Who Pays Corporate Taxes?

Congress is considering increasing the corporate tax rate from 21 percent to 28 percent to help pay for the big infrastructure bill it is currently assembling. Over at National Review, I point out that corporations don’t actually pay corporate tax. You and I do:

That is because companies pass on their costs. Some of the tax is paid by consumers, who pay higher prices. Company employees pay some of the tax through lower wages. And investors’ retirement accounts pay some of the tax through lower returns.

There is also an often overlooked rent-seeking story behind Treasury Secretary Janet Yellen’s proposal for a global minimum corporate tax rate:

It is not difficult to imagine a U.S. company lobbying heavily to raise its rivals’ taxes in lower-tax countries. This would make the U.S. company more competitive, but in strictly relative terms. Such a lobbying win could aid a company without it having to do the hard work of improving its products or offering consumers better deals.

At the same time, though, foreign companies could lobby to raise U.S. corporate-tax rates for similar reasons. Why bother improving your own company when you can just hurt your rivals instead? That is the real race to the bottom.

A global minimum corporate tax rate turns out to be a form of hidden trade protectionism.

Read the whole thing here.

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