The Tax Foundation’s Tax Policy Blog has been doing great fact-checks of the candidates after each debate, and I thought this excerpt from tonight’s post was worth sharing with Corner readers:
Throughout the debate, Sen. Obama repeatedly showed an unfortunate ignorance of one of the fundamental principles of taxation: all taxes are paid by people. On multiple occasions, Obama claimed that businesses or corporations “can afford” to pay higher taxes. But such a statement is just ridiculous. Companies have no “ability to pay” taxes. Does the corporation’s building pay the tax? How about its fax machine or water cooler? No. People pay the taxes. Here is one such example of why Sen. Obama would get an F in public finance:
Then Exxon Mobil, which made $12 billion, record profits, over the last several quarters, they can afford to pay a little more so that ordinary families who are hurting out there — they’re trying to figure out how they’re going to afford food, how they’re going to save for their kids’ college education, they need a break.
What Sen. Obama doesn’t understand or doesn’t want to tell the American public is that when Exxon Mobil writes that check to Uncle Sam, some PERSON is paying the price for that. In the short-run, that person could be a shareholder, a worker, or a consumer. But the fact that Exxon Mobil has a lower after-tax profit means that some PERSON is worse off. For example, Exxon Mobil would likely reduce its dividend payment, or its share price could fall, and that hurts every PERSON who was invested in Exxon Mobil at the time the tax was enacted.
And this isn’t controversial. If you called up Obama’s top economic advisers Jason Furman or Austan Goolsbee on November 5 (after the election) and asked them who pays taxes, both of them would tell you that people pay all taxes, and that a company merely acts as a means of collecting for the government the taxes imposed on owners of capital and in some cases, the company’s workers. In fact, if we truly taxed Haig-Simons income as a pure income tax would call for, it could be possible for no tax to be levied on a corporation assuming retained earnings were taxed.
I’ve been making that point about Haig-Simons income for so long it’s become a joke around the office. But seriously, as Larry writes, it would have been nice to see McCain make these points about his entirely defensible corporate-tax proposal.
UPDATE: Who owns big oil? Oh, that depends. Do you own any oil-company stock? Invest in a mutual fund? Have money in an IRA or a pension fund? If you answered yes to any of those questions, then chances are that you do.