It is just as meaningless to say that "employees don't pay taxes, corporations do".
No, it isn't. Altering marginal tax rates as significant effects on the composition of the economy. Increase or decreasing corporate tax rates effects consumer prices, while increase or decreasing payroll taxes effects employment rates.
The economy is more complicated than "dollars in/dollars out". When you alter the potentials of any given set of actors, you alter the behavior of that set of actors; usually, the downstream effects tend to be diffuse with minimal impact on macroeconomic behavior. As such, it makes a lot more sense to look at the economy as a series of pools of wealth. Transfers of wealth between actors should be taxed, but at minimal levels in order to minimally disrupt the market. Higher levels are appropriate *only* in situations where the goal is to manipulate behavior, not generate revenue (i.e. consumption taxes on road use are designed to fight congestion, supposedly, rather than to generate revenue). Furthermore, the goal of the tax system should be to subject each transfer of wealth to one tax; not multiple. Finally, non-human entities should be exempt from taxation-- unless the revenue generated never ends up in the hand of a human. This means that the only income that should be taxed is that which is claimed as income by individuals, or that which is subordinated to a financial instrument operated on behalf an individual (or individuals) but is not designed to pay out direct dividends (like trusts, or other long term group holding vehicles).
The current system, with vast numbers of loopholes and high marginal rates simply isn't workable. Most of the reasons that the current system pisses off both market capitalists and progressive liberals is that we have high levels of taxation and regulation, while we exempt the larger corporations and richest individuals from most of this system. Our current system is *the worst* of both worlds; wealth flows to the rich, and the middle class/poor are kept tied up in a system of regulation and taxation.
The fundamental truth is that overcomplicated systems are designed to help the "biggest" players. Did you ever get into a game, as a kid, that involved the other kids changing the rules constantly? "Oh, on your third turn, if you roll a 4, you don't actually get to move 4; you pay the other players X, and move backwards 2. You didn't know that? Your problem".
Well, that's the game the U.S. industrial fascist/corporatist system uses. And the rules change as different political parties sweep into power, and different big corporations end up as winners and losers. Today, the financial sector and big auto/big labor are the winners. Yesterday, it was petrochemicals and military contractors. Given the current political situation, I'm guess that health insurers and the agricultural sector are the next big winners.
Aren't you all tired of this? Don't you see that one of the benefits of a simpler, and flatter (but not necessarily totally flat) tax code is that these entities won't be able to game the system as much?
It exhausts me that people on board like Slashdot fight over whether the guy making $270,000 a year should pay on a higher marginal rate than the guy making $50,000, but neither really cares about the business shoveling money out of the Treasury at rate of $10 million a day (I'm looking at you, AIG) , because the "big guys always win". Everyone between the poor and the mid-upper class can pay less for government services if the top 10%'s playing field is leveled. Get a flat 10-15% out of everyone, and there will be plenty of government income. A $13 trillion economy should be able to function with a $1.6 trillion federal government and an additional $1 trillion in state/local governments. And that leaves you plenty of money to spare to build a "last-resort" welfare network to insure that the streets aren't full of polio victims or starving children.
You'll never fix society by implementing more Bush-like tax cuts, or by raising the marginal tax rates/brackets. Scrap the IRS code, rethink the revenue structure, and start over. There is far, far, far too much kruft in the current system to fix.