The Left Wing Case for Cutting Corporate Taxes

Cutting corporate taxes is often portrayed as a right-wing policy. Many on the left claim that a reduction in corporate taxation, currently sitting at 35% here in the United States, is merely a handout for the wealthy, giant companies, and their CEO’s.

However, cutting corporate taxes is not simply a right wing ploy intended to enrich their 1% masters. It is, in fact, an economic consensus, a policy on which most prominent economists agree (a rare occurrence, but one that is more common than many would have you think). This includes economists on the left as well as economists on the right. Because this broad consensus has been reached among economists, I think it is important to proselytize the importance of eliminating corporate taxation.  

The ‘right wing’ arguments for corporate tax reform are well known: make it easier for businesses to do business and more wealth will be generated to enrich society. Many on the left dismiss this as ‘trickle down economics.’ However there are several benefits of reducing (or preferably eliminating) corporate taxation that also appeal to more left-wing sensibilities.

Left wingers have mockingly used the phrase “corporations are people” to assault right-wing policies seen as pro-business. However there is a grain of truth to the phrase. Corporations are not people, but they are comprised of people. A corporation is essentially a legal entity, a mechanism that brings people, capital and assets together to facilitate the capitalist system.

For example, Apple is not Apple, but is comprised of workers, management, shareholders and a CEO–all people. A tax on corporations is a tax on the people within that corporation. “Every cent of corporate tax comes from people–from higher prices for products, lower wages for workers, or lower profits for investors. A corporation is just a shell, money goes in and money goes out.”

This begs the question of just who is paying for corporate income taxes? Is it labor, being the employees, capital, being the investors, or consumers, the people who purchase goods or services from the company? All indications point to labor, the employees and workers of the company, paying the largest share of burden, up to 70% in some estimations; much of the rest seems to be passed onto consumers.

Very little comes out of the pockets of shareholders or out of the salary of the CEO. By taxing corporations we levy a significant tax (35%, which is the largest in the developed world) on the middle- and working-class elements of a corporation, and not ‘the Wall Street fat cats,’ as anti-corporate tax reform activists like to think. Progressives who oppose cutting corporate taxes are betraying their own pro-labor principles.

Cutting corporate taxes would benefit several other progressive policy agendas. For one, it would help “level the playing field,” between small and large corporations. ‘Fairness’ has always been a major progressive value. Corporate taxes are unfair by every metric. While our corporate income tax rate is set to 35% (once again the highest in the developed world), the effective rate, the average of the rates that companies actually pay, is significantly lower, because of hundreds of pages of so called ‘tax expenditures,’ build into the 11,000 page long federal tax code.

There are over $100 billion in corporate tax exemptions, most of which are either extremely obscure or seem ridiculously silly. Worse still, most corporate tax exemptions are claimed by large companies. The insane complexity of the corporate tax web means that rich companies, which can afford more expensive lawyers, are better able to find and exploit loopholes and exceptions in the tax code. On top of this, the complex structure of large companies makes it easier to hide income internally or stash cash abroad.

This has resulted in a substantially lower tax rate for large corporations. Apple is estimated to pay a rate as low as 8%, while small- and medium-sized companies are straddled with 35%. This has given a massive advantage to large incumbent companies, entrenching them in place and allowing them to amass huge amounts of wealth that would otherwise be spent competing with other companies. The decreased economic dynamism has resulted in lower wages, higher prices and more inequality. Destroying the corporate income tax would do much to increase fairness and help return us to a level playing field.

The end of corporate income taxation, long portrayed as a right-wing corporatist policy, is in fact the opposite. The end of corporate taxation would be the fastest and easiest way to stick it to the large and greedy corporations that the left abhors, to boost the wages of hard-working Americans and to eliminate structures that help “rig the system” (to use one of Bernie Sander’s favorite phrases) in favor of the well connected and well established.

With this in mind, the destruction of corporate taxation should top the policy list of every committed progressive.