What Socialist and Democrats Don’t Want You To Know About Corporate Taxes

- The government that levies taxes is the same government that allows for deductions.

- Deductions alter effective tax rate not the actual tax rate.

- Tax deductions may lower the amount of actual tax dollar paid to the government but does not necessarily decrease corporate expenditures. Deductions are still an expenditure, just not to the government.

- Tax rates are not determined by the amount of profit a company makes. You can have little profit and high taxes and you can have a big profit with little taxes.

- The effective tax rate or actual dollars paid into taxes levied are determined after deductions are applied.

- No tax is levied on funds that are spent on government approved goods or services (deductions).

- Deductions encourage a company to spend money on goods and services. This can be a very good thing for the economy because it keeps dollars rolling over within the system. For example. Office supplies are a tax deduction. These expenditures by company A helps fund retail outlet B, which in turn helps trucking C that ships the supplies and helps manufacturing D which makes the supplies and producer E who grows the raw materials and so on and so. The alternative is for the government to take the funds (tax). This removes the monies from system.

- Tax deductions cause a company to spend their funds on purchasing goods and services of other companies. This helps the other companies to grow. The goods and services purchased are intended to help the taxed company to grow.

- Deductions keep the monies within the system. Monies not spent by a company on deductible goods and services are taxed away by the government and redistributed where ever the government sees fit.

- Tax deductible expenditures are sometimes amortized over several years. The amount of that deduction can vary from year to year. For example, let’s say the cost of an expenditure is to be deducted over 5 years. One year the government may allow the company to deduct 20% of the cost. The next year 30%. The year after that 5% and so on. As a result of this variance, a company that kept income and expenditures the same could have varying profit margins each year.

- Deductions explain why a big corporation could have a lower effective tax rate than a smaller entity. Actual tax dollars paid to the government are determined by the actual tax rate and the deductions. This is known as the effective tax rate.

- What a company can deduct varies from year to year and is determined by the government that taxes the company.

Let me know if you can think of more bullet points to add to this list.

Bill Hitchcock