Yesterday, Republican legislators gutted the proposal by Gov. Huntsman that the Utah corporate income tax be phased out by 2012. Apparently, legislators were shaken by a poll conducted by Salt Lake media that showed that 66% of respondants oppose the plan. Of course, that is the very same media that is quick to point out that repealing the corporate income tax would "cost public schools at least $200 million by 2012".
Economists might well debate how accurate that assessment really is. One economic truth, however, is that corporations don't really pay taxes. They simply build it into the cost of goods and services, and pass it on to the consumer. This is the real reason that corporate income taxes are politically popular: Politicians can hide the fact that they are passing taxes on to the individual, and are able to mask the total tax burden paid by families.
Unfortunately, a political move to repeal the corporate income tax takes will require some forward-thinking, and some courage. We hope that these are characteristics of our elected representatives, but the reality is that a politicians primary job - some would say it is their only job - is to get re-elected. So they run from positions not supported by polls. The real problem is that Joe Public is probably less qualified to make intelligent decisions regarding tax policy in our country than ever before. When you think about it, any time the idea of reducing or eliminating a tax - any tax - is discussed, the public is bombarded with dire forecasts and doomsday predictions by special interest groups. We have become conditioned to believe that we actually need to pay half of our income in various taxes.
In a society where tax policy is regularly used as form of penalty or incentive to advance somebody's theory of social engineering, the government frequently plays the role of Robin Hood (particularly at the federal level). Someone once said that the government that robs Peter to pay Paul will always have the support of Paul. We saw that in Utah's legislature yesterday.