Optimal rate of tax on capital is zero

From https://www.aeaweb.org/articles?id=10.1257/jep.23.4.147

Nice explanation

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The new corporate tax landscape

Randall Kroszner’s advice for the next president

The effects of cutting the Australian company tax by one percentage point

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Source: The incidence of company tax in Australia | The Treasury.

@PikettyLeMonde pension fund socialism has finished taking over #capitalism #Piketty

Peter Drucker first pointed out in the 70s that the retirement savings of ordinary workers will end up opening the majority of public listed companies. That day has come much to the disappointment of the Leftover Left ranging from Thomas Piketty to Max Rashbrooke.image 

Source: CONVERSABLE ECONOMIST: US Corporate Stock: The Transition in Who Owns It.

Any call for higher taxes on investment incomes and capital and even tax havens is an attack on the retirement savings of ordinary workers.

Why is GST but not company tax incidence so easy to understand

image The tax incidence of sales taxes is understood by everybody but who pays company tax is stubbornly misunderstood. The seller is sending the tax cheque to the taxman does not fool anyone regarding who ultimately pays sales taxes.

Everyone expects that sales tax increases such as of the GST or VAT will be passed on to buyers but sometimes a little bit is absorbed in terms of lower profits by sellers if it is more than the market can bear.

When it comes to company taxes, this intuitive understanding of the economics of the incidence of taxes completely disappears. There is a strong belief that only investors pay the company tax in the form of dividends.

The notion that investors may reduce their investment and therefore the amount of capital with which workers can work is stoutly denied as is the implications for lower than otherwise wages because of this.

The possibility that the entire company tax may show up as lower wages when capital is internationally mobile is just not even contemplated. This is despite foreign direct investment being welcomed on the grounds that more capital means higher wages for local workers.

Likewise, when a factory is re-located offshore, it is understood that that will harm wages. That understanding does not carry through to company tax incidence when the factory relocates offshore because of low company taxes rather than import competition.

@garethmorgannz gives optimal tax theory a pass once again @JordNZ

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Source: Mankiw, N. Gregory, Matthew Weinzierl and Danny Yagan. 2009. "Optimal Taxation in Theory and Practice." Journal of Economic Perspectives, 23(4):147-74.

The Morgan Foundation gave optimal tax theory a pass in yesterday’s publication about taxes on land and capital. Gareth Morgan is keen on a comprehensive capital tax.

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Source: Taxing Wealth & Property – What Works? A Morgan Foundation Report.

This failure to refer to optimal tax theory is despite the Foundation’s strong commitment to evidence-based policy. Any discussion of tax policy that is evidence-based must refer optimal tax theory.

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Source:  Morgan Foundation, Public Policy Education.

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No two tax cuts impact the economy in the same way.

Tax mix in the USA as a percentage of GDP since 1965

The only major change in the US tax mix in the last 50 years has been greater reliance on social security contributions.

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Source: OECD Stat.

The share going to income taxes bobbing up and down quite a lot in the last 30 years much of that to do with the business cycle. In the 1990s, the share of taxes from personal income increased during boom times. In the Great Recession, the tax share to income tax rose with the declining economy as did that on corporate profits.

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