How Corporate Taxes Work

excited to it's it's been well over a year. I don't remember the last time we recorded together, but it was definitely I would say February probably of the last nuts we we isolated pre pandemic. We saw it coming, yeah, we did. We probably should have warned everybody, but well we didn't want to, cause, you know, a stir right, We don't like to make waves, so we knew some people would just not believe us. Um. So we're talking today, Chuck about corporate income tax, and I'm sure some people

just said, well, goodbye and must stop. But I feel bad for those people, because it turns out that corporate income tax is less eye bleedingly boring than it seems on its surface. I think, yeah, I mean, I think so too. I think a lot of I mean economics, as you know, is tough for me. Uh, And there is a part everyone it's been many years since I've had to do this, but there's a part where Josh is gonna have to teach me because I read that section four times and I told Josh it sounded like

physics to me. I'm I'm with you though, like, And there's a reason that I figured out all these years of us doing economics um episodes, I figured out why it's so hard to understand because a lot of it is just straight up who we like, economists are wrong about a lot of stuff, and um, they know it too, So I'm not exactly sure what they're doing to reinvent their field, but there's a I mean, it's taken a

beating in the last few decades for sure. So I think one of the reasons why it's so hard to understand because it doesn't make a lot of sense in a lot of ways to Yeah, and there's economics is one of those things where you can have two very knowledgeable, well respected economists saying completely opposite things and saying that they are they are each correct, You're wrong, I'm right, And it's not like this philosophical sort of political stuff

that can easily be disagreed on. It's just like no, they're they're like, no, I'm right about this economically speaking, and the other person's like, no, you're dead wrong. It's really this and then guys like us are like, I don't even know who to believe, right, And then agreeing to disagree solves nothing. It basically just punts it down the road. Yeah, don't you think that indicates that there's a fatal flaw in that science if there you know,

if no one knows who's right. Well, that's like a really good point because that really comes to the surface with corporate income tax because there's a lot of people out there, typically liberal economists, who tend to think that corporate income taxes are a very very good thing and we need them, and that average American typically agrees with those liberal economists, even people who are not liberal in any way, shape or form, because the average everyday American

tends to think that corporations should pay taxes as well. Um. And then there's conservative economists who say, no, this stuff is stifling business. It has all sorts of other pernicious effects that will get into um, we should do away with them alltogether, And the fact of the matter is, no one is sure who's right. Do we need corporate Texas, do they actually harm things? They don't even agree on

who actually ends up paying corporate taxes. It is so um there's a lot to like kind of dig into here, which is one reason why I like it so much. Yeah, I mean, I guess we'll go ahead and get some stats on the board out of the gate. I think at ten of the countries in the world, only ten don't have some kind of corporate income tax, and here

in the United States. And we'll get to how it's been over the years, but I think in twenty nineteen we've brought in about two thirty billion in corporate tax compared to one point seven to trillion from you know, people like you and I and uh now, it's about six percent of the total take, whereas in the nineteen sixties it was forty of like all taxes were paid by corporations. Yeah, and like, I mean, corporations were paying for a lot of the functioning of America at that time.

What's weird is corporate profits were also higher during that time too. And I couldn't see anything any smoking gun where some economists was saying like this is the reason why, um that you know, a decline in corporate tax rates has actually led somehow to decline in profits. But I don't think there's anything in economics, especially when we're talking about huge, sweeping macroeconomics that make up one of the world's largest economies, if not the largest economy, America's. Um,

it's never just one thing. There's never you don't just push one button and then it just has its one effect. You know, it's a whole bunch of buttons that are creating this one larger effect, and they're really hard to disentangle. Yeah, and Congress has been taking uh, corporate income tax since nineteen o nine when they said, quote, Congress shall have power to lay in collect taxes on incomes from whatever

source derived without uh what is that apportionment? Okay, how I read the the oh, and the I switched in my mind apportionment among several states and without regard to any census or enumeration, right, which is a kind of a different thing like it used to be where if you taxed one group you had to text everybody equally, regardless of say, like if West Virginia the same population

as California, but California had a lot more income. Well, West Virginia had to pay the same amount, not not percentage, amount of income tax that all the wealthy people in California had to pay, and so that kept income taxes away for a while. Which, by the way, we've done an episode on income taxes, and we also did that chapter in the book on it too. We apparently can't get enough of income taxes. Yeah, and we did a an episode on corporate personhood many years ago too, right, Yeah,

which really kind of plays into this. It's the reason why a lot of people say corporations should pay their fair share. They're treated as people under the law, and people under the law have to pay taxes in the United States. That's kind of a big, a big reason

why people want to see it. But yeah, it wasn't until nine nine, and I think, um, it was like you said, the sixties where that was like the heyday of corporate taxation, where the tax rates for for corporate income tax reached almost fifty three percent in the United States.

It is apparently, um, the UK had a similar peak, but there's came later in two and then Australia's peak came in nine six at fort So that and that actually kind of points out something that I came across, Chuck, because there's a lot of like, um, one country will change its tax code to kind of attract foreign money

to kind of get dumped into it. And which makes a lot of sense because when you dump billions or hundreds of billions of dollars from all these businesses who find your tax codes attractive, that money is now in your economy, like your financial institutions can go out and invest it, and you can do all sorts of amazing stuff with it. That's why countries have different tax codes at different times to a tracked foreign investment basically, right,

which we'll get into that. I mean that's foreign investment is one name for it. Um hiding money another way to say it. Jackie channing, Uh, I don't get that. What did you do? Remember the Panama papers they revealed this, this Panama's attack haveing. The only person who was basically publicly pilloried for it was poor Jackie chan. Somehow Jackie chan ended up the face of that thing. That's terrible. Um,

So you mentioned conservative and liberals. It's a little counterintuitive, but under Ronald Reagan actually um the He actually went after corporate taxes to try and increase the corporate tax amount so he could decrease US paying taxes a little bit.

And in eighties, I think that was with a Tax Reform Act, they cut the rate from forty to thirty four, closed a lot of loopholes, and I think the end the end result of that was the percentage went from five percent to ten percent starting in the eighties until Bill Clinton came along. Yeah, and then Bill Clinton topped it off at thirty five percent, and there it stayed. He's just added a percentage point and there it stayed for quite a while, actually until I think two thousand

and seventeen when it got slashed to one UM. And for from about to two thousand seventeen, the US had one of the higher tax rates in the world. Because it seems like there's there's always an outlier, like the the United Arab Emirates I think has Camorros in Africa has fifty, and then usually it drops down into the thirties. And there's a handful of countries in the in the mid to low thirties UM, which is where the United

States was for a while until two thousand seventeen. So it looks like, if I'm reading this right, the since of the nineteen eighties, the person image of federal revenue from corporate taxes has been under ten percent. Yes, yes, which is historically low. I think it got down to one percent of g d P, which is another way to measure it. Um uh, for the first time since

the very early eighties when Reagan first came in. Because Reagan slash taxes across the board in and I think he overstepped it so far that Congress is like, we're reforming corporate taxes in six there, Like you want to paycheck, right exactly, fellow congress person. Right, Uh, maybe we should take a break after that set up, you think, I think so. Yeah, it's a little early, but now we can really get into the really fun stuff. Prepare for

the eye bleeding, all right, We'll be right back, okay. So, um, when it comes to corporate income tax, it's a little different than individual income tax in the US. Right. With individual income text, there are a few things that are kind of removed from your taxable income, right, like you're um, health spending account contributions, just a little stuff like that.

But for the most part, you're paying like on your gross income, which makes sense because you don't have like profit and loss necessarily, although I guess if you think about it, you could just tax people on just what they have left over. They're they're, um, what's it called your something income? You know, you're you're well, yeah, you're net but income expendable income, right, Yeah, they could totally just text everybody after like housing, after healthcare, after groceries,

all that stuff, just like a business. They hadn't occurred to me, but that's totally how you could do it, And they don't do it that way. I'd be great, But they do it for for corporations. Uh they do because corporations get do get text on their net and uh, you know, this is actual corporations, where if you're a sole proprietorship or if you're a partnership like an scorp or yeah, like you know that's that's not the same thing.

This is only for corporations. Uh. It says here that you know, if you're like my wife's business, for example, is not a corporation. It's a small business and she pays personal income tax, so that's like sort of the pass through situation. Yeah, her companies have passed through entity. Right, so like all of the profits and all that stuff just comes right to her your individual income tax. But with the corporation, it's a its own entity. Again, it's

like in the United States. I'm sure not everybody out there understands this, but the Supreme Court, starting in the nineteenth century and a few times over the course of the last hundred or two hundred fifty years, has affirmed that corporations are artificial people. They have the same rights and everything is as everyday Americans. It's nuts, it's totally wrong, and it's created all sorts of horrible problems. But one of the things that that amounts to is that you

can tax a corporation. They're treated, uh, in that sense under the law as a person, but a person with special privileges. Right, And he talked about moving money around. The reason that happens is because here in the United States, they are taxed on money that they make in the

United States. So if you're I don't know, like Apple or Microsoft, let's say, or any you know, not any or every big corporation, but many big corporations of them, you might want to say, hey, let's, uh, let's find, like you mentioned earlier, a country with a really friendly tax code. It's called tax in version, and let's just confuse everybody by uh using what's called transfer pricing, which is basically creating they're not fake transactions, but their transactions

between subsidiaries all over the world just to move profits around. Basically, yeah, using more biblical terms, it's like robbing Peter to pay Paul. Basically, it's all like moving goods from one division to another within the same company. There's no reason that the company has to charge that division or the other division or providing a service. Like let's say you bring your marketing

team into launch a new podcast. You could have the podcast division charge or the marketing division charge the podcast division front and it's all as far as the company's concerned. It's all internal money. It's all kept in the family. But all of that is just kind of right exactly. And then you're like this, I really needed that money, um, But the as far as like um, multinational corporations are concerned.

When you do that and it crosses international borders, that's a really good way to move money from say the United States to say the Cayman Islands, where there's no income tax. It's one of those ten countries, And so all of a sudden, that money that you just moved from the U S to the Caymans doesn't count as profit that America can tax any longer. That's that's transfer pricing, which is a form of tax and version. There's other

stuff you can do too. You can move your headquarters to another country with um a lower tax, which really, from what I can tell, basically amounts to changing the address on your letter head um and maybe some legal documents, like I think Burger King did that when they bought Tim Horton's. They basically used Tim Horton's headquarters as the

new corporate headquarters for Burger King. So Burger Prince could go to school in the right district exactly right, except in this case rather than going to school districts is saving billion and billions of dollars in taxes, even though it's kind of a joke because Tim Horton's is just dwarfed by the size of Burger King. So the idea of this giant company, Burger King, transferring its headquarters to you know, relatively smaller Tim Horton's headquarters. It seems a

little disingenuous, because that's the thing. Everybody knows that corporations try to get out of paying their taxes. They're just famous for it, especially in the United States. But when you come down to it, that is deeply un American and really immoral. And businesses are not supposed to be doing that. They're supposed to be paying their taxes and being upstanding corporate citizens, but they don't do that, and so every once a while they get called out on it.

And one of the reasons why we still have corporate taxes, as we'll see, is because the average American, like you know, me, thinks, heck, yah,

corporations should be paying their taxes just like us. Yeah, And these tax havens they cost governments a lot of money all over the world, between five hundred and six hundred billion dollars, which you know that that puts a dent on us here in the United States, but if you're a developing nation or a low income economy, it makes a real big dentu If you're losing, you know, a couple of hundred billion dollars, it's going to be a real hit to your g d P. And you

know when Apple moves thirty billion dollars to Ireland over the course of four years and employees and nobody over there, and their TAXI rate of two percent, that does hit the United States, but not like it would in some other countries. Right, But again you can understand why why Ireland would be like, I think they actually made a sweetheart deal with Apple for that. Because Ireland's corporate tax is normally twelve point five percent, they knocked ten percent

off for Apple. So um, but I looked at Ireland's GDP that thirty billion dollars was twelve percent of the value of Ireland's GDP in two thousand So I Land, that was an enormous influx of cash and worth whatever effort they were going to make to get it into their borders. Plus they got to make some money off of it in taxes in addition to having it invested

into their economy. Um. An, Apple, like they got pilloried and kind of called out in two thousand thirteen for that that kind of transfer pricing or tax in version technique, right because they didn't have any any employees in Ireland at the time, and they got called out for it. But if you compare Apple to a lot of the other fortune five hundred companies, they are they might as well be we blows for goodness sake. As far as like paying taxes is concerned, they are ned flanders, um,

just to the tea. As far as paying taxes goes compared to like companies like Amazon, it's just astounding. They should not be ever be picked on at all in that respect, just by comparison. Yeah, I mean, let's talk about Amazon. You know, they've been criticized a lot and called out a lot, especially over the past couple of years. Uh. In two thousand, seventeen and eighteen, they paid zero dollars in taxes. Uh, and they made big profits three billion

dollars in profits. This isn't the gross. This is that that net profit that we were talking about that they're supposed to get taxed on. Uh. In seventeen, I think it was I'm sorry, in eighteen it was eleven point two billion dollars in profits from three billion. Yeah, they paid zero dollars in tax of both years. And not

only that, check they got refunds those two years. Yeah, hundred and twenty nine million dollars and a hundred and thirty seven million dollars respectively over those two years, and then finally a couple of years ago in twenty nineteen, they were like, we'll pay some taxes. So they paid a hundred and sixty two million on the profit of thirteen point nine billion for a whopping percentage rate of one. Yeah, so in Amazon deserves to get it, you know, UM

publicly berated for it. And I also have the impression that they paid those taxes in two thousand nineteen just because politically it was getting bad, like the press for it was getting kind of ridiculous. So they're like, all right, we'll pay a hundred and sixty two million. It's not even the combined refunds that we got the last two years, but at least we're paying something. Um. There are there

plenty of other corporate tax sodgers. Chevron, Haliburt and IBM also paid zero dollars and taxes, and I think two thousand eighteen UM and there was a two thousand two eighteen study UM that found that of three hundred and seventy nine of the Fortune five hundred companies that turned a profit in two thousand and eighteen, ninety one of

them paid zero dollars in taxes um. And I think altogether those three d seventy nine paid something like eighty six billion, when really, had they paid just the one percent that lower twenty one percent effective rate, it would have been a hundred and sixty one billion. So you can make a really good case that the corporations in America are really really good at getting out of paying taxes for the most part, even though not all of

them do. And going back to Apple, Apple paid sixteen billion in taxes in two thousand nineteen compared to Amazon's hundred and sixty two million in in that same year, right, And you could also make the case that the UH tax reduction for corporations and leaving open of the loopholes did not in fact boost federal corporate tax revenue like they said it would, which never made sense to begin with anyway, exactly now it was all just a big scam, UH.

You mentioned earlier though, like we still can't agree on who actually pays this. So you hear Amazon or whoever pays a hundred and twenty six what they pay a hundred six million dollars, I don't know, hundred and sixty two million, Like who actually you know, Jeff Bezos, right, a check to the federal governed want for that? How does that work? And economists don't even really agree on

who ends up like taking this financial burden on. I think even in the seventeen I'm sorry, sixteen hundreds, there was an economist named William Petty, Sir William Petty, and he said, you know, kind of like what a lot of people probably think, which is it's just gonna be passed onto the consumer as higher prices. They're gonna just

raise the price of their goods. Other people say, well, that can't be true, because if you're already charging prices where you've maximized your profits, you can't there's there's a cap. You can't just keep raising your prices over and over and over to cover yourself because eventually people are gonna be like, I'm not gonna buy that, right. Yeah, When you raise prices, it makes people think like, oh, can I actually afford that? And you start you start actually

shooting yourself in the foot. And that's generally the understanding among economists today. You know, hundreds of years after Sir William Petty um that he was wrong and there that idea is actually born out. Among the different states in the US, some of them have zero taxes on corporate income,

others have, you know, relatively high taxes on it. And yet if you go from one state to another state, when you buy a pack of Hubble Bubba bubble gum, it's probably gonna be exactly the same price before before you pay sales tax on it um, which goes to show like, you know, they're not going to charge a different price because they're having to pay corporate taxes. That just isn't the way it is. And Plus, also, corporations

aren't the only ones who sell Hubba bubba, right. You know, if Emily wanted to, she could become a distributor of Hubba Bubba bubblegum. And I wouldn't blame her if she was, because it's about as good as bubble gum has ever been produced. I was a hubble Bubba kid. I was not bubblicious. I I didn't like bubblicious either, but ultimately I was bubble Yumm. And I think there are a couple of things that represent the pinnacle of human endeavor. One of them is um lemon lime bubble yum. Remember

it was the green outside in the yellow center. Oh yeah, yeah, yeah, Um. I think I've mentioned it before. Rambo bubble gum. It was BlackBerry flavored big League chew with Rambo holding a missile launcher on the I've definitely never heard that. That's amazing. And then lastly et peanut butter flavored cereal. Uh well, I'm a Captain crunch guy, as you know, but uh on the gum. Hubble Bubba to me always produced, It

always yielded the best bubbles. Yeah, and if you were a champion bubble blower and sometimes bubble within bubble blower like myself, then you reach for the hubble Bubba. You need to. You need to make a video of yourself doing that. Man. Bubble gum was good too, though, but just bubble you Almo was good too, But you're absolutely right there was hubble bubble was as good as it gets with the bubbles, for sure, don't. I don't chew gum anymore, but if I was going to, I would

get a pack of bubblegum like that. I think hubble Bubba is basically unchanged bubble yams a little weird. Now, it's a little different the current state bubba. I've tried it once in a while. Yeah, I mean if you want to go get transported back to your youth, like get some get some real bubble gum, and I'm going to do that. Where were we? Okay, where we are? So states? Uh yeah, states don't charge different prices. Like it's not like let me go to Florida and stuck

up on that gum because it's you know, six cents cheaper. Um. So then, ohh I know where we were. Really we were talking about Emily becoming um Hubba Bubba distribution. She doesn't have to pay corporate text, so she could sell Hubba Bubba way cheaper than say, General Electric could sell Hubba Bubba. If they ever wanted to, she could undercut them. General Electric wouldn't be selling Hubba Bubba any longer because it would be hamstrung by those corporate taxes. Emily is

not hamstrung by the right. So we're still left without an answer on who's paying um. Usually these days modern economists say, well, here's what's going on is the burden is going to fall on the owners. But what that really means is it's divided among shareholders of that corporation. And what it really is happening is employees are being paid less, and so they're all kind of taking in

on the chin. Yeah, because as far as the economists are concerned, if if the government is coming in and taxing somebody, then there's three entities that could possibly be paying for it. Capital, the business owners, the people who like own the machinery, own the money that's invested into businesses, capital, employers, labor, you know, the workers employees, and then customers. And if we've already decided that it's not being passed on to customers,

you've got capital and labor left. And so yeah, it makes sense that it would be capital who's paying the tax in the form of lower dividends than they would otherwise be getting if the pot that the dividends were coming out of was greater because the tax hadn't been taken. But economists still say that's not the end of it.

We think it's probably ultimately divided somewhat, probably not evenly, but somewhat between capital and labor, and that labor helps bear the cost of these corporate taxes by getting paid lower wages. There's just less capital stock involved, and so when you have less money, um, you know, you can't get like a goose plucking machine. That that that means you're gonna pluck this goose. You know you you can

do ten gooses an hour rather than two. That just little Samuel, the ten year old boy with the full chin beard, can pluck by himself with just his hands. Even though Samuel saying, you get this goose plucking machine, I'm going to oversee it and we're really going to make some money. You don't have the money to buy the goose plucking machine, so all you can do is just keep employing Samuel. Maybe his cousin Ezekiel every once in a while comes in on weekends, but you don't

have that money. They're less productive, so you're making less money in the market, which means you have less money to pay Samuel and Ezekiel, even though they're doing harder labor than the otherwise would be. If you weren't such a tight wad and would buy the goose plucking machine, right and do you get his fire Samuel, to be honest, you probably would. Well, yeah, he has been talking back quite a bit lately. I mean someone could turn on that machine and push push goo. Ezekiel could at a

lower rate than Samuel. Oh yeah, he has zero loyalty to anybody, including his cousin. Let's take a break here and then we'll talk about arguments against in than four after that. How's that? Okay? So arguments against taxing corporations some people, and this is sort of the thing you hear all the time is is the economy referred to as an engine and this motor that's got a home along and people that say you should not text corporations are people that are saying, listen, this is what is

keeping that engine humming. Is they're employing people, they're generating money. Uh, they're selling things there. I mean, this is the economy basically, And if you just get rid of corporate taxes, then they're gonna they're gonna reinvest that stuff. They're gonna pay their employees more, Your prices are gonna drop, they're gonna it's gonna trickle down to you, and that engine is just gonna hum right. I mean, that's that's ultimately what

all of the arguments against corporate taxation amount to. Because and you are already taxing those individuals and those shareholders on their personal income taxes. So like your double taxicum to cut it out right. So, yes, the corporation itself has to pay income taxes theoretically where they actually, like you said, Jeff Bezos, cuts a Skexias from the dark crystals check to the federal government for a hundred and

sixty two million dollars or whatever um. And then on top of that, after they pay their taxes, this post tax amount, the the corporation sends out dividends quarterly annually. However, to the shareholders. The shareholders are in some way shape or form and oftentimes very literally owners of the company. But if you own shares in a company, you are part owner of that company, and so you're getting dividends,

you're getting a part of the profits. Right. So when you get those dividends given to you, um, at the end of the year, you have to declare those on your income taxes and then you have to pay personal text and that. So it's like you said, it's double taxation. And so the government saying we'll take a little bit of this capital out of the economy for ourselves. Oh and by the way, we'll take out of your your

little wealth pot too, um. And not all of a sudden, there's just that much less money to be reinvested into business. That's a huge argument against corporate income taxes that's been around for a very long time. But there's also like

a lot more nuanced ones too. Um. One of the big ones is that, like it's a tax on entrepreneurship where if you are a company and you need some money to keep it, say expand your business right, um, and you're you've got your profits and everything like that, but you really want to take it up to the next level and you need a lot more money than you have in the bank, you can issue shares more

shares of your your company. UM. That's called equity financing, where you're releasing equity shares, which your current investors don't really like because all of a sudden there are way more shares on the market, um, and their shares are suddenly worth a little bit less. Even though they didn't do anything and your business is doing fine, they don't

like you very much. Then there's another way to do It's called debt financing, and that is instead of issuing shares of ownership to your company, you're saying, hey, I need I need to borrow money from you. I'm going to issue you the certificate, I'll pay this back in X number of years with with interest. Right, they're called corporate bonds. You have to be a massive company to issue debt securities to raise money like that. You just have to have that kind of established business and trust

with the public to issue debt securities. But the reason that businesses do that is because you you can deduct the interest that you pay those investors for lending you that money. You can't deduct dividends. So if you're a little startup, all you can do is um issue shares. Nobody trusts to enough to buy debt securities. I mean, you're an unproven business, but they will buy shares in your company because they think you probably are going to

be able to make it. They're just not sure. So you can issue shares and then put out dividends, but you can't deduct the dividends. Your competitors, the bigger guys, can do that, or they can issue death securities and then they can deduct the interest. So there's actually a tax is corporate tax. Um is actually at tax on entrepreneurship in that sense, which again it's really nuance and

it's really wonky. But once you start to like enter the world of like high finance and new innovative technology. This is a big deal to you, you know what

I mean. Yeah, And you know there are people that say that the disparity between the taxation between those interest in dividend payments is why we're getting all these stock buy backs happening, which you know, if you're if you paid attention at all to the news in the United States, when tax laws change for corporations, you heard a lot about stock buy backs, which is the idea that a company is going to use their profits to buy its own stock off the market instead of doing the thing

that they said it would do, which is, hey, they're going to reinvest these these profits that they're they're making back into the company. They're gonna get new equipment, they're gonna hire more people, everyone's gonna get a raise or R and D is gonna pick up. And what really happens a lot of times is they just buy stock by box. They just say, hey, we got this extra money, now, why don't we buy back a bunch of our own stock and consolidate even more control and more power and

more money. Uh. And it's you know, insert doctor evil laughing, right, at this point. Basically yeah, because allegedly you're theoretically, the stock buy backs only come when this company is so flush with cash it can't spend all of it, so it just does these buybacks. But they happen even when a company doesn't have a bunch of cash, because it raises the share price a lot more. Too. It also

lowers their their non deductible dividend payments as well. So the the the idea that you that deductibles are not or dividends are not deductible. Um, but interest is it's it's a it's it's also laying the foundation for those stist buy backs, like you were saying, right, and then you add in just the complex plate of spaghetti that is the U. S. Tax code, and it's just it's

really complex. And some people say, if companies weren't having to kind of sift through this tax code and it was a lot simpler, or maybe if they didn't have to pay them at all, then maybe they would uh reinvest some and not have stock buybacks. Yeah. Not to mention the critics of of corporate taxation say, like, we don't even know who's paying this at this point. It's possible that wages could go up if we didn't have this.

So when you take all of these reasons together, there's some pretty good arguments um against corporate taxation, and um you can take them all together, put them into a pile and say, hey, every day, Joe American, what do you think of this? And watch them urinate on all of your reasons that you just neatly piled together. O there reasons for uh corporate taxation? The people say, no,

we definitely should. One of the big reasons is just kind of what we've been talking about is just public perception of your average American is, yeah, why do I gotta pay taxes? And Amazon doesn't? Uh, So that's one big reason. Another is is people that say, hey, look, the government is basically providing the infrastructure for which these companies are getting rich. The bridges and the waterways and everything that we're maintaining and subsidizing as tax paying citizens,

the roads. Even these corporations are are utilizing that stuff. So they need to pay their fair share just to support that that infrastructure. And the government is really the

engine because they take care of all this stuff. In theory, it's dude, it is just such a smoke screen too, that the government is portrayed as just this, this spend thrift pickpocket that just steps on innovation and and takes the rev out of the engine of the economy by taxing business like there's an entirely different way of looking at it, and that by maintaining those bridges in these waterways and and um, the infrastructure that businesses used to

hum along. The government itself is a wealth creating engine two. And the government is mandated to use that money as soon as it gets it right. A business is not necessarily mandated there, There is no mandate. The board of directors and the shareholders might want the business to spend its money rather than sitting on it, but it doesn't have to. And plenty of businesses might just be sitting

on a big pot of money. Well. Another argument in favor of corporate taxation is that the government says, you can't do that, at least not with this percentage. Is twenty one percent of that money that you made this year, because we're gonna take it and we're gonna put it

back in those roads and everything. And yes, agreed, the government is not like a uh an efficient machine by any stretch of the imagination, and plenty of that money also ends up going into other things that I consider very important, like social programs that keep people from starving to death, that kind of stuff that don't necessarily have anything to do with business unless you zoom out enough and then realize that if you want a worker to show up to work um alive, they need to eat food.

And so if you're not paying them enough, the government's actually taking that money from you and making sure that that worker is fed so they can show up at work the next day. If you zoom out far enough, it all has to do with business, and it all

connects like that. It's just some people argue that that it's it should just be just on its face about business, that anything that isn't obviously overtly on its face about business should just go away and and be and not have anything to do with business and let business deal with business. Yeah, how's that working? Yeah, real well, real well,

thanks for asking. Another reason you might want to argue for corporate taxation is is merely took to put these companies in check and these corporations in check, and to make them tap the brakes every once in a while, because with that kind of money yields great power, especially in the wake of the Citizens United Decision, when now corporations and companies can spend whatever they want to get involved in politics and to woo politicians through lobbying efforts.

And you know, some might say that if you at least, you know, smash their head with attacks a little bit, maybe that shouldn't be so violent. If you levy attacks on their corporation, if you tickle their ear with a feather a metaphor for taxation, then that at least keeps their power and influence a little bit more in check. I'm not sure how much that's that's working, but that's

the thought. I think it's working a lot. Actually, yeah, And I think and it's weird to think of and I didn't think of it before, but researching this, it seems to be. Um, you know, it's two sides of this same coin. Some people say, well, a good way to keep government power and check is to reduce its ability to tax things because it depends on that money. It's like a vampire that just sucks money right out of everybody. Um, So it's two sides of the same coin.

I think that that is the give and take that we see when it comes to the tax code is you know, whatever group thinks that the government is a blood sucker um if they're in charge, then taxes go down. If somebody thinks that that businesses need to be kept in check, taxes tend to go up. And that's that kind of seesaw effect that we see. But I think ultimately it does have at least some impact. It's not perfect, but I think it's enough that it's it's worth doing

just for that that point as well. Right, You also might say that it provides a backstop basically two personal

income tax for the wealthy. Here in the United States, nine tenths of corporate stock are owned by the top tenth of the income distribution, So it's you know, the wealthy are uh, they're the ones that are running these corporations obviously, and if we didn't text the corporations, they're also getting away with tax loopholes and tax shelters, and these individuals might not be paying any tax at all

as people and as corporations. Yeah, they might actually form shell corporations themselves and say, oh no, all of this is corporate income. It's not taxable. If there's no corporate tax, and I read that that's one reason why most countries have a corporate income taxes too, because it's ultimately a tax on the wealthy, because the wealthy are the largest shareholders in the corporations around the world. And I hadn't

really thought about it before. But once you see corporate taxes a tax on the wealthy, like, the picture becomes much clearer of what, you know, what the battle lines are in that that argument and debate over the existence of corporate taxes. Right, so it's here to stay. It's not gonna go away. They're not going to completely do away with it. The tax code is a big jumble play a spaghetti. Like I said, it's a big mess.

And there are some people that say, well, you know, if we want to kind of fix this corporate problem that we have, maybe and I think these were a couple of Rutgers professors, and there are there are some different ideas will govern, But they had an idea I thought was interesting, which is, let's not rewrite the tax code again. It just gets more confusing and offers more opportunities for loopholes. Let's just lock that in, but then offer a wealth tax on top of everything for these corporations.

They said, how about five percent of the actual growth of the company for that year. So maybe the federal government, here's what you should do. Subtract the end of the year's share price from that share price that uh where it was at the beginning of the year, multiplied by the number of outstanding shares on each date, and then tax him on that amount over and above the regular

corporate tax rate. Yeah, and then that captures everything that captures the actual growth in the company's well that year, not just necessarily their profits from revenue. And it also says, hey, keep it up, keep going. You can find all these loopholes and all these tax hodges that you figured out. This is again like a like like, uh, corporate taxes a backstop to wealth and income tax for the wealthy. This is like a backstop for corporate corporations getting out

of paying corporate income tax. It's it's just kind of clomped on in addition to it. I don't know if it's going to go anywhere, but it's a it seems like a pretty good idea. Uh. Some people say, another way we can fix it is to basically treat these corporations like they are partnerships and you know, just let the money flow through and then tax the shareholders individually. Yeah.

The problem with that that I saw is that you then would be taxed on your individual income on all the profit that the corporation made that year, even though

you didn't see that amount in dividends necessarily. Let's say you saw twenty or dividend that year for your one share, but really your your share of that profit was two hundred dollars, but you might be text on the two hundred dollars rather than the twenty dividend, and that, I mean, that would just chase people away from investing in companies. So that's probably a generally bad idea, agreed. But yeah, it's it's like you said, it's not it's not going

anywhere at all. It's it's here to stay, just at the very least, because the everyday American is like, yeah, corporations should pay taxes. Yeah. Um, the none or the everyday Americans that are saying let's just get rid of it are not every Dame Marian's right there, like Mr Burns and disguise sort of wearing a bowling shirt or something. You got anything else, I've got nothing else. I'm taking

off my ice skates. Finally, you did great. Man. You didn't seem like you were hanging by your fingernails at any point in time either. I don't think fooled you again. Uh. Well, since Chuck said he fooled us again, I think then everybody is time for a listener mate. Yeah, boy, this is a good one. Uh, I need to said this one up. Remember we did. I don't want to bring this up. I know it's a matter of a past

trauma for both of us. But remember when we did our Feral Children Live show at south By south Befests. Just so you folks know, you might not have heard the story. We did our Feral Children Live show at a bar in south By Southwest where there was a big sort of DJ event before and after I think,

and then we were squeering in the enter. We were squeezed in between and this was a bar with they were probably I don't know, let's just ballpark it and say four dred people in there and about fifteen of them. We're stuff. You should know listeners that wanted to hear what we were having to say. Let's not exaggerate, Chuck

it is probably like eighteen or nineteen. I just remember you and I locking eyes at a certain point very early on and and literally mind reading each other of we're agreeing right now to skip this material, right, And we did, Yeah, we did, And it was it was like we just kind of knew what parts we were going to skip and all that too. It was pretty

amazing that. The saddest thing about all this is that a lot of stuff, you should know, listeners were left out in the hot sun on the sidewalk and couldn't get in, which we had nothing to do within our still apologizing for it. So that's the setup. Uh, this morning, I was listening, Hey guys, I was listening to our Feral Children real and you started the episode by lamenting how terrible your first attempt was when you did it live in Austin In Like, we didn't even release that

it was unreleasable. Uh no, it wasn't even close. Like we re recorded it, if I'm correct, right, Um, yeah, we recorded it as like a regular studio exactly after we got over the trauma. I just want to let you know that at least one great thing came from that show. See, I was in the audience that day with an old friend that I hadn't talked to and ages. We were both fans of the show and we're excited for the chance to see you live. We ended up having a great time decided to hang out again a

few weeks later. Long story short, we're now married with an eighteen month old. That's awesome. How awesome is that you guys would continue to play a huge partner lives and have kept his company during countless road trips and commutes, including to cross country moves. Our daughter now starts dancing when she hears the theme song and we jokingly refer to you guys as Uncle Josh and Uncle Chuck. I think that's only right. Yes, thanks for all you do,

and please come back to Austin. Uh. And that is Jenny And I told Jenny. I was like, this is amazing. I'm gonna read this. And I'm a little mad at you for not sending a picture of this baby that we're partially responsible for. I want to see this kid. I bet Jennielsen the picture. I'll bet you will too. Um. Well, thanks to Jenny, thanks to the kid, thanks to the husband, and thanks to all of the terrible bar patrons at that episode that we record at that time but never released.

But thanks especially to all this Stuff you Should Know listeners who were turning around and telling the people at the bar to sh Do you remember that it didn't work? No, it didn't work, But I was like, hats off to all of you guys trying to shush the people at the bar who've never heard of stuff you should Oh boy, that was terrible. Yeah, but that's great news, Jenny, And

thanks again. And if you want to get in touch with this, like Jenny and take one of our terrible memories and dust it off and make it shine and show it in a different light. We love that kind of stuff. You can send us an email to stuff Podcast at iHeart radio dot com. Stuff you Should Know is a production of I Heart Radio. For more podcasts my heart Radio, visit the i heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows.