Disappearing Corporate Income Tax
Ways and Means, The Disappearing Corporate Income Tax, February 11, 2020
If the Corporate Income (nee Profits) tax disappears, we shall not mourn it at the Center for Fiscal Equity. A border adjustable credit invoice value added tax (I-VAT) raises money more efficiently. Because it has a labor component, industry specific offsets to profit taxation cannot pass the smell test. This is especially the case with a standard deduction of $75,000 on individual income.
A subtraction VAT would be the vehicle for distributing tax expenditures for family size, health, retirement and education to workers and their families. An S-VAT is no harder to collect than payroll and income taxes for workers. The only employee reconciliation required is reporting issues with reporting the child tax credit for families with two working parents.
An asset VAT separates out collection of taxes on corporate income, capital gains, interest, rent, pass-through income, inheritance and dividends at point of sale rather than through self-reporting. This allows a simplified income tax to on high salary income, either on a stand-alone basis or as higher tiers of a subtraction/net business receipts tax.
A collection of consumption taxes will ease collection and preserve progressivity, especially including subsidies for workers and their families. Please see Attachment One for our current plan.
The Tax Cut and Jobs Act unified the tax rate on capital gains and returns at 21% (adding Affordable Care Act and Pease provisions increases the rate to over 23%). Rates in capital have been bouncing from 50% (pre- Reagan) to 28% (1986 tax reform, which was paid for by higher corporate rates) to 31% (Bush 41) to 39.6% then 28% (Clinton) to 20% (Bush 43) to 25% (Obama with ACA and Pease). Repealing ACA taxes and Pease and setting the rate at 24% as a bipartisan compromise will put us all out of business.
The proposals offered today for a 28% corporate profits tax on domestic and international flows are too high to be stable. A 24% rate (20% of invoice) will avoid this.
A plan with both consumption and high rate income taxes has many proponents, including the Generation X Committee, the Center for Fiscal Equity, the American Action Forum, Michael Graetz, Lawrence B. Lindsey, Bruce Bartlett and Tax Policy Center Directors William Gale and Len Burman. Perhaps it is time for legislation.
Sadly, no real change will occur until wealthy families are made to realize that our future debt bomb (caused by net interest, not entitlements) falls on future high rate income tax payers, AKA their heirs. There is no per capita debt because there are no per capita taxes.
May we suggest a hearing in liability and ownership of the national debt? We are about to release an updated edition of our monograph Squaring (and Settling) Accounts: Who Owns the Debt? Who Owes It? Attachment Two contains and excerpt.
If the Corporate Income (nee Profits) tax disappears, we shall not mourn it at the Center for Fiscal Equity. A border adjustable credit invoice value added tax (I-VAT) raises money more efficiently. Because it has a labor component, industry specific offsets to profit taxation cannot pass the smell test. This is especially the case with a standard deduction of $75,000 on individual income.
A subtraction VAT would be the vehicle for distributing tax expenditures for family size, health, retirement and education to workers and their families. An S-VAT is no harder to collect than payroll and income taxes for workers. The only employee reconciliation required is reporting issues with reporting the child tax credit for families with two working parents.
An asset VAT separates out collection of taxes on corporate income, capital gains, interest, rent, pass-through income, inheritance and dividends at point of sale rather than through self-reporting. This allows a simplified income tax to on high salary income, either on a stand-alone basis or as higher tiers of a subtraction/net business receipts tax.
A collection of consumption taxes will ease collection and preserve progressivity, especially including subsidies for workers and their families. Please see Attachment One for our current plan.
The Tax Cut and Jobs Act unified the tax rate on capital gains and returns at 21% (adding Affordable Care Act and Pease provisions increases the rate to over 23%). Rates in capital have been bouncing from 50% (pre- Reagan) to 28% (1986 tax reform, which was paid for by higher corporate rates) to 31% (Bush 41) to 39.6% then 28% (Clinton) to 20% (Bush 43) to 25% (Obama with ACA and Pease). Repealing ACA taxes and Pease and setting the rate at 24% as a bipartisan compromise will put us all out of business.
The proposals offered today for a 28% corporate profits tax on domestic and international flows are too high to be stable. A 24% rate (20% of invoice) will avoid this.
A plan with both consumption and high rate income taxes has many proponents, including the Generation X Committee, the Center for Fiscal Equity, the American Action Forum, Michael Graetz, Lawrence B. Lindsey, Bruce Bartlett and Tax Policy Center Directors William Gale and Len Burman. Perhaps it is time for legislation.
Sadly, no real change will occur until wealthy families are made to realize that our future debt bomb (caused by net interest, not entitlements) falls on future high rate income tax payers, AKA their heirs. There is no per capita debt because there are no per capita taxes.
May we suggest a hearing in liability and ownership of the national debt? We are about to release an updated edition of our monograph Squaring (and Settling) Accounts: Who Owns the Debt? Who Owes It? Attachment Two contains and excerpt.
Attachment One - Tax Reform, Center for Fiscal Equity, November 13, 2019
Attachment Two – Excerpts from Squaring (and Settling) Accounts: Who Really Owns the National Debt? Who Owes It? - December 2019
posted by Michael Bindner at 10:00 AM
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