Politicians in DC are debating the fate of the Bush-era tax cuts set to expire at the end of this year. Many from the “soak-the-rich” camp are calling for the tax cuts on the highest income earners to expire. But research from the Tax Foundationshows that a sizable share of these taxes would be paid by businesses:
About 39 percent of the $630 billion tax increase on high-income taxpayers (defined by President Obama as individuals earning more than $200,000 and married couples earning more than $250,000) in 2011 would come from business income. This amounts to an extra $246 billion in taxes on business income over 10 years.
But that only makes profitable businesses pay their “fair share,” this still won’t hurt the little guy – many will declare.
Businesses don’t pay taxes, however, people do. And as I previously pointed out, studies have shown that taxes on businesses end up having a significant negative impact on worker wages, especially low-skilled, low-wage workers:
For instance, a September 2007 study produced by the Oxford University Centre for Business Taxation studied data from more than 15,000 companies located in four countries. The study found that more than 60 percent of corporate taxation is “shifted onto the workforce in the form of lower wages” in the short run, growing to 100 percent in the long run. In other words, over the long haul, every dollar extracted from businesses in the form of taxation reduces worker pay an equal amount.
Making matters worse, the negative effect of corporate taxation on wages falls hardest on lower skilled workers and those on the margins of employment. While politicians often express a desire to further cut income taxes for lower- and middle-income taxpayers, many of these taxpayers already have virtually no income tax burden. In reality, these taxpayers would benefit more from a cut in the corporate tax rate.
A 2007 Tax Foundation study examined the federal corporate tax burden on workers based on income level and determined that “a cut in corporate taxes would provide a greater benefit to low-income households than would more cuts in individual taxes.”