Taxes interrelate to so other economic parameters:

Despite the pro-distributors theory that taxes do not disturb the economy, to the contrary, the effects are real and the increased taxes are not without their negative effects on the middle class.

Pounding on the issue of Fairness, and that a higher moral ground is declared, should be a warning more for mischievous politics and bad outcomes.


The time to assume that one can just construct a get-even policy like the Buffet Rule without it having quite negative impact on the well-being of the middle class.


How Taxing the Rich Harms the Middle Class   


President Obama’s budget speech on Monday expanded on the theme of economic “fairness,” like his State of the Union speech in January.  He lectured Americans that if critical steps are not taken, the rise of the middle class will be threatened and disparities between the rich and the rest will continue to grow.
A general theme was that taxing the rich would get us a long way towards reducing income inequality.  This may be why President Obama failed to extend the promise he made last year to fight for corporate tax reform.  Why lower tax rates on “rich” corporations if inequality is what really matters?
But when it comes to the corporate tax rate, all is not as it seems.  In a recent paper that I co-authored with Kevin Hassett, we explored the effect of high corporate taxes on worker wages.  
 The motivation for the paper came from the international tax literature (summarized by Roger Gordon and Jim Hines in a 2002 paper1) that suggested that mobile capital flows from high tax to low tax jurisdictions.  In other words, in any set of competing countries, investment flows are determined by relative rates of taxation.  
The current U.S. headline rate of corporate tax is 35 percent. The combined federal and state statutory rate of 39 percent is second only to Japan in the OECD.  With Japan set to lower its statutory rate later this year, the U.S. rate will soon be the highest in the OECD and one of the highest in the world.  What effect do these high rates have on worker wages?
High Tax rates hurt income and jobs in the middle class.
The Obama administration has often disputed the effect of the high corporate tax rate by suggesting that while the statutory rate is high, the effective taxes paid by corporations are minimal.  Hence, the high corporate tax rates are not a real issue.  In another article that I wrote last year, I pointed out the flaws in this argument.  Even if we look at effective tax rates (both average and marginal) facing U.S. corporations, these are among the highest in the OECD.  It is no wonder that firms try to avoid these rates by locating investments overseas or minimizing capital expansions in the United States.  
The low tax revenue that the United States generates from the corporate income tax is a reflection of the behavioral response of rational firms to high rates.


The combined federal and state statutory rate of 39 percent is second only to
(Note: now actually ahead of ) Japan in the OECD.