Why a Corporate Tax Rate at All?

[badlydrawnjeff.livejournal.com]

Today, President Obama unveiled his latest plan to reform the corporate tax structure. I'm not too curious about the community's thoughts on this overall since I'm fairly sure we all know where we all sit on Obama making good/bad choices here, but I do have a more general question:

Why have a corporate tax rate at all?

I'd like to think we all agree on these basic points:

a) The corporate tax rate is not really paid by the corporation or business in question. Taxes are simply another cost that is levied on a company, a cost recouped through fewer services, lower wages/employment, higher prices, or some combination therein. It's not an issue of "fair share," really, since we're all paying it.

b) Our corporate tax rate is comparatively high when stacked up against other nations. We're #1 in the OECD at 35%. Canada, directly to our north, is at 15%. And that's without factoring in the corporate tax rates of individual states. Whether you think this matters much is up to you.

c) We only tax profits, and that's proper: If a company doesn't make a profit, it's not paying that tax rate. It's one reason why many corporations don't end up having a tax obligation.

d) We offer a lot of tax credits and opportunities to lower the effective rate: From green energy tax credits to employment credits, even profitable companies are able to reduce their effective rate to zero - or lower.

e) Corporate taxes account for a fairly small amount of overall receipts: Well under $250b in 2010.

So the question I pose is this - if you're in favor of a corporate tax at all, why? Is it worth it given what we all know and agree on? Is the value of getting $220b in revenue from the corporations worth it?

Comments

[politikitty.livejournal.com]

The federal corporate income tax isn't similar to other taxes. It's only on profits. Sales, Individual income, Gross Receipts, Property, Estate and even capital gains are all on the total amount earned or spent.

You can manipulate and avoid the definition of profit, and most firms spend considerable resources doing just that.

I can lie and say that I earned less money than I did. But I can't easily spend all my money on tax deductions without severely impacting my ability to eat or pay rent or all the things people need but can't deduct.

A good tax is hard to avoid, does little to distort the market and promotes horizontal and vertical equality.

A corporate income tax has none of those qualities. Yet it remains a liberal standard.

[a-new-machine.livejournal.com]

even capital gains are all on the total amount earned or spent

Is this correct? It was my impression that you only paid capital gains if your investment turned a profit, and you paid it only on the amount of profit it earned.

[politikitty.livejournal.com]

You've already paid taxes on the initial investment, so the profit is what's being earned. It might be near the line, but the tax base is still much easier to determine than revenue - cost of business.

this is not to say that grey areas don't exist in all tax types. Especially given government likes using tax to create policy. But profit is a vague and increasingly useless word the larger a company gets.