Paul L. Caron

Tuesday, December 20, 2011

Bartlett: Cutting the Corporate Tax Rate Is No Economic Panacea

New York Times, Cutting the Corporate Tax Rate Is No Economic Panacea, by Bruce Bartlett:

First, insofar as taxes affect businesses, more than 90% of businesses are not really affected by the corporate tax. They are sole proprietorships, partnerships or S corporations that are essentially taxed only on the individual tax schedule.

The corporate tax affects only C corporations, legal entities separate and distinct from their owners, the shareholders. The income of C corporations is taxed twice -- once at the corporate level and again when the corporation’s income is paid out to its owners.

Therefore, the tax burden on C corporations is a function of both the corporate tax rate and the personal tax rate on dividends. To be valid, an international comparison of corporate taxes must take both into account.

This table uses data from the Organization for Economic Cooperation and Development:

... [W]hile it may be a good idea to reduce the corporate tax rate as part of a tax reform package, the idea that this will jump-start growth is nonsense.

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Is this willful ignorance or just propoganda?

A lowered corporate tax rate makes the CORPORATION more competitive. More profits to reinvest. Apple, Microsoft, and other growth companies were know to NEVER pay dividends.

And since corporations noramlly pay dividends in the 2 to 4% range, how is it relevant to propose a combined corporate/individual rate based on a mythical 100% dividend.

The comparison is again totally invalid. One can either assume the author is very ignorant or a mere propagandist looking to create numbers for a sound bite. Since Mr. Bartlet clearly knows better, you make the choice.

Posted by: Ed D | Dec 21, 2011 7:52:53 AM