Call To Lower the Corporate Tax Rate

Well, I’ve heard many times that it’s “time” to lower the coprorate tax rate here in America. People point to France and President Sarkozy and how he wants to lower the tax rate for businesses to 20%.

I hear all the time on CNBC with rhetorical questions like “Is France better for business than America?”

I know it’s been debated a lot and fought over, but it’s a little more recent.

Personally, I wouldn’t mind seeing it lowered, but I’d like to see all the companies paying that tax rate, with little to no exceptions.

Even better, we could keep the tax rate and enforce the 40% and use it for universal health care!
only kinda kidding
For what it’s worth, here’s a link to one of Brain Glutton’s many threads. This one concerns Sarkozy as well.

There should be no corporate taxes. They make little to no economic sense. Just tax individuals and/or purchases, although I do think that there need to be watchdogs for corps providing housing and so forth (i.e., stealth raises).

OK, then let’s also agree that corporations are not fictional legal persons, and are not allowed the benefits of incorporation as well as the liabilities.
They do not pay taxes now. Many corps get millions back. Many move their headquarters abroad and avoid taxes. It is a scam.

It’s pointless to tax corporations because they are economic producers. Taxing them only reduces economic performance across the board and gives an advantage to other types of businesses which are less welcoming to small investors. While Mom-n-Pop probably won’t benefit one way or another, it raises the profile of private partnerships and so on; they have to pay money on all their income once. The corproation has to pay it once, but since a very large chunk of it will go out again as salaries, their employees essentially get taxed on the same money again. It’s wiser to not tax corporations; this will encourage them to raise salaries via competition. Those salaries will then be taxed in the usual manner. Everybody wins in this scenario: the govenrment gets its money (in fact more money - see below), the employees get more, and the corporation shifts a huge burden off its shoulders.

Plus corporations have ample reasons to avoid taxes. This actually hurts them and the economy, but it’s better than paying the taxes. Firms are more likely to move overseas and less likely to expand, since they have less capital to work with. And the govenrment is never going to close its loopholes. Plus, why shouldn’t they find tax loopholes, anyway? It’s pegal, and it’s not like they have some moral imperative. The 11 Commandment ain’t “Thou Shalt Not Avoid Paying Your Taxes When The Tax Law Writers Are Idiots.” Individuals certainly adjust their investments and opportunities to reduce their tax burden, and like corporations, they sometimes have to do things which would otherwise be a bad deal for them.

In short, money shoudl onyl be txed when it goes through private hands. You could tax corporations, but only if everyone everywhere worked at a corporation, which is certainly not true.

Why would not taxing corporations cause them to increase salaries? Are you suggesting that just because they have more disposable income they will pay more than they need to to attract staff?

I am not the knowledgeable about this topic.

However, the idea of taxing income (personal or corporate) seems flawed to me. What about foreign companies or ‘Amercan’ companies based overseas? What about outsourcing? Those wages aren’t taxed.

Why not tax sales and services only? That way if you’re based in Podunk Island offshore but sell your stuff in the U.S. then you have to pay tax on what you sell. If you don’t even make money you will still be taxed per unit of what you sell. This cost will be passed on to the consumer, of course, but everyone is on an equal footing.

Is there something wrong with this? What are the flaws?

Well…there is one thing…it is implementing it now. People with savings were already taxed on that saved money and would therefore be taxed again after it is implemented…but that is an issue with switching, not the idea itself.

We need to reign in corporations, not eliminate them altogether. As for the OP, I’d be in favor of eliminating the corporate income tax if we closed loopholes and taxed individuals on everything, AND I MEAN EVERYTHING, that they take out of the corporation personally, up to and including using the company phone line to make a long distance call to his or her grandmother on her deathbed in the nursing home. It would create an accounting nightmare, you say? Well, they can pay for their new accountants with their corporate income tax savings. It would cause executives to run the money through overseas shell corporations, you say? Fine, then make such executives give up their US citizenship.

So are people.

This old argument had more foundation when corporations actually paid taxes and they actually created jobs here. Now they loot the system for all they can get under the guise of being competitive.
We have to transfer all our jobs to Indonesian sweatshops or Chinese prison labor to compete with Wal Mart. I think there is another answer.
This article shows how far corporations go to avoid paying taxes . They cheat like hell. No corporation should get money back from the govenrment like the top corporations do.

Yes they are. I’m too lazy and in an airport with questionable reception for my air card, but yes, corporations and workers who work overseas are taxed. There are tax treaties between nations that avoid certain double taxation, but that’s mainly for people, and not corporations. My company has a whole team of lawyers and multiple different corporate entities dedicated to reducing tax liability. I do know for workers who work exclusively and live overseas that they will have a tax liability in the US (I know, because it’s happened to me).

I totally agree with this. I’m not a big believer in tax (and then again, I’m not a big believer in big government), so I’ll tell you my bias right now. However, logically speaking, as someone who does not like to waste, the best tax is to tax consumption – a mirror solution to what you’re suggesting. That way, all those “rich” people spending things that others find “offensive” will have to pay a tax for it. Make the tax a flat percentage and you force producers to cater to different segments of the population and the market, or you force producers to sell as cheaply as possible to minimize tax liability.

The problem with this is that it’s a regressive tax, though, I don’t buy it. The theory is that poorer people are buying more disposable goods and make many more daily purchases, so they are being taxed more often. Since they don’t have as much income to begin with, they pay a lot more in taxes, relative to their income. However, in my scenario, I would give the poor (a congressionally mandated defined term) a rebate for a certain amount of the taxes they paid, hell, I’ll even make it progressive (well, the poorer you are, the greater the rebate).

The only other problem with this scenario is that there is a huge industry dedicated to taxes, which actually require the tax code to be more complicated to justify the existence of these people (lawyers and accountants, not to mention all those employed in the IRS). Perhaps these people can be retrained to administer a universal health care of some sort.

Then do away with C-Corporations and force everyone into S-Corporations.

S-Corporations do not pay corporate tax. All shareholders pay tax based on their own tax rates.


The first part I was thinking of foreign companies selling in the U.S. or U.S. companies using foreign labor. Those foreign workers do not pay U.S. tax which they would if they were U.S. workers.

Regressive…you’re right but could be easily fixable like you suggested making it non-regressive. You could also omit certain things from tax like some groceries, clothes under a certain $ amount, medical, mortgage under a certain amount…to make it non-regressive.

I thought of another flaw…a black market type thing. If such a tax came through and spending not decreased on all levels of government then the % tax would be relatively high (I don’t know 20-30% a good guess?). That would tend to spur under-the-table dealings. However, I can’t imagine it would be less efficient (more cheating) than the current system.

We’ve had many threads on this. The first problem is that rich people don’t consume that much of their income. Even the deductions that are commonly mentioned make the tax regressive, and you have the problem of a big jump in tax rates when you cross income boundaries.

The second problem, and I heard this from retailers during a debate on the radio, that effectively increasing prices by 30% will cut sales of products with elastic demand. It may be true that you get the money back come tax time, but you might buy 1 CD instead of 2 if they’re all 30% more expensive.

Third, in the current system most income reporting is done by large companies directly to the government. Cheating requires faking deductions, etc. in these cases. I have a hard time seeing how it wouldn’t be easier to cheat in a flat tax system. For example, there is a lot of cigarette smuggling in the east, because states with low taxes aren’t far from states with high taxes. It would be a lot harder to enforce than the tax code.

A number of people have mentioned possible fixes for the problems I cited apparently thinking I might come in and argue. I don’t like all of them or all of them, equally, but many of them wouldn’t be bad.

I don’t have a problem with current corporate structure, however. The plain fact is they don’t have vast power over the political system, because for any corporation on one side of an issue you find there’s another one who wants the exact opposite. Whenever they do try to control something they generally wind up looking like idiots in public. The real winners from favors and all aren’t the corporations, but the politicians and lobbyists who take a fast percentage.

Some will go to raises to pay for more and better employees. Some will pay better dividends to more to get more investment. Some corporations will pay down debt to better their financial situation. And all of these are very good for everyone in the economy.

Now, some companies will try to pay its board or their favorites mucho more money. These companies aren’t adhering to their financial responsibiltiies and will tend to lose ground over time to thsoe making wise investments or hiring better staff. It’s pretty much what happens right now, just magnified because of the windfall.

I don’t know Voyager.

In the area I grew up (think MT and ND), I suspect sometimes that fully half the economy is underground. Meaning that people are paid in cash and not reported as income. Both methods (probably all) are vulnerable to cheating but I don’t think it would be more vulnerable than the current method.

However, the regressive nature is a problem, I agree.

I wonder what the most effective, cheat resistant less obtrusive method of taxation would be? Property? Hard to hide…you own this building? OK, here’s the tax. Tax not paid on this piece of property…ok it is seized. Hard to hide…hard to cheat…but doesn’t solve the problem of offshoring. Just relocate out of the U.S. and send product in…no taxes. Therefore a bad method, IMO.

Wealth tax? same. Move yourself/move wealth offshore.

A tax system needs to solve this offshore issue to be effective. I was throwing that idea in a previous post out against the wall and see if it stuck :slight_smile:

The Times had an article on the result of a program that encouraged companies to bring money back onshore with tax relief. It was supposed to increase jobs in the US, but actually big Pharma, who most.utilized this program, laid off 10K people (though they claim they increased the amount of research.) They played other games also.

Companies are only going to give the raises they must give for retention. No company wants to get into a pay race with its competitors, after all. You’ll wind up paying more for the same level of employee. More profits, for sure. They will only pay down debt or buyback stock if the return on investments is less than the interest rate on their debt. Buying back debt by itself may not improve your business position at all.

We’ve had excellent corporate profits for some time now, but we’re just beginning to see an increase in salaries to match. I suspect this may be because there are a lot of people waiting to jump ship until the job market improves, which it is finally doing.

I posted something on this earlier when I was in the airport. I log on now and I don’t see my post. Since I don’t feel like re-researching everything, I’ll just say that foreign workers who actually work here, as well as foreign workers who come over here (but are otherwise salaried over here) and work (take meetings, answer e-mails, make calls, etc.) also get taxed as if the source of income is derived here. If a foreign company sells something in the US, they will be subject to the US tax code.

I don’t think the black market is as huge as you think it is. Go to Australia where they have like a 17% GST tax, and then you’ll see a bunch of work under the table.

The GST in Australia is 10%.

I also liken this a lot to a professional sports league, like, let’s say, the NFL.
The owners are multimillionaires and they’ve got these sports teams either as money-making ventures, or as hobbies (generally speaking). The NFL is incredibly profitable and money is coming in like crazy from everywhere: revenue, memorabilia, concessions, etc.

The players’ union, as weak as they are now, got the wages fluffed up so not all that money goes straight to the owner.

A lot of people would be for lowering the corporate income tax if it were also stated that the workers’ wages would increase and all the “savings” wouldn’t go straight to the top.

There’s give and take, and it seems that there’s an awful lot of take coming from the top.