When we think about corporate taxes the field of inquiry becomes muddled with . . . well, mud slung from different political positions. Any discussion has to include a reference to "static" or "dynamic" considerations. Liberals (including myopic bureaucrats in government) primarily use a static model. Conservatives, and other right thinking people, know this presents one falsehood after another. And the problem with these falsehoods is that "computer models" then dictate present and future policies.
Here's a quick example. If taxes are at 20% on $100,000 and the government raises the rate to 30%, they will not take in an extra $10,000. That's static. Life is dynamic. We all make decisions based on our interests. We cut back, we buy tax shelters. We don't expand our businesses. We prolong selling assets. As a result, we contract, the economy contracts. It's not good. And one ugly side-effect is that the government takes in less revenue. Then, the disease of stupidity catches on, and spreads among the Liberal intelligentsia like a contagion and they ask for higher rates--adding more insult.
Real world experiences teach the opposite. I'll tell a personal story. I was taking my 15 year old daughter Carrie to a class. I asked her what she thought of this same scenario. I used the same 20% and 30%. Without being prompted she said, "No, they [the government] won't take in more. People will make less. Businesses won't grow and everything goes down." Oh, the pride of Papa Wade!
Kevin A. Hassett in NATIONAL REVIEW magazine put it this way: ". . . the counter intuitive economics of corporate tax reform." It was not counter intuitive to my daughter! It's natural to think in dynamic ways. The problem we face is so many government politicians. But people adapt and adjust. In short, they make better choices for themselves.
Mr. Hassett goes on: "How did we get here? The lion's share of the blame can be pinned on Democrats. They are in such denial on this issue that President Obama's proposed corporate tax 'reform' actually would increase the taxes paid by U.S. corporations."
True, and reality must check itself at the door of reason. Lower tax rates mean an expansion of the economy. This expansion is growth. Growth is profits, jobs, a better standard of living, and all things good. Growth seems anathema to liberals.
We now have the highest corporate tax rate in the world (of all economically developed countries). The world generally gets smart. They too adjust and adapt. "The change came after an explosion of academic literature that identified clear links between lower corporate rates and economic growth." (Ibid., Hassett)
And here's the rub: Studies conclude that labor - the working people - get much if not all of the corporate tax. And the counter intuitive and comical (if the results were not so pathetic) aspect to all of this is that lower rates (broad-based and permanent) would benefit workers more than corporations. The President's economic illiterate policies are destructive and recessionary.
