The world's most progressive nations also have the lowest corporate tax rates

[yllus]

I was looking through the blog of an economist up here and came across some his graphs of corporate tax rates in a number of countries that are big spenders on social programs. My assumption had always been in the opposite direction - that large social programs are necessarily financed by high corporate tax rates. Not so, it seems (at least if you want to effectively fund said programs).

Worthwhile Canadian Initiative - Economic policy advice for the NDP, Part IV: Corporate income taxes

This is a lesson that has been learned by successful social democratic governments - including the one in Manitoba, which has recently realised that lower corporate tax rates are not inconsistent with progressive goals. Here are graphs of the statutory corporate income tax (CIT) rates, the effective rates and the marginal effective rates in various rich countries plotted against the levels of social spending:

Here are the effective rates (taxes as a percentage of the tax base after deductions):

And here are the CD Howe estimates for the marginal effective tax rates (the tax on an extra dollar of profits):

Corporate taxes are not paid by capitalists. Here we have to think about the incidence of corporate taxes. If the owners of the firm can pass the tax along in the form of higher prices, lower wages and/or reduced employment while maintaining the same after-tax rate of profit, then the burden of the corporate tax is borne entirely by workers and consumers. And if firms must compete for investment in an integrated global capital market - as is the case of firms operating in Canada - then that's exactly what will happen.

Even if they're not the ones who write the cheque to the Receiver-General, the people who really pay corporate taxes are consumers (in the form of higher prices) and workers (in the form of reduced wages and employment). For more on this point, see Who pays corporate taxes? and Why progressives should support reducing corporate tax rates.

 

[crashtestdummy]

Yup. What they do is keep the corporate tax rates low to keep the businesses around, then have very high personal income/value-added taxes to rake in money from the employees.

 

[RedChief]

And each of these countries has less population then New York, LA or Chicago metropolitan areas...

 

[Acanthus]

Low tax rates worked out great for Ireland...

Hell they even had massive funds being laundered through their country by US companies to dodge taxes.

 

[Anarchist420]

Doesn't surprise me.

The corporate tax needs to be repealed. Small biz is hurt the most and revenue lost from the corporate tax is more than recaptured via personal income tax.

 

[Anarchist420]

If they can't repeal then they should reduce to like 1% or 2% flat marginal rate and no deductions.

 

[xj0hnx]

Yup. What they do is keep the corporate tax rates low to keep the businesses around, then have very high personal income/value-added taxes to rake in money from the employees.

Exactly.

And each of these countries has less population then New York, LA or Chicago metropolitan areas...

But dude can you imagine scaled to the US population how much extra social programs we could fund off 28.89%-59.09% personal income tax, 31.42% payroll tax and a 24%/12%/6% VAT, zomg!!! Workers paradise and free healthcare for all!!!!!!11!!!

 

[yllus]

Low tax rates worked out great for Ireland...

Hell they even had massive funds being laundered through their country by US companies to dodge taxes.

Any policy becomes bad policy when taken to ridiculous extremes. And as the graphs show, they didn't even use the funds for social works - that was just silliness.

 

[crashtestdummy]

Exactly.



But dude can you imagine scaled to the US population how much extra social programs we could fund off 28.89%-59.09% personal income tax, 31.42% payroll tax and a 24%/12%/6% VAT, zomg!!! Workers paradise and free healthcare for all!!!!!!11!!!

While I don't recommend taxing on a European Level (or having their employment laws), it does seem reasonable to lower the corporate tax to 15-20% while raising income taxes enough to compensate. Any damage done by increasing the income tax on individuals would be more than offset by the incentive for companies to keep their manufacturing and offices here.

It's not politically viable by any means, but I can dream, can't I?

 

[her209]

Just curious how the corporations' profit margins are compared to ones here in the US in the same industry or industries.

 

[the DRIZZLE]

While I don't recommend taxing on a European Level (or having their employment laws), it does seem reasonable to lower the corporate tax to 15-20% while raising income taxes enough to compensate. Any damage done by increasing the income tax on individuals would be more than offset by the incentive for companies to keep their manufacturing and offices here.

It's not politically viable by any means, but I can dream, can't I?

You could do it just by raising the capital gains and dividend tax rates without touching the regular income tax rates.

 

[Throckmorton]

While I don't recommend taxing on a European Level (or having their employment laws), it does seem reasonable to lower the corporate tax to 15-20% while raising income taxes enough to compensate. Any damage done by increasing the income tax on individuals would be more than offset by the incentive for companies to keep their manufacturing and offices here.

It's not politically viable by any means, but I can dream, can't I?

You can never lower taxes enough to make America competitive with China. And if you tax workers more, they'll just need to be paid more... The taxes have to be paid somehow. You can't get something for nothing.

 

[ShawnD1]

Yup. What they do is keep the corporate tax rates low to keep the businesses around, then have very high personal income/value-added taxes to rake in money from the employees.

It's the best way to do it. What are people going to do? Relocate to China so they can pay lower taxes? Have fun with that! :awe:

 

[RbSX]

What about all of Scandinavia?

 

[ShawnD1]

What about all of Scandinavia?

Did you actually read the thread or are you trolling? Sweden has the lowest taxes on those graphs.

 

[Hayabusa Rider]

And each of these countries has less population then New York, LA or Chicago metropolitan areas...

You think Toronto is a little city?

 

[Acanthus]

While I don't recommend taxing on a European Level (or having their employment laws), it does seem reasonable to lower the corporate tax to 15-20% while raising income taxes enough to compensate. Any damage done by increasing the income tax on individuals would be more than offset by the incentive for companies to keep their manufacturing and offices here.

It's not politically viable by any means, but I can dream, can't I?

I would agree with this if bonuses and capital gains were taxed as income.

 

[Gonad the Barbarian]

The other side of lowering corporate taxes, raising taxes on capital gains and higher level income, will never make it past the "OMG socialism! Wealth redistribution!" crowd.

 

[Fern]

Well, Japan is set to lower their corporate tax rate leaving us as the clear #1 in highest corp tax rate in the world.

Fern

 

[Broheim]

"OMG socialism! Wealth redistribution!" crowd.

what those people don't understand is that the intire society benefit from "wealth redistribution"...

and Denmark does ok on those charts /national pride >.>

 

[xj0hnx]

what those people don't understand is that the intire society benefit from "wealth redistribution"...

Depends on what you view as a benefit.

 

[Broheim]

Depends on what you view as a benefit.

the rich will stay rich and the poor will get richer...
people will have the freedom to choose what they want to do with their life, instead of being unable to get a decent education just because their parents can't afford it...
sickness wont cripple a family's economy or hamper a company's competitiveness because they have to pay for health care so they can attract workers.

and so on...

honestly I could write intire books on the subject, but let's just leave it at that for now.

 

[blackangst1]

the rich will stay rich and the poor will get richer...
people will have the freedom to choose what they want to do with their life, instead of being unable to get a decent education just because their parents can't afford it...
sickness wont cripple a family's economy or hamper a company's competitiveness because they have to pay for health care so they can attract workers.

and so on...

honestly I could write intire books on the subject, but let's just leave it at that for now.

[derail]
Before you embark on your book writing adventure, please take a few english 101 classes
[/derail]

edit: apologies if english is not your first language

 

[dmcowen674]

what those people don't understand is that the intire society benefit from "wealth redistribution"...

and Denmark does ok on those charts /national pride >.>

What's an intire? Something Goodyear makes?

 

[bfdd]

why don't we just remove all possible loop holes and write offs and just require a straight up flat taxed rate across the board? we could have a much lower tax rate if that was the case.