December 5, 2015

TAX WHAT YOU DON'T WANT, NOT WHAT YOU DO:

Why the U.S. should cut corporate tax rates (Michael Hiltzik, 12/04/15, LA Times)

Big controversies often arise from big numbers, and on the surface the cost in U.S. tax revenue from the corporate tax avoidance scheme known as "inversion" looks like a big number: potentially $20 billion over 10 years, according to a congressional estimate last year.

But since the corporate income tax is projected to bring in some $4.5 trillion over the same period, inversions might cost less than half a percent of corporate tax receipts.

That suggests that the real issue for U.S. lawmakers shouldn't be the particular method corporations use to avoid U.S. taxes, but why they would go to such great lengths to do so. [...]

One hesitates to reward corporate tax shenanigans with lower tax rates, but the logic of restructuring U.S. corporate taxes to match our foreign rivals' has become inescapable. Says Kleinbard, "The right solution is worldwide tax consolidation at a fair rate" to shut down corporations' efforts to play one country's tax regime off against another's. The reform might reduce the U.S. corporate rate from 35% to somewhere in the mid-20s, he says, but the result will be a cleaner, fairer and perhaps even a more productive corporate tax.

Which begs the question of why we don't want corporations to maximize productivity.  Tax their consumption, not their profits.

Posted by at December 5, 2015 9:21 AM

  

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