Virginia has a car tax. Does the car pay the tax? In most political jurisdictions, there’s a property tax. Does property pay the tax?…What about a corporation? As it turns out, a corporation is an artificial creation of the legal system and, as such, a legal fiction. A corporation is not a person and therefore cannot pay taxes. When tax is levied on a corporation, who pays it?
A valid question. One whose answer seems almost too obvious:
One response is to raise the price of its product, so customers share part of the burden. Another response is to lower dividends, so shareholders share a part of the burden. And a considerable portion of reduced dividend burden falls on ordinary nonrich people…Therefore, it is people, not some legal fiction called a corporation, who bear the burden of the tax.
Really!?!? So how bad is it?
In 1980, Joseph Stiglitz, now a Nobel laureate, said that workers share the highest corporate tax burden in the form of lower wages. A number of economic studies, including that of the Congressional Budget Office, show that workers bear anywhere from 45% to 75% of the corporate tax burden.
Armed with such facts, perhaps the whole debate over corporate taxes can take a new direction–at least for workers, it is time to demand higher wages!
Hmm, can we say market reality? Wages reflect supply and demand. As to the best response, it clearly has to be drop corporate taxes. If they went to zero then the workers would see the least tax effect. The corporate tax doesnt raise that much revenue. More fair would be to drop the corporate tax and tax dividends at ordinary income rates.