Your neighbor is not treated the same way that you are in our tax code. If you've attended a financial planning seminar you know that they give you certain advice. They tell you to maximize the mortgage on your home(s). This is because you may write off mortgage interest. They will also tell you that if you're wealthy enough you may invest in low-income housing you may receive a 120% rebate from the government. Warren Buffet holds the largest amount of this type of investment. They will also tell you that if you invest in oil drilling you may write off 80% of your investment even while you retain full ownership of your shares. This is neither fair nor clear to the public.
If you own a small business Americans for Fair Taxation's research shows that it costs you $742 in compliance costs for every $100 you owe in taxes. Larger businesses do not experience that punitive a ratio, but still experience high compliance costs.
3. Clarity is certainly lacking in our tax system. Most people are not aware that businesses have never, and will never pay taxes. They do raise the price of their products to cover the cost of any tax, but it is impossible for them to open a magic drawer and come up with money to pay taxes. The only source of income for this restaurant is the food they sell. You will see that taxes are part of their expenses. If they do not collect enough money to cover their expenses they will go out of business.
Americans, for the most part, never do any accounting work. For that reason, when someone says, "Companies must pay their fair share," they are speaking out of ignorance. Because of the 40% corporate tax many companies are moving jobs and headquarters overseas where the taxes are lower, where their prices may be lower because of the lower taxes. A Finnish company, Stora Enso, purchased Consolidated Papers, Inc. Bethlehem Steel was purchased by the International Steel Group. British Petroleum merged with Amoco and calls them Beyond Petroleum so as not to offend any Americans. Many manufacturing jobs have moved to Mexico, Spain, The Philippines, Korea, China, and India. A recent survey by A. T. Kearney found that 500,000 service jobs would be moving out of the country shortly. Here is a quotation from the Center for Freedom and Prosperity, "Indeed, the interaction between corporate taxation and international competitiveness has become so striking in the "casual" data that a fierce international tax competition is raging. For example, it does not take a rocket scientist to recognize that between 1991 and 2000, Ireland, which has a corporate tax rate on profits from manufacturing activities of only 10 percent, posted an average growth rate of real GDP that was almost three times the average of other countries in the European Union (EU). While the U.S. has avoided engaging in this corporate tax competition over the past decade, the positive experience of those countries that have cut corporate taxes - and negative experience of those that have not - will likely have a significant impact on the U.S. tax policy debate in the coming years. Put differently, while the high tax on corporate income makes little sense from an optimal tax perspective, it makes even less sense from the perspective of international competitiveness."
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