The U.S. corporate tax, the second highest on the planet, is a hidden tax where workers end up paying 70 percent of it. It's also a tax with no economic justification on efficiency grounds. So, why are some left-of-center folks so enamored with it? Simple: It's a nearly $400 billion a year tax that most folks are unaware of. So, what if we killed the corporate tax for competitiveness reasons and just raised income and investment taxes, essentially getting rid of the double taxation issue? (Profits are taxed at the corporate level and again as dividends.) Look at this bit of static analysis (it assumes no impact of taxes on economic growth) from the folks at the Tax Policy Center:
It turns out that if you want to finance complete repeal of the corporate tax, you'd need to boost the top three individual rates to an eye-popping 50.1 percent, 59.1 percent, and 62.7 percent, and raise the tax on capital gains and dividends to about 27 percent. If you leave the rates on gains and dividends untouched, taxes on ordinary income would have to double to 56 percent, 66 percent and 70 percent.
But in a way, taxes are already at those confiscatory levels because of the way the tax is passed along to workers and shareholders. We just don't quite perceive it as such.