I have recently become intrigued by Senator Al Franken’s (D-MN) claim that, ‘Corporations are not people.’ Who knew?
After owning a small incorporated business for eighteen years, I was of the opinion that I was a ‘people.’ According to Senator Franken, I was not a people!
For the uninitiated, there were two reasons why I chose to incorporate my business. The primary reason was to create a corporate umbrella that protected me from personal liability as the result of an event that could be construed as negligent in a court of law. In a litigious society, this would be considered ‘good business practice.’ I am proud to say that in the eighteen years of being a general contractor, I was never involved in a lawsuit. That record is a rarity in the general construction business!
Grandma P did not discourage me from starting my own business. She just wanted assurance that we would not lose our house in a lawsuit as a result of the business. Thus the corporate umbrella.
The second reason for forming a corporate structure was tax-related. During my tenure as a business owner, the tax codes would change depending on who was POTUS and which party controlled Congress. Some years it was advantageous to pay corporate taxes and other years, it was more advantageous for us to take the additional income and pay the personal taxes. Because I was a small company, we are talking tax consequences (personal and corporate) of less than $5,000 per year. I paid my very good accountant to keep both our personal and corporate taxes in line and to our advantage. We did not mind paying our ‘fair share.’ We just did not want to pay the majority of someone else’s fair share.
My corporation was a small wholly-owned corporation. As corporations get to mid-size and larger, they do not have the latitude that I enjoyed.
So why do corporations get such a bad rap? We are all aware of corporate fraud and abuse. These businesses are in the minority, yet the government demonizes all businesses.
I believe that corporations get a bad rap because they are in business to make a profit! The word ‘profit’ has now become a bad word and a thing to be ashamed of. As a result, some of the people involved with a corporation due to their education, diligence, experience, tenacity and ambition could actually become rich. This is truly a nasty four letter word! It is also the key word to create class envy between the ‘haves and have-nots’ as pandered by the liberals. (The liberals keep chipping at the foundation of capitalism in an attempt to make this country socialistic!)
Keep in mind that if you do not own one share of stock and yet receive a pension, your pension fund most likely owns bonds and stocks in those darn, capitalistic corporations! (If you are a pension- receiving liberal and hate corporations, you should show your disdain by forgoing your pension! Please forward your pension account numbers to this website for disposal!)
Here are three burdens that have been laid on corporations that have the audacity to be incorporated in the United States of America.
Obama Care (The Affordable Care Act)
If you have followed my blog, you know that I blame a large portion of our economic downturn on the passage of Obamacare. Our Congress, because of the liberal dominance of both houses, forced through a bill that was unwieldy, unknown and expensive merely because the POTUS wanted it. Do you remember when the POTUS stated that it would save the government money? How many people really believed that?
US businesses were at a loss as to the costs of Obamacare. I listened to the president of GE explain that after attending many fact-finding seminars. Their best guess was that it would cost (not save!) 20%-25% of their payroll costs. That is a boatload of money for any entity!
Remember Grandpa T’s Rule Number 2: ‘Businesses are in business to make money.’
What businesses of all sizes did in response to the pending implementation of this law was to lay off employees and implement hiring freezes. Many of the ‘new hires’ were hired as part-time employees to circumvent the requirements of the Affordable Care Act. The unemployment rate sky rocketed and, contrary to the latest employment figures, I do not believe we have ever fully recovered. People lost their jobs, their homes, their cars and their dignity. How was that for hope and change?
But alas, we have a scapegoat! US businesses, not our government, caused all these problems. As an aside, corporate America is doing well in that most major corporations have not yet fully implemented the Affordable Care Act. Many businesses have been saving for its implementation since passage in 2009. Thus the record stock market indicators. In the meantime, Government America cannot balance a budget and has placed our country trillions deeper in debt.
Raising the Minimum Wage
Estimates show that raising the minimum wage would affect less than a million working Americans. But if the minimum wage were raised to over $10 per hour, who will pay? You will. Who will suffer? Those people currently working for minimum wage. High school students, college students, retirees looking for additional income, moms who have young kids in school and anyone needing to save or supplement their income. Now you are wondering if I have lost my mind by saying that these people will suffer with a pay raise. Yes they will. That is because, much like the pending implementation of Obamacare, businesses will lay off employees and implement hiring freezes. I heard one McDonalds franchisee say it best, “If I have to pay that much more for an employee, I will be looking to hire better qualified employees.” I predict there will be layoffs aplenty as a result of this law.
Not one young person has life ambitions of getting a ‘minimum wage’ job. But getting work experience is a desirable quality when looking for your ‘perfect’ job. Less young people will have that chance.
A person receiving minimum wage has three choices. They can get another, higher paying job. They can receive an education or training that would qualify them for a higher paying job. Or, they can refer to the time tested method of asking their employer for a raise. If you are worth the extra money, you may very well get the pay raise.
How many times have we heard the statement about corporations paying their ‘fair share?’ The implication is that they do not pay their fair share. How many people know that our US corporations pay more than their fair share? As a matter of fact, our US corporations pay the highest corporate taxes in the world!
The average global corporate tax rate is 23.48%. The average European Union corporate tax rate is 21.34%. The average South American corporate tax rate is 26.83% Canada has a corporate tax rate of 26.5% The US corporate tax rate? 40%! Can’t you hear the chant? “We’re number one! We’re number one! U-S-A! U-S-A!’
It’s getting harder and harder to ‘Buy American’ when the government feels so compelled to ‘Tax American Corporations’ so harshly.
If a US company wants to move to Ireland, they would pay a corporate tax rate of 12.5% Driving a Japanese car? Their corporate tax rate is 35%. Their earnings are given a 5% tax advantage over American car manufacturers.
So, now that you are informed, do you still wonder why US companies are placing new facilities in foreign countries, thus moving their companies ‘offshore?’ Oh! One more thing……our corporate tax structure does not include state corporate taxes. Each state is different and that is why some businesses are moving from high-tax states to low-or-no tax states.
So there you have it. Our US businesses pay the most corporate taxes in the world at both the federal and state level. Our businesses have to deal with the expense of idiotic legislation like Obamacare. Many companies are now facing the possibility of a higher minimum wage. And yet, our businesses that build buildings, create jobs, hire employees, purchase raw materials and are the foundation of our capitalistic democracy face continual scrutiny from the media and our government!
Are corporations people?
It is because of the heartbeat of a corporation in building buildings, hiring employees, purchasing raw materials and sharing its profits with stockholders that I do believe that a corporation is ‘people.’ Corporations are the heartbeat of our economy which allows us to enjoy the freedoms of a capitalistic, democratic society.
So, because of all the bad raps that corporations suffer from the media and from our government interference, I, Grandpa T, declare the first week of June as the First Annual ‘Corporation Appreciation Week!’
Here are a few suggestions for gifts for your favorite corporation:
1. Elect a government that can balance a budget and reduce our debt in the hope of reducing the US corporate tax rate. After all, we acknowledge we are part of a global economy and we are tying the hands of our American businesses, making competition with foreign corporations nearly impossible.
2. Abort Obamacare. If this means gaining conservative control of the US Senate, so be it. A bad bill from start to finish. Two thousand pages of unread, yet approved garbage.
3. Leave the minimum wage at its current level. Yes, some will benefit, but more will suffer.
4. Lastly, buy American. They need the income to keep up with their taxes.
Did you know that just short of 50% of all Americans are on some form of government assistance? If we could enact the four above suggestions, I believe we would have lower unemployment/underemployment and a terrific, real economic turnaround.
P.S. Almost on cue, Medronic, Inc. of Minneapolis has announced it will be relocating its corporate headquarters from Minnesota to Ireland. They have indicated that this is not for tax purposes. Yet, they will be subject to a 15% corporate tax rate rather than a 40% tax rate. They will also shed the State of Minnesota corporate tax. This was announced within a week after posting this blog.