Corporate Tax

It's like income tax for companies. The same way you owe the government a certain amount of your income just for existing within the country's borders, corporations owe the government a certain percentage of its profits.

These taxes can be levied on all levels of government, national, state, or even local. And you think your taxes are complicated? The corporate tax code has layers of rules and interpretations and grey areas. That's why big companies have entire divisions of accountants.

Corporate tax is a politically controversial thing as well. To the common man, a company making a billion dollars is just an unfathomable load of profit. But the company dug oil wells and took ten billion dollars of capital to get that oil. So the guy complaining about whoever making a billion dollars in profits...also happens to love paying only three bucks a gallon for his gas instead of eight, like they do in Europe, where they layer taxes upon taxes.

So corporate taxes can be pushed high. American companies then earn less, and end up being less competitive on a few fronts with the rest of the world, which has lower taxes. Think: China.

Many companies pay dividends as well, but dividends come after corporate taxes, so when the recipient of the dividend gets that divvy, she pays tax on it...again. Should corporate taxes consider that "double-taxation"? Maybe. Not an easy political football to throw around.

And there's another hot potato: what's deductible? In the 70's, corporate taxes were massive, but corporations could deduct just about everything. Think: That snazzy country club membership for each of its execs. That pool table for the break room. That firefighters' pole from the 9th floor to the 8th.

So...just looking at the number in a vacuum doesn't mean all that much if enough can be deducted so that the corporation doesn't have enough profits to be taxed in the first place. The process is kind of a mood ring. Each decade, it seems, different resource allocation pressures get recognized, and the tide (and mood ring color) shifts.