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xchrom

(108,903 posts)
Mon Jan 13, 2014, 07:43 AM Jan 2014

4 Reasons Why the Corporate Income Tax Should be Doubled—Not Abolished

http://www.alternet.org/economy/4-reasons-why-corporate-income-tax-should-be-doubled-not-abolished



***SNIP

1. Corporations Have a Proven Record of Spending Tax Breaks on Themselves

The evidence comes from 2004, when a "repatriation holiday" allowed corporations to bring their profits home at a much-reduced tax rate. But they used over 90% of the money to "enrich shareholders and executives" by paying dividends and buying back their own stock. At the same time, they cut jobs and research spending. A Senate subcommittee called the whole affair a "failed tax policy" that shouldn't be repeated.

***SNIP

2. They Only Pay Half of Their Tax Obligation

Mr. Kotlikoff claims that "the United States may well have the highest effective marginal corporate income tax rate of any developed country." But the effective rate in the U.S. is not high at all, and it keeps dropping. For over 20 years, from 1987 to 2008, corporations paid an average of 22.5% in federal taxes on their profits. Since the recession, this has dropped to an outlandishly low 10% -- even though their profits have doubled in less than ten years. Even taking into account IRS figures that reduce taxable income to about two-thirds of profits, their 10% tax rate increases to only 15%. They should be paying over twice as much.

***SNIP

3. They've Stopped Investing in America

The Bureau of Labor Statistics (BLS) provides job data by size of business. A review of job gains and losses reveals that since the recession:

--Almost 4 million jobs have been lost, almost all at companies with less than 50 employees or more than 1,000 employees.

--Only 2% of the jobs were lost at medium-sized companies (100 to 999 employees).

***SNIP

4. Their Vision of Tax-Free Prosperity is a Delusion

Mr. Kotlikoff cites the "Irish Miracle" of the 1980s, which led to "a massive inflow of capital, with over 1,000 multinationals setting up shop." The authors of a New York Times article explain, "Simply put, the Irish miracle was a mirage driven by clever use of tax-haven rules and a huge credit boom that permitted real estate prices and construction to grow quickly before declining ever more rapidly." In other words, a bubble.
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4 Reasons Why the Corporate Income Tax Should be Doubled—Not Abolished (Original Post) xchrom Jan 2014 OP
I think the main reason is #3 -- they've stopped investing in America. LuvNewcastle Jan 2014 #1
kick xchrom Jan 2014 #2
I would lower corporate taxes for businesses sites in the US ... Martin Eden Jan 2014 #3
You forgot Reason #5: The jobs aren't leaving fast enough badtoworse Jan 2014 #4
Recommend jsr Jan 2014 #5
k/r marmar Jan 2014 #6

LuvNewcastle

(16,820 posts)
1. I think the main reason is #3 -- they've stopped investing in America.
Mon Jan 13, 2014, 08:00 AM
Jan 2014

That's the main reason we can't get out of recession. They're giving all their profits to shareholders and executives instead to investing in the companies themselves and hiring more people. The profits are then being invested in the stock market, whose increasing returns aren't benefiting the average person one bit. That paper they're trading really isn't worth shit, but as long as others in the market will buy it, the system stays afloat. One of these days, though, reality is going to hit them and all that paper will only be worth the real assets it is supposed to represent. I think that will be the end of capitalism as we've known it.

Martin Eden

(12,803 posts)
3. I would lower corporate taxes for businesses sites in the US ...
Mon Jan 13, 2014, 10:16 AM
Jan 2014

... and raise taxes on individual income. When the corporation funnels profits to the major shareholders, that would be taxed as regular income -- not 15% capital gains. Boost the top rate to at least 70%. The key is to design the tax code so the real incentive is to employ people in this country and re-invest in the business rather than skim a huge chunk off the top to enrich the 1%. Raising corporate taxes instead will encourage off-shoring and the major shareholders will continue to reap the profits.

I've worked at the same medium sized privately owned corporation for 20 years, advancing from hourly to management. I report to the senior vice president of distribution, a self-described "very conservative guy." But he's also a good and reasonable person who treats his people well. About 3 years ago we were purchased by a private equity firm. The first thing they did was refinance the company (putting it deeply in debt) and paid themselves huge bonuses. The company pays interest to THEM for the loan. My boss says what they did should be criminal. He attended a conference at the mansion of the Chairman/CEO in the Hamptons (one of 5 palaces he owns around the country) and he described the opulence as "obscene."

Wall Street and the financial "industry" needs major reforms. The elites of wealth and power have rigged the game to provide them with more wealth and power while the vast majority get a few crumbs. The needed changes go well beyond an adjustment to corporate taxes.

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