What is the problem with taxing corporations?
Like most people, economists would like to see more equity in the tax system. By equity, we mean that families with similar incomes should pay similar taxes, and that rich families should pay more in taxes than poor families. But when we tax corporations, we have no idea who is actually bearing the burden of the tax. The most important thing to realize is that people pay all taxes. If you impose a tax on General Motors, then GM may lower dividends to its stockholders, pay lower wages to its workers, or charge higher prices to its customers. It must do at least one of these, and will most likely do all three. Thus a tax on GM is actually paid by it stockholders, its employees and its customers. Will rich families pay more of this tax than poor families? Will families with similar incomes pay similar taxes? We have no idea.
