Thoughts on Corporate Taxation

The most frequent argument against American states raising corporate taxes that I have seen is that this will cause corporations to move their headquarters out of the state in question, transferring their jobs and patronage to another state in the process.

But this argument has a fundamental flaw. Besides having the general defeatist tone of a state that is enslaved to corporations for its well-being, it underestimates the power of the state itself to regulate commerce.

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Tenth Amendment of the United States Constitution

In context, since the ability to regulate intrastate business activity is not barred from the states by the Constitution, the Tenth Amendment allows states to levy taxes on any and all entities that do business in a state, whether they reside there or not. It is perfectly legal for the government of Wisconsin to tax an Illinois citizen for activity in Wisconsin; why should an Illinois corporation be any different?

Besides, the state government could lower taxes on businesses that choose to host their headquarters in the state itself, creating a positive incentive to create jobs there. #

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