Business Taxes

Discuss business taxes and their importance to financial decisions.  Are taxes an important consideration when choosing the type of business to form?  What does the term “double-taxation” mean and when might that be a concern?

Business Taxes-Sample Solution

Business taxes refer to the federal, state, or local charges businesses pay as part of their everyday operations. Burman and Slemrod (2020) observe that business taxes in the U.S. include income, excise, employment, and self-employment taxes. These taxes are necessary when making financial decisions since they dictate business performance. For instance, higher taxes could lead to reduced revenue, affecting business expansion. This may force business owners to increase their products’ prices to cater to the high taxes. Also, taxes help businesses establish short-term or long-term financial goals (Burman & Slemrod, 2020). A company can shelve its investment decisions when it anticipates a future increase in marginal tax rates. The amounts of tax a business pays represent its cash flows which are vital when making investment decisions. Consequently, tax breaks increase disposable income in companies, which increases investments. Additionally, businesses use tax rates to determine the type of research and innovation to implement. Reduced taxes on research and innovation impact companies venturing into it to take advantage of the tax breaks.(Business Taxes Sample Essay)

Investors must consider taxation policies before venturing into any business. Some businesses incur higher taxes, reducing profit margins and potentially driving away potential companies (Burman & Slemrod, 2020). Generally, double taxation involves imposing taxes on the same asset or income twice. For example, double taxation is evident when the government taxes shareholders’ dividends after taxing the corporate earnings. It mainly involves corporate double taxation and international double taxation. Burman and Slemrod (2020) explain that double taxation causes concerns by inducing hardship on taxpayers, especially concerning international double taxation. In this case, it increases the tax burden on investors, who transfers it to consumers through increased prices of goods and services. Such scenarios are concerning since they discourage foreign investments and capital movement.(Business Taxes Sample Essay)



Burman, L., & Slemrod, J. (2020). Taxes in America: What everyone needs to know. (2nd ed., pp. 64-96). New York: Oxford University Press

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