Corporate tax hikes are often advertised to generate revenue for helpful government services.
Unfortunately, higher corporate taxes tend to hurt the very people they are supposed to help as they lead to lower wages and fewer opportunities for many workers.
Consider this hypothetical example:
Imagine a company considering moving some of its workforce from desktop computers to laptops in the early 2000s.
Your investment pays off in several ways:
Field technicians who used pen and paper and then had to re-enter data and reports on the office desktops were instantly more productive.
Other workers were given the freedom to work from home. This increased performance and increased job satisfaction.
The company could now hire remote workers in other cities and attract more talent.
All of these gains resulted in greater efficiencies, product breakthroughs, and increased revenue – which in turn enabled the company to raise wages through pay rises, bonuses, and promotions, and to create new jobs.
Now imagine if corporate tax goes up and the investment is no longer profitable for the company.
All productivity and innovation gains will then not be realized and workers will lose these higher wages and opportunities.
The same story would play out differently for all types of businesses and workers across the economy.
This is the problem with corporate tax hikes – workers can benefit from the government services they provide, but they also suffer real economic damage.
Studies show that higher corporate taxes lower wages for young workers, the low-skilled and women the most.
Many in these groups already face significant barriers to work, such as limited transport or high childcare costs, which, combined with lower wages, can make employment unaffordable.
Many economists agree that corporate tax is one of the most harmful and inefficient ways of funding our priorities.
Taxes are necessary to pay for government services. But they shouldn’t come at the expense of the people these services are designed to help.