Corporation Tax and the Harberger General Equilibrium Model

Owner and company are independent legal entities, because the company can be defined as the first limited liability, its owner, shareholder and not using its personal assets to pay the failed company's debt . Second, the company entrusts management to decide how to operate the company, apart from management by management. Finally, the owner of the company can easily transfer ownership interests through interactions in financial markets.

Prior to the development of general equilibrium analysis, Professor Harberg was a pioneer in the 1960's, part of the corporate income taxes are thought to be borne by the labor force, in part by consumers, and in part by shareholders (or capital) I will. Professor Harberger pointed out that this led to the recognition that the worst scenario is that capital bears all taxes. Conversely, the general equilibrium analysis concludes that capital can bear less, equal, or more burden than the total burden of corporate income tax.

Harberger reviewed a general equilibrium model in recent papers and explains how the four-sector open economic model (both enterprises and non-companies, both tradable and non-tradable sectors) produces different results from the closed sector economic model of two sectors showed that. Harborger, 2007). Because of the open economic assumption, changes in the domestic corporate tax rate do not affect the return on capital (capital can be acquired internationally), which does not affect the international price of tradable products and services Hmm. Therefore, tax burden can only be reflected in lowering wages and prices of non-trade goods and services (Harberger, 2007). Harburg's modified model and its basic assumptions are still affected by excessive simplification of criticism. 7-8). Therefore, he concluded that only simplified models are used to talk about income tax events in common terms.

In the context of the corporate tax in the United States, the American economist Arnold Havergar said that in order to test the long-term impact of corporate tax, assuming closed economies with fixed capital and labor supply, as well as enterprises and nonprofit organizations I designed a model. Complete liquidity of capital between companies. Department (Harburg, 1964 and 1974). Harberger model predicts that declining capital return on the corporate sector pushes capital to the non-enterprise sector, thereby increasing labor demand (alternative capital) in the corporate sector. As a result, the labor force is transferred from the non-corporate sector to the corporate sector. As corporate taxes raise production costs, the price of goods produced by the corporate sector rises and leads to a shrinking demand.