Some folks on the Left are starting to question the corporate income tax, recognizing what economists have known for years, that a lot of the tax is paid by consumers, making it more regressive than just (say) punishing Exxon for being large and productive.
There are many other reasons to hate the corporate income tax
- It does not raise very much money
- Its administrative costs (think corporate tax attorneys) is very high
- It is hugely distortive. The tax preference for debt over equity helped drive the LBO boom, for example
- It is the font of much corporate welfare and cronyism. A LOT of political paybacks get made within the corporate tax system
So here is my simply two-point plan
- Eliminate the corporate income tax. Entirely
- Tax dividends and capital gains as regular income on individual tax returns
Done. All corporate profits get taxed but only when they pass through to individuals as capital gains or dividends. I think this would actually raise more money but rates could be adjusted (or better yet deductions eliminated) if needs to keep it neutral.
I believe the economic benefits of this would be immediate and substantial.
Of course, corporate tax attorneys are rich and powerful and would cut their throats to stop this. It would be enormously entertaining to see them try, and in turn see what the reaction of their clients was to this.