We regard this as an interesting little logical puzzle, this fuss being made about corporation tax at present. The basic starting point is that corporations don't pay the tax at all, they cannot. All and any taxes mean the wallet of some live human being is lighter. Whose pocket is being picked by which tax is the study of incidence.
About which we have an interesting paper:
Data on the foreign activities of American multinational firms provide wage rates and interest rates for a panel of more than 50 countries between 1989 and 2004. Evidence from applying this framework to these data indicates that between and 45 and 75 percent of the burden of corporate taxes is borne by labor with the balance borne by capital.
We do not, by any means, insist that this specific number is correct. However, we do insist on the basic underlying logic of the case. Which is that the more mobile factor of production will bear less of the tax burden, the more immobile more. Mobility here is a close proxy for elasticity of course. Which brings us to the common complaint about that corporate taxation:
Second, capital - financial and real - and goods and services are now more mobile across national boundaries than ever before. This is because many highly valued modern products - such as the iPhone - are relatively lightweight and can be shipped economically (and in volume and rapidly) by air. Other valuable modern products weigh nothing. Consider the digital nature and economic value of operating systems and the multitude of apps for smartphones and the growing value of "big data." Financial capital and services are also weightless. These products can be shipped globally with a few strokes on a computer and at the cost of a few electrons.
A major and unheralded problem for modern governments is that they are landlocked, while firms and their plants and equipment and job bases can move with growing ease among countries at decreasing cost.
Which brings us to what we think is the interesting little puzzle. When capital was less mobile the incidence of such taxation weighed more heavily upon the capitalists. Perhaps a good idea perhaps not but what was actually desired at the time at least. Now with the greater mobility such corporate taxation necessarily falls more upon the wages of the workers, the least mobile factor of production. Yet this is exactly the point where people are calling for more corporate taxation. Just when we absolutely know that it's not the capitalists or the rich people being taxed.
The very thing which is causing the problem being complained of, that mobility of capital, is exactly the thing which says we shouldn't be trying to tax it in this intermediate manner, through the corporation. Yet the campaigning insistence is the other way around, that because of the mobility we must tax it more, as we actually cannot in this manner.
Isn't that an interesting little puzzle? It's almost as if the campaigners don't understand the subject, isn't it?