The Case Against the Corporate Tax
by Gary Jason | Posted December 28, 2010
As the new Congress gets set to liberate America from the stranglehold of the freshly defeated Red Congress, hopes for change are arising. One is the hope for a lowering of the US corporate tax rate.
This rate is a hefty 35%, second highest among the developed economies of the world. It seems obvious, just considering basic psychology, that lowering the corporate tax will be economically beneficial. It is a truism of behaviorist psychology that if you punish (negatively reinforce) a behavior you get less of it, and if you reward (positively reinforce) a behavior you get more of it. Corporate taxes punish business activity, resulting in less business — great if you are a leftist, but lousy if you are anyone else.
The Heritage Foundation has released the results of a study by economists Karen Campbell and John Ligon that spells out the case for lowering corporate taxes, called The Economic Impact of a 25 Percent Corporate Income Tax Rate. Campbell and Ligon ran a simulation of the economic impact of lowering the corporate tax from 35% to 25%. The results are eye-opening.
Their simulation (which covers the period 2011 to 2020) estimates that under the lower taxes, GDP would grow by an extra $132 billion annually, creating over 530,000 new private-sector jobs per year. The average family of four would see its after-tax yearly income go up by nearly $2,500. Gross private investment would rise by over $57 billion annually, and foreign assets in the US would rise by 4% annually. American capital stock would grow by $240 billion more a year, and real after-tax corporate profits would increase by an average of $124 billion a year over the current projected levels.
Notwithstanding all this, it is questionable whether Obama will ever allow a drop in corporate tax rates. He is instinctively anti-business, and although the economic case is compelling, he is the most economically ignorant president in recent history.
Gary Jason is a philosopher and senior editor of Liberty, and the author of Dangerous Thoughts.
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Comments
Clown
Corporate taxes apply to all businesses, not just big ones. As a small business owner myself--please note, I have no affiliation with any corporation except the small one I own--I count business taxes as a major issue.
Again, the fact that I support lower taxes on business does NOT mean I like high taxes on people or their property. You have to be daffy "troll" to think the people who favor lower business taxes are the ones who favor high personal taxes--in fact, it is exactly the reverse: the people (such as I) who favor low corporate taxes are precisely the ones who favor low personal taxes.
In fact, I favor a flat tax of 15% on personal income across the board, as well as on businesses.
That will be hard enough to achieve, and dreaming about doesn't really help us get there.
Sat, 2011-02-12 16:00
Ed Burley
I believe that this should be changed to read BUSINESS taxes should be reduced. And not to 25%, but to ZERO. All taxes are ultimately a burden to the economy (i.e., you and me).
Here in Michigan, our less-than-impressive outgoing governor banked on tax exemptions and abatements for all new corporations moving to Michigan. Sure, it created jobs, but those life-long Michigan businesses could not compete. They still had the burden of taxation to grapple with. And so, while Walmart is tearing up the landscape here in Northern Michigan, infiltrating new markets (like selling autos and auto insurance), the local small businesses, that were a stable part of our economy for decades, are going bankrupt. Who can compete with the largest corporation in the world marching towards a monopoly on every conceivable economic front - food, clothing, drugs, tires, gasoline, etc., etc.? Who indeed can compete with a corporation that can place a store in a community, sell for under wholesale, cover the losses until those small competitors, who remain heavily taxed with the Michigan Small Business Tax, file bankruptcy and retire to Florida?
It's small business that needs the tax break. Corporations are fine, but conservative corporatists (like the people who listen to the Heritage Foundation) give them an unfair advantage. They have the lobbyists to drive small business out of business.
I won't support that.
Tue, 2010-12-28 15:12
Visitor
Property taxes are oppressive, too. They prevent many people from being able to hold onto property that they paid for free and clear. Lower to no taxes for EVERYONE on EVERYTHING would see a great economic benefit to EVERYONE, not just corporations. This article writer sounds like some kind of corporate-paid shill/troll.
Fri, 2010-12-31 14:26