Aside from my irritation about federal legislators’ refusal to really attack the budget deficit, I continue to harp on the fact our nation has an uneven playing field for our various business structures.
The President’s recent speech about how U.S. corporations face an unfair tax rate in the international community just rubbed salt in my wounds. Not only does it seem insincere coming from this man and considering his record and his past, it also reminds me that C-corporations are still subsidized by federal tax policy which gives them many more options for siphoning off funds without taxation than are available to all other business entities.
For the record, corporate tax rates and all other tax rates are roughly equivalent, depending on generally dissimilar income brackets. In a few cases, corporate rates are higher, but the top income tax bracket is the same – 35%. It’s the deductible/tax-free items which make the difference.
Further, I remind you the President and others pushing their agenda last year and the year before harped on the fact small business is the real engine that drives our economy.
To that I say: If government leaders recognize small business is the engine of our economy, why are small-business operators forced to operate at disadvantage to C-corporations, most of which are large enough to have many structural and efficiency advantages anyway?
Ultimately, the question remains: Why is there any difference in tax rates for businesses?
When I was a sole proprietor of my freelance writing business and several other enterprises I looked seriously at all the structures in an effort to minimize my taxes. I also faced high health insurance costs as do most of our readers who are self-employed.
Frankly, it was a stake in my heart that legislators didn’t care enough to give me the same 100% tax break for health insurance costs they gave corporations. That wound in my psyche remains fresh, and the recent moves to allow 50% write-off of those expenses in the monstrous health-care bill made law last year hasn’t assuaged my anger.
There are plenty of other inequities I won’t dwell on, but if you read the tax code or a few books on how it operates you will see what I mean.
In fairness, I must add that agriculture has many tax advantages not open to any other form of business, so we don’t have a lot of room to whine in our industry. Yet I also believe a major overhaul of the tax system so all businesses have the same opportunities and none have advantages would be an important change.
In the long run, I advocate less social engineering via the tax code and generally less government meddling in the economy. Tax breaks are just another subsidy distorting the economy and causing secondary repercussions, as all subsidies do.
If you doubt the wisdom of this, look in your own barnyard. Consider how the subsidies paid to grain farmers have distorted the prices of feedstuffs downward by increasing supply. Then consider how the ethanol blenders’ subsidy and federal mandates have now helped reverse that situation and are reshaping the beef industry and all other animal agriculture industries.
Do legislators really think individually they are that much smarter than the collective wisdom of the marketplace?
I do not.