Tax Lawyer's Blog

According to a study released by the Scapegoat Society titled, Constructive Inquiry Into the Nature and Nuetralizing of Blame, scapegoating is,

[a] hostile social/psychological discrediting routine by which people move blame and responsibility away from themselves and towards a target person or group.

A new GAO study requested by Democrat Senators Byron Dorgan (North Dakota) and Carl Levin (Michigan) was released today with this inflammatory and misleading headline in Yahoo News, “Most Companies in U.S. Avoid Federal Income Taxes.”

And Senator Dorgan has already made political hay out of the study,

It’s shameful that so many corporations make big profits and pay nothing to support our country. It’s time for the big corporations to pay their fair share.

Here’s the problem, though: The great majority of U.S. companies operate as S corporations or Limited Liability Companies whose taxes are required to be paid by the shareholders or members of the company and not by the company itself.

Chris Edwards for the Cato Institute was quick to point this out,

[I]ncreasing numbers of limited liability corporations and so-called “S” corporations pay taxes under individual tax codes.

The IRS keeps statistics on the number of returns filed by type and here are the numbers for 2004:

Type of Return                                                                        # Filed

C Corporations                                                                       1,834,390

S Corporations                                                                       3,518.334

Foreign Corps                                                                           200,000

Total of Corps                                                                        5,552,724

Percent S Corps                                                                              66%

As usual, cynical politicians are counting on Americans not to actually read the study. Most people have busy lives and will just read the headline and say to themselves, “those evil corporations make all that money and don’t pay any tax. Horrors!”

I think everyone should pay their fair share of taxes. But scapegoating the job creators that fuel America’s economy is both cynical and foolish. No wonder an ever increasing number of U.S. corporations are choosing to do business overseas.

Because the electorate includes fewer “haves” than “have nots” blaming the “haves” for America’s problems has long been a strategy of the left. But history shows us the havoc scapegoating a successful minority in order to assauge an unsuccessful majority can wreck. See Germany, circa 1933; Russia, circa 1917; and Cuba, circa 1959.

We would be well advised to heed these words of La Rouchefoucauld:

A readiness to believe ill of others, before we have duly examined it, is the effect of laziness and pride. We are eager to find a culprit, and loath to give ourselves the trouble of examining the crime.

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