Companies can't pay taxes

Making corporations pay taxes instead of people is an often-used political slogan. Like other political slogans, it is entirely non-sense and easy to debunk by the primary weapon of the rationalist thinker: looking beyond the abstract concepts used to trigger emotions and understanding what the consequences of the tax raise will likely be.

Companies are people

Just as countries cannot start wars (kings, warlords, presidents can), companies cannot pay taxes. Companies only exist in our shared world of concepts, and it's always people who pay taxes. If the tax raise has other consequences, those are born by individuals, too.

Companies face competitive pressure in almost all sectors of the economy (except those where government grants a monopoly or heavily regulates the market), and they need to be efficient in producing the goods and services they sell.

You can be certain that if they’d had extravagant expenses (lavish offices, company cars, exorbitant salaries, bonuses for managers, etc.), they’d have had to cut back those to reduce costs and stay in business.

So the idea that they can pay the new tax from the profit they get on their overpriced product is ridiculous.

"All right, I'll only get my second yacht a few years later." – say these imagined, exploitive CEOs in the common imagination, putting the whip down for a moment to take a sip of their margarita.

Ways to deal with increased costs

They usually can't just take the loss unless they are a government-favored business, in which case it's unlikely they'll have their taxes raised in the first place. Instead, they can deal with the increased costs in different ways, none of which is favorable to the common man.

Possibly the most straightforward one is passing the increased cost to the consumer. If a 5% tax is levied on strawberries, the price of that delicious fruit will suddenly go up by the same percentage.

That is if it is allowed to do so. Remember, the government exists to protect you and solve all life's problems. They will not let those filthy capitalists trying to buy their 3rd yacht pass on the increased cost to you, a law-abiding citizen. They will dispatch thorough inspectors who roam the streets and shops to spot any infringement where business owners try to raise the price they sell their products. So those mongrels can't do that.

Instead, they will have to reduce their costs. There are several ways to do that, possibly the most simple of which is to lay off people. They can also make production cheaper by moving some part of the production process to countries with lower wages, or use materials of poorer quality, or spend less on capital renewal and accumulation (so that they can keep making the same products but of better quality and at lower cost in the longer term).

If none of these work, they'll have to shut down the business, raising unemployment and reducing competition in their domain. Sure, venturing individuals could start companies by hiring those people and increasing competition, but starting a new business in a heavily taxed sector is not appealing – they will instead take their capital and entrepreneurial spirit elsewhere.

Who's left holding the bag?

Notice how people in the taxed country get the shorter end of the stick in all of the above scenarios?

Raising corporate taxes will not result in transferring money from "companies" to "ordinary people" (not least because companies are ordinary people, to begin with). And it should be no consolation that business owners might have to delay the purchase of their 4th yacht.