The Misguided Rhetoric of Corporations “Not Paying Their Fair Share” of Taxes

There has been a lot of talk recently about “greedy” corporations not paying “their fair share” of taxes. These claims have a lot of populist appeal, but they are really quite misguided if we think about it.

After all, corporations are owned by shareholders. And who are those shareholders? Why they tend to be large pension funds, such as those benefiting public employees, trade unions, and corporate pensioners, not to mention individual 401k plans and university endowments. Indeed, Pensions and Investments reports that the assets of the 1,000 largest U.S. retirement plans totaled $8.8 trillion last year, the vast majority of those assets were invested in corporate equities.[1]

Economists generally agree that, at least in the short-term, the burden of corporate taxes is really borne by shareholders through lower dividends and share prices. Considering this, the following statements kind of ring hollow:

“Those greedy pension funds aren’t paying their fair share of taxes.”

“Those greedy 401ks aren’t paying their fair share of taxes.”

“Those greedy college endowments aren’t paying their fair share of taxes.”

Sounds kind of silly, right? Not the kind of statements that would motivate people to march on Wall Street.

But in the long term, economists agree that the ultimate burden of corporate taxes tends to fall on workers, since they are the least mobile factor in the economy. So, to say that “workers aren’t bearing their fair share of corporate taxes” kind of loses its populist appeal as well, doesn’t it?

Once upon a time, economists used to think that 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. was also passed along to consumers through higher prices. However, this is probably less so in a global economy where prices tend to be competitively set worldwide. None-the-less, to say that “consumers aren’t bearing their fair share of corporate taxes” doesn’t have a lot of rhetorical power to it either.

You have to wonder about the motivation of people who demagogue this issue—such as Senator Bernie Sanders, or groups like Citizens for Tax Justice. Because, ultimately, their obsession with getting corporations to pay higher taxes runs totally against the best interests of the people they profess to represent—pensioners, workers, and consumers.

After all, cutting our globally uncompetitive 35 percent corporate tax rate would translate into higher dividends and share prices for union pension funds, higher wages for workers, and, to some degree, lower prices for consumers. Now how could it be considered “greedy” to promote a policy that would raise the living standards of these corporate stakeholders?

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