Want Jobs? Abolish Corporate Income Tax, Says New York Times Op-Ed

Boston
University economist Laurence Kotlikoff has a
terrific op-ed today in the New York Times cogently
arguing that abolishing the corporate income tax is the equivalent
of unleashing a jobs creation machine. Kotlikoff accurately notes
that capital goes to where it’s wanted and low taxes are a great
signal that it’s welcome. Kotlikoff and his colleagues have
developed a econometric model to see what effect various corporate
tax rates have on job creation and wages. Kotlikoff reports:

In the model, eliminating the United States’ corporate income
tax produces rapid and dramatic increases in American investment,
output and real wages, making the tax cut self-financing to a
significant extent. Somewhat smaller gains arise from
revenue-neutral corporate tax base broadening, specifically cutting
the corporate tax rate to 9 percent and eliminating all corporate
tax loopholes. Both policies generate welfare gains for all
generations in the United States, but particularly for young and
future workers. Moreover, all Americans can benefit, though by
less, if foreign countries also cut their corporate tax rates.

The size of the potential economic and welfare gains are
stunningly large and don’t reflect any extreme supply-side (a k a,
voodoo economics) assumptions. Fully eliminating the corporate
income tax and replacing any loss in revenues with somewhat higher
personal income tax rates leads to a huge short-run inflow of
capital, raising the United States’ capital stock (machines and
buildings) by 23 percent, output by 8 percent and the real wages of
unskilled and skilled workers by 12 percent. Lowering the corporate
rate tax to 9 percent while also closing loopholes is roughly
revenue neutral and also produces very rapid increases in capital
(by 17 percent), output (by 6 percent) and real wages (by 8
percent).

Before the 2012 election, even
President Obama said that he wanted to cut corporate income
taxes from 35 percent to 28 percent.