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Kill the Corporate Income Tax
Posted by: Jon Henke on Friday, March 21, 2008

Quin Hilyer has a good idea: "Eliminate the federal corporate income tax."
The problem with the economy right now is not a lack of liquidity — the whole world is awash in dollars — but a lack, instead, of anything good to do with those dollars rather than hoard them. The problem, in short, is that nobody has any incentive to invest those dollars, or to lend them for investment, here in the United States.

Eliminate the corporate income tax and, immediately, every American corporation becomes more profitable by as much as a third. All the pensioners who own stock in those companies get richer — immediately. All the workers with company stock-share plans get richer. Prices will drop as companies can make more money, net, even with lower prices. Companies also would save billions of dollars spent in tax-form preparation, and in time spent figuring out tax-avoidance schemes. The economy will get more efficient when tax considerations no longer distort decision-making.

Real interest rates will drop due to market forces (rather than through panicky fiats from the Federal Reserve Board). And, wonder of wonders, companies that have been moving operations overseas will now reverse course and race back within our shores — bringing hundreds of thousands of jobs with them. ...

That's why this is one "pro-corporate" reform that also is overwhelmingly pro-labor. The Congressional Budget Office has noted that "domestic labor bears slightly more than 70 percent of the burden of the corporate income tax."
The problem, of course, is that it is very easy for opponents to ignore the complexities and demagogue supporters for being in the pockets of big business. And it is fairly difficult to explain the relatively minimal cost and the broad benefits of this move. And when you're explaining, you're losing.

One potential path forward: get Unions to support the elimination of the corporate income tax.

After all, Unions can only negotiate with their companies and industries. They cannot negotiate for a share of tax revenue. The more the corporation gets to keep, the bigger the pie for which Unions can fight. They could expect to see almost immediate benefits out of this, and it would be difficult for the Democratic Party to oppose this move if their Labor coalition is actively working to get it passed.
 
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Two thoughts occur to me:
1) The benefits offered for abolishing the corporate income tax are speculative at best, other than the obvious fact that companies won’t need to deal with tax returns. Abolishing the tax won’t, for instance, make the companies less likely to move out of the country—labor costs, such as health insurance benefits, are much more important in that sort of decision. The Fed will still play blindman’s bluff with interest rates. etc.
2) Are we so naive as to think that what plan that abolishes the corporate income tax won’t also have a plan for a new tax, or higher personal income tax, to match the revenues "lost"?
 
Written By: kishnevi
URL: http://
What a fantastic load of baloney. Eliminating the corporate income tax doesn’t create any new value, and it doesn’t fix structural deficits in either finance or real provision of goods or services either. Companies might become more profitable, but not more productive, which means that they’re no better able to compete with labor or products/services elsewhere. What does profit without production get us? More bubbles. If stock prices go up at all, the primary beneficiaries will not be the many stockholders who hold few shares but the few stockholders who hold many - and are often foreign. If prices go down, that will be balanced by personal taxes going up to keep revenue flat, and practically all of the people paying that extra tax will be Americans.

If the actual value being created is the same, and government revenue is the same, and more money is flowing toward the already-rich and people overseas, then clearly the money must be coming out of domestic not-rich people’s pockets. It cannot be otherwise. It’s vicious, all right, but it’s not capitalism. Your protect-the-fatherland government-for-the-corporations agenda looks more like fascism every day.
 
Written By: Jeff Darcy
URL: http://pl.atyp.us
Jon, you Big Business shill.

:)
 
Written By: Scott Jacobs
URL: http://
I think you’re dramatically underestimating the effects such a move would have on currently distortionary incentives, and completely overlooking the fact that the corporate tax burden is largely borne by "domestic labor". So you’d prefer that the tax burden be borne by a legal concept, as if that’s an alternative to taxing actual people.

But hey, reasonable people can disagree about the utility of tax structures. Unfortunately, you don’t appear to be a reasonable person.
Your protect-the-fatherland government-for-the-corporations agenda looks more like fascism every day.
Apparently you can’t disagree about tax policy without completely disregarding my own arguments and assuming instead that I must be a fascist.
 
Written By: Jon Henke
URL: http://QandO.net
What spending cuts are you proposing to match those revenue cuts? Or are we just planning to borrow against future tax increases?
 
Written By: Retief
URL: http://
Your protect-the-fatherland government-for-the-corporations agenda looks more like fascism every day.
Wow, who knew that eliminating a tax was a form of fascism? As usual most on the left who throw that term around have no idea what fascism means.
 
Written By: David C.
URL: http://
Germany has experienced a mini-boom in the economy (albeit threatened a bit by the weak dollar and strong Euro). They also decreased their corporate income tax from 25% to 15%, with support from both the left and the right. So politically, it’s feasible, and if the German case works, that might be evidence in favor.
 
Written By: Scott Erb
URL: http://faculty.umf.maine.edu/~erb/blog.htm
One potential path forward: get Unions to support the elimination of the corporate income tax.

After all, Unions can only negotiate with their companies and industries. They cannot negotiate for a share of tax revenue.
Hmmm. Two points, and they’re linked;

* They’ll never do it, given their seemingly unbreakable ties to the left in this country.

* I submit that given the ’public sector’... IE; government jobs, constitutes the largest amount of union membership, that unions are already negotiating for a share of tax revenue. The reason for that is simple enough; Given that government income is far more guaranteed than is any private corp... say, Ford, or GM, for example, it’s the place where Unions, logically are going to be more successful in maintaining their hold.

I submit that the only way for such a plan to move forward is to exclude the unions.

 
Written By: Bithead
URL: http://bitsblog.florack.us
What spending cuts are you proposing to match those revenue cuts? Or are we just planning to borrow against future tax increases?
The losses would be relatively minimal. For one thing, much of that money would be distributed to people in terms of dividends, increased income, etc. They’ll pay taxes on that. Hilyer outlines some of the other efficiencies in such a cut, as well.

I’d love to reduce or eliminate corporate welfare. Perhaps Jeff can explain how that fits into his corporate fascism argument.
 
Written By: Jon Henke
URL: http://QandO.net
Apparently you can’t disagree about tax policy without completely disregarding my own arguments and assuming instead that I must be a fascist.
I’m not ignoring your own arguments or assuming anything, Jon. I’ve been reading your arguments for years, and I’m thoroughly conversant with what "fascism" really means. One of the defining characteristics of fascism, as any decent political lexicon could affirm, is a closer relationship between government and business than between government and the people. While the relationship you advocate for is different in some ways, particularly in who gets the driver’s seat, those differences are inessential. The fascist implications of having big government do favors for big business are not an assumption but a conclusion. I could hardly care less that you object to the term. I care whether it’s applicable, and it is. If you don’t like that one word in my previous comment, maybe we could follow up on the hundred others instead of going down a silly rat-hole. To that end...
you’d prefer that the tax burden be borne by a legal concept, as if that’s an alternative to taxing actual people.
Oh, wait, that’s another silly rat-hole. News flash, Jon: corporations are real. Too real, in my opinion, being given all the benefits of personhood with none of the responsibilities or limitations (like mortality). Taxing that "legal concept" means taxing its owners, i.e. the majority owners of its stock, who may be better able to bear the burden and might even be foreign (as I already pointed out). Damn right I’d rather tax them than Joe Sixpack, and if that "legal concept" is the mechanism then so be it. Why would you prefer it be otherwise, and that Joe foot all the bills?

Reasonable people may disagree about tax policies. Reasonable people try to justify their preferences and proposals with more than a hand-wave. Your "distortion" might be my "as it should be" and vice versa. I’ve tried to explain, albeit briefly, why I think repealing the federal corporate income tax would have only deleterious effects. When will you reciprocate instead of diverting and dismissing out of hand anything you’re not prepared to address?
 
Written By: Jeff Darcy
URL: http://pl.atyp.us
Jeff, who paid more in taxes for 2007? The bottom 50% of the tax bracket (so that would be half the nation), or Exxon?
 
Written By: Scott Jacobs
URL: http://
I’m thoroughly conversant with what "fascism" really means
Fascism is not a tax structure.
One of the defining characteristics of fascism, as any decent political lexicon could affirm, is a closer relationship between government and business than between government and the people.
What that has to do with how the tax system is structured isn’t really clear. Corporate taxation is inefficient and a poor way to raise revenue, particularly as it is simply a way of taxing people but obscuring that taxation through a proxy, so they don’t perceive it as taxation...even though it impacts them, anyway.
The fascist implications of having big government do favors for big business are not an assumption but a conclusion.
Please, do explain to me how eliminating all corporate welfare also fits into this notion of yours.
Taxing that "legal concept" means taxing its owners, i.e. the majority owners of its stock, who may be better able to bear the burden and might even be foreign (as I already pointed out).
Jeff, please go back and read this post again. This time, read for comprehension. In particular, read the part about how more than 70% of the burden of corporate taxation rests on domestic labor, rather than the owners of capital. That’s Joe Sixpack you’re taxing there. Does that make you a fascist? Or do you simply feel better about yourself because you can pretend you’re taxing the Bad People rather than the Good Guys.

I’m not sure if you’re really this simpleminded, or if you’re just a jerk. In either case, if your response to discussions of tax structure is to call me a fascist, then I’m not sure there’s any reason to even attempt to engage you in a debate. You’re not debating, you’re trolling. If you wish to continue this dishonest personal attack, then I intend to hold your arguments up to ridicule on the front page.
 
Written By: Jon Henke
URL: http://QandO.net
I’m thoroughly conversant with what "fascism" really means.
Obviously not, if you think eliminating corporate taxes somehow equals fascism.
Reasonable people may disagree about tax policies. Reasonable people try to justify their preferences and proposals with more than a hand-wave.
Reasonable people don’t make ridiculous accusations of fascism when they disagree with others about tax policy.
 
Written By: David C.
URL: http://
Let’s not cloud the discussion with ideology, this is practical. Again, the Germans cut theirs from 25% to 15%, with left and right agreement, in order to specifically stimulate investment, which is a good way to try to boost growth. IF it is true that investment generated from corporate tax cuts would increase growth and have a net positive effect on the economy, then it is likely money well spent, and might boost overall tax revenues. After all, most tax revenues come from individual tax payers, not corporations. So we shouldn’t approach this question from a pure ideological perspective "tax big business vs. taxation is theft." Rather, put the ideology aside and think practically. I need more data before I could be certain of my position on this, but increasing investment via tax rebates to individuals may be far less effective for the economy overall — and far more costly (and if we borrow more to pay for it, that will have a negative consequence, better to boost investment the cheapest way possible).
 
Written By: Scott Erb
URL: http://faculty.umf.maine.edu/~erb/blog.htm
kishnevi: "The benefits ...are speculative at best, other than ...that companies won’t need to deal with tax returns."

But that’s a powerful thing. Not only does it lower the cost of doing business, it also - and this is key - lowers the incentives to hire lobbyists, because there is less at stake.

"Abolishing the tax won’t make the companies less likely to move out of the country—labor costs, such as health insurance benefits, are much more important in that sort of decision."

Yes, but decisions are made at the margin. The US has about the highest corporation tax rate going. Not where we want to be.

"plan that abolishes the corporate income tax won’t also have a plan for a new tax..., to match the revenues "lost"?

This is a valid objection. It makes sense to eliminate the lower rates for dividends and capital gains in return. The "double taxation" issue disappears with this change.

Jeff - "Eliminating the corporate income tax doesn’t create any new value, and it doesn’t fix structural deficits in either finance or real provision of goods or services either."

Nor does it cure cancer. The question is whether it leaves us better off. I think it does.

"Companies might become more profitable, but not more productive"

Profits attracts investment. Investment improves productivity. Get it?

"If stock prices go up..., the primary beneficiaries will not be the many stockholders who hold few shares but the few stockholders who hold many - and are often foreign."

The biggest holders of US stocks are now...pension funds. Presumably you don’t mind if they benefit.

Retief: "What spending cuts are you proposing to match those revenue cuts?"

That’s a good question. My answer is above.

Scott: "Germany has experienced a mini-boom in the economy (albeit threatened a bit by the weak dollar and strong Euro). They also decreased their corporate income tax from 25% to 15%"

The US is behind the curve in getting these taxes down. Shame on Bush for not proposing this.

Jon: "The losses would be relatively minimal."

Corporate income taxes produce a lot of tax revenue. And the dividend/cap gains rates are much lower than the corporate rate, and pension funds pay no taxes. If we got rid of the special treatment of capital income, we’d partially fix those issues. But corporations often don’t distribute their gains, and stocks can be held without incurring tax liability, so there’s some devilry in the details. If we had to increase some other tax (I’d propose a carbon tax) to balance the books, we’d still be better off overall. I envision the massive reduction in lobbying and its accompanying corruptions as the biggest benefit.

 
Written By: Larry
URL: http://
. . . we shouldn’t approach this question from a pure ideological perspective "tax big business vs. taxation is theft." Rather, put the ideology aside and think practically. I need more data before I could be certain of my position on this, but increasing investment via tax rebates to individuals may be far less effective for the economy overall . . .
Scott,

My view on this is ideological, i.e., the company isn’t really taxed, it is simply being used to collect another hidden tax from either its investors, employees, or customers.
I’d rather the government use honest, up front taxes rather than this behind the scenes tax.

The other point is that if the company pays less taxes it is free to invest more. Jobs, tools, whatever. This, IMO, is much better than a tax rebate, which is likely to be spent as "fun money" and consequently stimulate the wrong areas of the economy (i.e., spur bad investment).
 
Written By: Don
URL: http://
My view on this is ideological, i.e., the company isn’t really taxed, it is simply being used to collect another hidden tax from either its investors, employees, or customers.
Correct.
As a rather recent and painful example, let’s look at Oil companies, in this case, Exxon, since Jacobs brought it up...

According to CNN Money,, Exxon total "profits" if you don’t count exploration costs, were $40BUSD, in 2007. Their taxes, however, were $100BUSD. Gee, you think this affects the at the pump price? DIs anyone really foolish enough to think those taxes get absorbed by the companies, themselves?



 
Written By: Bithead
URL: http://bitsblog.florack.us
My view on this is ideological, i.e., the company isn’t really taxed, it is simply being used to collect another hidden tax from either its investors, employees, or customers.
I’d rather the government use honest, up front taxes rather than this behind the scenes tax.

The other point is that if the company pays less taxes it is free to invest more. Jobs, tools, whatever. This, IMO, is much better than a tax rebate, which is likely to be spent as "fun money" and consequently stimulate the wrong areas of the economy (i.e., spur bad investment).
Yes, I agree a cut in corporate taxes would be a better stimulus. But it’s an easy political sell to say "the economy is in trouble so we’re going to give you more money." Cutting taxes to business is a harder sell, most people don’t follow the economic logic. I doubt all the tax gets passed to the consumers since the market sets the price and in many cases the market won’t allow tax increases to simply be passed on. But it does cut in investments.
 
Written By: Scott Erb
URL: http://faculty.umf.maine.edu/~erb/blog.htm
I call this proposal to kill corporate income tax a case of Halliburton Envy.

Halliburton, which receives still, billions of US tax dollars in no bid contracts, has already effectively killed the US corporate tax.

They have moved off-shore. They are now a foreign corporation.

Other corporations are fearful if they do that, they will get punished by the press, then their US customers.

Halliburton has no such fear - because they are fully protected by the Repuiblican Party, and the full evil power of "SSoooooooo" Dick Cheney.

 
Written By: John Stanley
URL: http://
I expect soon from the elitist conservative movement, a proposal to Kill All The Trial Lawyers.

They are such a nuisance to working class conservatives, dontcha think ?

Of course, I never remember a single time hearing from, or reading in, the main stream media, suggesting how it is possible that all the bad guy lawyers become Trail Lawyers, while all the good guy lawyers work for corporations.

No, corporate lawyers are fine with working class conservatives because they haven’t been made visible by the corporate media. Just a coincidence I am sure.

But we all know how despicable are trial lawyers, don’t we?
 
Written By: John Stanley
URL: http://
From Jon H.:
What that has to do with how the tax system is structured isn’t really clear. Corporate taxation is inefficient and a poor way to raise revenue, particularly as it is simply a way of taxing people but obscuring that taxation through a proxy, so they don’t perceive it as taxation...even though it impacts them, anyway.
If that statement was reality based, we would see corporations drop their prices on products whenever their tax rate decreased. But that doesn’t happen - even in so misely a proportion of 99% of the increased revenue to the corporation, and 1% to the consumer.

When Nike started making $150 sneakers overseas for a cost of $5.00, did they drop they price to the comsumer by any amount? Of course not. Corporations are totally focused on extracting as much money from the markets they operate in. It is misguided to think they are morality driven instruments of income redistribution.

Many corporations impose huge costs on the societies they operate in. Walmart keeps pay and benefits so low for its workers, that local, state and federal agencies, funded by Joe Blow wage earner, has to provide the services to the people underpaid by Walmart.

If Jon’s statement had any basis in the Real World, ExxonMobil would not be raking in billions in profits per quarter, while charging $3-$4 a gallon for gas. If Jon’s theory were true, ExxonMobil would be passing on SOME of those Mega-profits as lower prices for gasoline. But they are not, are they.

It is magical thinking to posit that ExxonMobil, if they gained additional revenue by having NO Corporate Income Tax to pay, that they would drop the price of gasoline from that particular revenue stream.

Let’s all please operate in the Real World. Our children will live in a better world if we do.


 
Written By: John Stanley
URL: http://

 
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