Ideal Taxes Association

Raymond Richman       -       Jesse Richman       -       Howard Richman

 Richmans' Trade and Taxes Blog



Palin calls for elimination of corporate income tax
Howard Richman, 9/6/2011

In her speech in Iowa on September 3, which you can watch above, Governor Sarah Palin called for the complete elimination of the U.S. corporate income tax as a way to create jobs. She correctly pointed out that the corporate income tax sends American jobs abroad and that eliminating the tax would cause investment in America to surge.

At the same time that she would eliminate the corporate income tax, she would end corporate bailouts, corporate welfare and tax loopholes. She would do so partly as an anti-corruption measure. She argues that Obama is growing a corrupt system of "crony capitalism" in the United States.

She is correct about the self-destructive nature of the corporate income tax. We summarized the disadvantages of that tax with the following four points in our 2008 book Trading Away Our Future:

  1. It penalizes American workers in international markets. Because most of America’s international competitors have lower corporate income taxes, the high US corporate income tax makes US products less competitive and drives corporate headquarters overseas.
  2. It results in double taxation. The same corporate income that is taxed as profits is taxed again when distributed to shareholders as dividends.
  3. It violates the principle of equity. There is a violation of the principle of equity in that the short-term burden of the tax is on shareholders and the same rates apply to poorer and richer shareholders. The long-run burden of the tax is shared with workers and consumers, since it reduces investment and economic growth.
  4. It encourages borrowing over equity. The corporate income tax causes businesses to favor debt over equity, increasing the likelihood of business bankruptcy. (p. 136)

Three other changes would need to be made in the tax code when the corporate income tax is eliminated:

  1. The personal income tax rate on dividend income should be raised to the same rate that applies to normal income (or corporations would be used to convert normal income into dividend income).
  2. The capital gains tax rate should be raised to the same rate as other income, but only applied if the capital is consumed, and not taxed at all if the capital is reinvested -- the roll-over tax treatment of capital gains (or corporations would be used to convert normal income into capital gains income).
  3. Income earned by non-corporate partnerships should also go untaxed if reinvested (or partnerships would be discouraged in favor of the corporate form of business organization).

When concluding our case for the elimination of the corporate income tax at the end of Chapter 7 of our book, we wrote:

In our view, the optimum solution is to treat corporate earnings and partnership earnings the same. Neither should be taxed if reinvested. Once sheltered within a business, capital could then grow tax free until it is consumed. The corporation would assume a role similar to that of an Individual Retirement Account (IRA), a type of tax shelter that encourages savings and discourages consumption.

We want corporation income to go untaxed if it is reinvested, just as we want capital gains to go untaxed when the capital producing the gains is reinvested (see Chapter 5). Reinvested capital is future income that should be taxed in the future when it is realized and consumed. (p. 147)

Palin continues to show more economic common sense than any other potential candidate who has a chance to be president. She has a three-fold plan which would grow the American economy: (1) encouraging the drilling for our energy resources, (2) eliminating the corporate income tax, and (3) balancing trade.

Your Name:

Post a Comment:


Comment by Bill Patterson, 9/8/2011:

Ceaseless vetting, Books and ‘fact finders’, 24,000 emails forced open, fighting Obama since even before ‘Death Panels’ and long before a campaign . . .

I’m not sure when it happened, but I actually trust a politician.  Never thought I’d say that.  I hope I don't have a fever.




  • Richmans' Blog    RSS
  • Our New Book - Balanced Trade
  • Buy Trading Away Our Future
  • Read Trading Away Our Future
  • Richmans' Commentaries
  • ITA Working Papers
  • ITA on Facebook
  • Contact Us

    Archive
    Sep 2017
    Aug 2017
    Jul 2017
    Jun 2017
    May 2017
    Apr 2017
    Mar 2017
    Feb 2017
    Jan 2017
    Dec 2016
    Nov 2016
    Oct 2016
    Sep 2016
    Aug 2016
    Jul 2016
    Jun 2016
    May 2016
    Apr 2016
    Mar 2016
    Feb 2016
    Jan 2016
    Dec 2015
    Nov 2015
    Oct 2015
    Sep 2015
    Aug 2015
    Jul 2015
    Jun 2015
    May 2015
    Apr 2015
    Mar 2015
    Feb 2015
    Jan 2015
    Dec 2014
    Nov 2014
    Oct 2014
    Sep 2014
    Aug 2014
    Jul 2014
    Jun 2014
    May 2014
    Apr 2014
    Mar 2014
    Feb 2014
    Jan 2014
    Dec 2013
    Nov 2013
    Oct 2013
    Sep 2013
    Aug 2013
    Jul 2013
    Jun 2013
    May 2013
    Apr 2013
    Mar 2013
    Feb 2013
    Jan 2013
    Dec 2012
    Nov 2012
    Oct 2012
    Sep 2012
    Aug 2012
    Jul 2012
    Jun 2012
    May 2012
    Apr 2012
    Mar 2012
    Feb 2012
    Jan 2012
    Dec 2011
    November 2011
    October 2011
    September

    August 2011
    July 2011
    June 2011
    May 2011
    April 2011
    March 2011
    February 2011
    January 2011
    December 2010
    November 2010
    October 2010
    September 2010
    August 2010
    July 2010
    June 2010
    May 2010
    April 2010
    March 2010
    February 2010
    January 2010

    Categories:
    Book Reviews
    Capital Gains Taxation
    Corporate Income Tax

    Consumption Taxes
    Economy - Long Term
    Economy - Short Term
    Environmental Regulation
    Real Estate Taxation
    Trade
    Miscellaneous

    Outside Links:

  • American Economic Alert
  • American Jobs Alliance
  • Angry Bear Blog
  • Economy in Crisis
  • Econbrowser
  • Emmanuel Goldstein's Blog
  • Levy Economics Institute
  • McKeever Institute
  • Michael Pettis Blog
  • Naked Capitalism
  • Natural Born Conservative
  • Science & Public Policy Inst.
  • TradeReform.org
  • Votersway Blog
  • Watt's Up With That


    Wikipedia:

  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]