In the olden days, taxes were used to raise money, initially to help governments wage wars, then later to fund public services. Taxes still help governments wage war and run public services of course, but they are now much more than mere revenue-raisers. They are an instrument of economic policy, and a symbol of the “social contract” between rulers and the ruled. Thus, governments cut taxes in an attempt to stimulate the economy, and raise them to cool overheating markets. That taxes are typically used also to promote income distribution makes tax policy a political issue.
Now taxes are so politicized, it’s very hard to get rid of one — even when it could be argued that it serves little purpose. And South Korea’s debate about corporate tax highlights the role of corporate tax in particular. To most people it … Read More »