Thursday, December 21, 2017
Bloomberg View: AT&T's Tax Cut Bonus Isn't Just a Gimmick, by Justin Fox:
Yes, AT&T chief executive Randall Stephenson's announcement that his company will be paying out $1,000 bonuses to 200,000 workers in the wake of the passage of a big corporate tax cut is probably to some extent a lobbying ploy. AT&T, as many, many people have noted this afternoon, has a giant acquisition (of Time Warner) currently being held up by antitrust regulators. It has every reason, then, to want to curry favor with the man for whom the tax bill represents a first major legislative victory, President Donald Trump.
But Stephenson's move is also a simple representation of what a lot of economists think is the natural result of a cut in corporate taxes. Corporations themselves don't ultimately pay taxes.
As veteran tax wonk Bruce Bartlett put it a few years ago:
They are legal entities that exist only because governments permit them to and are artificial vehicles through which sales, wages and profits flow. Hence, the actual burden of the corporate tax may fall on any of the groups that receive such flows; namely, customers, workers and shareholders.
It was once believed that shareholders bore almost all of that burden. In recent decades, though, economists have increasingly come around to the idea that workers shoulder much or even most of it. That's because, as my Bloomberg View colleague Mihir Desai (of Harvard Business School and Harvard Law School) put it to me in 2014, "Those other folks are pretty mobile. The workers aren’t." That is, investors can choose to buy shares in firms operating in countries with lower corporate taxes. Customers can choose to buy things from firms in other countries. Workers can migrate, but it's a lot harder.