At last, an econ post

Some people have been complaining that U.S. corporate taxes are too high, and are driving investment to other developed countries that have lower rates. Paul Krugman and others show that this isn't really the case; the U.S. has so many loopholes that corporations can basically avoid most of the taxes here. So the high corporate tax rate isn't really a problem.

But wait a second. Just because the corporate tax isn't killing our economy doesn't mean it's a good thing. In fact, most economists think corporate taxes aren't a very good idea in general. Here's some good reasons why:

1. Corporate taxes are more "distortionary" than personal income taxes. That's because it's a lot easier for a corporation to delay investment - or to move it overseas - than it is for a person to stop working. So $1 of revenue raised from corporate taxes has a much bigger side effect ("excess burden") than $1 raised from personal income taxes.

2. Corporate taxes aren't just taxes on company owners. As Linda Beale points out, the "incidence" of corporate taxes - i.e. , who really ends up paying - can fall on shareholders and managers, but it can also fall on low-paid workers and consumers. So corporate taxes sometimes end up being a tax on the poor.

3. As things stand, corporations spend a lot of time and money finding those loopholes to avoid the taxes. With a lower tax rate, the corporations won't have such an incentive to dodge, and can get back to doing whatever it is they do.

So even though corporate taxes aren't the menace some people make them out to be, they're still an awfully inefficient way of raising money. Why don't we just replace corporate taxes with personal taxes?