Workers Would Benefit from Abolishing the Corporate Income Tax

August 6, 2014

There should be no corporate income tax, argues James Pethokoukis of the American Enterprise Institute.

The United States boasts the highest corporate tax rate in the develop world -- at 40 percent including federal and state taxes. The tax only hurts American workers and the economy at large:

  • According to a Congressional Budget Office study, workers bear 70 percent of the corporate tax burden.
  • High corporate tax rates reduce workers' wages. According to economists Kevin Hassett and Aparna Mathur of the American Enterprise Institute, wage rates drop 0.5 percent when corporate tax rates increase 1 percent.
  • The Organization for Economic Cooperation and Development has identified the corporate tax as the most harmful tax for economic growth.

To escape these taxes, businesses move abroad -- taking jobs with them. Not only would cutting the corporate tax rate keep American businesses in the United States, but many multinational corporations would likely want to headquarter themselves in the United States, says Pethokoukis.

According to NCPA Senior Fellow Larry Kotlikoff, Director of the Tax Analysis Center, abolishing the corporate income tax would lead to a 12 percent to 13 percent increase in wages.

Source: James Pethokoukis, "Why corporations shouldn't pay any taxes - zero, zilch, nada," The Week, August 4, 2014. 

 

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