Abolish corporate tax – it has been a worldwide failure

Collecting the economic rent of oil doesn't impact job numbers.

Corporate taxation is one of the main election issues in this campaign, and many writers, analysts and politicians are weighing in on the effect corporate taxes have on employment. Is Harper right or wrong? What is the correct level of corporate taxation, if any? Here's another piece on this subject, just as unhelpful as the others.

*** Abolish corporate tax – it has been a worldwide failure, Globe & Mail ***

What writers like Saunders don't appreciate is that there are two types of corporate revenue. One is revenue from productive enterprises, which is earned, and the other is unearned income (economic rent: revenue without a corresponding cost of production) resulting from monopoly ownership or monopoly access to assets like oil, potash, land, EM bandwidth...

Corporate taxes on the first type of revenue cause job losses, whereas taxes on economic rent revenue have no effect on jobs, since this type of tax can't be passed on to consummers.

Almost no one makes this distinction, which means the prevailing analysis is misleading to voters and to political parties seeking policy advice.

In the final paragraph of this G & M article, Doug Saunders ventures the solution is to tax only personal incomes -- clearly a job-killing option bar none!

To create jobs, real wealth (as opposed to bubble wealth), and to conserve the Earth, governments should tax only the use and abuse of nature (economic rent), with no taxation of business, consumption or people.

Below from Jeff Dean:

Why have corporate tax cuts have not lead to increased investment or jobs? Standard economic analysis can provide an answer: Much of corporate profits are economic rent, also known as monopoly profits. Taxing them or untaxing them has very little effect on the behaviour of corporations - on their decisions about whether to invest in productivity or hire new workers.

Mainstream (aka neoclassical) economists de-emphasize the concept of monopoly power and economic rent simply by assuming that markets tend towards perfect competition and in the long run, surplus profits get competed away. But what if this isn’t the case? What if companies are able to consistently earn economic rents through their sheer market power or through controlling the laws of the land? In short, through rent-seeking.

The economist.com says this about economic rent:
“Reducing rent does not change production decisions, so economic rent can be taxed without any adverse impact on the real economy, assuming that it really is rent.”