Click here to watch the video. Click here for more on corporate taxes.