Corporate Income Taxes: Cash Cow or Bull?

ACC 532 – Tax Partnerships/Corporations |

Corporate Income Taxes |

Cash Cow or Bull? |

|

Jan Affholter |

5/8/2011 |

Jan Affholter

Dr. Russell Hardin

ACC 532-Tax Partnerships/Corporations

CORPORATE INCOME TAXES—CASH COW OR BULL?

The primary purpose of the corporate income tax is to raise revenue for the government. There is also the appeal of making the “rich corporations pay their fair share.”

The prevailing thirty-five percent corporate tax rate takes a huge bite from all U.S. businesses. Along with slow-growing Japan, the U.S. has the highest marginal tax rate on corporate profits of any of the developed countries (Kudlow). [Note: Japan planned to reduce their corporate tax rate below that of the U.S., but the recent earthquakes may prevent this.] One would assume that since the United States has the highest tax rate, the U.S. would also have the highest revenue, but this is not true. In fact, the U.S. ranks near the bottom in the amount of money collected (Chapman). Mankiw notes that when the government levies a tax on a corporation, the corporation is more like a tax collector than a taxpayer.

Kevin Hassett notes, “The U.S. government is about to have the highest corporate tax rate in the developed world because our competitors have noticed that revenue goes up as rates go down.” Multinational corporations today simply move their profits to the friendliest environment, rewarding tax havens like never before (“Laffer curve . . .”)

In addition, Washington economist Hassett has shown that the U.S. workforce bears a full seventy percent of the cost of corporate taxes. When you tax American companies more, the American workforce is paid less. (Kudlow).

What do you say to a politician or news media people who

propose increasing corporate taxes as means to get rich corporations

to pay their rightful share of government? They should be told that they

speak nonsense because corporations . . . do not pay taxes, only people

pay taxes.”...