The Role of Businesses in Society: It's More than Just Taxes

I often revisit the topic of taxing the rich and big businesses because I think it's crucial to understand it in a different way than we usually tend to. Although, I will admit, it's probably a rather controversial thing to say, I think it's likely in the best interests of most Americans to maintain the current system, even if it appears unfair.

If we view taxes as a contribution to society and our way of life, as they fund essential public services, infrastructure, and social programs like Social Security and Medicare, forming the glue that keeps everything functioning, similarly, businesses contribute enormously too, even if they pay a lower percentage in taxes than the average working-class citizen.

If we consider taxes as a means to enhance society, ensure smooth functioning, and in some circumstances, redistribute wealth, businesses also play a crucial role in achieving these goals through what they produce.

Consider that businesses provide employment, helping people support themselves and their families. They drive innovation, creating new products and technologies that improve our lives. Although they may not send a physical check to the IRS, they significantly contribute to the tax base by stimulating economic growth through their goods and services, which generate tax revenue. Businesses also make substantial contributions to society by supporting communities through charity, sponsorships and volunteer efforts. For example, Anheuser-Busch has donated cans of water for disaster relief, and Elon Musk made Starlink available for communication in hurricane-affected regions. Additionally, businesses heavily invest in infrastructure, including communication networks like telephone and Internet services, as well as rail and shipping services.

In other words, when we demand the rich and the businesses pay their fair share, are we overlooking the valuable contributions they already make? We all play a role in a functioning society, and if we solely measure contributions in dollars and cents, we're missing the point. We're focusing on the wrong things.

How would we feed our families without the jobs that businesses provide? Beyond that, how much wealth would we miss out on without the opportunity to invest in these businesses through stock sales? Without the profit incentive, what inventions that enhance our lives might never have existed?

Taxing businesses or the wealthy more pulls money out of the real economy and places it in the hands of the government who are not equipped to function as drivers of innovation and growth. The rich, with less to invest, would be hindered in creating new ventures or expanding existing ones. Instead of fostering economic growth, as the government suggests more taxation would achieve, taxing businesses more actually depletes resources, leaving less money available for meaningful contributions to society.

Sure, it can seem disheartening to see the top 1% getting richer and richer, and it may seem like they're holding back the lower rungs of the financial ladder. But I believe the opposite is true. Without strong businesses growing and generating massive profits, society would be in far worse shape than it is today.

As I said before, we all have a role to play. I think understanding our place in the world is important, and rather than undermining the achievements of one class, what another class achieves should be an incentive to have loftier goals for ourselves—on top of that, success should never be something that we should ever want to penalize. 

When it comes to taxation, we have to ask ourselves what truly improves our lives? Is it economic growth that fosters better opportunities for working Americans, or the artificial redistribution of wealth that fails to lift anyone out of their current class and circumstances?

Regardless of what anyone thinks "fair share" really means, I think businesses are already paying their dues and we have more to be thankful for than to be angry about. No matter how unfair it seems. When we look around us, all we see are the businesses and the massive profits they generate. We fail to see how our lives might be very different if they did not exist, or what opportunities might not exist without what they contribute for them to even be possible.

The United States is the richest nation in the world for a reason. And that's because we allow people to become rich and be more in control of their own wealth. You can say my commentary here is a commentary on trickle-down economics and claim it doesn't work. I contend it has always worked, and the only problem we have with it is that some people simply don't open the spigots to their faucets.

Taxing the rich and businesses more is not the solution to our own financial problems we face. Allowing the free markets to work and educating people on how they can participate in it is the answer. Taxes do not contribute to better opportunities for society as a whole. It robs us of them.

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© 2024 Jim Bauer

Tax the Rich?

It's an idea that looks great on paper, and certainly the masses enjoy the idea of taking money out of the pockets of the rich. While the vote in the recent reelection for President Barack Obama was not a clear mandate for higher taxes, the Obama administration is definitely interested in continuing its pursuit of diminishing the wealth of the most wealthy people in the country. In fact, he recently announced that he wants to raise $1.6 trillion in new tax revenues, which is double the amount he originally said he wanted.

The question is who ultimately pays the tax? I think the answer is very clear. It's not the rich.

In order to understand how taxes affect everyone and not just the rich, one has to keep in mind what businesses do when they have to incur higher costs to run their businesses. Higher taxes are costs.

While it is not a direct comparison, I can use my rental property as an example of what happens when the cost of owning and operating that property increases. As a part of the rent I offer my tenants "free" heat. I put the word free in parenthesis because whether or not the heat is truly free is a bit of sleight of hand, is it not? So long as my rental property produces cash flow, the actual cost of the heat is being paid by the tenant. So, what happens when the cost of my heat bill goes up? Of course this cost is ultimately passed on to the tenant in the form of higher rent.

The same applies to the cost to insure my property, or the cost of repairs to the property. You can also apply this to higher costs incurred through higher property taxes. All of these costs are ultimately passed on to the tenant in the form of higher rent as well. Perhaps the costs are not immediately passed on. But at some point they must be, otherwise I have no reason to own the property.

I've made the point before that businesses do not pay their overhead. In fact, they recoup their overhead.

In addition, it's important to note that any money that the government collects from the private sector are essentially removed from the real economy. I've heard many people on the left argue that dollars collected in tax revenues are simply spent by the government, and that those monies ultimately wind up in the economy as a whole inevitably.

The problem with this thinking is that it is not exactly true. Consider that much of the dollars that the government collects must go to repaying debts and interest we owe on those debts. That means that a lot of the money goes to other governments we've borrowed money from—China would be one of the larger ones. We also spend hundreds of billions of dollars a year in foreign aid. Again, that money does not necessarily return to our own economy. The money essentially just disappears.

At the end of the day higher taxes on the rich and on businesses means less money will be spent on investing in new company startups. It means less money will be spent on research and development, and on capital expenditures. It means less money will be available to hire more workers, or provide pay raises. It means less money will be available to pay, for example, certain benefits like healthcare for their workers. It means less money will be available to make matching contributions to their worker's 401k plans. It means less money will be spent on marketing that helps their businesses to grow.

And let's not forget the first example I made about investment. Less money will be in the real economy for people to help companies obtain the funds they need to expand the business. All of this leads to higher unemployment, less job creation, and higher prices for all of the goods and services that the middle class, and the poor buy.

When it comes to taxes, people really need to see the forest for the trees. Sticking it to the rich is sticking it to ourselves, and there really is no way of getting around that. If President Obama does not cut spending, and reduce taxes across the board, the people who will be hit the hardest are the very people who he says he wants to help.