As citizens, we have an irrational approach to the taxation of businesses. I have watched this phenomenon, the irrationality of our opinion, for years and am still in awe of it.

It makes absolutely no sense to tax businesses – and I am talking primarily about income tax – but the same argument that I am going to lay out here could be used for property taxes as well (Workers' Compensation is not a tax, it is insurance, so it does not belong in this category; unemployment insurance, paid by employers, could probably be argued either way).

The first mistake most make when considering taxation of businesses is this: Businesses have a lot of money, they can afford it.

Yes, businesses – successful businesses – have lots of money, but it is all allocated to specific places. What is left over at the end is called profit.

What is missed is this: Ultimately businesses have only one place to get money – through the sale of their services and products. Yes, they borrow money for short term, long term and revolving needs, but the expectation is that money will be paid back from revenues.

Revenues only come from one place – you, the purchaser of goods and services. Yes, you pay all the bills of businesses, including their taxes, and contribute all of their profit, if they have any.

I’ll repeat in a different way: Businesses have no other source of funds than you.

This means you pay the taxes for businesses. Again, it is pure folly to say something like, “Businesses have lots of money, let them pay their own taxes.” The statement is completely without merit. All their money comes from those who buy their products and services. They are merely a conduit for money passing through.

Let me offer an illustration. Company A makes a product that sells for $100. They strive to make $5 profit on this product (5 percent of the gross sales price). This means all costs, including materials, energy, labor and taxes must be held to $95.

Company B makes an identical product, but chooses to sell it for $97. Company B also wants to make a profit of 5 percent of the gross sales price which calculates to be $97x.05 = $4.85.

Company A is located in a state where its state income tax is 10 percent and its federal income tax is 20 percent. I’ll not go through the calculation, but its income tax burden is $1.50 (essentially 30 percent of $5).

Company B is located in a state with no state income tax and federal income tax of 20 percent, so its tax burden is 97 cents.

Magically (because it will never happen), one day these companies wake up to find they have no state or federal tax burden. What then?

Well, without getting too far into the weeds, Company A can now reduce the selling price of its product by $1.50 to $98.50 and slightly improve its profit percentage ($5 out of $98.50 is a larger percentage than before), or perhaps it can hold its profit percentage and give its employees a raise.

Company B can reduce the selling price of its product by 97 cents to $96.03, to hold the 5-percent profit steady and perhaps give its employees a raise, by the same logic used with Company A.

Notice the product prices used to be $3 apart, and now they are only $2.47 apart. In both cases, however, the consumer enjoys lower prices.

Why don’t we as a nation do this? There are a couple of reasons.

First, taxes charged to businesses are hidden taxes – legislators like this because it hides from you, the consumer, the real tax burden you bear. Secondly, if this corporate source of tax revenue were eliminated and all government provided services remained the same, the individual tax rate would go up. And the hidden tax would be exposed to you. Legislators would not like to answer for that, either. So, the charade continues.

There is only one tax in the U.S. that is exposed to full daylight in retail and commercial transactions. This tax is the sales tax, which in this country is added onto the price of the goods or services enabling you to see it fully exposed.

In Europe, they have even hidden this in the VAT (Value Added Tax) which effectively buries it in the price of the goods or services just as the income and property taxes are here.

Eliminating corporate taxes would do something else – eliminate so-called “corporate welfare.” For if you examine deals containing “corporate welfare,” they largely consist of tax abatements for some period of time. If there were no taxes on corporations, there would be no corporate welfare.

Again, not to worry, we’ll never make any changes like I am suggesting here. As consumers, we want to experience the ignorant bliss of not thinking that we ultimately pay the corporate taxes.

And legislators certainly don’t want us to recognize the full burden of taxes we pay or for us to realize at the end of the day, the tax burden all falls in only one place – the individual wage-earner/consumer, who coincidently, are the only ones who have a vote in the tax game.

This leads to the rest of the foolishness, for if we think we are sticking it to the corporations because they can’t vote on taxes, we are ultimately only taxing ourselves more. There is no free lunch.

Jim Thompson, formerly of Marshall, is a graduate of Hillsboro High School and the University of Cincinnati. He resides in Duluth, Ga. and is a columnist for The Highland County Press.