Eliminating The Corporate Tax Has Got To Rank As One Of the Dumbest Ideas

[marmar]

from the Working Life blog:


Eliminating The Corporate Tax Has Got To Rank As One Of the Dumbest Ideas
Posted on 28 August 2014.


Politics is full of really asinine ideas–let’s see, the Iraq War counts as a good example. But, for perhaps the dumbest one going I’d offer up the mumbling, coming from even some Democrats, to eliminate the corporate tax. It is stupefyingly idiotic–in the midst of the greatest divide between rich and poor in 50 years, and corporate profits rising to record levels even as wage growth remain at its lowest level in half a century.

The folks at Citizens for Tax Justice have it nailed quite succinctly:

First, a corporation can hold onto its profits for years before paying them to shareholders. This means that if the personal income tax is the only tax on these profits, tax could be deferred indefinitely. It also means that people with large salaries could probably create shell corporations that would sell their services. Their income would then be transformed into corporate income and any tax would be deferred until they decide to spend the money, which could be decades later, if ever.Second, even when corporate profits are paid out as stock dividends to shareholders, under our current system about two-thirds of those stock dividends are paid to tax-exempt entitles, such as pensions and university endowments which are not subject to the personal income tax. In other words, a lot of corporate profits would never be taxed if there was no corporate income tax.

Third, our tax system overall is just barely progressive and it would be a lot less progressive if the corporate income tax were repealed. The corporate income tax is a progressive tax because it is mostly paid by the owners of capital — people who own corporate stocks (which pay smaller dividends because of the tax) and other business assets.

Some have tried to argue that the corporate tax is mostly borne by labor because it chases investment out of the United States, leaving working people with fewer jobs and/or lower wages. But corporate investment is not perfectly mobile and, as a result, the Treasury Department has concluded that 82 percent of the corporate income tax is paid by owners of capital, and consequently, 58 percent of the tax is paid by the richest 5 percent of Americans and 43 percent is paid by the richest one percent of Americans. Congress’s Joint Committee on Taxation has reached similar conclusions.

Robert Reich, the same genius who was a passionate advocate FOR NAFTA, which arguably was a key component in the hammering down of wages over the past 20 years, is among those who have a dumb idea: eliminate the corporate tax and, then, tax dividends and capital gains as ordinary income and, then, as CTJ, says, “tax the gains on corporate stocks each year rather than only when they are realized when the stocks are sold. ..................(more)

The complete piece is at: http://www.workinglife.org/2014/08/28/eliminating-the-corporate-tax-has-got-to-rank-as-one-of-the-dumbest-ideas/#sthash.LdkzrV5G.dpuf