What does everybody complain about all the time? Taxes.
This graph shows the corporate income tax, in red:
 |
| Graph #1: Corporate income tax in red, and corporate interest cost in blue. |
And what do they complain about? Taxes.
|
| Graph #1: Corporate income tax in red, and corporate interest cost in blue. |
And why is that? Perhaps because they're making money from each other's interest payments.
ReplyDeleteMaking money on money is not like making money by making output. Making output is good for the economy. Making money on money is only a cost.
And obviously, the cost of interest is much higher than the taxes, and adds much more to the cost of output.
Art
ReplyDeleteI and not a tax guy but aren't business allowed to deduct interest payments from their tax bill?
Hey O.T.
ReplyDeleteYeah they can deduct interest payments, because they pay them. Their taxes are reduced by about 25% of the interest cost (based on graph #1 here). So this is like the Federal government giving corporations a 25% discount on their interest costs (and on all the other costs they get to deduct from taxable).
But the corporations still have to pay the interest, and it still makes their costs higher, and it still increases the prices of the products they sell.
And they still pay more in interest cost than they pay in income tax.