Briefly put, higher corporate taxes reduce the after-tax rate of return on investment, and this in turn reduces investment, employment and income below what they might otherwise have been.
Of course, we might be prepared to pay this price if increasing corporate taxes reduced inequality, and there are apparently people who believe that this is in fact the case. As far as I can tell, this argument goes along the following lines:
- Corporate taxes are applied on profits.
- Profits go to capitalists.
- Corporate taxes are paid by capitalists
- Capitalist = rich person, therefore
- Corporate taxes are paid by rich people
The first two statements are of course true, but everything else is wrong: