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Response to TampaAnimusVortex (Reply #59)

Sat Dec 19, 2015, 10:55 PM

60. Which of the five studies did you not see?


Pretty straightforward, no?

In the first place, almost no economists believe that the incidence of corporate income taxation falls on consumers. Most studies show that the actual burden of the tax is unequally divided between corporate shareholders, the corporation itself and the corporations employees but never consumers. In 1962, Arnold Harberger, a conservative University of Chicago economist and colleague of Milton Friedman did a careful study of the incidence (distribution of the burden) of the corporate tax and found that it fell largely on corporate shareholders in the form of lower dividends and stock value. Other studies show some ratio of distribution between labor and management, but it almost never includes consumers of the corporation's output. Another free market economist, Bruce Bartlett (a former Reagan adviser), explains why;

"...most people assume that the corporate income tax is largely paid by consumers of its products or services. That is, they assume that although the tax is nominally levied on the corporation as a whole, in fact the burden of the tax is shifted onto customers in the form of higher prices. All economists reject that idea. They point out that prices are set by market forces and the suppliers of goods and services arenít only C-corporations, which pay taxes on the corporate tax schedule, but also sole proprietorships, partnerships and S-corporations that are taxed under the individual income tax. Other suppliers include foreign corporations and nonprofits. Therefore, corporations cannot raise prices to compensate for the corporate income tax because they will be undercut by businesses to which the tax does not apply."

http://www.dailykos.com/story/2014/5/8/1297707/-Do-Corporate-Income-Taxes-Really-Get-Passed-On-To-Consumers-Another-Conservative-Zombie-Myth

Here are a few more examples of what economists say on the issue. As you'll see, some disagree slightly with each other, but nobody takes the "corporations just pass on all their taxes" fantasy position.

Who Pays the Corporate Income Tax?

One way or another, though, actual people have to ultimately pay the tax. Consumers pay it if companies respond to corporate taxes by raising the price of their products. Workers pay the tax if corporations respond by lowering wages. Shareholders pay the tax if it simply eats into profits and lowers share prices.

But which is it? Bruce Bartlett reports today that the March issue of the National Tax Journal has four articles that address this question. Here are the answers:


Article #1: Shareholders pay 100 percent.
Article #2: Shareholders pay 100 percent.
Article #3: Shareholders pay 40 percent, workers pay 60 percent.
Article #4: Shareholders pay 82 percent, workers pay 18 percent.

http://www.motherjones.com/kevin-drum/2013/02/who-pays-corporate-income-ta

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