Issue in Focus
The most dreaded day of the year is, once again, behind us. Tax Day is more than a bureaucratic filing deadline, it is an ignominious monument to our dysfunctional tax code – everyone’s annual, visceral reminder that our tax code is too costly and too complex, and that complexity is itself a cost.
Some pay this cost in the form of filing fees to tax-software companies, like Turbo Tax, or accountants. For others, the cost of complexity is measured in time. The Taxpayer Advocate Service estimates that Americans spend more than 6.1 billion hours every year doing their taxes. Six billion hours – that’s more time than the entire federal workforce will spend working this year.
But there are other, even less visible, costs that our tax code imposes on the American people.
Take the corporate tax, for instance. Listening to our political debates, it’s easy to think that taxes on corporations are borne by, well, corporations. Many on the left argue that corporations aren’t paying their “fair share,” while others on the right respond by pointing out that American corporations already pay plenty of taxes under the current corporate rate of 35 percent, the highest in the developed world.
But this misses the point: corporations don’t pay taxes, people pay taxes. As any economist – or business owner – will tell you, when the government taxes a business, that burden translates into lower wages for the firm’s employees (everyone from the CEO to the janitor), higher prices for consumers, or reduced capital for investors (as the business has less money to boost its value by investing in innovation and expansion).
The exact distribution of the corporate-tax burden varies from one firm to the next, but the non-partisan Joint Committee on Taxation estimates that, on average, at least 25 percent of the corporate tax burden falls on workers. That means that reducing the corporate rate would have real, immediate benefits for American workers and families.
So if conservatives want to win a mandate for pro-family, pro-growth tax reform, we must make a concerted effort to explain to the country that lowering the corporate tax rate doesn’t give a tax break to corporations (there’s no such thing!) – it leads to increased wages and expanding job opportunities for American workers.