Why Eliminate the Corporate Income Tax?

H/T John Taylor at TertiumQuids

Three reasons:

1) Corporations don't pay taxes, they collect them. The taxes they pay are collected from their consumers.

2) There are many states (California, Oregon, Michigan, New York, Rhode Island, New Jersey just to name a few) that are losing their business base as fast as companies can relocate their headquarters. Apparently, the politicians in those states do not understand the well-chronicled history of people and businesses voting with their feet by leaving high-tax jurisdictions for low-tax jurisdictions. Virginia should be contacting Google, Cisco Systems, Apple, etc. with the good news that we just eliminated our corporate income tax and that Virginia is a business friendly place to bring jobs.

3) The U.S. has the second highest corporate tax rate in the world among the developed countries . As long as we do, we will continue to watch our jobs go overseas. This is the inevitable and foreseeable consequence of really stupid tax policy. If we continue the insanity of taxing productive activity and organizations that provide jobs, we will continue to see less of both.

Flat Tax or Fair Tax - We Need One or the Other

10% Flat Tax across the board. No deductions, no exemptions. Paid quarterly. Everyone pays.
If you want to access the "real cash" flowing daily in America, a 10% National Retail Sales Tax will get anyone who buys stuff. A VAT will only add to the base cost of goods, and will be passed on to the consumer.

Repeal the Sixteenth Amendment
by Paul Moreno
01/14/2010

One hundred years ago, Congress sent a constitutional amendment to the states to permit the federal government to tax incomes. The pressure for an income tax had been building ever since the Supreme Court declared the 1894 income tax unconstitutional -- as a “direct” tax, it had to be apportioned among the states according to population. Such apportionment would defeat the principal aim of the tax’s southern and western Populist proponents, which was to shift the tax burden onto the high-income states of the Northeast.

In 1909, these Populists wanted a corporate income tax as well as a personal income tax. The story goes that the conservative Republicans, led by Sen. Nelson W. Aldrich of Rhode Island, agreed to enact a corporation tax but let a personal income tax depend on the ratification of a constitutional amendment -- one that they were confident the states would not ratify. Aldrich openly stated that he would vote for the corporation tax in order to defeat the income tax.

To the Republicans’ surprise, the states quickly ratified the Sixteenth Amendment, and we have both corporate and personal income taxes.

The income tax, as its opponents a century ago predicted, has become a monstrosity. It has spawned a system of special privileges and penalties as Congress uses it to promote and discourage all sorts of policies that have nothing to do with raising revenue, nothing to do with the Constitution’s grant of power to “collect taxes… to pay the debts and provide for the common defense and general welfare of the United States.”

The income tax is also the source of our deranged health-insurance system. During World War II, the government prohibited employers from competing for workers via higher wages. Instead, employers began to offer health insurance as a tax-deductible fringe benefit.

The ridiculously arcane tax code has spawned entire industries, costing billions of dollars, in which individuals and businesses lobby for exemptions, try to exploit loopholes, or simply struggle to comply with the code. The system is so ridiculously complex that the Secretary of the Treasury (the chief tax-collector) and the chairman of the House Ways and Means Committee (the chief author of the tax law) can claim that they failed to pay their taxes because they didn’t understand the tax code.

Our dysfunctional tax system has led many to advocate a radically simplified “flat tax.” Others call for the abolition of the income tax and adoption of a national sales or “value-added” tax (VAT). Conservatives dislike the VAT idea because, as an indirect and hidden tax, it makes it much easier for the government to raise taxes. Liberals dislike the VAT because it is regressive, taxing everyone’s consumption equally, rather than falling more heavily on the rich.

The problem is that, like Nelson Aldrich, we will end up with both an income tax and a VAT. Indeed, that could happen even if we did repeal the Sixteenth Amendment. A good argument can be made that the amendment was unnecessary, because Congress had always had the power to tax incomes, and it was the Supreme Court that got it wrong when it struck down the 1894 income tax. The federal government had collected an income tax during the Civil War, which the Supreme Court upheld (at least with regard to professional earnings) in 1881.

So, to be really certain, we need to amend the Constitution in such a way as to prohibit income taxation.