Erstwhile Obama Administration “auto czar” Steve Rattner takes to the opinion page of the New York Times to argue that it’s time to end the corporate income tax. Reacting to the same news I commented on earlier he writes:
A more ambitious, and therefore more politically difficult idea, would be to scrap our unworkable corporate tax system altogether and instead tax shareholders, first by eliminating low tax rates on capital gains and dividends.
That would offset only a small portion of the loss of corporate tax revenue (a projected $350 billion in 2015), so we should raise the balance by eliminating loopholes enjoyed by wealthy Americans, increasing rates on their earned income and potentially introducing new concepts, such as taxing gains on investments as stock prices rise rather than when they are sold.
The wealthy need not fear; eliminating corporate taxes would lead to a jump in business earnings and, consequently, stock prices. That would encourage similar actions by other countries. Otherwise, their companies might move here to enjoy a zero corporate tax rate.
Higher stock prices would also help pension funds, foundations and other tax-exempt institutions focused on social betterment.
While eliminating corporate taxation would be branded a giveaway, properly engineered reforms would provide a huge uplift to ordinary Americans.
It’s heartening to see a Democratic Party apparatchik like Mr. Rattner getting behind eliminating the corporate income tax. As best as I can tell, it presently serves mostly to give large corporations that can afford armies of tax attorneys and accounts and are able to engineer exemptions for themselves a competitive advantage over small and medium companies that don’t have the resources to do the same thing.
Just as a reminder, the U. S. has the highest marginal effective tax rate on corporate investment of any OECD country.