Corporations do not pay taxes, but it seems that workers bear most of that burden – not investors. That’s what Glenn Hubbard says based on his review of recent research. He concludes, “[W]orkers collectively would be better off if they voted for higher taxes on labor with corresponding cuts in the corporate tax.” Some highlights:
- Arnold Harberger finds labor may lose more than the tax collects
- Willliam Randolph of the Congressional Budget Office finds labor bears 70% of the corporate tax burden
- Kevin Hassett and Aparna Mathur of the American Enterprise Institute find that a 1% increase in the corporate tax rate leads to a 0.8% fall in manufacturing wage rates
- KPMG finds that many countries are cutting corporate taxes and replacing them with consumption taxes, which economists and laborers should both like
According to the Randolph paper, labor’s burden is higher if people make decisions about saving based on after-tax returns on investment and the country [or state] has little effect on world prices. Competition for mobile capital is one important factor in this result. Another factor is the cost of growth for businesses.
This means workers in North Carolina suffer more because of the state’s high corporate income tax rate than they do from not having a state earned income tax credit.
