Sunday, June 4, 2023
  • About Us
  • Contact Us
Parliamentobserver
  • Ecology
  • Economy
  • Healthcare
  • Politics
  • Education
  • Business
  • Login
No Result
View All Result
Parliamentobserver
Home Economy

Raising Corporate Taxes Does Not Help Workers

Dennis Rogers by Dennis Rogers
September 29, 2022
in Economy
0
Raising Corporate Taxes Does Not Help Workers
0
SHARES
11
VIEWS
Share on FacebookShare on Twitter

Reprinted from the Cato Institute

For decades, Congress has done little more than complicate the tax code which, to this day, punishes success in a variety of ways. During this time, many politicians have consistently demagogued corporations, treating them as little more than a new source of tax revenue.

Related posts

Biden could reduce inflation, mitigate a recession, and strengthen democracy with a new EU-US trade agreement

Biden could reduce inflation, mitigate a recession, and strengthen democracy with a new EU-US trade agreement

September 29, 2022
Recent trends in global value chains and beyond

Recent trends in global value chains and beyond

September 29, 2022

The Inflation Reduction Act of 2022 continues this trend and ignores the fact that corporations are nothing more than legal associations that represent human beings, all of whom potentially represent employees, consumers, and shareholders. Raise taxes on “corporations” and people will pay–or pay for–higher taxes.

A sensible framework would acknowledge this fact and only collect taxes from individuals (once) when they earn or consume income. But Congress refuses to implement that sort of system.

Based on the Inflation Reduction Act, Americans will soon have to deal with an even more complex tax code, one that institutes a corporate minimum tax tied to financial statement income. This provision may seem obscure, but as it currently stands, financial statement income and taxable income are very different. So different, in fact, that progressives have long used financial statement figures to wrongly assert that corporations pay very low tax rates.

The Inflation Reduction Act also institutes a brand‐​new tax on stock buybacks (see section 10201), one of the latest progressive pet peeves. During the last few years, members of Congress have criticized stock repurchases as devices for manipulating stock prices and for unfairly rewarding executives and large shareholders. The Securities and Exchange Commission has even proposed new disclosure requirements for buybacks, ostensibly to “modernize and improve disclosure about repurchases of an issuer’s equity securities.”

One problem with this new tax, though it appears relatively small, is that it adds a layer of taxation even though stock buybacks already trigger capital gains taxes, as they should under the current tax code. Beyond this criticism, the whole idea fundamentally ignores that there is no evidence of these buybacks being used to illegally manipulate prices. It also ignores that “the value of buybacks relative to market capitalization has remained relatively constant over the past decade.”

The truth is stock repurchases represent management’s decision to purchase the company’s own shares in lieu of paying dividends or investing cash in something else.

This decision is often driven by (among other reasons) a lack of profitable investment opportunities for the firm, the desire to alter the firm’s capital structure, or even the choice to implement new tax strategies (thanks partly to an overly complex tax code). Evidence also suggests that some managers use buybacks to signal their views on whether the company’s stock price is too low relative to what they believe the firm is worth.

Adding this new tax is not going to hurt “big corporations” because those are just legal names. It will, however, hurt customers, employers, and investors. Managers will distribute less cash to private investors, and innovation will suffer as members of Congress substitute their political judgement for private individuals’ investment decisions.

It is good that the tax is relatively small, but that fact is hardly comforting given the history of the income tax in the United States. It’s also unclear exactly how much this “small” tax might end up distorting corporate managers’ decisions in conjunction with the new corporate minimum tax and the countless other “small” provisions in tax code.

What is clear, though, is that members of Congress should not be in the business of punishing people when they make voluntary financial decisions that members emotionally don’t like.

Previous Post

Existing Home Sales Continue to Collapse

Next Post

No, This Is Not 1970s Style Stagflation

Next Post
No, This Is Not 1970s Style Stagflation

No, This Is Not 1970s Style Stagflation

RECOMMENDED NEWS

Power politics: Trump and the assault on American democracy

Power politics: Trump and the assault on American democracy

10 months ago
Fixing child care: What expanded public subsidies could mean for children, families, and teachers

Fixing child care: What expanded public subsidies could mean for children, families, and teachers

12 months ago
Ketanji Brown Jackson is Neither a Biologist nor Fit for the Supreme Court

Ketanji Brown Jackson is Neither a Biologist nor Fit for the Supreme Court

1 year ago
Will Taiwan be Next?

Will Taiwan be Next?

1 year ago

BROWSE BY CATEGORIES

  • Business
  • Ecology
  • Economy
  • Education
  • Healthcare
  • Politics

POPULAR NEWS

  • Klaus Schwab – The Most Dangerous Man in the World

    0 shares
    Share 0 Tweet 0
  • Ukraine Adopts WEF Proposals

    0 shares
    Share 0 Tweet 0
  • Dr. Robert Malone v WEF

    0 shares
    Share 0 Tweet 0
  • Trudeau’s Approval Rating Hits 12-Month Low

    0 shares
    Share 0 Tweet 0
  • Trudeau Backs Down After Banks Scream about Massive Withdrawals

    0 shares
    Share 0 Tweet 0
Parliamentobserver

We bring you latest news about ecology, economy, healthcare, politics, education, business.

Recent News

  • Financial Literacy for Kids: Teaching Your Children About Money
  • The Benefits and Drawbacks of Freelancing: Is It Right for You?
  • The Role of Small Business in Driving Economic Growth

Category

  • Business
  • Ecology
  • Economy
  • Education
  • Healthcare
  • Politics

Recent News

Financial Literacy for Kids: Teaching Your Children About Money

Financial Literacy for Kids: Teaching Your Children About Money

April 17, 2023
The Benefits and Drawbacks of Freelancing: Is It Right for You?

The Benefits and Drawbacks of Freelancing: Is It Right for You?

April 13, 2023
  • About Us
  • Contact Us

© 2022 parliamentobserver.com Submit news release

No Result
View All Result
  • Ecology
  • Economy
  • Healthcare
  • Politics
  • Education
  • Business

© 2022 parliamentobserver.com Submit news release

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In