Department Of Duh

By Joseph Calhoun

Bruce Bartlett reports on a new study of the corporate income tax:

While economists still believe that the bulk of corporate income taxes is paid by the owners of capital, in recent years they have come to believe that workers ultimately pay much of the tax in the form of lower wages. This results from lower capital investment due to a higher cost of capital, which reduces productivity and hence wages, and because capital investment moves to other countries where corporate income taxes are lower.

I think this falls in the No Shit Sherlock category but I guess some people out there still think there is some evil entity known as a corporation from which the tax is extracted. Corporate taxes can only come from one of three groups of people: Shareholders, customers or workers. That's it. We know management will find a way to shift it off of shareholders (who will have to pay taxes on their dividends in any case). And we know that in a globalized market where every country on the planet save Japan has a lower corporate tax rate, that it won't be customers. That leaves workers to pick up the tab. Duh.

Reforming the corporate tax code would best be accomplished by getting rid of it entirely. That would not only remove the capital distortions but also have the pleasant side effect of taking the crony out of capitalism, at least to some degree. But then who would the Democrats demonize? And from whom would the Republicans get campaign contributions (not that Dems don't as well but I try to be balanced in my politician ridiculing around here). 

To be fair to Bruce Bartlett, the study goes quite a bit further than just saying workers pay much of the corporate tax. It attempts to quantify the effect in calculating the total tax distribution. So, I guess the corporate tax code does create jobs - for economists studying the corporate tax. 

Joseph Calhoun is CEO of Alhambra Investment Partners in Miami, Florida. He can be reached at

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