09 November 2011

Only People Pay Taxes: Redux

Walter E. Williams, on corporate taxation:

The largest burden of corporate taxes is borne by workers. We discover that by asking a simple question, such as: Which workers on a road construction project earn the higher pay, those employed moving dirt with shovels and wheelbarrows or those doing the same atop giant earthmovers? You'd guess the guys operating the earthmovers, but why? It's not because they're unionized or because construction contractors have a fondness for earthmover operators. It's because those workers have more capital (tools) to work with and are thereby more productive. Higher productivity translates into higher wages.
Tax policies that raise the cost of capital formation -- such as capital gains taxes, low depreciation allowances and corporate taxes -- reduce capital formation. As a result, workers have less capital, lower productivity and lower wage growth. 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 percent of the corporate tax burden. Adding to the burden is the fact that capital has the kind of mobility that labor doesn't. Corporate capital can flee to other countries easily, but workers cannot.

I’ve hammered on this before, but it bears repeating:  Only people pay taxes.  Corporations are nothing more than legal fiction and, at the end of the day, an actual human being has to pay taxes.

What’s intriguing is how workers end up paying more in taxes than consumers.  It does make sense, though, since the current legal and political system in the United States encourages consumption and discourages capital accumulation.  At any rate, it should be clear that it takes a significant amount of ignorance to talk about taxing corporations.  This cannot, and will not ever be done; only people can be taxed, and so it would be more constructive talk about how best to go about taxing people.

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