One question that seems to be bantered about from time to time as we delve into the issues surrounding the Fair Tax is the corporate tax. It would seem that many citizens are concerned that if the Fair Tax were enacted, corporations would not pay taxes at all. What our fellow citizens have not yet grasped is the false facade that is corporations. All citizens are able to see is the news thrust in their faces that aggrandizes the profits these corporations bring home. Case in point, during the aftermath of Hurricane Katrina, there was a time in the news when gas and oil companies were demonized for their outrageous profits.

Yet, our citizens do not stop to consider just what a corporation truly is. A corporation is nothing but a legal fiction, which means that there are individuals behind these fictions. Individuals just like you and I.

There is only one entity in this country that actually pays taxes, and that entity is the individual. Businesses and corporations merely collect the taxes from individuals and pass them on to the government. Taxes are paid from wages, and in this country, only individuals earn wages.

What is utterly amazing about this is the way this is politicized. Both of the major parties vigorously demonize corporations as though they are evil and out to rob the poor to fill the coffers of the rich. Yet, when one understands the simplicity of this ‘fiction’, it is easy to see why politicians are able to get away with such disingenuous attacks. With such, no revenue is to be lost if we were the individuals forced to bear the load.

Tax collectors discovered long ago how convenient it was to disguise a significant percentage of government revenues as corporate taxes. Politicians realized that the average American knows no more about corporate accounting and taxation than Dan Marino does about hockey goaltending. After all, they run the schools, remember?

What’s more, you may ask on top of the burden that is placed on each of us through this cover of darkness, think of how difficult it is to comply with your taxes each and every year. Once again, not only are the taxes paid by corporations a fiction that inevitably resides in your pocket, the cost of compliance is thrust upon our backs, as well. Usually, an individual has to set aside a significant portion of their time to prepare each Spring. This inefficient use of time could definitely be more fruitful if put to use for something of our own choosing. Now, picture the cost and time surrounding a corporation’s complying with the behemoth known as the Internal Revenue Code.

The corporate tax rate in the United States is the third highest in the industrial world, and the burden falls most heavily on small businesses. According to the Tax Foundation, just the time and effort of complying with our massively complex tax code costs the average small business about $724 for every $100 it pays in income taxes to the government. It is hard to imagine a more incredible waste of human and business effort. In total, the Director of the Congressional Budget Office believes that it costs American businesses somewhere between $400 and $500 billion.

But what of the actual corporate taxes that are indeed paid? I think this, itself, would be the more legitimate question. For, it would be a concern to one actually concerned with the sizable revenue generated by the income tax.

So, the next time you begin to demonize a corporation in regards to the insignificant amount of taxes it pays, remember this post.

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