An old scorpion wanted to cross a river but couldn’t swim, so it asked a frog for a ride. The frog, knowing that scorpions sting, hesitated. But the scorpion promised not to sting, making the obvious point that if it stung the frog, it too would die in the middle of the river. The frog agreed to carry the scorpion. Halfway across the river, the scorpion stung the frog. The dying frog indignantly asked the scorpion why it stung him, despite knowing that it too would perish. The scorpion replied, “Because I’m a scorpion; it’s my nature.”
A U.S. presidential candidate named Joe Biden promised voters that if they voted for him, he would never raise taxes on anyone making less than $400,000 a year. They elected him. And then he sought to raise their taxes, if only indirectly, by raising the corporate income tax. A wise man who was asked why Biden would raise their taxes after promising not to replied, “Because he’s a Democrat—and although it’s his country that will suffer the consequences of the tax hike, he doesn’t care . . . because he’s a Democrat.” It’s his nature.
In Biden’s State of the Union, he stated he would raise the corporate income tax to make corporations pay their “fair share”—whatever that is. The Democrats leapt to their feet, hooting, clapping, and cheering as if Biden had discovered a cure for cancer. Or maybe hemorrhoids.
The Democrats are either stupid (possible), ignorant (possible), or disingenuous (bingo!).
Once upon a time, in an era long, long ago, even first-year college students who studied economics would have known what taxing corporations meant and who was actually paying the tax. Not any more.
The question is, do retired people today know where the money corporations pay out in taxes comes from? Send not to know from whom the money comes. It comes from thee.
Actually, it comes from several groups of people, but that is deliberately hidden when politicians say they are going to tax “corporations,” as if corporations were from Mars.
What do corporations do with the funds they have? They buy stuff that allows them to make and sell goods or services to consumers, an activity that makes a profit for the corporation. They pay their employees. And when they make a profit, they either use it to expand or pay it out in dividends to stockholders. Many stockholders are current employees who receive shares in the company—or the right to buy shares in the company—as part of their retirement plan. Needless to say, most of these employees make less than $400,000 per year.
When corporate taxes are raised, the money corporations have to pay has to come from (a) the employees (who will get paid less), (b) the customers (who will have to pay more for the corporation’s product or service), and/or (c) the owners of the corporation, i.e., the stockholders (many of whom depend on the corporation’s growth for their retirement). Economists disagree on exactly how much each group pays, but everyone admits that both stockholders and workers (i.e., everyone) bear a portion of the cost.
One study says that when corporate taxes are raised, customers pay 31 percent more, workers bear 38 percent of the cost increase, and shareholders (all those pensioners) bear the remaining 31 percent.
Another analysis estimates that raising the corporate tax rate from 21 percent to 28 percent, as Biden wants to do, would result in households making less than $100,000 a year paying almost $100 billion over the next decade.
Biden says “working families” benefit when “big corporations pay their fair share.” He might want to check that claim with America’s own Treasury Department, which released a study in 2007 directly challenging the idea that “capital” (the owners of corporations) bears the burden of the corporate income tax. “Recent empirical work using cross-country data on corporate taxes and wages suggests reconsidering this assumption,” the authors wrote. “Labor may actually bear a substantial burden from the corporate income tax.”
Even the Congressional Budget Office, which—for fifteen years—allocated all of the burden of corporation income tax to business owners, now admits that workers pay at least a quarter of new corporate taxes over the long run. Raising taxes on the $15/hour cashier at the grocery store isn’t exactly “sticking it to corporate elites,” no matter how Biden might try to spin it.
So Biden’s statements about not raising taxes on people making less than $400,000 are just a lot of hooey. How many times has he made those statements?
We asked ChatGPT; here is its reply:
As of my last update in January 2022, President Biden has made this statement multiple times, particularly during his campaign and early presidency. . . . You may want to check recent news sources or official White House statements for the most up-to-date information on this topic.
Yes, indeed, you may want to check, especially before you vote in November—or in October, or maybe next week if that’s allowed where you vote.
Adam Smith said there’s a lot of ruin in a country. If Biden and his fellow scorpions raise corporate taxes, this country may discover how much ruin there is, and we all may go the way of the frog.
Daniel Oliver is Chairman of the Board of the Education and Research Institute and a Director of Pacific Research Institute for Public Policy in San Francisco. In addition to serving as Chairman of the Federal Trade Commission under President Reagan, he was Executive Editor and subsequently Chairman of the Board of William F. Buckley Jr.’s National Review.
Email Daniel Oliver at Daniel.Oliver@TheCandidAmerican.com.