Tax Lawyer's Blog

Michael Boskin of the Wall Street Journal says it’s time to get rid of the corporate income tax:

President Obama has put tax reform on the agenda, but surprisingly little attention is being paid to fixing the most growth-inhibiting, anticompetitive tax of all: the corporate income tax. Reducing or eliminating the corporate tax would curtail numerous wasteful tax distortions, boost growth in both the short and long run, increase America’s global competitiveness, and raise future wages.

The U.S. has the second-highest corporate income tax rate of any advanced economy (39% including state taxes, 50% higher than the OECD average). Many major competitors, Germany and Canada among them, have reduced their corporate tax rate, rendering American companies less competitive….

I agree with Boskin and said so in a blog post I published back in January 2009 titled Repeal the Corporate Income Tax and Bring those Jobs Back Home:

If it is true that U.S. corporations have operations in tax haven countries because they want to save taxes, then that fact supports the argument that eliminating corporate taxes would bring jobs back home.

Clearly, a zero corporate tax rate would mean no more off-shore tax shenanigans. 

Even if we weren’t in dire economic straits, a zero corporate tax is the right thing to do because large, successful corporations already contribute greatly to the public weal. First, they do so by creating employment that creates wages that are taxed at the source through withholding. Second, they do so because their corporate profits are taxed when they are distributed to their shareholders in the form of dividends.

I say we kill two birds with one rock by eliminating the corporate income tax and thereby eliminate the corporate use and abuse of offshore tax havens.

Now for the reality check.

For the last quarter of a century anti-corporatism – a close cousin of soak-the-richism – has been a highly effective political weapon for the Democrats. It’s unlikely they’ll voluntarily relinquish it by voting for the abolition of corporate taxes. 

And even though a repeal of the corporate income tax might be the right thing to do for the country and the economy, Democrats won’t be able to vote for it without angering their base - a base that thinks corporate America deserves to be punished.

Related Posts:

• Increase Corporate Taxes, Says Obama Chief Economic Advisor
• Ways & Means Chairman Charlie Rangel Wants to Reduce Corporate Tax Rate to 28%
• Should we Kill the Corporate Income Tax? One Man’s Argument for Assassination
• U.S. Corporate Tax Second Highest of 30 OECD Nations
• The GAO Study on Corporate Taxes and the Scapegoating of Corporations

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