Who Pays the Real Cost Of Deferred Tax Reform?

Hooked Taxes ConceptAs congress is starting to vet strategies to amend and fix our tax code, it’s helpful to remember the reason they’re addressing this issue in the first place. With a 35 percent business tax rate, the highest among the OECD nations, it’s not just the businesses that are suffering.

At this week’s Ways and Means Tax Policy Subcommittee hearing, Representative Rob Woodall (R-GA-7) summed this concept up very well in his opening statement:

“This fiction that businesses pay taxes has to be stopped. Businesses don’t pay taxes. They collect them from their employees in lower wages, they collect them from consumers in higher prices, or they collect them from their holders of capital in lower rates of return.”

What the representative is driving at is that taxes ultimately affect those who ordinarily benefit from a business’s success. An opinion piece in Forbes last week confirmed this theory stating: “Economists have long suspected that it is workers, not investors. New research confirms that suspicion.”

The research for the study was conducted by Boston University economist Laurence Kotlikoff using a first-of-its-kind model of international capital flows to analyze the effects of corporate taxation in the United States and concluded that workers would be the principal beneficiaries of changes to the corporate tax code.

By failing to modernize our business tax code, we are effectively making everyone pay the economic costs of uncompetitive tax rates. Tax reform that sets the rate at a competitive 25 percent would reduce the number of jobs lost overseas, encourage domestic investment and increase opportunities for economic growth. It’s time for congress to lower the corporate rate to a more globally competitive level and in turn lower the economic burden on the American worker and consumer.