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More Evidence That Corporate Tax Cuts Help Workers

1 min readBy: William Ahern

A new study from three prominent economists finds that employees suffer most when their corporate employers must pay high corporate taxes. That contradicts the theory that has prevailed for decades — that corporate taxes mainly hurt investors — but it supports a recent CBO study by Randolph that found workers bearing 70 percent of the burden of corporate income taxes.

The new study’s authors are Fritz Foley and Mihir Desai of Harvard and James Hines of the Univ. of Michigan, and their study is titled “Labor and Capital Shares of the Corporate Tax Burden: International Evidence.” They first presented it to the Brookings Institution in December, and yesterday, March 17, they presented it to the American Enterprise Institute.

They find that the workers’ share of the corporate taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. burden ranges from 45 to 75 percent. This provides more intellectual ammunition to the growing group of lawmakers who are arguing that the U.S. needs a lower corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rate, a group that includes Ways and Means CommitteeThe Committee on Ways and Means, more commonly referred to as the House Ways and Means Committee, is one of 29 U.S. House of Representative committees and is the chief tax-writing committee in the U.S. The House Ways and Means Committee has jurisdiction over all bills relating to taxes and other revenue generation, as well as spending programs like Social Security, Medicare, and unemployment insurance, among others. Chairman Charles Rangel (D) and Senator John McCain (R).

The Tax Foundation has recently compared U.S. corporate income tax rates, both federal and state, to the rates levied around the world, finding that U.S. taxes are either highest (federal only) or second highest (federal plus state).