A case for dropping corporate income tax
Another tax filing deadline has passed, and with it a significant anniversary: the federal income tax now is 100 years old.
The tax has passed the century mark with no signs of old age, so don’t expect it to die a natural death. But here is an unusual suggestion that might not initially excite individual taxpayers: Eliminate the corporate income tax.
While the U.S. has the highest corporate income tax rate among industrialized nations – 35 percent – the tax collects at a rate about half that. In 2011, corporate income tax collections totaled $181 billion. That same year, corporations took advantage of tax breaks worth $181 billion.
That helps explain why 2,221 organizations pay 6,503 lobbyists to lobby members of Congress on taxes.
Compared to the more than $1 trillion people paid in income taxes that year, the corporate income tax didn’t raise much revenue. And the corporate tax isn’t likely to hit richer companies – or individuals – any harder than poorer ones.
All those tax lobbyists, plus tax lawyers, tax advisers and accountants, cost money. Those with the most money can lobby for the biggest tax breaks and take advantage of them the most.
Plus, taxes on corporate profits hit a working-class stiff who invests in a few shares the same as an investor-class heir. Taxing corporate income only as it is distributed to shareholders would allow the income to be taxed using the same sliding scale as ordinary income, meaning a Paris Hilton would pay more than a Joe Lunchbucket.
Also, the easiest, and perhaps fairest, way to eliminate corporate tax loopholes would be to drop the corporate income tax. This would simplify the work of the Internal Revenue Service. Eliminating the corporate income tax and the loopholes it can spawn also would get a big chunk of money out of politics.
Congress still would face lobbyists seeking to manipulate regulations to favor one corporation or hamper another, but that’s a subject for another editorial.