The Corporate Goose

As our budget impasse meanders along, there is renewed energy behind the notion that the problem in Wisconsin is not that we tax too much, but that corporations are taxed too little. Paul Soglin is on board with that and cites to a Wisconsin's Future study that says that the percentage that business pays of all state taxes and local property taxes is a five percentage points below the national norm. Jack that up (why shouldn't we lead the pack on all sorts of taxes?) and there would be that much more love for all manner of governmenty goodness.

Maybe, but isn't the problem here the difficulty in double taxation ? If I tax a rich man and forget about the disincentives to income generating activity, it may well be that he'll just buy a smaller yacht, hoard less gold, cop a few less carbon credits, etc. In other words, he may cut his overconsumption and stop building his already obscene net worth. That may suck if you work for a yacht company or are looking to borrow money for a new business, but, you know, cry me a river.

But what happens when I tax that mysterious vehicle of modern evil - the corporation. It can't reduce its consumption because it can't consume. (Yeah, I know about business perks but that's not enough to be material here.) It can hold cash but this just deprives the shareholder.

So it must either short employees or shareholders or pass the cost on to customers. There will be a variety of effects of that, but, to the extent that employees and shareholders take the hit, won't one be to reduce individual income and, as a result, individual taxes? Although I can imagine that some kinds of taxes - those that closely correspond to the services provided to an entity - might be imposed at the corporate level, can't you make an argument that the best place to tax income or wealth is where it comes to rest?