If you didn’t catch Glenn Hubbard’s New York Times op-ed, you might want to. It’s a critique of the president’s “bad economic ideas” and a few alternative proposals. I presume that Dr. Hubbard’s op-ed will elicit substantial counter-attacks.
The proposal that caught my attention was his first one:
The first is to move to a simple business tax system, with a lower marginal tax rate and no special industry preferences. There would be no separate corporate tax, only a single business income tax for all businesses. Ideally, investment would be expensed, and its cost deducted in the year it was made, rather than deducted gradually. Businesses would be able to bring back overseas profits free of additional United States taxes. A one-time modest tax on current overseas earning could be used to help finance reform. Such a business income tax would encourage both growth and investment opportunities in the United States, while offering more jobs and higher wages to American workers.
The emphasis is mine. I may be misreading that but it appears to me as though he were proposing that the income of partnerships, S corporations, and sole proprietorships as well as that of C corporations be subject to a business income tax analogous to the personal income tax. Leaving aside the constitutional questions in such a tax which, presumably, would be resolved in how income was calculated, it seems to me that the political backlash from such a proposal would be insurmountable. Every accounting firm, law firm, and medical practice would suddenly be subject taxes they don’t presently have. And it’s something the Congress can understand. Relatively few ever worked for a big company but lots of them are lawyers.
His proposal does have a sort of “if you can’t raise the bridge lower the river” sort of quality to it to the extent that eliminating the corporate income tax appears to be politically impossible however much economic and policy sense it might make. It will result in all income being taxed twice rather than just corporate income. I just don’t think it will fly.
Hat tip: memeorandum