Controversy over whether our corporate taxes are high or low is matched by controversy over who pays them in the first place. This issue recently made the news when Republican presidential candidate Mitt Romney informed a heckler that people pay the corporate income tax. But which people? The Congressional Budget Office and the Treasury Department have traditionally assumed that owners of capital pay the tax. More recent models, though, emphasize that if capital can cross borders, it’s labor that gets stuck paying the tax. Capital moves to countries where it is taxed less. Less capital investment here leaves Americans with lower-wage jobs.
Empirical work on the subject has yielded a wide range of outcomes. At the low end of estimates, three economists led by Mihir Desai have found that 45 percent of the corporate income tax falls on labor. The high-end estimate comes from R. Alison Felix, an economist at the Federal Reserve Bank of Kansas City, who concluded that labor pays 420 percent of the burden: For every dollar of revenue the tax raises, wages fall by $4.20. A study by the Tax Foundation, a nonpartisan think tank, split the difference, finding that wages drop $2.50 for every dollar raised.
[…]
So it’s fair to conclude that the corporate income tax lowers wages. And that’s not the only reason to reduce the tax. As Jonathan Berk explained on Bloomberg View last week, the corporate tax is highly inefficient. It raises little revenue. It encourages debt over equity, and some types of company organization over others, for no good reason. I would add that corporate taxes, like all taxes on investment, encourage consumption today over consumption tomorrow. And its costs are going up as other countries reduce their corporate taxes.
Occasionally one hears calls for countries to “harmonize” their rates so that no nation feels any pressure to cut its tax. But this is just not going to happen. The more realistic response to the mobility of capital is the one that other countries, blessed with politicians who are generally no more far-seeing or intelligent than ours, have made: reducing their corporate taxes.
Eventually, we’ll get there too.
So: corporate tax lowers wages for employees. It raises prices on consumers. And it “nudges” (to borrow from a certain Czar) businesses into particular and predictable practices that may prove damaging to long-term viability and security.
Well, then.
Too bad any cuts to the corporate tax will be met with calls for a need to raise other taxes to make up for these “tax expenditures” — meaning, any way you cut it, the private productive citizen will still have to pay.
— Which is precisely why we have to change the rhetoric that enables excessive taxation (and non-cutting spending “cuts”) in conjunction with any cuts in taxes.
Otherwise, we’ll just be redistributing the wealth in new and “business-friendly” ways.
(h/t geoffb)
– Which is precisely why we have to change the rhetoric that enables excessive taxation (and non-cutting spending “cuts”) in conjunction with any cuts in taxes.
The Eurotrash understand this. That is why they have “Value Added” Taxation.
Lower wages, higher prices, and inefficient capital allocation. FOR THE FAIRNESS!
Bye, bye jobs.
I will bet anyone, that within the next 15 years the feds will institute a VAT on everything but food and car insurance. And the Republicans in congress will go for it, because it’s “fair” and because the miser of Omaha will ask for it.
#4: I am afraid of that, Then again, the Clintonistas, at their high tide in 1993-1994, couldn’t get the VAT anywhere. Then again-again, the Obamunists did get socialized medicine where the Clintonistas could not.
I will bet anyone, that within the next 15 years the feds will institute a VAT on everything but food and car insurance.
I’ll take that bet, but only because I’m confident that well-connected lobbyists will engineer a lot more exemptions than just food and car insurance.
Squid#2, fairness is for children.
It’s for SOCIAL JUSTICE!, thank you very much…
I’ll trade a VAT for repealing the Volstead Act..
OT . . . I think this fairly well sums up the NY Times and its readership:
http://www.nytimes.com/2011/07/17/fashion/weddings/frida-berrigan-and-patrick-sheehan-gaumer-vows.html?_r=1&pagewanted=all
When you tax ‘things’ you get less of them, what with the artificial friction added to ‘thing’-related transactions reducing demand for same…
So, the underlying message couldn’t be any clearer: “Stop being productive and adding value!”
—-
If I was Benign Dictator For A Day, I’d rescind the corporate income tax altogether. Zero it out. It brings in a mere $200B/yr, roughly 10% of revenue. I’m convinced that the sudden rush of new companies fleeing other countries to take advantage of this exciting “Tax Sale Event!” would lead to increases in the revenue from personal income taxes that would more than offset the lost corporate income taxes.
Not that I wish to increase the revenue of the Federal Government in any way.
The Left want high corporate taxes for one reason only: Corporations are EVIL, and therefore we ought to stick it to them as hard as possible.
The very idea of lowering corporate taxes gives them the vapours because it’s the moral equivalent of opening all the jails and letting the criminals roam free.
Don’t forget that if goods cost less, people will buy more, thus putting more money into the economy, creating more jobs, and ultimately creating more taxpayers. The trick is to not tax the bejeezus out of the few people you can, but tax the most people you can at a much lower rate. Same revenue, overall happier people (except those who didn’t pay taxes before, and really, eff them).
OT and apologies for that — Spurred by Ernst’s citation of the Gary Johnson interview in the Originalism thread and coupling that with Rick Perry’s favor toward the Fair Tax (so assuming the Fair Tax is a proposal which we’ll be hearing more of and therefore considering at greater length as time marches on), a question: does the Fair Tax incentivize theft somewhat beyond the ordinary misguided incentives which already stand with regard to stealing stuff (adding to them, so to speak)?
There was also a study done that showed for every dollar the government spent in entitlements 72 cents went to administrative overhead and only 28 cents went to what the program was supposed to be for. Using the $2.50 figure above for the “cost” of collecting $1 in taxes means that to get $1 to a recipient of an entitlement program there is a “cost” to the private sector of $8.93. If ther higher $4.20 corporate “cost” is correct then the price the private sector pays to deliver that $1 in benefits is $15.
This incredible inefficiency is the tremendous drag that ruins an economy as the government sector grows larger. The reason that the Democrats still wish to increase it is due to the fact that they, as a Party, capture a share of that 72 cents in administrative costs from union dues kicked into their coffers and from contributions by those government workers who realize who will best protect their jobs and so contribute and vote accordingly.
Jeezus, geoffb, I had no idea the costs were that high. That is insane. I think we could actually afford the entitlements without the overhead. Not that I’m advocating entitlements, but man is that a truckload of money wasted.
The leverage involved is why even slight changes can have large effects.
There is much that government is needed for in society, IHHO as I’m not an anarchist or even a radical libertarian, so there will always be some “costs” to the private sector. But what we have developed under the progressive/socialist model of governance is a system of incentives which lead to growing the public sector more and more.
Obama has merely accelerated what was happening and by so doing made it more visible to more people. The belief for a portion of the left is that hiding what they are about no longer matters. Another group there believes this openness is a fatal error. I hope that group is right.
Demographics also has a role to play. Government and union positions are based on seniority and are very hard to be let go from. The demographic bulge of the baby boom, which I am part of, is now of the age where they are the most senior ones in these types of jobs. They form a huge clog of upper management (entitled by seniority) that has to have someone/thing to manage. Obama has to service that need if the Democrats are to continue to exist as a major party. Lose the funds and votes from that base and they are toast.
IMHO not IHHO. I’m not doubly humble.
Don’t be silly. No one on the left would see any problem with opening the jails and letting the oppressed
extract retributionimplement justice.And the right want low/no corporate taxes for one reason only: Because the left want them high.
Two reasons actually, ’cause the right also can’t or won’t retire the pernicious myth that says that (just like filtering money through Washington DC creates jobs and net growth like some over-entity engine), slashing or even eliminating the corporate tax somehow returns a magical net boost. It doesn’t, of course (at least not if you tax fairly, which I’ll get to). Taxation is a zero-sum entity, even if the overall economy is not: It takes precisely one thin dollar to fulfill one dollar of federal need. And be need I mean waste, of course.
Taxing fairly depends on freeing the individual from the burden of remitting to his government master under pain of law a fee on the exchange of his labor for his daily sustenance, or on his ownership of property just because he owns it. These things the right think are elements of conservativism when they’re cornerstones of control, i.e., statism.
We have no stomach for moving all taxation to the non-private sector, meaning the corporation. It’s not even on radar as a serious proposal, probably to some very significant degree because the Corporate State won’t have it, and because that State is corrupt to its core.
So, we settle. We move for a national sales tax. It’s principally fair because it only taxes one when he uses the economy, leaving property aside and returning him a hefty degree of legal protection he’ll never have under the federal personal tax regime. And it’s practically fair because makes no allowance for the abuses of progressive taxation, which is perpetually victim of the destroy-the-“rich” movements that infest and devour the left’s every envious thought. Plus it hangs a bigass 50% sticker on every gallon of gas or milk, right where it can really piss us all off to the point we do something about it.
Leave the individual the hell alone. With regard to taxation, it’s an ethic the right has abandoned virtually utterly. That ain’t right.
What does this even look like JHo?
Capital that flows to the government is not available to invest in things that grow the economy (or at least that particular business).
So, yeah, there isn’t a “magical net boost”.
Benedick #9 –
I’ll say one thing…they know how to live on next to nothing, and are happy doing so. That’s a life skill we all might need when everything goes straight to hell.
Roughly 1780.
True, as far as it goes. Yet capital that remains with the individual flows to the business to be available to invest in things that grow the economy and thereby business at large. And that pay the added bonus — which the ostensible right refuses to see as such, having fixated on the accepted, Keynesian dogma that the corporation has the sole (and somehow constitutional) need for tax protection under the lousy myth of only it driving growth and prosperity — of relieving the individual of a host of ills that inherently come with the personal tax system.
We’ve elected the corporation to the same status the left has elected government to occupy, and we apparently cannot see that as the Wall Street banking cartel showed us to our faces and continue to show us these past years, that it’s all the same and it’s all corrupt — remember Too Big To Fail? Eight hundred billions of so-called stimulus in the aftermath? We insist on running these low level mental experiments to prove to ourselves that we need to revere and protect the same people and organizations that are quite literally destroying us and American principles.
We do this by our own a variant on spend-yourself-rich theory, in this case that by our individual suffering and oppression we’ll boot-strap corporate America into profitability and raise all boats. As I’ve said, it takes little to understand that if you return to him all his personal taxes, the individual will put them into business automatically, and will do so quite probably away from the banking engine ruining the country. You know, buying outboards and pickup shells and houses.
The “right” lacks one more step in its reasoning and suffers one extra step in its myth-making. Add one, take one away and you’re back to genuine originalist, classical liberalism.
So custom duties, excise duties, a tariff taxation of imports-exports is the model you’ve in mind, imposing a heavier burden on trade?
Is this where I protest and point out that I never said any of that? Or that I was obviously referring to the problem with the national income tax, and not (somehow) that of Massachusetts?
Cause, like, are you still slugging the wife?
If you’ve finished, kindly defend transferring most of the national tax burden onto what I already pointed out and you ignored, which was yours and my time spent providing us and ours with food and shelter, or our substance and properties.
PS: Duties and tariffs are fine by me, as it happens, because they principally resemble a national sales tax, where you pay knowingly and painfully when you purchase in the market economy and not when you earn a living wage or turn a personal profit or own various private property, thus giving you a choice and certain protections, plus the incentive to harangue your representative about the large percentage he’s tacked onto what you purchase…even if you actually have more net money to buy it than you do now.
So yeah, kinda like a few years after the Republic was reformed.
I’m not clear what you have in mind JHo, is all. I thought maybe the reference to the practices of Mass. might have been representative, since you kind of leave me hanging so far as filling out the details of your notion goes, so sallied a guess. I don’t think I have any particular responsibility to “defend transferring” anything here, at least insofar as I’m simply trying to grasp what it is you have broached (“We have no stomach for moving all taxation to the non-private sector, meaning the corporation.”) and have in mind. But hey, if you don’t care to elaborate or persuade, who am I to argue?
By the way, your ability to edit and change your entries is startling at times. One minute I read one thing you’ve written and the next it’s disappeared to be replaced by something else. This can make any responses created in the interim seem to be absurd when read by late comers.
From #19:
and
and from the startling post script in #26
The right has plenty of reasoning power when it comes to the corrupt causes and negative effects of a huge federal Goliath — it’s why we’re on the right. It’s past time it use that same reason to rebuild the means of taxation, not unlike how it’s finally seeing through the Ponzi functioning of Social Security, the nanny Statism of federal medicine, the abysmal failure of government schooling, the society-crushing effects of Welfare, and the inherent instability of central fiat/reserve banking.
What happened to “. . . moving all taxation to the non-private sector, meaning the corporation” then, which I’ve cited a couple of times now as the bit I didn’t understand? Seems to me a national sales tax is paid by individuals at the sales counters and the like, so that’s hardly moving all taxation to the “non-private” sector or corporation (whatever the meaning of non-private in itself, like say, public).
What happened to it is you modified it from
…from which I moved on to promote a national sales tax, just as I promised I would in that comment.
Good one, sdferr. My context aimed to use an ambiguous term to reinforce the private component in the argument but darned if you still didn’t miss it.
I guess I mistook your exclamation that “It’s not even on radar as a serious proposal . . . ” as a desire for it or an advocacy of it, despite the resistance of the Corporate State or whatever it is. But it was merely a strawman? Or not something that needed fleshing out, since all you meant was that you are in favor of a national sales tax? But then, that isn’t hard to say, or even to advocate. So the misdirection swept me in. Sorry for the timewaster JHo.
I think that to protect the individual — that being an original goal of the American Republic — taxation should be through an intermediate structure and entity. Since it’s purpose is to create profit, and since as an impersonal structure it can shield the individual from a government tax liability, that entity is the corporation.
Oh, so now we’re back to an advocacy for taxing “the corporation” in order to protect the individual? Then I’m back to a need to try to grasp what this means to the order of our politics, since so far as I know it wasn’t the practice in 1780 or at any other time in our history. It really is quite bewildering as a taxation program in this eventuality.
So, say, what then if people simply dissolved their corporations — however those may be defined — to escape taxation, since corporations are the voluntary constructions of individuals in any event? Then the polity would seem to be thrust back upon the individuals for whose sake it exists after all, if it’s to be funded to carry out the purposes those individuals desire it to undertake!
First you misquote me, and when corrected you haul us back to not only what you misquoted, but what you insist I defend. How; historically? Functionally? Just tax something other than the individual, which was an apparently suitable solution for what, a century and more? From there, here.
Let’s try it this way: Prior to personal income taxes, how did the federal government acquire revenues? There’s your answer, or at least a version of things far better than today’s massive tax code and attendant problems, which are an endless rabbit hole of unconstitutional issues.
And as far as people routinely dissolving their corporations to escape tax obligations to the federal government, good luck there, sdferr. That herring ain’t got enough stink on it.
I didn’t misquote you JHo. Ever. In fact, I quoted your first post with precision as to the question it generated in me. And then later truncated that quote dismissing “We have no stomach for …” as inconsequential to the problem I had, so don’t let’s be getting all snooty about misquoting, please. I don’t insist you defend anything, by the way, that you don’t happen to believe yourself, which is what I’d thought you meant by:
“I think” you said. Makes no difference to me whether you defend your own words.
Tariffs and excise taxes IIRC. All of which are paid by individuals. All taxes are paid by individuals. Entities such as corporations are simply a collection of individuals who together will pay in some way any tax or pass it on to another individual.
What we as a nation have to decide is how much revenue is needed to fund the government and what precisely we will tax knowing that every tax does at least two things, raises revenue for the government and places a disincentive and burden on whatever thing or activity is being taxed.
The use of taxes on corporations has been to hide the tax from the person who is actually paying it since the corp. is a tax collection entity not a tax paying one. As I noted above there is a heavy price paid by workers for the taxing of corporations which is basically taxing capital. Capital being able to cross borders more easily than workers means the burden falls there with the one input making a product or providing a service which can’t move away to avoid the tax as easily as can capital and materials.
I find it interesting that you’ll hold me accountable to your view of what I said, sdferr, but expect me to intuit correctly what you, in a thread inhabited by at least a few of your specious comments, have said. Not universally, but enough as to make me form that opinion.
In other words, with precision as to the questions they generated in me. Since we’re doing that thing now.
Financially, approximately yes. Legally, no. That’s the very important difference.
Of course, the entire system is synthetic and manipulated and to avoid a relatively small effect brought about by law or policy, we need to force the individual to be legally bound to his government through its tax code. To wit:
So reform that component. Restore his rights.
Budgets are not balanced, revenues are arbitrary, governments cannot be trusted to be fiscally sound, money is itself a hoax, and the entire machine churns on with the individual jammed into the gears. You are correct in a sense, which makes progressive income taxation a component of the enormous fraud perpetuated on the public by the insurmountable monster of social programs, unresponsive and unrepresentative government, paper money and the gross international conflict of American interest of central banking, legions of corporate fraudsters running much of the show, and the like. What you’re ultimately supporting with the argument that taxing a corporation harms the economy is an admission that there’s something profoundly wrong with former government involvement.
Of course; personal income taxation legally obligates and therefore oppresses the taxed individual, placing a disincentive and burden on him.
That this doesn’t concern the right — to the point that they argue for its abolition instead of the opposite as they do now — is mystifying.