Professor of Economics at Boston University, Laurence Kolitkoff, developed a large-scale model simulating the American economy in interaction with other national economies. When the corporate income tax is dropped to 0% and lost revenue is replaced with somewhat higher personal income tax rates, investment skyrockets. Better yet, output and real wages also rise dramatically. Additionally, capital stock (machines and buildings) rises by 23%, while output rises by 8% and real wages of all workers increase by 12%.
Okay. That's great news, adding credence to the hypothesis that lowering the corporate income tax builds the economy. But, that will never pass the Democrat-controlled U.S. Senate. Try selling that to Harry Reid (D-NV).
So, Kolitkoff modeled lowering the tax to 9%, making it revenue-neutral. Capital stock increases by 17%, output by 6%, and real wages by 8%. Not quite as robust, but better than the current situation.
But, economic liberals will insist, "Lowering the corporate tax rate will hurt the average American worker!" After all, that's their real concern, isn't it?
The good news is that reforming the corporate tax reform could lead to a raise in real pay which, adjusted for inflation but not including fringe benefits, was 10% lower in 2013 than in 1966.
The simple fact is that the American economy doesn't work in isolation but in interaction with other national economies. Kolitkoff's more dynamic mode indicates that the corporate income tax doesn't only affect the rich, as economic liberals claim. Quite the opposite! The corporate income tax hurts workers by hindering economic expansion.
Of course, these facts won't matter much to economic liberals because they really don't understand the beauty of capitalism. They focus like a laser on its excesses, which can, should, and must be controlled due to the original sin of greed.
That said, The Motley Monk thinks economic liberals had better take note of Kolitkoff's study. After all, The Grey Lady did and that means something is in the air...and it isn't the smell of medical marijuana which is coming soon to the State of New York. Perhaps it's a "trial balloon," floating what will be one element of Hillary Clinton's economic platform in 2016?
Let the discussion begin...
To read Laurence J. Kotlikoff's article in the New York Times, click on the following link:
"Abolish the Corporate Income Tax."