The FT issued an email last night saying:
Steven Mnuchin warns of market fall without tax cuts.
The US Treasury secretary warned Congress that US stock markets will shed a “significant amount” of their recent gains if lawmakers do not pass tax reform.
On the eve of a critical Senate vote aimed at pushing tax-cutting plans forward, Mr Mnuchin told Politico in a podcast that there was “no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform”. US equities would “go up higher” if the reform plans, which include a reduction in the corporate tax rate, were passed.
This is interesting for three reasons. First, it says quite explicitly that the proposed tax reforms are meant to cut the tax rates of big business. Second, it quite clearly states that the corporate tax rate changes share prices, in this case by driving them sharply upward. And third, as a result it states quite clearly that the US Treasury thinks the incidence of corporation tax is on shareholders, who are already capitalising the value of the gains they are to be given.
But let’s stop debate on who benefits: Mnuchin has stated what we all already knew, which is that this is for the undisputed benefit of the owners of capital on whom almost all the incidence of corporation tax indisputably falls. That debate is, I think, now closed.
At which point we’ve got to conclude that idiot is still idiot. Because everyone does agrees that in the first stage the incidence of the corporate ta is upon the holders of capital. But that’s the point, that’s the start of our analysis.
What happens when you tax something? You get less of it. So what happens when we tax investment, or saving? We get less of it. And as even Spudda will agree it is indeed investment over time which makes us all richer over time. So, the more we tax investment, the less there will be, the less rich we all are over time.
That shareholders bear the incidence of the corporate income tax in the first iteration is well known and is so well known that it’s the start of our analysis, not the end as the Senior Lecturer at Islington Technical College seems to think.