There is much talk about increasing corporate income taxes (which represents about 9% of all Federal revenues). But consider that today the amount that we collect (as a percentage after credits and special tax breaks) is close to the total amount collected in other countries. How about this proposal: Let’s make the corporate tax rate (foreign and domestic) a flat 10% (instead of the nominal 35% today). You get zero tax loss carry forward. If you lose money one year you eat it. If you make money the next year you pay 10% of your profit (sorry General Electric). Very simple and we will spend far less on tax accountants and attorneys.
This should give an advantage (on one of many factors) to US companies and should result in more jobs being created in the US rather than abroad. But let’s make up for lower tax revenues on the back side. For individuals let’s increase both long-term capital gains rates and corporate dividend rates from 15% to 22%.
The value of the S&P and the Dow would immediately go up on this news. This would result in optimism not seen in years and this alone would translate into optimism of CEOs deciding whether to open a new plant or not in the US. We would collect more revenues from these categories (in total) and we would create far more jobs.
An interesting new college model - Minerva
10 years ago
I'm trying to figure out how to make your proposal any more simple-minded than it already is, but I'm coming up blank.
ReplyDeleteHate to break the news to you, but tracking NOL carry-forwards is not all that complicated and eliminating them will simplify the tax code by (estimate here) nearly zero. Your plan taxes net profit just like the current tax code does, so your plan calls for every single deduction, credit, exchange, recapture and so forth just as now...well, with the lone exception of not having losses carry-forward.
As for taxing foreign corporations, how do you plan do do that when the tax rates in their own country exceeds your proposed 10%...tax treaties and all those pesky details coming into play?
Tracking NOLs is the easy part. Tracking all the special tax credits is another matter all together. The major advantage of my proposal is that corporate jobs will be driven back to the US from locations that have a higher corporate tax rate. But again I am willing to make it up with higher corporate dividend rates and higher individual long-term capital gains tax rates so that Warren Buffet can pay a higher tax rate than his secretary but the after tax income for his corporations would be higher.
ReplyDeleteHat to break it to you Eric - but every corporation has to pay corporate income taxes on every country they operate in. Sometimes there is double taxation and sometimes not depending on the structure of the tax treaties between the countries. The US already taxes foreign corporations that do business in the US - do you understand this Eric?