Taxing The Poor To Lower Corporate Taxes

The corporate income tax is not my favorite tax, and proposals have been circulating for years to replace it with a straightforward tax on rich people (i.e., tax executives and owners rather than “corporations”) but Phil Oliff at CBPP notes that a number of states are doing the reverse and raising taxes on the poor in order to create new tax breaks for businesses:

Yet another state has proposed raising taxes on low-income residents to pay for new corporate tax breaks. Leading lawmakers in Missouri want to eliminate a property tax credit for low- and moderate-income seniors and people with disabilities in order to help finance new tax credits for businesses.

Sadly, swaps like this are increasingly common; both Michigan and Wisconsin have cut low-income programs this year to pay for business tax breaks.

When I used to play SimCity, I would always keep the tax rate for Commercial and Industrial properties at 0% and rely on residential taxes for all my revenue needs. Low taxes on businesses spurred business activity in the city, and the jobs would draw residents in. Given an extremely crude model in which commuting was impossible, this made perfect sense as a policy mix. The “logic” here as applied to the state level seems roughly similar. The most important thing is to bribe firms to locate in Missouri. In addition to being inhumane, this is a pretty sorry model of how a real world regional economy works. Create a place that’s good to live — affordable housing on safe streets with decent schools and a plausible commute to a central business district — and people will want to live there. And where there are people, there are jobs. People need supermarkets and schools and hospitals and car repair shops and banks and ministers and gas stations and lawyers and even local news bloggers.