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Perhaps we should drop the corporate tax rate to zero. It's simply too easy for a global company to avoid them. In the end, small and mid-sized businesses are

• deleted 12y ago
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• nkozyra 12y ago
  I think that's the eventual outcome, as there will likely always be some place with a low enough rate to compel businesses to setup shells.
• antidaily 12y ago
  Yeah. Then, raise taxes for those who can afford it to make that up. I like it. It'll never happen but I like it.
• ericcumbee 12y ago
  If we just moved to be inline with the rest of the world that would be an improvement.
• cyorir 12y ago
  That could pretty quickly sour relations with a lot of other countries, if we were cutting our own tax unilaterally. Anything like this would preferably be coordinated with other countries. http://en.wikipedia.org/wiki/File:Effective_Corporate_Tax_Rate_OECD_Countries,_2000-2005_Average.jpg http://en.wikipedia.org/wiki/File:Effective_Corporate_Tax_Ra... http://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States http://en.wikipedia.org/wiki/Corporate_tax_in_the_United_Sta... http://en.wikipedia.org/wiki/Tax_rates_of_Europe http://en.wikipedia.org/wiki/Tax_rates_of_Europe
  • MrZongle2 12y ago
    What hasn't soured relations between the United States and other countries in the last 15 years? Changing our tax rates seems downright benign.
  • Symmetry 12y ago
    We could probably just stop trying to tax people in those other countries and they'd be happy enough to forget about the corporate tax thing, speaking of stupid US tax policies.
• jimbokun 12y ago
  How do we replace that 10%? According to your link, that would be about $280 billion per year.
  • stephencanon 12y ago
    Presumably by taxing dividends (and possibly capital gains, depending on who you ask) as normal income, and eliminating other quirks of the tax code that overwhelmingly benefit the wealthy.
    • nathos 12y ago
      Which is soon followed by the inevitable "but I was already taxed on this money!" wealthy investor complaint.
      • briandh 12y ago
        That does not follow. Complaints about double taxation on dividend income are based on the existence of corporate taxes.
  • patrickmay 12y ago
    Cut spending. Does anyone really think that 10% of what the federal government does can't be eliminated entirely?
    • carbocation 12y ago
      Roughly 100% of people agree with you, just not on which 10%, which is why that plan is prima facie untenable.
      • talmand 12y ago
        Across the board cuts for any programs with budgets above a certain percentage of the entire Federal budget. Basically a progressive budget cut to avoid small programs getting hit too hard.
• bduerst 12y ago
  I like your thinking, but there's a sliding scale (15%-35%), just like personal income tax, so that smaller businesses don't get hosed. Theoretically it would also be easy to game payroll and income taxes this way. You could essentially file articles of organization for a corporation with you as the sole shareholder, and have your employer pay your corporation your wages, instead of you directly. When it comes time to take money out, you pay a fat dividend with 15% dividend tax rate, instead of 35% income tax rate. There are of course some exceptions to this and it isn't possible in some states, but it would be possible.
  • bradleyjg 12y ago
    > When it comes time to take money out, you pay a fat dividend with 15% dividend tax rate, instead of 35% income tax rate. If we were to eliminate the corporate tax we'd need to simultaneously eliminate the preferred tax status of qualified dividends and long term capital gains. We'd also need to crack down on wage substitutes (aka fringe benefits). Still think it'd be a worthwhile tradeoff.
    • justincormack 12y ago
      The dividend tax rate is mainly there so as to avoid double taxation, so it would make sense to remove it.
• tsuraan 12y ago
  So, I create a corporate entity that provides my housing, transportation, other major needs. All my income is paid to this entity, which pays no taxes. I, as a biological person, get some basic stipend to cover daily costs, and live comfortably with all my necessities being paid by the corporate entity. How does the state collect any taxes at that point? EDIT: thinking a bit more, I guess sales taxes could still be collected. Could a government function almost entirely off sales taxes?
  • karmicthreat 12y ago
    Even now as far as the IRS is concerned you will personally pay tax on all of those services that were given to you. The IRS doesn't just tax cash transfers.
  • tedsanders 12y ago
    I believe that the housing, transportation, and other major needs would be taxed just like the income they replace. (Or should be, in any case.) This IRS page says that benefits are taxed like income: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Employee-Benefits http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employ... My mother is self-employed, and there are strict rules about deducting business expenses (like home office square footage) but not personal expenses (like the rest of the house's square footage).
    • tsuraan 12y ago
      Ah, very interesting. Thanks for the info!
  • aidenn0 12y ago
    What you just described is illegal. A corporation must act as an independent entity, not just be a shell around a single individual.
    • pessimizer 12y ago
      What about two individuals, or 40?
• bluthru 12y ago
  So not only are corporations super humans that have limited liability and now religious views, you don't want those extremely wealthy "people" to pay taxes, either? I'm open to a "first world tax rate" for corporations, but dropping it to zero would do more harm than good.
  • lotharbot 12y ago
    As long as the US has existed, there has been corporate personhood. The Supreme Court has argued it in terms of corporations being essentially groups of people acting together for a common cause, and noted that working together should not invalidate the rights to free speech, religious practice, entering contracts, etc. Chief Justice Marshall said it this way in 1830: "The great object of an incorporation is to bestow the character and properties of individuality on a collective and changing body of men." Key cases (you can find them all at http://supreme.justia.com/ http://supreme.justia.com/ ): Dartmouth College v. Woodward, 17 U.S. 518 (1819) Providence Bank v. Billings, 29 U.S. 514 (1830) Santa Clara County v Southern Pacific Railroad Company, 118 U.S. 394 (1886) United States v. United Auto Workers, 352 U.S. 567 (1957)
    • caseydurfee 12y ago
      Funny you didn't quote Marshall's much more famous saying about corporations in Dartmouth College v. Woodward: "A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it."
  • seanflyon 12y ago
    Taxes are a great argument against corporate personhood. People pay taxes on income, corporations pay taxes on profit. This is why so many corporations pay no taxes at all. If they want to be people they should pay income tax like the rest of us.
    • lotharbot 12y ago
      For most people, business expenses are paid by the employer and profit==income, but for some (the self-employed in particular) their business expenses come out of pocket and are deductible. Individuals actually end up paying taxes on profit, we're just used to wording it as income.
• rayiner 12y ago
  This is probably the best course of action. The teeth-gnashing over whether corporations should pay taxes should take a back-seat to whether it's practical to require them to. We have to acknowledge the race to the bottom that comes along with living in a globalized world. We don't have the leverage needed to tax these companies, and it's better if they stay here and don't pay taxes than if they move somewhere else and don't pay taxes.
  • mseebach 12y ago
    I agree with you, but I really don't like the term "race to the bottom" - it's is just a fear-mongering term for competition and the inconvenience and sometimes embarrassment that comes with the realization that something you thought you were good at can actually be done cheaper and better. "The bottom" is the best service/price tradeoff (with the desired service level delivered as efficiently as possible, ie. at the lowest price). Ireland luring businesses with a low tax rate and Americans and other higher tax countries complaining about a "race to the bottom" is much more similar to the creative destruction that takes place when say Postgres and MongoDB displace an expensive Oracle DB (and the reactions of both Oracle and high-tax advocates are pretty similar).
    • dllthomas 12y ago
      I agree that "race to the bottom" is often abused when all that is really at issue is competition. However, it is applicable when it's undermining ability to deal with externalities. When the pressure is "who makes their air unbreathable fastest", calling it a "race to the bottom" seems perfectly appropriate and like something we want to avoid.
• snowwrestler 12y ago
  That would not actually help small and mid-size businesses, most of whom are organized as pass-through entities and are therefore not subject to the corporate tax rate.
• kazinator 12y ago
  I'd be in favor of this zero rate, if, at the same time, all "corporate welfare" ended also: no coddling of corporations by the state. Also, no protective measures such as tariffs.
• amalcon 12y ago
  The corporate tax is the only disincentive to use corporations. There must be one, or the corporate veil will start to be used for trivial things. We see this already, even with corporate taxes, in e.g. patent trolls or Hollywood films. Small businesses are mostly proprietorships, partnerships, and LLCs anyway, which don't generally need to pay corporate taxes. Mid-sized businesses might be hurt by the corporate tax, though.
  • cynicalkane 12y ago
    The corporate tax is a terrible disincentive to make money. Wealthy entities that make money are more concerned with relative status than absolute status. On the other hand, the corporate tax is a great way to ensure corporations retain profits instead of paying them out, thereby making the corporations larger. This would all be obvious if people remembered rule 1 of economics, which is that actors respond to incentives.
    • dnautics 12y ago
      There are plenty of ways to make money without incorporating. I'd much rather eliminate the personal income tax and shift to user fees, and a flat corporate rate (a user fee for limited liability, if you will) and equal flat tarrif. But that's not popular for some reason.
      • audunw 12y ago
        Flat fees/taxes are unpopular because people tend to believe that the capitalist system is inherently unfair. For instance, a rich person who gets $100 can invest all of it, while a poor person must spend it on necessities. (And there are deep psychological drives and practical reasons that also cause most people to spend more irrationally when theyre poor as well) Theres also Pikettys argent that return on capital grows faster than the economy. But there are counter-arguments, and its always good to consider and experiment with new ideas, so believe what you will. But I think people have a prettty good reason for liking a progressive tax, even rich people like this. Personally I think the economy has deep flaws. Like private ownership of natural and limited resources being a thing (which i believe will cause wealth to consentrate in a counter-meritocratic way) and the transfer of money not accurately reflecting the value of intellectual "property" (transfer of money of physical goods, which money is supposed to model, is zero-sum. sharing intellectual products is not). So I welcome new thoughts. But I dont think anyone has the right solutions yet, and flat fees/tax isnt exactly a new idea.
• skywhopper 12y ago
  You would have to somehow balance it out against the fact that eliminating corporate income tax would invalidate a lot of incentives built into the corporate tax structure. No more flexibility for the government to encourage capital purchases or otherwise use tax policy as a policy driver. It would also decrease the incentive to invest in their own company because the cost of building a new factory or raising workers' wages or hiring more workers would actually increase. Think about it, if a company were considering giving all of its workers a $5,000 raise. In a world with a 30% marginal corporate tax rate, the actual cost to your company's bottom line of such a raise would be $3,500/worker, because you only pay tax on net income. But with a 0% tax rate, the cost would be $5,000/worker, that's a 43% bigger cost. Plus, presuming that personal income taxes would need to be raised by ~11% to make up for the loss of corporate income taxes, the workers are going to end up a lot less likely to get substantial raises. The benefits of eliminating the corporate income tax are going to have to be huge to make up for the disincentives it would create.
  • rthomas6 12y ago
    I don't know, I think a ~35% boost in profits for all profitable American businesses is pretty huge.
    • erichocean 12y ago
      If you had $100 in corporate profits now, you'd keep $65 and pay the government $35. If you got to keep all $100 in profits, that's a (100/65 = ~54%) increase, not 35%. So the effect would be even greater. :)
    • skywhopper 12y ago
      So if the corporation owners get a huge boost in profits, how does that benefit the country as a whole when the extra money is actually less likely to be spent on re-investment?
      • rthomas6 12y ago
        >the corporation owners By "corporation owners" you can only mean "shareholders" for publicly traded companies. My retirement is invested mostly in the stock market, as is most people's. I would benefit, and so would anyone else that owned stocks.
• encoderer 12y ago
  Honestly most small businesses pay taxes on their members' individual returns. Keep the corporate rate where it is, how about a non-refundable small business tax credit?
• ranran876 12y ago
  Another aspect of the corporate tax is that it in-effect is a secret tax. You see how much the gov't takes from you on your pay stubs, or your receipts at the store. But you don't see the effects of the corporate tax. I'd think it would be healthy too move to a model of looking at corporations are simply intermediaries for organizing people. Ultimately the money that flows into the corporation has to flow out either through salaries, dividens or sales - and the money should be taxed at those points. If you tax it in the middle people just end up thinking "oh, well they're taxing the evil corporates, so that's good!" without seeing the dampening effect on salaries and their investments. I understand that it's a bit simplistic, but I think the current model of hidding taxes is parasitic. You look at the insane sales taxes they have in Europe. They keep going up and the citizens don't really perceive it and so there is no push-back. Here in the US, when the sales tax goes up by half a percent people are up in arms.
• Alupis 12y ago
  I agree, maybe not 0% rate, however, instead of focusing on chastising and ridiculing companies that make [business smart] choices to alleviate their tax burden, we need to focus on fixing the core of the problem that promotes businesses to seek tax relief in the first place!
• sp332 12y ago
  Instead of 0, how about 20%? Right now the nominal rate for large companies is 35%, but they spend a lot of resources bringing the actual number lower. If we set the rate at 20%, then it becomes unprofitable for them to work so hard to avoid the tax. That means we get two advantages: companies can use that money for actual investment instead of dodging taxes, and the government might actually get more money since companies are dodging less and have more money to grow with.
• eqdw 12y ago
  Planet Money did a series on "policies economists would love and politicians would hate". One of their biggest suggestions was "eliminate the corporate tax rate and significantly raise income taxes on the high end". For exactly this reason, as well as what is said here https://news.ycombinator.com/item?id=8087103 https://news.ycombinator.com/item?id=8087103 The more money a company has, the more money they can use to employ people and be productive. The general public usually gets upset at what they see as severe profits to a corporation, but in general those profits aren't being "wasted" on the rich until they draw them out in salaries or dividends. It makes more sense to simply tax them at that point (at least, according to NPR)
  • dllthomas 12y ago
    It's worth noting that it's not corporate revenues that are taxed but corporate profits. Money that corporations use to hire people is not taxed at the corporate level. That said, "[t]he more money a company has, the more money they can use to employ people and be productive" is still true and relevant because money is fungible. It is just less extreme than if corporate taxes were applied to that money as well.
• Gustomaximus 12y ago
  Or table this with WTO, G20 or new body to set a minimum tax at a few key points like company tax and income. We're going to see increasingly mobile assets and company structures IMO so a global body working together to set benchmarks makes sense. The alternate seems to be countries will be stuck in a race to the bottom in trying to attract companies & talent.