Corporations Don't Pay Corporate Taxes. People Do

www.nationalreview.com
3 min read
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Addressing Janet Yellen's call for a global minimum corporate-tax rate.
Treasury Secretary Janet Yellen speaks at Biden's transition headquarters in Wilmington, Del., December 1, 2020. (Leah Millis/Reuters)

If lawmakers want to fund an infrastructure bill, they should tax people directly — not through a corporate-tax-rate hike.

A mammoth infrastructure bill is on the way from Congress, and policy-makers are touting a corporate-tax-rate hike to help pay for it. Treasury secretary Janet Yellen even proposed a global minimum corporate-tax rate this week. These are both bad ideas for three reasons.

First, corporations do not pay any corporate tax — individuals do. That is because companies pass on their costs. Some of the tax is paid by consumers, who pay higher prices. Company employees pay some of the tax through lower wages. And investors' retirement accounts pay some of the tax through lower returns.

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So, while it might be good politics to stick it to big corporations — or at least to posture that way in front of voters and television cameras — a corporate tax-rate hike would not accomplish its intended goal. Instead, taxes are paid by individuals who then get less for their money, receive smaller paychecks, and have a harder time saving for retirement.

In a 2020 study by Scott R. Baker of Northwestern University, Stephen Teng Sun of City University of Hong Kong, and Constantine Yannelis of the University of Chicago estimate that 31 percent of the cost of an…
Ryan Young
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