Experts across the political spectrum agree that the corporate income tax should be reformed. The federal rate of up to 35 percent is the highest in the developed world.
John Steele Gordon, author of "An Empire of Wealth: The Epic History of American Economic Power," thinks the tax should simply be eliminated. Writing in The Wall Street Journal
, he offers several reasons why.
- It would simplify the tax system.
- "With suddenly increased profits, corporations would increase both dividends and investment in plant and equipment," Gordon explains. This would result in increased personal tax revenue for the government.
- "Stock prices, which are a function of perceived future earnings, would rise substantially. This would lead to a wealth effect and increased spending by consumers.
- "Much of the $2 trillion of foreign earnings, now kept abroad to avoid being taxed when repatriated, would flow into this country. That would greatly increase the country’s liquid capital. That, in turn, would cause interest rates to decline and investment in plant and equipment and new technology to go up, boosting the economy as a whole," he notes.
- "The U.S. would now have the lowest corporate income-tax rate." Therefore, Foreign corporations would invest more here.
- "Eliminating the corporate income tax would deal a blow to crony capitalism."
, chairman of Forbes Media, has advocated a flat personal and corporate income tax rate for years. "The federal tax code is beyond redemption," he wrote in Forbes earlier this year. "We should kill it and institute a flat tax."
And how would that work?
"My flat-tax proposal calls for a 17 percent tax rate for all, with generous deductions for individuals and families (a family of four would owe no federal income tax on their first $46,000)," Forbes said.
"And that's it — no tax on savings and no death tax. The federal corporate tax rate would be dropped to 17 percent, and capital investments would be expensed immediately."
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