by Anna Manning
North Carolina is on the right track with corporate income tax. The tax is currently at 3 percent, after annual reductions in the rate since 2013 when it was at 6.9 percent. The tax is scheduled to be reduced to 2.5 percent in January; however, the tax increases in Governor Cooper’s proposed FY 2018-19 would repeal this scheduled reduction.
North Carolina has the lowest corporate tax rate of any state in the country that has a corporate tax. There are six states that do not have a corporate income tax and John Locke Foundation’s Roy Cordato argues that North Carolina should not either.
In his rhetoric supporting this change, Cooper perpetuates the deception that corporations actually pay taxes and that, in not allowing the corporate tax to continue its decline, average working-class taxpayers will go unscathed. In other words, taxing corporations is just another way to tax the rich.
In making these arguments Cooper, either unwittingly or knowingly, is taking advantage of the voters’ lack of understanding about taxation generally, namely that every dollar in tax must be paid by some real person. Legal entities, like corporations, cannot pay taxes.
A corporation is a legal and accounting entity. It can’t pay taxes; only people can. All revenues that flow to a corporation ultimately end up in the wallets and bank accounts of real people. Because of this, all taxes “paid” by a corporation must come out of some real persons’ wallet or bank account. The real people who pay the corporate income tax are shareholders, customers, and workers. And clearly, the vast majority of these people are not “the rich.”
While decreasing the corporate tax to 2.5 percent would be a step in the right direction, Roy argues that as long as the corporate income tax is in place, North Carolina’s citizens will continue to be misled.
Allowing the corporate tax to fall to 2.5 percent, as current law prescribes, keeps the rate moving in the right direction but it wouldn’t make the tax any less dishonest, more transparent, or more consistent with the democratic process.
Read the rest of Roy’s piece here.