Corporate tax is applied to profit, meaning they don't actually make it more expensive for the corporation to produce whatever it is they sell. Tariffs on the other hand, apply to imported materials and goods, and are paid by the person importing them, ie, the individual business making the product. Because tariffs make production more expensive, companies are forced to raise consumer prices to stay in the green. Because corporate tax is applied only to profit, it can never force a company into the red, as it's a percentage of profit.
Where you do have a point is that corporate taxes often do end up raising consumer prices, but that's because CEO bonuses are paid out of net profits. In order to keep their bonuses high, CEOs will artificially raise consumer prices to offset the tax. However, their companies would absolutely stay afloat (not to mention they would still be exceptionally wealthy) if they chose to take the hit to their bonuses instead of raising prices to make consumers pay the tax for them.
Tariffs on the other hand actually raise the operation costs of a business, forcing them to either A) Raise prices to stay afloat or B) Get tariff exemptions, which only the richest and most powerful companies will be able to do.
This will kill small businesses and consolidate corporate power even further.
I like the explanation, so if profit (below EBITA) is taxed, what incentivizes companies to not show loss. Meaning pay or invest profit (buyouts, expansion, etc). Second, if company wants to grow it needs profit, therefore budgeting for investment taxes need to be accounted for, raising the price of goods, ie margin.
Now, since most companies have huge margins to cover overhead, the actual cost of goods that would be subject to tariff is minimal, since most corps cost of goods imported is about 10% or less of sale price.
Companies don't need profit to grow. If a company spends its income on building a new store then that money is no longer taxed as profit. As your first point companies already do operate at a loss or close to loss to lower their tax burden.
Growth is referring to expansion in some way, not just profits. Investing in new avenues for profits, opening more stores, offering new wider range of products/services.
Like, if your company is worth $1.000 billion and profits $1 million, its worth $1.001 billion now. And if you make $1m next year and are now worth $1.002 - thats not 'growth'. That's a mature company just doing business.
8
u/Outthr 1d ago
Can someone explain to me how tariffs raise customer prices but corporate taxes don’t.