>from another post of mine
Now here's the thing on corporate income tax, you'll find very very few economists who think corporate income tax is a good idea. Currently the rate is 39%, but the large, profitable U.S. corporations only pay an average effective federal tax rate of 12%. So smaller businesses in the US are disadvantaged. Regardless all the academic literature on corporate income tax points to it being an inefficient tax highly distortionary tax.
http://www.nber.org/papers/w9141
http://faculty.chicagobooth.edu/austan.goolsbee/research/taxcorp.pdf
It's complexity causes a broken window issue; firms spending money on accounting/finance teams, IE wast. It moves capital into non-productive sectors of the economy to avoid taxes, and moves capital out of country.
In addition, multiple studies show, that due to globalization corporate tax incidence primarily lands on labor. Now would removing corporate income tax drastically increase wages, probably not, but over time you'll see eventual rises. But even if the money is paid out in dividends it's still taxed as capital gains.
http://www.sciencedirect.com/science/article/pii/S0014292112000451
In a basic partial-equilibrium model, a company’s capital stock is assumed to be fixed in the short run. Imposing or raising a tax on the profits will not change the company’s decisions on prices and production, because to maximize after-tax profits the company would take the same steps as to maximize pretax profits.
But this goes right out the window when dealing with an open economy in a long term model.
https://www.amazon.com/Corporate-Tax-Reform-Issues-Congress-ebook/dp/B006T9XYU4
(free pdf below, be warned it downloads to your device) https://www.cfr.org/content/publications/attachments/corporate_tax_reform.pdf
When looking at an open economy you have a few things that cause labor to bear more of the tax incidence of the corporate income tax.
1: the ease of which investable funds can be shifted to other countries.
2: ease in the taxing country to substitute imported goods and services for all domestically produced goods and services
3: The ease in the taxing country's taxed and untaxed sectors to substitute labor for capital, in domestic production of goods and services.
4: capital intensity of production in taxed and untaxed sectors of the taxing economy
5: the size of the economy to the rest of the worlds economy.
So in a closed economy, sure the owners of capital bear the cost of the corporate income tax, but in a world being pushed to into globalization and free trade, then capital can move to untaxed or lower taxed countries, and so labor bears a higher cost. Now in every model that assumes completely open markets, then labor bears the entire cost of the corporate income tax.
Now regardless of who bears the cost you still have huge levels of economic loss due to the movement of capital.