This points up minority status of the consumer burden outcome, as opposed to the burden being shared by labor and capital. I'll retreat to the position that there is a dearth of research showing the tax is borne by consumers.
A tax on corporate world-wide income (highly imperfect at present) would reduce the advantage of moving capital offshore. To escape, capital would have to be transferred to non-U.S. corporations.
If you think the tax makes capital run away, leaving the burden on workers, I think you have to ask why there is any capital here to begin with, in light of lower taxation and much lower costs of labor elsewhere. If taxes loom too small in business costs of operating in alternative locations, then as far as taxes are concerned, capital is immobile and bears the CIT.
I actually had the chance to ask Harberger about his 1995 result. I pointed out that there was little evidence of tax differentials affecting capital movement within the U.S. across regions. I'm afraid I can't recapitulate his answer because it was opaque to me.
If you want to get picky about tax effects, the proper model is the cost of capital, which entails factors like the rate of interest, depreciation, and the rate(s) of tax on different types of capital income. The rate differentials get seriously diluted in this context (especially within the U.S. between states).
I've written about junking the CIT myself, but I'd say this is something undertaken with great reluctance, if at all.
mbs
Insofar as there is capital flight already occasioned by the CIT
-----Original Message----- From: lbo-talk-bounces at lbo-talk.org [mailto:lbo-talk-bounces at lbo-talk.org] On Behalf Of dks Sent: Thursday, April 01, 2004 5:58 PM To: lbo-talk at lbo-talk.org Subject: [lbo-talk] Kerry's Tax Cut Makes Me Wanna Ralph
I'm interested in seeing more of the empirical work that Max refers to about the incidence of corporate income taxes. I'm not convinced there's a clear consensus on the empirical side of things.