Rerun: Ep6 "Can (and Should) Corporations Be Taxed?" with Larry Summers
Jun 26, 2024
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Former Treasury Secretary Larry Summers discusses the complexities of corporate income tax, arguing for its retention as an effective tool to ensure the wealthy pay their fair share. He suggests improvements but advises against abolishing it without a superior alternative. The podcast delves into the burden shift of corporate taxes onto shareholders and examines practical challenges in taxing corporations, including collection from foreign entities. The speakers debate the pros and cons of corporate taxation policies, considering issues like tax avoidance and moral considerations.
Taxing corporations is crucial for ensuring the wealthy contribute fairly.
Current corporate tax structure promotes debt financing over equity financing, causing economic distortions.
Deep dives
Corporate Income Tax and its Impact on Stakeholders
Corporations pay taxes based on profits, but ultimately individuals bear the brunt of these taxes. Equity holders often bear the corporate income tax burden as reduced profits lead to fewer dividends. However, the impact extends to various stakeholders, such as workers and customers, affecting wages and product prices in the market.
Challenges with Current Corporate Tax Implementation
The current implementation of corporate income taxes, which tax profits after interest deductions, incentivizes corporations to take on more debt to reduce tax obligations. This practice skews investment decisions towards debt financing rather than equity financing, leading to potential economic distortions.
Debate on Taxation and Equity Holders' Role
The podcast discusses the complexities of taxing corporations, with a focus on equity holders as the likely targets. There are debates on whether taxation should target individuals directly rather than corporations. The implications of corporate tax on democracy, lobbying practices, and efficient tax collection strategies are explored, highlighting the need for a balanced and effective tax policy.
This summer break, we'll be taking a pause from uploading new episodes. However, Jules and Jonathan have handpicked some favorite past episodes for new listeners to enjoy and subscribers to revisit!
In this episode, hosts Jules van Binsbergen and Jonathan Berk discuss the complexities of the corporate income tax with former Treasury Secretary Larry Summers, who argues for retaining the tax.
Summers explains why taxing corporations is one of the most effective tools the federal government has in making sure the wealthy pay their fair share. Might there be room for improvement? Yes, Summers says, but don’t abolish it. “Before we are critical of that tax, we better make awfully sure that we have a superior alternative.”