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More Blog Posts by Quin Hillyer
http://spectator.org/blog/2013/02/15/zero-out-the-corporate-income
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RJ| 2.15.13 @ 2:27PM
Interesting idea to eliminate the corporate income tax, but doesn't that discriminate against businesses that are sole proprietorships and partnerships which will continue to pay income taxes (through their owners)?
Since corporations are legally viewed as a separate legal entity from their owners, perhaps, a more simple approach is have them pay income taxes and set the maximum income tax rate at 17% or so. The goal would be to tax all businesses equally and there would be no tax incentive for major corporations to give their senior executives substantial perks instead of higher salaries since the corporate tax rate would not be lower than the executive's (based on income from the employer).
In terms of general tax reform, we would benefit from eliminating all tax credits, most deductions and lower the rates.
Peter Ferrara's recent article, Obama and the Pirates, pointed out that 10% of the federal income tax revenue is redistributed in the form of tax credits. The IRS does not have the capability to ensure that claims for tax credits are valid. And the tax code should be used for tax revenue, not redistribution.
Pecos Pete| 2.15.13 @ 4:08PM
RJ: "... but doesn't that discriminate against businesses that are sole proprietorships and partnerships which will continue to pay income taxes (through their owners)?"
Excellent point. You are correct. The only way out of this box would be for all businesses to be incorporated. The current sole proprietorships and partnerships (new corporations) would then be taxed on their salary and/or their dividend. The only form of taxation would then be the personal tax.
Thus, elimination of taxes on corporations (all businesses) would improve national productivity by reducing bookkeeping staff to that required for public reports by publicly owned corporations. No more tax accountants or lawyers for businesses, but they will still be around to help the individual taxpayer.
smee| 2.18.13 @ 1:28AM
Right now, ignoring various tax credits, owners of corporations are at a tax disadvantage vs. privately held companies (including partnerships and S-corps). When a company makes money, they pay the 35% corporate tax rate, and an investor pays the capital gains rate on dividends or capital gains (theoretically, the change in the present value of future dividends). When a partnership makes money, they are just taxed at the owners marginal personal tax rate. By getting rid of a corporate income tax, you would then eliminate the capital gains / dividends rate and tax everything only at the personal level.
Bob K| 2.15.13 @ 7:44PM
States have Corporate Taxes too.
There is a big fight going on in PA about privatizing the PA lottery. The private company which might take it over wants to incorporate in Delaware because taxes are lower there.
JD| 2.16.13 @ 12:46AM
The only way to eliminate the many unfairnesses in income taxes is to stop taxing income.
A fair tax is one and only one kind: a tax by which a person pays for the services rendered by government. Unfortunately, in addition to vehemently opposing fairness, Democrats and those like them work VERY hard to ensure that our system prevents an accurate calculation of the value of government's services on a per-person basis. They only seek that we consider it a large, vague number, such that no one has ever paid enough.
Oldefarte| 2.17.13 @ 1:55PM
Forget "revenue" okay? It's the governmental spending stupids! Eliminate Interior, Energy, Education, Justice, Agriculture as a start. Oh and also, outlaw legislatively governmental labor unions as lagnippe!!!!!!!!!!!!
Fiscal| 2.17.13 @ 2:18PM
Here we go again with continued misinformation/myths, now propounded by Hillyer that leads to making the "stupid party" even dumber. First of all, the deficit problem is NOT caused by just a "spending problem". The source of the problem is that we have an aging population and rising medical care costs. In addition, our basic tenet of free market capitalism (to which I agree), makes us the source of pharmeceutical largesse as those companies are forced to sell their products to other countries, like Canada, at government price limitations. The problem is primarily STRUCTURAL, and is not subject to choice as Quin and others would have you believe. If you really believe in the free market as I do, then you would have people actually pay for what they receive and let them feel the burden of Medicare and Social Security.
Secondly, Quin does not understand why revenues increase when capital gains are cut. Perhaps he is not an educated investor. Capital gains allow an investor to delay the gains they made in the value of a company. When the rate is cut, investors take the opportunity to take their profits and thus pay taxes. It has nothing to do with the strength of the economy.
For the record, I do agree that corporate income taxes should be eliminated in favor of a consumption tax as there are now so many loopholes that the tax is just not an effective form of revenue.
smee| 2.18.13 @ 1:33AM
While I like the idea in theory, a big problem w/ this is it eliminates the incentives to employ individuals. Currently, if a company wants to pay a dividend (return money to the owners), the money is first taxed as a profit at the corp tax rate and then to the individual at the personal income tax rate. When they pay employees, this counts as an expense, so their taxable income is reduced by this amount. The employee of course pays income tax on this (at a lower rate than the corp + capital gains). Should all money go to labor? Of course not, however neither should all the upside go to capital.