On the way in to work today, I heard some Republican gasbag repeat two common misrepresentations about corporate taxes.

“The US has the highest marginal corporate-tax rates in the world.
So what? It’s not the marginal rates that matter; it’s the effective rates. A high marginal rate with a high threshold and many exemptions will result in less tax (and thus revenue) than a lower rate might. In fact, the Center for Budget and Policy Priorities has studied this matter, and they report that the US effective rate of 13.4% is lower than the OECD average of 16.1%. Somebody on the corporatist side of the fence had better come up with some credible new numbers before they repeat such misleading statements.
“Corporations don’t pay tax, they pass it on to consumers.”
They might pass some on to consumers, but not all. In a competitive market, raising prices might not be an option, so instead the cost gets passed on to employees, suppliers, etc. It might also result in corners being cut in product safety, environmental impact, and so on. Given that all of these other affected parties might in fact be overseas, the idea that corporate tax in the US gets passed straight on to consumers in the US becomes pretty questionable. Of course, both the original claim and my counterclaim are just theories. Where are the numbers showing the actual observable effect of past changes in corporate tax rates on prices (and wages or employment which we also shouldn’t ignore)? I can’t find any easily, suggesting that no clear measurable effect has been documented – i.e. that the compensating mechanisms I mention negate practically all of the assumed effect on consumer prices. Those making the “passed on” claim should prove it, and they never even seem to try.

This whole idea that we should coddle corporations because markets are good is based on two basic errors. The first is conflating corporations with markets. Sorry, but people are part of the market too – people working, people consuming, people running sole proprietorships and partnerships and other businesses where they still pay personal rather than corporate tax. Taxing corporations differently than people is simply giving one class of market participant an advantage over another. One could argue that no such distinction should be made, or that the difference should go the other way – i.e. that capital as represented by corporations should be taxed more than labor as represented by flesh-and-blood people – but I’ve yet to see a reasonable argument for taxing corporations less. The other mistake is a little harder to explain, but even more important. One of the most excellent books I’ve read recently is David Bollier’s Silent Theft, and one of the most powerful statements in it is this (from memory):

The market should be inscribed within the commons, not the other way around.

What he’s saying is that resources – he talks elsewhere in the book mostly about things like land and other natural resources, or “intellectual property” – should be assumed to be shared unless they are explicitly privatized, monetized, etc. What we tend to do is the exact opposite; everything is assumed to be private unless explicitly placed in the public domain. As Bollier explains far better than I could, that model doesn’t really work even a majority of the time. Markets are powerful tools, and perhaps a majority of property should be handled via markets, but that majority should be explicit and not just the result of a mistaken “private is good” assumption.

Bollier’s sentiment is very closely related to another that I’ve heard expressed, and with which I completely agree: markets should serve people, not the other way around. Somehow we’ve become a society where people feel that their duty is to be good workers and good consumers so that “the market” may thrive. That’s garbage. Again, markets are powerful tools, but they are only a means to an end and that end is human prosperity. When markets fail (we should all know by now that they do for a variety of predictable reasons), or when they “succeed” in a way that has a net negative effect on the life experiences of real flesh-and-blood people, then they are not the right means to the right end and should be eschewed in favor of more appropriate tools. Sometimes that tool is government, sometimes it’s individuals acting in a context that is neither governmental nor corporate, sometimes it’s even nature (or perhaps even God for those inclined that way). In any case, these other actors must sometimes be allowed to take a primary role instead of being subordinated to a market that effectively (and too often legally) puts corporations first. Like governments, markets should be of the people, by the people, for the people. We have a long way to go before that’s the case.