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The Spectacle Blog
I had a column yesterday at the Washington Examiner that explains, again, why we should drastically cut or, even better, completely eliminate the corporate income tax. See here.
A taste:
Americans businesses were turned into April Fools on Sunday when a cut in Japan’s top corporate income tax rate left the United States with the highest such rate in the developed world — including Communist China’s. With Great Britain also slicing rates this month from 26 percent to 24 percent, the U.S. average top rate (federal and state combined) of 39.2 percent stands as a tremendous barrier to economic growth, higher incomes and job creation. …
[A] zero rate would help keep consumer prices down, boost retiree and union pension funds and eliminate most businesses’ tax compliance costs, freeing business accountants to concentrate on efficiencies rather than tax avoidance. It would also discourage debt financing in favor of safer equity financing and produce multitudinous growth effects.
Among numerous other benefits, one bears particular emphasis. Half the lobbying in Washington is aimed not at securing pork or contracts, but at finagling special corporate tax treatment. Eliminate the tax, and we eliminate that lobbying — and the incentives for graft that go with it. The repeal of corporate taxes would serve as a sort of backdoor ethics reform…..
Hope y’all enjoy the whole thing.
View all comments (22) | Leave a comment
More Blog Posts by Quin Hillyer
http://spectator.org/blog/2012/04/03/eliminate-the-corporate-income
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RJ| 4.3.12 @ 4:53PM
The US corporate tax rate is too high and you could eliminate it, but I bet the majority of citizens would think that business would be getting special treatment. I like the idea of a 10% of revenue tax because it is competitive in the world market and would probably satisfy most reasonably-minded Americans as being fair. To avoid businesses providing personal perks to senior executives, non-taxable to the executives (club memberships, condos, cars for personal use), such expenses would need to be taxed at the highest personal income tax rate.
jan| 4.3.12 @ 6:46PM
Ask all the morons who say Corps. don't pay enough taxes just one simple question " Where do corporations get the money to pay the corporate tax?"
Mike 3/505| 4.3.12 @ 7:08PM
I know! I know! Pick me! Pick Me!
Consumers pay it! Right! Right?!
Pat| 4.3.12 @ 8:49PM
Mike, in theory, corporations do pass on incurred costs to their customers – but only when they can. Visit your local Walmart and notice how much of their merchandise comes from overseas. So, how do you force the Chinese companies to pass on increased federal income taxes to their American consumers? If they don’t pay United States income taxes and American companies do pay, then how does this pass on to the consumer work in their case, or in India’s case or in Japan’s case? And what about prices controlled by tariff regulations (trucking) or by state law (private utility companies)? In theory, you’re dead right if this was 1955, but, today, not so much.
In fact, this situation would be one reason so many foreign companies have gained increased American market share within everything from clothing to cars. If you don’t have to pay Uncle Sam the yearly tax bite and your American competitor does, then sayonara to your American competitor.
There are no good costs and bad costs, just costs. So, cheap labor is one competitive advantage but so is exemption from federal and state income taxes. And, yes, their American subsidiaries do have to pay U. S. income taxes but there are several ways around that problem so as to reduce the overall tax bite. One of the favorite method is to charge the American sub for “management services” which are a legitimate tax deduction for the American sub and a cash infusion for the foreign parent corp.
Mike 3/505| 4.3.12 @ 11:39PM
"but only when they can."
When they can't...over time, they go out of business.
C Bowen | 4.3.12 @ 5:11PM
Quin;
It's a good article, with a good point, but the title is way off. Big Corporations like the tax rate--it helps keep competition away, helps with regulatory capture, and when, say GE loses a ton of money speculating on derivatives, they can get a bailout and all is well.
And that is why it won't be eliminated.
In order to actually get it eliminated will require a beyond left and right coalition that attacks the Too Big to Fail Corporations--proof being TARP.
aware| 4.3.12 @ 6:37PM
It would require the elimination of the State as it currently exists too. They won't go quietly.
C Bowen | 4.3.12 @ 6:57PM
I realize where you are coming from, aware.
But for the purpose of discussing tactics, how about attack 501Cs? Direct popular anger, left and right, at 'charities' who conduct social revolution after social revolution and often enough, employ the children of the state.
And even with an ethical Christian perspective, a Christian should not give to a charity (even a church) with the consideration of getting a tax refund of any sort.
I think there is a chance for success here, and once the IRS loses control of the 501cs, perhaps we can juggle the politics a bit.
larry| 4.3.12 @ 5:27PM
who takes the jobs out of country for greed (lv of money not country) note< still don't hv enough big corp. ceos. (inflated egos and opp. of themselves)Gov is the only one who can stop the greed. first we hv to get it out of gov then corp. stop elec. character to office, instead men with character, w/term limits and put U.S. first.
Pat| 4.3.12 @ 5:58PM
If we eliminated brick and mortar banks that would certainly reduce the incentive for bank robbery under this author’s inverted logic. Try looking at corporations without the conspiracy theory paranoia. Large signs bearing corporate logos announce to the world and our government enforcers where the corporate assets reside – corporations can’t hide their property in Cayman Island bank accounts like certain elected employees who shall remain nameless – and they remain safely anonymous because taxpayers and our so-called free press aren’t allowed to know who they are. Corporations don’t employ hit men and when the federal folks with guns and badges come knocking, corporate employees say “yes sir” and give them whatever they want. General Electric doesn’t have an army and can’t declare war on our government – remember who holds the upper hand here.
In short, Virginia, there is no Santa Claus and corporations have less power than you or I to write new tax laws favoring their stockholders. Yes, they have lobbyists out of self-defense. If Corporation A doesn’t fight back, then Corporation B enjoys the new law reducing their yearly tax bite and some anonymous politician makes another large deposit into his Cayman Island account. Banks employ security guards because of bank robbers and not because they enjoy paying men and women to wear uniforms. Let’s not lay the blame on banks for the existence of bank robbers and let’s not pretend taxpaying corporations are the victimizers rather than the victims.
fiscal| 4.3.12 @ 6:25PM
Be careful in comparing tax rates as the marginal rates are overstated. The effective corporate tax rate -- what companies actually pay after all of the deductions and subsidies, is about 24-25%. Whenever someone on the right misstates the comparative rate as you did, it only makes the right look dumb.
That said, even 25% is about 5% too high to be competitive. However, I'd recommend getting rid of the corporate income tax completely in favor of a revenue neutral consumption tax. Our advantage over other countries is that we are huge consumers of other countries products. A consumption tax would make it possible to capture more revenue from other countries, increase manufacturing in the U.S., and get rid of the deductions and subsidies that make up corporate welfare.
Mike 3/505| 4.3.12 @ 7:10PM
Wrong! No matter what effective rate you come up with...it's still the Consumers who pay it. Eliminate it completely.
Mark in LA| 4.3.12 @ 11:18PM
Well if it is the consumers who pays it then there should only be corporate taxes and no personal income taxes. That way the only people who are taxed are those people who are voluntarily partaking of that companies products. Why should somebody who doesn't smoke subsidize the habit of somebody who does. Isn't this the same logic used by the right about lotteries, that people are voluntarily making their money available to the state?
See what happens when all your arguments boil down to simple-minded drivel?
Mike 3/505| 4.3.12 @ 11:45PM
Mark....I would be fine with that..in the form of a national sales tax...but in exchange for that...get rid of all other taxes. That would be equitable (no such thing as "fair.").
A better way yet, wopuld be to eliminate all current taxes and replace them with two taxes:
1) Use/Excise taxes for Federal Highways the FAA etc...funded by fuel taxes, both car & aviation.
2) "Head" taxes to fund all the "Take care of Everybody" stuff, like the military. Everyone pays the exact same amount, because everyone gets the same benefit...all life is valued the same correct?
PattyMor| 4.3.12 @ 6:27PM
Sarah Palin was the first notable person to call for the elimination of the corporate income tax. On the surface it seems like a big sop to the corporations. But if you look under the covers, what you see is the big corporations supporting
laws and regulations that they can overcome, but suffocate their competition. Corporate
America (along with many others) has captured Washington, lock,stock and barrel. The only way to get them out of Washington, is to get Washington out of our lives.
No more Jeffrey Immelt's snickering over shovel ready jobs that weren't so shove ready. Enough.
RJ| 4.4.12 @ 4:17AM
Great comment. I hope we can get that type of reform.
Pete| 4.3.12 @ 10:03PM
I would go further and eliminate the corporation. All we need are individual businesses and partnerships. I also would eliminate the status of Employee. It has no existence in the constitution and it should have no special status. You have a job, you contract someone or some group to do that job. Very simple.
Mike 3/505| 4.3.12 @ 11:50PM
"eliminate the corporation."
Who would I talk to, to get a definitive answer from the "Large Group of Individuals" working in concert for the purpose of Fossil Fuel Development, that formerly used to be called "Exxon Moblile?" That wasn't facetious. Who speaks for that large group?
Pete| 4.4.12 @ 10:50AM
Who speaks for it today, a crony board of directors hand picked by the CEO? Much better if its actually the owner's themselves.
Pete| 4.3.12 @ 10:05PM
My one question is that when a corporation does an illegal act, do you put all its owners in prison? Certainly a corporation should not be able to do something an individual can not do.
Mike 3/505| 4.3.12 @ 11:51PM
and as a follow on.....When you say "owners," do you include all the stockholders...who are legally the owners...In the case of GM...that would mean all of us taxpayers....Heheheheheheheh
Pete| 4.4.12 @ 10:53AM
It is why corporations are actually the superclass. They have rights and privileges the rest of us do not have. Time to cut all corporate welfare and special benefits. A corporation should not be able to do anything I as an individual can't do. Right now its capitalistic collectivism.