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Who will pay to raise U.S. corporate taxes?

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Joe Biden wants to raise taxes for companies and can do better. They may not get the payment all the way from 21 to 28 percent, but some increase exists.

Who will bear the heaviest tax burden: corporations, co-workers or shareholders?

Big corporate taxes mean less money per unit. Naively, with everything else being the same, which would indicate that stocks should be smaller. The stock price is its profit in the long run. If the deductions that can be applied for future projects are not the same, and the profits are lower for tax purposes, the cost should be lower. That’s why shareholders pay.

However, the U.S. stock market has only recently risen since Biden became a leader, won the election and finalized his tax plans (which was clear all along).

Not everything else is the same. Perhaps the excitement at the end of the plague outweighed the attraction of the taxpayer. But the point can be combined. The corporate tax rate has it flexibility strongly, from about zero before 1917 to the young to World War II, up to about 50% in the middle of the century and then between 30 and 40% from the 1980s until Trump cut to 21% in 2017 But for a long time data In terms of findings, the benefits of growth and accounting do not reflect any changes that may be related to changes in scale. The market does not care.

Economist Paul Krugman thinks taxes come from corporate business. That sentiment is clear. The market puts the amount of money returners expect. Then there are the problems that corporate businesses need to keep going. Larger taxes reduce the company’s return on sales, so less that can be sold exacerbates the problem. As a result, there is less money and less resources.

That’s why, like Krugman recently he wrote, the corporate crisis was part of a 2017 Trump administration that doesn’t really like it. Now he thinks he was wrong, because corporate money we did not move according to all the household goods.

Why stop? First, he says, most business entities are supported by loans, which are tax deductible. As a result, most businesses in software and equipment are only a few years old, which is why the value proposition is relatively low (where home mortgage is very important for a person who pays for a car loan). Finally, companies such as Apple, Amazon and Google have sole control over the market power. The benefits of being a monopoly are free money, not refunds, which is why they ignore taxes.

Andrew Smithers – a well-known city economist and part-time contributor to the Financial Times – they do not agree. In terms of debt and long-term financing, he quotes from the Bureau of Economic Analysis and the Fed, which shows that the longest period of corporate governance is 16 years, and the total debt is only 30% of companies employed. On its own, the share of profits has not gone up in recent years and is close to history, inconsistent with claims that the potential for growth is growing.

But Smithers’ denial is as clear-cut as the facts. Corporate taxes should be deducted from the company’s tax records in order to defer or defer the investment. If it can be used, there are three categories that can be hit: shareholders, creditors or partners. We know that shareholders who have come from stocks have remained unchanged over time regardless of corporate tax rates, so shareholders do not pay. We know that lenders do not pay less interest when taxes are higher, which is why borrowers do not pay. And Mr. Smithers argues that payments related to corporate exits have become more stable over time, meaning paying back regardless of corporate tax. That is why workers do not pay. The extra money is the only thing left for the taxes to go out.

Smithers thinks that the reason the money did not go up so much after the tax cut is because of government incentives. In the “bonus system”, executives would prefer to buy shares in order to increase the profit per share, as well as their share price, rather than having a longer period.

Let a better economist than me call a winner here. But my ability to work as a fundraiser makes me rely more on the Smithers approach. What we were looking at were companies that are increasing free travel, then profits after refunds and taxes, which can also be donated to shareholders. Companies know that this is what they are looking for, and they promise to give it to them. When taxes are high, something must be deducted to continue providing the seller with what he or she wants. Long-term investment is a natural place to look.

robert.armstrong@ft.com

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