More one-sided economics

Tim W referred to this article recently, summarising thusly:

The whole paper is [interesting] actually as it’s an empirical study of who really does bear the burden [of corporation tax]... The (lefty) Nobel Laureate [Joe Stiglitz] says that it is at least possible that the corporate income tax diminishes the workers’ wages by more than the revenue raised. Something which, if true (and the references to that paper allow a lot more investigation), means that the corporate income tax is not progressive. It is actually regressive and thus we’d do well to abolish it really.

I left the following comment:

There’s an equal and opposite argument to say that as workers work for their net wages, that their entire income tax and National Insurance burden is borne by the employer.

So putting the two arguments (each of which only looks at half the equation) together, workers pay the shareholders’ corporation tax and VAT; and shareholders pay the workers’ income tax and National Insurance.

This is clearly nonsense.

As corporates are merely collections of indidivuals, and workers and customers are also all individuals, the commonsense and overriding rule must be that the entire tax burden (corporate or personal) is borne by individuals [whether as workers, shareholders or customers]; quite who suffers from the incidence of any particular specific tax is nigh impossible to say.

The only reasonable comparison you can make is by how much any particular tax reduces economic activity, or makes an activity (which would be viable in the absence of taxes) unviable.

There is a further theory, which looks at all sides of the equation, and concludes that in all probability, all taxes come out of rents (in the old-fashioned sense of the word, i.e. ground rent - I don't mean 'rents' as in quangos and bureaucrats siphoning off tax money for their own nefarious ends, these 'rents' clearly come out of taxes, natch).

According to the theory, while cutting taxes on income is in and of itself A Good Thing, if you do it, all that happens is that rents and property prices go up to soak up that extra income so our productive worker or entrepreneur doesn't actually end up much better off; he'd have made just as much profit by buying land and property before the tax cuts are anticipated at their old depressed prices and then cashing in on the higher future rents he can collect from workers and entrepreneurs who failed to 'get on the property ladder' in time. But that's a bit more advanced.