There's a Lot to Like About Cutting Corporate Taxes

My Bloomberg View colleague Tyler Cowen received quite a bit of pushback for his endorsement of President Donald Trump’s proposal to cut the federal corporate tax to 15 percent from 35 percent. But Cowen is broadly right -- lowering the tax is a good idea.

One reason is that corporate taxation isn't the greatest way of raising revenue. When you tax a corporation, it’s not just the shareholders who pay. Prices for customers go up to some degree, and take-home wages for employees -- both at the top and the bottom of the pay scale -- go down. It’s difficult to tell who pays what -- some economists estimate that shareholders pay essentially all of the tax, while others conclude that workers pay the lion’s share. There’s also a chance that some piece of the corporate tax might fall on those who can least afford to pay, specifically low-wage workers and poor people. That uncertainty implies that society should shift the tax burden from corporations to wealthy individuals. That will ensure that less of the cost of government falls on the poor. Since corporate tax represents only 11 percent of U.S. revenue, replacing some of that with higher top-end income taxes shouldn’t be too difficult.