Let’s go to the basics. Corporations are not people. They don’t feel pain. They don’t feel pleasure. In court they are treated as a person, but everyone understands this is a “legal fiction.” If you tax a corporation you are taxing a relationship. The burden of the tax ultimately falls on real people. If you regulate a corporation the burden falls on real people. If you subsidize a corporation, the benefits are realized by real people. This isn’t really economics. It’s just logic.
Yet, courtesy of a pointer from Aaron Carroll, this is a defense of the employer mandate that appeared in a recent commentary in JAMA:
“The core value undergirding the shared responsibility principle is the realization that all of the major stakeholders of the health care system must contribute something if comprehensive health care reform is to be accomplished. Stated differently, making the ACA work requires a measure of responsibility from consumers, hospitals, physicians, insurance companies, drug makers, medical device makers, home health agencies, labor, and—because of section 1513—large employers.”
In fact there are only three real stakeholders cited in the paragraph above: consumers, workers (labor) and physicians. Every other entity is a pass through organization. If you tax insurance companies for example, the ultimate burden of the tax doesn’t fall on some entity called “insurance company.” It falls on consumers (in the form of higher premiums) or employees (in the form of lower wages and benefits) or on shareholders (in the form of lower returns).
For that reason, the quoted passage is not reasoned analysis. It is sloppy rhetoric — the kind of rhetoric that one expects to hear from politicians, especially politicians on the left. One reason such rhetoric survives, 200 years after Adam Smith, is that economists don’t always know where the burden falls – especially in the case of a tax on a specific industry, such as insurance companies or device manufacturers.
However, there are two things that are fairly well established: (1) payroll taxes fall on workers and are a dollar-for-dollar substitute for employee compensation and (2) employee benefits – whether mandated or not — are a dollar-for-dollar substitute for wages.