3 ms·

Here's another idea: drop the corporate tax rate to 0% and raise income, high-end property (let's say houses that cost 2x the median in a particular area), and

by digisth 15y ago

Here's another idea: drop the corporate tax rate to 0% and raise income, high-end property (let's say houses that cost 2x the median in a particular area), and high-end consumption taxes (a "yacht tax".) Another handy related idea would be to have a maximum income multiplier. Something like "the highest paid employee cannot make more than 20x the lowest paid in total compensation", so if you want to make one million a year, the lowest paid employee must be making 50k.

lliiffee 15y ago
I worry that the maximum income multiplier would have distortive effects. For example, if all my employees make high salaries, I would have a strong incentive to hire a company that provides janitorial services, rather than hire a janitor in house. (Which is presumably more efficient, as most firms do that in the current structure.)
nradov 15y ago
The "yacht tax" is proven to be a terrible idea; last time that was tried it basically killed the US boat industry. But otherwise I absolutely agree that we should eliminate corporate income tax and replace it with higher taxes on the individual owners of and creditors to those corporations. The government wouldn't be collecting any more revenue. This would encourage economic growth by avoiding the need for corporations to waste resources on tax planning.
tsuraan 15y ago
Here's another idea: drop the corporate tax rate to 0% and raise income, high-end property (let's say houses that cost 2x the median in a particular area), and high-end consumption taxes (a "yacht tax".) If corporations don't pay taxes, then won't everybody who can afford to just do all their business (income and all) through shell corporations? Sort of the way that currently wealthy people skirt the estate tax by having a company own their land, so their next of kin can just inherit the CEO position of the company?
- lucasjung 15y ago
  This already happens to varying degrees, because if you make enough money the corporate tax structure doesn't hit you as hard as the personal income tax structure. There are plenty of other tricks available as well, such as deferring income, etc. If you also eliminate income taxes and shift completely to consumption-based taxes, it gets a lot harder for wealthy people to avoid taxes; in fact, the only way to avoid consumption taxes is to live the lifestyle of a less-wealthy person. Even illegal sources of income get taxed when you switch to a consumption-based tax system: you can't tax the income of a gangster with no declared income, but you can tax all of the shiny stuff he buys. Regardless of the source of income, the same truth applies: if you want to enjoy your wealth, you will end up paying taxes on it. Of course, some wealthy people will choose to live more frugal lifestyles in order to avoid taxes (many wealthy people already do so, for a variety of reasons). The reduced consumption might hurt the economy some, but they have to put their money somewhere, and that somewhere is generally some sort of investment, which helps the economy. The biggest problem with consumption-based taxes is that they tend to be highly regressive because there is generally an inverse relationship between income and the percent of income spent on consumption. However, there are ways to correct for this. You can target specific categories of goods which only the wealthy can afford (the aforementioned "yacht tax,"), but this tends to be very destructive to those industries and can cause big distortions throughout the rest of the economy. You can exempt certain categories of goods, such as groceries and other basic necessities, but this also creates huge distortions, and also creates a situation where industries buy politicians in order to get their products exempted. Another approach is to offer rebates equal to the consumption taxes paid by a typical low-income family, so that such families will pay zero net tax, but that's complex and expensive to administer.
scriptproof 15y ago
It is funny a such system is implemented in France and it is sometimes helped by Google Earth to discovers undeclared properties.
bzbarsky 15y ago
We had a federal "yacht tax" (literally) from 1991 to 1993. It didn't work very well. See http://www.thecitizen.com/blogs/lance-mcmillian/07-12-2011/tax-rich-tried-doesn%E2%80%99t-work http://www.thecitizen.com/blogs/lance-mcmillian/07-12-2011/t... for the gory details, but the summary is that people bought many fewer yachts, a bunch of yacht-making companies went bankrupt, 25,000 employees of said companies were laid off, and revenue from the tax was far below projections (because the purchase volume fell). Now it's possible that one issue here was credibility of the tax: maybe people figured it would be repealed soon and just tried to wait it out. But it's hard to tell, and even if that's the issue any proposal to introduce taxes like this needs to take that factor into account.

by digisth 15y ago

lliiffee 15y ago

I worry that the maximum income multiplier would have distortive effects. For example, if all my employees make high salaries, I would have a strong incentive to hire a company that provides janitorial services, rather than hire a janitor in house. (Which is presumably more efficient, as most firms do that in the current structure.)

nradov 15y ago

The "yacht tax" is proven to be a terrible idea; last time that was tried it basically killed the US boat industry. But otherwise I absolutely agree that we should eliminate corporate income tax and replace it with higher taxes on the individual owners of and creditors to those corporations. The government wouldn't be collecting any more revenue. This would encourage economic growth by avoiding the need for corporations to waste resources on tax planning.

tsuraan 15y ago

Here's another idea: drop the corporate tax rate to 0% and raise income, high-end property (let's say houses that cost 2x the median in a particular area), and high-end consumption taxes (a "yacht tax".) If corporations don't pay taxes, then won't everybody who can afford to just do all their business (income and all) through shell corporations? Sort of the way that currently wealthy people skirt the estate tax by having a company own their land, so their next of kin can just inherit the CEO position of the company?

lucasjung 15y ago
This already happens to varying degrees, because if you make enough money the corporate tax structure doesn't hit you as hard as the personal income tax structure. There are plenty of other tricks available as well, such as deferring income, etc. If you also eliminate income taxes and shift completely to consumption-based taxes, it gets a lot harder for wealthy people to avoid taxes; in fact, the only way to avoid consumption taxes is to live the lifestyle of a less-wealthy person. Even illegal sources of income get taxed when you switch to a consumption-based tax system: you can't tax the income of a gangster with no declared income, but you can tax all of the shiny stuff he buys. Regardless of the source of income, the same truth applies: if you want to enjoy your wealth, you will end up paying taxes on it. Of course, some wealthy people will choose to live more frugal lifestyles in order to avoid taxes (many wealthy people already do so, for a variety of reasons). The reduced consumption might hurt the economy some, but they have to put their money somewhere, and that somewhere is generally some sort of investment, which helps the economy. The biggest problem with consumption-based taxes is that they tend to be highly regressive because there is generally an inverse relationship between income and the percent of income spent on consumption. However, there are ways to correct for this. You can target specific categories of goods which only the wealthy can afford (the aforementioned "yacht tax,"), but this tends to be very destructive to those industries and can cause big distortions throughout the rest of the economy. You can exempt certain categories of goods, such as groceries and other basic necessities, but this also creates huge distortions, and also creates a situation where industries buy politicians in order to get their products exempted. Another approach is to offer rebates equal to the consumption taxes paid by a typical low-income family, so that such families will pay zero net tax, but that's complex and expensive to administer.

scriptproof 15y ago

It is funny a such system is implemented in France and it is sometimes helped by Google Earth to discovers undeclared properties.

bzbarsky 15y ago

We had a federal "yacht tax" (literally) from 1991 to 1993. It didn't work very well. See http://www.thecitizen.com/blogs/lance-mcmillian/07-12-2011/tax-rich-tried-doesn%E2%80%99t-work http://www.thecitizen.com/blogs/lance-mcmillian/07-12-2011/t... for the gory details, but the summary is that people bought many fewer yachts, a bunch of yacht-making companies went bankrupt, 25,000 employees of said companies were laid off, and revenue from the tax was far below projections (because the purchase volume fell). Now it's possible that one issue here was credibility of the tax: maybe people figured it would be repealed soon and just tried to wait it out. But it's hard to tell, and even if that's the issue any proposal to introduce taxes like this needs to take that factor into account.