Corporate Tax Breaks: Dead Wrong

Leo Toribio

Leo Toribio Pittsburgh, Pa.

An article by Laurence Kotlikoff in the NYT suggests that income taxes for corporations should be abolished and that would produce more jobs.

The author claims to have developed a computer model that demonstrates his claim. But this wouldn't be the first time when a computer model was dead wrong! In fact, as more than one commenter noted, as corporate tax rates declined, so did employment. That clearly points to a problem with the model. Was Professor Kotlikoff's model created by the same people who created

Corporate income taxes are paid only on profits, not on every dollar of revenue. One way for a corporation to cut its income taxes would be to hire more workers, which would reduce its profits, ergo, reduce its income taxes.

The article also states that eliminating corporate income taxes would prevent jobs from being moved overseas, that if corporate income tax was eliminated more jobs would be created and the difference in federal revenue would be made up in personal income taxes paid. But the truth is, jobs are moved overseas to take advantage of cheaper labor and to increase profits, not to avoid taxes.

To make Prof. Kotlikoff's suggestion work, a tariff would have to be imposed on imported goods and that tariff would have to be high enough to make it more profitable to have those goods made by American workers. But that would contribute to inflation, not to domestic job growth. It would also create another "tariff war" around the world.

A more constructive approach is being taken by the OECD to eliminate countries known as "tax havens."

Professor Kotlikoff missed his true calling. He should have been a butcher. I don't know what he eats, but it appears that no matter what goes into his mouth, what comes out is baloney!


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