{"id":12241,"date":"2024-05-17T22:01:03","date_gmt":"2024-05-17T19:01:03","guid":{"rendered":"https:\/\/ch.jfdi.cc\/?p=12241"},"modified":"2024-05-17T22:01:03","modified_gmt":"2024-05-17T19:01:03","slug":"are-billionaire-taxes-falling-that-depends-on-who-you-think-pays-corporate-taxes-2","status":"publish","type":"post","link":"https:\/\/ch.jfdi.cc\/?p=12241","title":{"rendered":"Are Billionaire Taxes Falling? That Depends On Who You Think Pays Corporate Taxes."},"content":{"rendered":"

In a recent New York Times column (paywall), Berkeley economist Gabriel Zucman calculated that the highest-income Americans pay only about 23 percentof their income in taxes, and, as a result, \u201cfor the first time in the history of the United States, billionaires had a lower effective tax rate than working-class Americans.\u201dThere is a lot to unpack in those results, but let\u2019s focus on one pillar of Zucman\u2019s argument\u2014his controversial claim (more fully argued in a 2019 book with his frequent research partner Emmanuel Saez) that owners of capital receive all of the benefits of corporate tax cuts.
\nWho Pays, Who Benefits?<\/strong>
\nNearly all economists agree that the burden of corporate taxes does not fall on businesses themselves. Corporations may remit taxes to the IRS, but the tax ultimately is paid by some mix of workers and owners of capital.
\nBut how to divide the burden of taxes, or the benefits of tax cuts?
\nZucman and Saez found a steep decline in the share of income paid in taxes by the wealthiest 400 US households, falling from 56 percent in 1960 to 30percentin 2017 and 23percentin 2018, after passage of the 2017 Tax Cuts and Jobs Act (TCJA). Zucman argues the decline from 2017 to 2018 was largely because shareholders received all the benefit of TCJA\u2019s significant cuts in corporate taxes.
\nBut other economists believe that when employer taxes fall, workers also share some benefit through higher wages. Lower taxes increase cash available for businesses to invest in capital equipment, which in turn makes workers more productive and ultimately leads to higher pay. Lower taxes also could boost foreign investment, which \u00a0could raise wages as well.
\nSimilarly, when corporate taxes are raised, workers bear some of the burden.
\nAlternative Views<\/strong>
\nWhen he was at the American Enterprise Institute, economist Kevin Hassett took that argument to its extreme. He concluded \u00a0that workers get more than 200 percent of the benefit of corporate tax cuts. \u00a0Later, as a top \u00a0adviser in the Trump White House, Hassett projected that the TCJA\u2019s corporate tax rate cuts would raise annual wages by an average of $4,000.
\nEven at the time, those estimates seemed implausible. And evidence suggests recent wage increases are more likely due to a tight labor market since the mechanism though which investment-driven wages were supposed to rise, productivity growth, has stagnated. \u00a0\u00a0\u00a0
\nMost analysts land somewhere between Hassett and Zucman, though much closer to Zucman. \u00a0\u00a0
\nIn 1962, UCLA economist Arnold Harberger concluded that effectively all of the corporate income tax was paid by the owners of capital. More recent assumptions acknowledge some burden on workers.\u00a0\u00a0\u00a0
\nThe Congressional Budget Office, the congressional Joint Committee on Taxation, The US Treasury Department, the Penn-Wharton Budget Model, and my colleagues at TPC assume that three-quarters or more of the burden of the corporate income tax falls on shareholders and other recipients of capital income. The rest falls on workers. The Tax Foundation divides the tax burden equally between workers and owners of capital.
\nTPC initially allocated the corporate tax to capital in its modeling. But about a decade ago, it updated its long-run incidence assumptions. Today, TPC assumes 60 percent of the burden falls on shareholders, 20 percent on all owners of capital, and 20percenton labor. And it is constantly rethinking those assumptions.
\nWho Pays, And When?<\/strong>
\nBut that raises another question: Which workers ultimately pay the corporate income tax?
\nIn 2022, my TPC colleague Bill Gale and co-author Sam Thorpe concluded that highly-paid employees \u00a0bear much more the burden than their rank-and-file colleagues. Consequently, they reap more of the benefit when corporate taxes are cut. \u00a0
\nTo further complicate matters, \u00a0the burden of corporate taxes may shift over time. At first, corporate tax cuts may primarily benefit shareholders. But once firms implement productivity-enhancing investments, workers will be rewarded.
\nSimilarly, higher corporate tax rates may encourage firms to shift profits overseas or to non-corporate forms of business, lowering the tax burden on corporate shareholders. But this may happen over several years.
\nOne solution may be to show how the distributional effects change over time. The challenge is that economists don\u2019t yet understand how long this transition takes.
\nPerspective Matters<\/strong>
\nFinally, there is the matter of which shareholders benefit from corporate tax cuts or bear the burden of tax hikes. Recent research by my TPC colleague Steve Rosenthal and Livia Mucciolo found that only about 28 percent of publicly traded corporate stock is held by taxable entities. \u00a0\u00a0
\nThe debate over corporate tax incidence is both important and ongoing. When Congress considers the fate of the TCJA next year, Democrats are highly likely to try to raise corporate income taxes. And what you think about that effort may depend a lot on who you think ultimately will pay those higher corporate taxes.<\/p>\n","protected":false},"excerpt":{"rendered":"

The highest-income Americans pay only about 23 percent of their income in taxes, with billionaires having a lower effective tax rate than working-class Americans. Berkeley economist Gabriel Zucman argues that owners of capital receive all the benefits of corporate tax cuts, while other economists believe that workers also benefit through higher wages. The burden of corporate taxes may shift over time, with highly-paid employees bearing more of the burden initially, but workers benefiting once firms implement productivity-enhancing investments. Only about 28 percent of publicly traded corporate stock is held by taxable entities, highlighting the ongoing debate over corporate tax incidence.<\/p>\n","protected":false},"author":6,"featured_media":12242,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"Default","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[1521,6332,5800,6497,3492,4461,8591,1766,186,5933,1512,3348,5702,6196,3681,3393,4498,6064,4919,4061,3399,5099,2190,4117,9999,1610,9836,3767,658,9046,2294,3398,4773,1823,2753,3752,5236,28,4484,2121,393,4593,5957,10271,6074,720,10273,1065,6917,3358,4847,4222,4556,5680,4738,1183,9563,618,7045,973,841,8643,544,380,4217,4870,457,165,6305,9204,10388],"class_list":["post-12241","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-other","tag-1521","tag-2017-tax-cuts-and-jobs-act","tag-americans","tag-benefit","tag-bill","tag-billionaires","tag-book","tag-budget","tag-business","tag-capital-income","tag-cash","tag-change","tag-committee","tag-congress","tag-corporate-income-tax","tag-corporate-income-taxes","tag-corporate-tax","tag-corporate-tax-cuts","tag-corporate-tax-rate","tag-corporate-tax-rates","tag-corporate-taxes","tag-corporations","tag-decline","tag-democrats","tag-divide","tag-evidence","tag-foreign-investment","tag-growth","tag-history","tag-house","tag-income","tag-income-tax","tag-income-taxes","tag-increase","tag-investment","tag-investments","tag-irs","tag-jobs","tag-labor","tag-land","tag-new-york","tag-office","tag-productivity","tag-profits","tag-research","tag-rest","tag-stock","tag-tax","tag-tax-burden","tag-tax-cuts","tag-tax-cuts-and-jobs-act","tag-tax-hikes","tag-tax-rate","tag-tax-rates","tag-taxation","tag-taxes","tag-tcja","tag-top","tag-transition","tag-treasury","tag-trump","tag-ucla","tag-united-states","tag-us","tag-wage-increases","tag-wages","tag-white","tag-white-house","tag-who","tag-workers","tag-workers-wages"],"acf":{"keyphrase":"","keywords":"","sourceimg":"","country-category":""},"yoast_head":"\nAre Billionaire Taxes Falling? 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