Economic Responses To The Elimination of The Corporate

Income Tax
Tristan Ryan
ECB 491
Professor Smith
The U.S. corporate income tax has been one of the most polarizing issues in
American politics over the last several decades. The consensus among the general public
is that owners of corporations, who are disproportionately rich, pay most of this tax and
its presence seeks to curb economic inequality. However, many public economists have
produced research that shows that the burden of the tax actually falls mostly on the
workers. This makes sense, because in todays world capital investment is very mobile
and can be moved from country to country with relative ease. Workers however, dont
have this luxury, and so when capital is moved abroad they are left behind with lower
labor demands and real wages. In this paper I intend to first examine the current structure
and tax incidence of the corporate income tax in the United States, and the problems the
currently exist. I then will model a domestic tax system where the corporate income tax is
eliminated, and instead taxes on shareholder income are raised. By modeling the
economic effects of such a policy and the domestic and political constraints it would face
I hope to provide a clear vision for what domestic tax reform could actually look like in
the United States.
In my opinion the tax system in the United States is currently flawed, and the
intentions of current tax policies are contradictory to their intentions. Over the last 30
years the U.S. has experienced significant economic growth, but at the same time real
wages of workers have remained stagnate and economic inequality has risen. The
corporate income tax, which was designed to impede inequality, has actually encouraged
it. Countries like Ireland, for example, have been lowering their corporate tax rates, and
in response corporations have increasingly been moving their operations abroad to avoid
paying the tax rate in the United States. This has left U.S. workers worse off, while
shareholders have received incredible profits. The problem of economic inequality is
something I care a lot about and I hope this paper can offer sensible solutions to reducing
it.

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