Yves here. C regulars will cringe at the “taxes fund spending” remarks in this video, sine in economies like the US and UK that issue their own currencies, spending precedes taxation and the real role of taxation is to create incentives and disincentives, as well as to control inflation. But our legal conventions are based on the gold standard era, not on monetary operations for a fiat currency issuer.
I’m surprised that Alex Cobham of Tax Justice Network did not mention that multinationals have persuaded policymakers to give “tax holidays” as they did in the US in 2004, allowing them to repatriate profits that had been booked offshore. Mind you, this had nothing to do with the location of cash (which is typically sitting in banks in New York) or the ability to spend. Yet the tech giants and pharmaceutical companies pressing for the 2004 tax holiday argued they needed the waiver so they could invest. When they got the break, they used the profits to pay dividends and higher executive bonuses.
Originally published at Tax Justice Network
im Worstall, a British commentator who has launched a number of vitriolic and personalised public attacks on TJN and TJN staff members in the the past, has been in debate with TJN’s Research Director, Alex Cobham, on the subject of corporate tax. (For a flavour of the extraordinary level of vitriol, see this.)
Anyway, here’s the debate.
Make your own minds up about who came off Worst.
On the much-debated subject of tax incidence, Worstall knows (because, as he states, he reads TJN’s outputs assiduously) that the nonpartisan U.S. Congressional Budget Office has highlighted studies that either find “capital bears the majority of the corporate tax burden” or that “even in an open economy, capital could bear virtually the entire tax burden and that the open-economy assumption is not sufficient to shift the burden of the corporate tax from capital to labor.” (And he might like to answer the question of who the ‘workers’ are in a hedge fund or a shell company.)
As this 2012 CBO paper put it in the conclusion:
“At the end of the searching, I find some evidence that suggests that corporate taxation may lower wages, but the preponderance of evidence does not suggest any wage effects from corporate taxation.
. . .
I close with a political economy point, mentioned by Lawrence Summers at a Hamilton Project forum in 2007. He noted that it was indeed possible that corporate stockholders and managers who resist the corporate tax are not really acting in their own interests because they do not understand corporate tax incidence, since corporate taxes will ultimately be borne by their workers. But it seems far more plausible that they have calculated their interests correctly.”
See much more on this question of tax incidence here.