Corporate Tax Increases Will Equal Higher Unemployment

Raising taxes on corporate America is right on schedule for the Obama administration. Mr. Obama believes by forcing corporations to give more of their rewards smart decisions in the market place, profits, to the government they will be contributing to the general welfare of the population as a whole.

Of course this isn't how the market place works. When the corporation has to pay more and more taxes they just make up the difference by cutting other expenses like wages and laying off less productive workers. The result is higher unemployment and a smaller tax base and therefore less taxes to the government.

Interesting how this works. But then more unemployment is just what Mr. Obama wants in that it forces the people to become more dependent on government subsistence and there by forcing them to vote to make sure the hand outs continue.

With the number of individuals accepting food stamps and other subsistence payments approaching 50%, Mr. Obama is well on his way to having a majority of the population voting for more of the same.

How Taxing the Rich Harms the Middle Class
Source: Aparna Mathurm, "How Taxing the Rich Harms the Middle Class," The American, February 15, 2012.

President Obama has continued a campaign for economic fairness throughout his last several major speaking engagements, including the State of the Union and his budget speech. To this end, the Obama administration seems content to force American corporations to continue to abide by one of the most abusive corporate tax rates in the world, as this is a tax on the "rich," says Aparna Mathurm, a resident scholar at the American Enterprise Institute.

Yet, the corporate income tax has just the opposite effect. Its burdensome effects are passed in full onto American workers, who pay the true price for the tax. With its 35 percent corporate tax rate, the United States is second only to Japan in the tax burden it places on domestic companies (and Japan plans to reduce its rate later this year). When combined with various corporation taxes at the state level, this tax rate rises to 39 percent.

The Obama administration has responded that it is the effective rate, not the statutory, that matters in assessing the burden on American businesses, but it bears mention that even the effective rate is one of the highest in the Organization for Economic Cooperation and Development.

With such a relatively high corporate tax rate, domestic businesses struggle to attract investment and are implicitly encouraged to move activities offshore. Specifically, studies show that in a world of globally mobile capital, investment will quickly flow to areas that have lower rates of taxation.

Therefore, the high corporate tax rate reduces American business' ability to compete with international market participants, as they fail to attract adequate capital investment. This reduces the productivity of their workers, and thereby inherently lowers their wages -- a conclusion validated by researchers from Harvard Business School, the Tax Foundation, and the Federal Reserve Bank of Kansas City, among others.