Why Not Abolish The Corporate Income Tax

In keeping with President's Obama's avowed interest in bi-partisanship and the obvious need to reform the Federal income tax laws here is an example of what he might do when his re-election is safely bagged, beribboned and under the White House Christmas tree.

　

First, though, to be bi-partisan tax reform ought to focus on a political balance of items. If each item requires either Democrats, or Republicans to yield something to the other, the package can be fairly colored bi-partisan. 

The hardest part, though, is finding a changes that both simplifies the tax code and is fair to taxpayers. Also, given these days of deficits to the horizon, it should add up as revenue neutral.

So, what should the Dems offer? I propose, in total violation of my progressive bent, complete elimination of the Federal Corporate Income Tax.

I can hear my fellow liberals now: "What! Corporations not pay their fair share? Why they can and should pay more, not less, and certainly not nothing!"

My answer to that: When did our corporate citizens ever not successfully connive, cajole or otherwise conveniently find their way to tax avoidance? Corporations, especially the ones that dominate their markets, have both economic and political clout. What they can’t pass on to the public in higher prices they whittle away by constant lobbying of the Congress. "Little" companies, meanwhile, have banded together and whined their way to tax credits, subsidies paid by the rest of us ($56.5 billion in 2001).

Abolishing corporate levies would hugely simplify the job of the IRS and the accounting tasks of those corporate entities still unable to avoid being tapped for taxes ($153.6 billion in 2001). Once all reason for loophole lobbying vanishes from Washington, companies will have one less major reason to drum up cash for politicians. They can concentrate on competing at home and abroad with one less cost to cover when pricing their products and services.

Some of our corporate citizens might even forsake their Carribean tax shelter headquarters and come home to America.

What should the GOP give up that would delight Democrats and make up for the loss of revenue from corporate coffers? How about keeping the inheritance tax for estates in excess of, say, $5 million, indexing that threshold amount for inflation, instead of letting that long standing tax expire as republicans so earnestly desire.

Unfortunately, the inheritance tax is only about one seventh of what is needed for revenue neutrality. I suggest another, higher tax bracket for personal incomes, calculated to raise the plugging figure needed for neutrality. That should be as painful to the GOP as abolishing the corporate income levy would be to Democrats.

Nor does this "complicate" the income tax law. Picking from among four brackets is harder than choosing the right one from three? Please. Not even Turbo Tax programmers can complain.  But if this doesn't float your boat, how about a carbon tax on businesses of a certain size?  We could install a gradual rise in the gas tax, too, to pay for the better, more intelligent roads we are going to need and to compensate for the smarter, more economical cars that are coming our way.  I suppose it is too utopian to plump for a taxation of legalized marijuana.   

Tax time could thus be vastly simpler for business, more progressive hence fairer to all individuals and easier on the heirs of small businesses and family farms while continuing to strip the excessive part of their unearned wealth from undeserving heirs.

This approach to compromise deserves a name.  Call it the Chinese Menu Scheme.  Pick a simplification from Column A and an Offset from Column B and enjoy a fair and balanced outcome. 

And there remains plenty more for future Congresses to do: Social Security, Medicare and budget and trade deficits to the horizon for openers. Maybe even more compromises on the income tax code.