Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 12
I don't disagree that corporations shouldn't be taxed; but the reality is that corporations never pay taxes. They put their tax burden into the price of their product/service and you and I pay their taxes through increased prices for their product/service.

No, they really don’t. Prices are set by cost of materials, distribution costs, and everything else *before* the sale. Taxes come after, if at all.

Consider scenarios: Goofyhoofy’s Finer Screen Door Company builds a factory to produce screen doors. I spend a million dollars doing so. I sell them for $100, except I only manage to sell 100. My net income is $10,000. How much did I allocate for taxes? Nothing. How much will I pay in taxes? Nothing.

Scenario 2: I build the same factory, I sell them for $100, I sell 10,000! My income is $1,000,000. How much did I allocate for taxes? Nothing. How much do I pay in taxes? Nothing. (No profit.)

Scenario 3: Same factory. Same price. I still 100,000. My net income is $10,000,000. How much did I allocate for taxes? Nothing. But my net income is now $9,000,000. How much will I pay in taxes? Whatever the tax rate is times $9,000,000.

Nod one knows what their taxes are going to be before the game starts. I have run several businesses, and “taxes” have never been part of the price setting mechanism. That has always been determined by the market (competition0, COGS, and so on.

Fr simplicity I have ignored depreciation costs of the factory over howevermany years, but the concept remains: I have no idea what the taxes are going to be - or if there are going to be any at all. How can I “put that into the cost” when it’s not there in the first place and could range from zero to substantial?
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.