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Comment by dibujante | Hacker News Reader

Some people make the (good? I don't know) argument that corporate taxes are distortionary anyways, and shuffling that tax burden over to income has the same effect with fewer side effects.

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I think people like corporate taxes because people only have a vague idea of where the incidence actually falls. Clearly, at the end of the day, corporate taxes take money out of the pockets of business owners/shareholders, employees, and customers in some proportion, but no one's really sure what it is. Taxes that you're obviously paying are unpopular, whereas taxes it feels like "someone else" is paying are less unpopular.

You're of course right that owners/customers/employees/vendors/etc pay the corporate tax. But when you say "tax the corporations" it sounds an awful lot like "tax the rich people", and people imagine the Monopoly man with a monocle shelling out money from his tuxedo pockets.

Of cours, in the real world, you likely work for a corporation, and the retired Teachers in California are collectively one of the biggest owners of companies in the US [1].

[1] - https://en.wikipedia.org/wiki/CalPERS

My father, who is quite wise and right about many things, is very fond of stating that corporation's don't pay taxes - they just pass them on to other people. He owned a local redi-mix company until he retired, and they routinely adjusted wages and prices in response to local, state, and federal tax changes. It's a fact of life that the money corporations pay comes from somewhere, whether it's on the 'in' side or the 'out' side of the balance sheet.

One of those "out" sides of the balance sheet is the owners of the corporation. That's generally who people think of when they think of who "pays" corporate tax. Especially for taxes on profits, which go 100% to the owners.

I agree that that’s what people seem to think. But if the corporate taxes get too high, wouldn’t you think that at some point, business owners start saying “screw it, I want to be a W-2 worker,” which obviously would put downward pressure on employee wages? Conversely, now that the tax reform bill created all these tax advantages for passthrough income, isn’t it obvious more people are going to be starting businesses and trying to structure their income as business income?

Why would the business owners wanting to be W-2 workers cause downward pressure on employee wages?

Because there’d be more competition for W-2 jobs? Any situation where the average business owner can make more money by becoming a W-2 worker at someone else‘s business is not a stable equilibrium.

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