Confused by the fight between Greg Mankiw and Brad DeLong over whether or not we should cut the corporate tax rate? Well, this is likely to confuse you even more: Steve Waldman has a great evisceration of Mankiw’s arguments – and then proceeds to say that cutting the corporate tax rate is a great idea, and such a tax cut should be paid for "by increasing the highest marginal tax rate, or better yet, by creating a new top tax bracket".
I don’t get it. I have one big reason for not supporting a decrease in the corporate tax rate, which is that the bigger the gap between the corporate tax rate and the top marginal income tax rate, the more top-earning individuals will figure out a way of turning themselves into corporations. In other words, a cut in the corporate tax rate is a cut in the income tax rate, even if you hike income taxes at the same time. Do we really want a world where corporations don’t have highly-paid employees, but rather outsource key managerial functions to sole proprietorships? If not, then I’d recommend keeping corporate taxes and income taxes at roughly the same level.