22 ms·

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 ta

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.
maxk42 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. The current corporate income tax structure favors large bureaucratic institutions that can afford to pass the barriers-to-entry to avoid taxation. Thus small enterprises end up spending more on taxes than large institutions do: it's a regressive tax. Eliminating the corporate income tax would heal that inversion.

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.

maxk42 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. The current corporate income tax structure favors large bureaucratic institutions that can afford to pass the barriers-to-entry to avoid taxation. Thus small enterprises end up spending more on taxes than large institutions do: it's a regressive tax. Eliminating the corporate income tax would heal that inversion.