An academic paper released this week by the Cato Institute examines the impact of state corporate taxes on retail prices.
We find an elasticity of retail price to the net of corporate tax rates of approximately 0.17. This means that a one percentage point increase in the corporate tax rate leads to a 0.17 percent increase in retail product prices.
In other words, because the corporate tax – a favorite of liberal ‘progressives’ – drives up retail prices, it should be considered as a “regressive” tax because the increase in retail prices harms low-income households disproportionately.
Civitas has previously highlighted research that shows the majority of the corporate tax burden falls on workers in the form of lower wages. The Cato study also buttresses those findings with a rough estimate of a wage elasticity of the corporate tax of .43 (i.e. a one % point increase in the corporate tax rate leads to a 0.43 percent decrease in wages).
The Cato study underscores a simple fact: corporations don’t pay taxes, people do. Contrary to what progressives would like you to believe, the corporate tax harms flesh and blood working class people.
In other words, the biggest beneficiaries of a corporate tax cut would be low-income consumers and workers.
Civitas has for some time now been advocating for North Carolina to eliminate its corporate income tax, because of the broad-based benefits. We released an academic study outlining those benefits, that you can read here.