Eliminate the Corporate Income Tax
For a while I have advocated for the idea that we eliminate the corporate income tax and simply tax capital gains and dividends as regular individual income. Corporate profits eventually flow to one or the other. Out would go a whole expensive class of taxation that has all kinds of distorting effects (and really does not raise that much money). Out would go the tax preferences for corporate debt over equity financing. Out would go double taxation of investment income. Out would go the disincentive to repatriate corporate profits and relocate headquarters to foreign countries. And out would go the perceived need for the goofy "Buffett Rule."
At least some on the Left might be open to the idea.
morganovich:
well, if you are looking to avoid double taxation, then taking out cap gains makes sense too.
the money you use to get cap gains (investment) has already been taxed as well for any individual.
this is a cleaner solution than eliminating corporate tax, especially as if corp tax went away, i'd immediately incorporate and use that corporation to shield all my income and to pay my bills. as a conglomerate home and car rental company with a financial advisory arm, i could bury damn near everyhting.
eliminating cap gains would encourage investment and not create such intense incentives to game the system.
June 20, 2012, 12:45 pmTJIC:
I've said for years that there is a "grand bargain" to be made:
1) the Left eliminates corporate income tax altogether, and the Right lets them hike other taxes by 5%
2) the Left eliminates all deductions and goes with a very simple 1,2, or 3 bracket income tax, and the Right gives them another 5% hike to taxes
3) as part of #2, we remove all transfers-via-tax-code: if you want to give The Blind (or other small voting group) special cash bonuses, just cut them a check every year.
The cleanup of the tax code would boost the economy more than enough to cover the increased gov bite.
Personally, I still want to burn the whole thing down and plow salt into the wreckage, but I'm talking about the art of the possible.
June 20, 2012, 12:47 pmMark:
I favor eliminating the corporate income tax. The corporate income tax is actually an exist tax. So, lets replace it with a true excise tax. Instead of a corporate income tax, lets have a national sales tax of 6-9%. The revenues from this tax can be used to offset individual income taxes and make those rates lower.
A sales tax is efficient and collected right from the start. There are no loopholes. There are no givebacks. They cannot move the profits offshore so they cannot be taxed. Since there would be almost no tax accounting and businesses would not have to create imaginative and often inefficient ways to avoid taxes, consumers would probably see lower costs over the long run from these efficiencies.
June 20, 2012, 12:52 pmmark2:
There is an unintended concequence of eliminating the corporate income tax. Companies would almost never make distributions because the distributions would be taxable to the shareholder. If the corps have the tax and the dividend tax is eliminated then corps would be compelled to release their load.
June 20, 2012, 1:17 pmJohn David Galt:
A sales tax would indeed be the perfect Single Tax if it weren't so simple to evade.
Here are changes I'd make to the income tax, to make it as progressive as it says it is:
1) Increase the personal exemption by a factor of ten, so that most people won't have to pay or file the tax at all, as was true (and promised forever) when the income tax was first enacted.
2) Taxing capital gains at the same rate as ordinary income would be great as long as they first allow taxpayers to inflation-index the basis of all long-term investments, so that we only pay tax on real gains (not on inflation as we do now).
3) The mortgage deduction should not only go away, but the law should recognize that all personal-use real estate is intended as an investment as well as for personal use (so you would get taxed on real gains, but be able to deduct real losses, when you sell a home). These breaks for homeowners are the biggest subsidy from the poor to the rich in the system as it is.
4) I would get rid of all payroll taxes and pay for those programs (Social Security, Medicare, and unemployment) out of the regular income tax. This achieves two important ends: it means working people so poor they don't owe regular income tax won't have to pay those either, and it makes all those taxes VISIBLE so people will make better informed choices on election day.
5) Either make child support deductible, or give the payer the child's exemption and the child tax credit.
And 6) Eliminate the "floor" amounts (Schedule A, lines 4 and 24) so all expenses of those types are deductible.
June 20, 2012, 1:17 pmDoctorT:
I agree with JDG's first three points. I disagree with #4 because I want all entitlement programs to end.
On item #5, the divorced parent who provides more than half the child support gets the deduction. My belief is that the deduction should be split between the parents.
Itemized deductions would not be needed if we had a simplified tax code.
June 20, 2012, 2:30 pmNoah:
Never happen as the Congress Critters need a tax code to manipulate to keep campaign bribes coming.
June 20, 2012, 3:50 pmMark:
Sales taxes are not "easy to evade". They are almost impossible to evade and in fact, people who make their income in the black market will even have to pay some level of taxes.
June 20, 2012, 5:53 pmIGotBupkis, Legally Defined Cyberbully in All 57 States:
>>>> At least some on the Left might be open to the idea.
Yeah, that one would go over well. I can't see the media letting it get by as ANYTHING but a chance to jump on the Right and the GOP (regardless of sponsorship) wanting to "let rich people off the hook" and wanting to "let corporations avoid taxes".
Come on, regardless of how rational, reasonable, or sensible it is, the propaganda value to the OWS mindset would be beyond belief, and they, with media help, could distort the reasoning and purpose to some pro-greed mentality that would be able to fool all too many "average joes".
This dog don't hunt, even though it should.
June 20, 2012, 6:16 pmIGotBupkis, Legally Defined Cyberbully in All 57 States:
>>>>> Mark: "lets have a national sales tax of 6-9%. The revenues from this tax can be used to offset individual income taxes and make those rates lower. "
Assuming you're talking basically, in one sense or another, The Fair Tax, I concur with supporting that with one immobile codicil: Any passage does not take affect until the Income Tax Amendment to the US Constitution is fully repealed.
Otherwise, I will absolutely guaran-effin'-tee you that there will be some fiscal emergency to pop up, and the income tax will be back "just for the duration of the emergency", and the US Citizen will thenceforth be burdened with BOTH.
Don't trust the government. If it's THERE, they'll implement it and abuse the ^$#$&% out of it.
June 20, 2012, 6:22 pmJohn Moore:
There is one good feature of corporate income tax: it acts as a flat tax on consumers. It's ironic that the left loves corporate taxes but hates the idea of a flat tax, so this is about the only way to sneak in a consumption tax.
June 20, 2012, 7:03 pmjack:
The power rests with the people: any attempt to make a permanent change to the revenue streams in the federal govt must be enshrined in a Constitutional amendment. T
Two other amendments I would suggest: 1, prohibit state/public/private bailouts of any flavor; 2, repeal the 17th (the power rests with the people).
Kill all federal-level entitlement programs (other than SSI, unless someone can propose a way to do so) and let the blue states reinstate them.. and drown by doing so.
June 20, 2012, 7:17 pmme:
I don't disagree, but the proposal doesn't nearly go far enough: abolish all taxes. Replace them with either a low transaction or a low property tax or a bidding system.
All of these come with some issues - transaction taxes depend on the transaction being fairly valued in monetary terms (if I exchange my skills for your sheep, we can avoid taxation; if my parents sell me their house for $1, I am probably not paying my fair share); property taxes depend on valuation and can force sales of property associated with the individuation of the taxed (say you're out of luck and the property for your family seat ends up assessed at $10 more than you can afford); a bidding system (if you vote for me, you have to pay $N in taxes into the pool the elected representatives get to use until next election) has issues with political influence.
None of the above, though, would be worse than the current system.
June 20, 2012, 10:13 pmGil:
If inflation is a "hidden" tax then instead of taxes the government should just prints up the money and spend it.
June 20, 2012, 11:30 pmIGotBupkis, Legally Defined Cyberbully in All 57 States:
Guys, if you're going for pie-in-the-sky overhaul, let's START with GAAP. That governments at ALL levels are not required to adhere to GAAP is just patently ridiculous and the source of all manner of chicanery -- state, local, AND federal. Clinton's "surplus" was exactly this sort of garbage that GAAP would have denied. The infamous sale by NY State of Attica Prison to itself was a similar bogosity. There's simply no reason governments don't have to adhere to actual legitimate accounting practices all around.
June 21, 2012, 3:34 amIGotBupkis, Legally Defined Cyberbully in All 57 States:
Seriously -- if I was going to go back to the Founders and advise them on a single alteration of the Constitution, I think it would be GAAP -- yes, even over and above the slavery issue. The slavery issue caused all manner of hardship and pain, but the full pain of zero-GAAP has yet to be experienced.
June 21, 2012, 3:36 ammichael:
Inflation is a multiple taxation though.
Every year you get a 2%-4% tax on money you paid
tax, i.e inflation last year.
So the most "unjust" tax is inflation.
June 21, 2012, 6:49 ammichael:
to mark2:
and then what? corps will accumulate cash?
and what they will do with it?
they will invest it on and on in perpetuity.
the individual - shareholder will see his fortune in a form of stocks he holds.
June 21, 2012, 6:53 amJared:
Any support from the left is simply a lever to win support for an increase on capital gains. When has the left ever lived up to a bargain? Look and the Reagan and O'neill "bargains".
June 21, 2012, 7:32 ammark2:
@Gil,
Your idea would work. If we would put up with 60 - 100% inflation per year. We would get used to it, but it would really hamper the currencies "reserve currency" status, and foriegn countries who are currently duped into holding greenbacks as some sort of security would see how silly that is and refuse to do so any longer. This would cause the inflation rate to at least temporarily go much higher.
June 21, 2012, 7:52 amDan:
But think of all the tax lawyers who would be put out of work by your proposal! The horror!
June 21, 2012, 8:24 amNick:
It's sad that we all know the Tax Code should be simplified and yet we are unable to make it happen.
Any one of the ideas mentioned here would be a huge boost to our economy, but we can't seem to make even the smallest ideas into a reality.
June 22, 2012, 8:37 am