Joe Biden And Janet Yellen’s Nutty Corporate Tax Rate Plan
In 2020, a great global pandemic descended upon the Earth. It not only affected people’s bodies, leading to death in many of the elderly, but also caused the global political class to lose a non-negligible number of IQ points.
The open question is: “Is their new stupidity a permanent or temporary condition?” Silly talk leads to silly policies. Where, at one time, it was known that if the government printed too much money without real backing or productivity growth, the currency would lose its value — that simple fact has been forgotten by those who make such decisions.
There was a time when most educated or naturally astute people knew that if tax rates were disproportionately high in one place, people and their money would flee to lower tax rate environments. That simple fact has eluded the
Every competent economist knows that there is some tax rate for each type of tax where the tax becomes counterproductive and causes a loss in revenue and economic well-being. There is considerable honest (and some dishonest) debate of where the revenue and welfare-maximizing point is for each tax. About four decades ago, the noted economist
There exists a series of letters between
Those who study the economics of taxation learn that a tax that falls on consumption (what one takes out of the economy) is usually far less damaging than a tax that falls largely on labor or capital (what one puts into the economy).
Thus, most tax economists oppose the corporate income tax, because it is a tax that falls largely on labor (in the form of lower wages and benefits) and perhaps a small amount on capital. Recognizing this fact and the fact that high corporate tax rates make their companies less internationally competitive, in recent decades many countries (including the
In order to prove their ignorance, some politicians have demanded that the corporate tax be increased because “it is not fair” that some companies in some countries pay a lower tax than others. If they were not so dim, they would understand that only people pay taxes and that the corporate tax is a tax on a particular legal form of business — corporations — that is actually paid mainly by the workers.
The corporate tax is a double tax being paid on the profits at the company level, and then the owners being taxed once again on their dividends or capital gains. High corporate tax rates incentivize businesses to move their legal homes to lower-tax jurisdictions or to recast themselves as limited liability companies, partnerships or sole proprietors, where they are taxed only once.
Pre-2016, the
So, once again, the
To briefly recap, the Biden folks think it is a good idea to not only increase one of the worst forms of taxation, but then try to get the other countries of the world to also adopt the same nutty policy. This, of course, will lead to endless pressures to increase the corporate tax rate, as tax competition is being destroyed, thereby ensuring lower wages, fewer jobs and less economic growth everywhere. Oh, how splendid.
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