It's Simple Economics, Stupid

If American workers understood that corporate taxes are a tax on the common man -- on them! -- wouldn't they clamor for a cut in corporate taxes?

But the little most Americans know about corporate taxes is the blather from U.S. politicians demagogically demanding more taxes on the rich and the big corporations, making those bloated bond holders pay through the nose -- especially those greedy oil companies.

U.S. Senator John McCain, the Republican who may be president of the United States within a matter of months, has had the singular courage to advocate a cut in U.S. corporate taxes to 25% from the current 40%, now one of the highest in the world.

American corporate taxes start at 35% and when you add state and local taxes, the overall rate is nearly 40%. In 2007, corporate taxes brought in $370 billion, representing 14% of federal revenue. Cutting the rate to 25% could cost the Treasury about $100 billion a year. Senator McCain wants to fill that hole in the budget by restraining spending.

Hurting the Average Guy

McCain makes the point that a corporate rate cut to 25% would help a lot of Americans, even though they might not know it. As pointed out in a New York Times article (June 1st) by N. Gregory Mankiw, a professor of economics at Harvard and former Bush advisor, "...the most basic lesson about corporate taxes is this: a corporation is not really taxpayer at all. It is more like a tax collector."

The professor points out that "the ultimate taxpayers of the corporate tax are those who have a stake in the companies on which that tax is levied. If you own corporate stock, if you work for a corporation or if you buy goods and services from a corporation, you pay part of the corporate income tax." That description includes just about every living person in America. And he adds: "The high corporate tax leads to lower returns on capital, lower wages or higher prices — or a combination of all three."

In other words, the worst of all worlds for the consumer.

Rates Revolution

Britain and the United States launched the corporate tax cut revolution in the mid-1980s. Since then, every major nation has cut its corporate rate. In the European Union, the average corporate tax rate has fallen by 24% since 1996. Further cuts are in the pipeline in Britain, Germany, and other countries. Canada has announced a cut to its federal corporate rate from 22% to 15%. The United States is far behind with that combined federal/state rate of about 40%.

Corporate tax reform was a key part of President Reagan's tax cutting blitz. Following the Tax Reform Act of 1986, the base of the corporate income tax was broadened but the top rate was slashed by 12 percentage points, from 46% to 34%, the biggest cut since the tax was introduced in 1909. Thus began a trend of reducing the tax rate on companies that has spread across the globe.

Many other nations have cut corporate taxes, from Ireland (with a super low rate of 13%) to even Communist controlled China, (which recently cut their rate to 25%), and the result has been increased jobs and prosperity as business has expanded.

To see an excellent video explaining why corporate taxes should be cut, click here: http://www.freedomandprosperity.org/videos/corporatetax/corporatetax.shtml