Sticking It to $15-an-hour Cashier
In Joe Biden’s State of the Union address last week, the President shouted to his audience how he would raise the corporate income tax to make corporations pay their “fair share.” “Whatever that is,” speculates Daniel Oliver in American Greatness.
The Democrats leapt to their feet, hooting, clapping, and cheering as if Biden had discovered a cure for cancer. Or maybe hemorrhoids.
Long ago, remembers Mr. Oliver, even first-year college students who studied economics would have known what taxing corporations meant and who was paying the tax.
How Corporations Spend Their Money
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They buy stuff that allows them to make and sell goods or services to consumers, an activity that makes a profit for the corporation.
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They pay their employees.
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When they make a profit, they either use it to expand or pay it out in dividends to stockholders.
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Many stockholders are current employees who receive shares in the company—or the right to buy shares in the company as part of their retirement plan. Needless to say, most of these employees make less than $400,000 per year.
How Corporations Pay Their Taxes
(a) The employees (who will get paid less).
(b) The customers (who will have to pay more for the corporation’s product or service).
(c) The owners of the corporation, i.e., the stockholders (many of whom depend on the corporation’s growth for their retirement).There is little consensus among economists on exactly how much each group pays. Everyone does admit, however, that both stockholders and workers (i.e., everyone) bear a portion of the cost, continues Mr. Oliver.
Raising the corporate tax rate from 21% to 28%, as Joe Biden wants to do, would result in households making less than $100,000 a year paying almost $100 billion over the next decade.
President Joe Biden claims “working families” benefit when “big corporations pay their fair share.”
(Joe Biden) might want to check that claim with America’s own Treasury Department, which released a study in 2007 directly challenging the idea that “capital” (the owners of corporations) bears the burden of the corporate income tax. “Recent empirical work using cross-country data on corporate taxes and wages suggests reconsidering this assumption,” the authors wrote. “Labor may actually bear a substantial burden from the corporate income tax.
Even the Congressional Budget Office, which—for fifteen years—allocated all of the burden of corporation income tax to business owners, now admits that workers pay at least a quarter of new corporate taxes over the long run.
Raising taxes on the $15/hour cashier at the grocery store isn’t exactly “sticking it to corporate elites,” no matter how Biden might try to spin it.
Adam Smith, famous for his The Wealth of Nations, long ago stated, “there’s a lot of ruin in a country.”
If Biden and his fellow scorpions raise corporate taxes, this country may discover how much ruin there is.
