Here is something governments don’t seem to know: corporate revenue funds capital accumulation, innovation, and economic growth

An interesting article by Stephen MacLean on Government Greed Axes the Golden Goose that got me thinking. The way you hear governments tell the story, there is a much larger amount of tax these corporates should pay than they actually do pay, which coincides with some fictitious number related to the amount of money they wish they could cream off for themselves.

But looked at another way, it may well be that the most socially beneficial outcome is for corporates to pay as little tax as possible so that their earnings can be ploughed back into their firms. The role of business is not as a means through which governments can raise money, but as a mechanism through which material welfare is provided to a community. The higher are the business taxes paid, the worse off the community ends up. As MacLean writes:

Middle-class Americans would be among those most hurt by Washington’s tax grab, as it is corporate revenue that funds capital accumulation, innovation, and economic growth. Tax away profit, and you tax away employment opportunities.

Thus, the most socially responsible approach to taxation by corporates may be to avoid paying taxes to the largest extent they are legally able. They are doing these governments a favour, but, as with so much, political greed far exceeds common sense.

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