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TAXING BUSINESSES: WRONG, BUT HANDY?

May 31, 2005

The TaxProf today pulls a comprehensive writeup on different ways businesses are taxed from today's State Tax Notes from behind the Tax Analysts subscriber firewall. The author is Richard M. Bird, a professor at the University of Toronto. The article starts this way:

Cynics have sometimes said that economists cannot agree about anything. An important issue, on which many economists do agree, however, is that, although it is obviously convenient to collect revenues through taxing businesses, there is little justification for taxing them. In the end, all taxes affect people in economic terms. There is little to gain, and potentially much to lose, by confusing the issue and pretending to tax companies, and not people. Of course, it is not always clear exactly which people -- owners, workers, or consumers -- end up paying business taxes, but somebody definitely will pay. Hiding who really pays the bills is not a good way to ensure accountable public sector decisions.

The article covers the arguments for taxing businesses anyway (efficiency and fairness), and surveys business taxes around the world.

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