Does cutting corporate taxes actually help workers and lower prices?

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1

I keep hearing people say cutting corporate taxes is supposed to boost the economy by creating jobs, lowering prices, and raising wages. But when I look around, I don’t see any real evidence of this happening. Instead, it feels like these tax cuts just line the pockets of executives and shareholders.

From what I’ve seen, in places like America and Canada, corporate tax cuts haven’t really led to more investment or job creation. Instead, we see companies using the extra money for stock buybacks, bonuses, or even hiding it in tax havens.

Why would this money ever trickle down to workers? If they can avoid it, why wouldn’t companies just keep the profits for themselves instead of investing in better wages or lowering prices?

What do you think? Is there any solid proof that cutting corporate taxes actually helps everyday people?

2

There’s actually research that supports both sides of this argument. Here are a few studies:

Prices: Corporate Taxes and Retail Prices | NBER

Employment and Wages: To Cut or Not to Cut? On the Impact of Corporate Taxes on Employment and Income | NBER

Innovation: Taxation and Innovation in the 20th Century | NBER

Incidence overall: Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms | NBER

This is still an ongoing debate in economics, and the exact impact of corporate taxes is not fully agreed upon.

3

@Paz
I did some digging and found quite a bit of consensus, especially around wages:

4

@Cassian
It makes sense when you think about it. Corporate taxes ultimately affect both labor and capital, and it’s hard to split the exact burden between them.

5

@Cassian
If the evidence is there, why is cutting corporate taxes still so unpopular? Is it just a PR problem?

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Ember said:
@Cassian
If the evidence is there, why is cutting corporate taxes still so unpopular? Is it just a PR problem?

People generally misunderstand taxes. I’d actually prefer no corporate taxes at all. Let businesses run efficiently, and then use progressive taxes on personal income to address inequality. But that’s hard to explain to most voters.

7

@Macon
Interesting point. But why shouldn’t we tax investment income if we’re okay taxing work? Both are forms of income, right?

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Ember said:
@Macon
Interesting point. But why shouldn’t we tax investment income if we’re okay taxing work? Both are forms of income, right?

Check out these threads for more on that:

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Ember said:
@Cassian
If the evidence is there, why is cutting corporate taxes still so unpopular? Is it just a PR problem?

Honestly, most voters and even politicians have little understanding of this topic. It’s just easier to appeal to emotion than data.

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@Cassian
If lower taxes mean higher wages, why have real wages been flat since the 70s while corporate profits keep climbing?

11

Sage said:
@Cassian
If lower taxes mean higher wages, why have real wages been flat since the 70s while corporate profits keep climbing?

One major factor is the rising cost of employee health insurance. It’s eaten into potential wage growth over the decades.

12

Your sources rely heavily on correlation rather than causation. For example, if a country cuts corporate taxes during a recession, you might see weak growth afterward, but that doesn’t mean the tax cut caused the weak growth. Correlation isn’t always causation.

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@Darwin
But we’ve been cutting corporate taxes for years, and wages haven’t gone up. Back when taxes were higher, people could afford homes, cars, and families. Now it’s hard just to pay rent. Where’s the benefit for regular workers?

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@Vance
You’re pointing out trends, but trends alone don’t prove anything. There could be other factors at play. It’s like blaming air conditioning for heat because it’s always on when it’s hot outside—it’s not the cause.

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This discussion has a lot of great points. If you’re interested, here’s a podcast that talks about how economists from different viewpoints look at this issue: Episode 387: The No-Brainer Economic Platform : Planet Money : NPR