Saturday, April 17, 2010

Educators in Need of Public Finance Education

I found this passage on taxes in the National Education Association's Advocate of April 2010:
The share of taxes paid by corporations as a percentage of their profits has declined 50 percent over the last 20 years. Big business gets tax subsidies - without any accountability or regard for their impact on schools and on school-age children.
The NEA doesn't appear to be aware of what public finance educators have to say on the subject. Rosen and Gayer's Public Finance textbook for example explains that:
By drawing a sharp distinction between "corporations" and "people," the statement reflects a common fallacy - that businesses have an independent ability to bear a tax. True, the US legal system treats certain institutions such as corporations as if they were people. Although for many purposes this is a convenient fiction, it sometimes creates confusion. From an economist's point of view, people - stockholders, workers, landlords, consumers - bear taxes. A corporation cannot.
Since the NEA analysis doesn't distinguish between statutory and economic incidence of taxes, its policy proposals could easily have effects that are the opposite of their goals. If the NEA cannot get even such a simple, textbook level, introductory public finance concept right, what to think of their policy proposals on issues that are much more complex than this one?

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