December 29, 2014

TAX CONSUMPTION, NOT PROFITS:

Top 10 Reasons to Abolish the Corporate Income Tax (JOHN STEELE GORDON, Dec. 29, 2014, WSJ)

What positive effects would abolishing the corporate income tax have? Many. Here's my Top 10:

First, that engine of tax complexity disappears. And with it disappears an army of lobbyists in Washington working to get favorable tax treatment for corporations.

Second, corporate managers are currently most concerned with after-tax corporate profits, because that is what the stock market cares about. But after-tax profits are largely an artifact of lobbying success in Washington. With no corporate income tax, management would concentrate on what is now pretax profits, an artifact of actual wealth creation.

Third, there would be no reason to tax dividends at lower rates to compensate for the fact that they now are paid out of after-tax profits. They would be taxed at the full rate, removing a perennial tool of leftist demagoguery.

Fourth, with suddenly increased profits, corporations would increase both dividends and investment in plant and equipment, with very positive effects for the economy as a whole and increased revenue to the government through the personal income tax.

The main reason is that Republicans will trade corporate taxes for taxes on consumption.

Posted by at December 29, 2014 9:38 PM
  

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