Should We Abolish The Corporate Income Tax?

In other words: Is zero percent even better than 28 percent?

No. Bad idea.

OK, sorry, that was a little blunt. After all, there are a lot of smart people who think President Barack Obama didn’t go far enough in his recent proposal to cut the corporate income tax rate to 28 percent from 35 percent. They would like to see it go all the way to zero. They say trying to tax corporations is a waste of time because they aren’t like people—ultimately they just pass along the cost of the tax to their shareholders, workers, and (to a small extent) customers.

The abolitionists aren’t all conservatives, either. The Atlantic‘s Megan McArdle has said the corporate income tax “may be the stupidest tax we have.” Even a liberal like blogger Matt Yglesias asked on Feb. 24 why the U.S. doesn’t just ditch the corporate income tax. (He decided that getting rid of it now and replacing the revenue in a fair way is politically unrealistic.)

But this just might be a case in which the policy elites of both left and right are wrong—and ordinary Americans, who kind of like the corporate income tax, are right. The strongest argument for the corporate income tax is one that is rarely heard anymore but was widely used at its inception in 1909—namely, that the tax is a brake on excessive corporate power.

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