Who Really Pays Business Taxes?

Who really pays business taxes? It’s the people, one way or another. Watch Nobel Prize winning economist Milton Friedman poke holes the argument that business taxes and personal taxes are separate. This video is part of a Milton Friedman lecture on tax reform. The whole lecture can be watched here. Source: Free To Choose Network YouTube channel.


There is a notion that somehow there are taxes on business and there are taxes on people. There has been a great deal of talk, and I use only the most recent proposals of President Carter for illustration, because the same kind of talk is emanated from every administration, Republican or Democrat. There is talk about how “we are not going to raise taxes on people, we are going to raise them on business and corporations”. The most obvious example is with social security tax.

Supposedly, that tax is half on employee and half on employer. But that’s a fake. It’s all paid by the employee. It adds to the wage cost of hiring a person. If an employer has to pay an addition to a wage –what is it currently? close to 6 percent of the wage?– Well, that’s how much less that he has available to pay his wages in trying to hire somebody or bid somebody away from somebody else.

But more fundamentally, businesses can’t pay taxes. A business isn’t a person. Only people can pay taxes. The corporate executive may write the cheque. He may sign his name to it. But who’s paying it? It either comes from the customers, or it comes from the workers, or it comes from the stockholders. Where else can it come from? Again, is there somehow, some way in which some people can’t pay or some funds can be gathered with nobody paying it?



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