I am free typing this on a smart-phone, so please forgive the typos. I have been giving a lot of thought to what tax structures should look like, especially corporate tax structures. Here are some of the things I have considered:
– Corporate tax take is around 9% of total tax revenue
– The IRS employs well over 100,000 people (I have read it is around 130,000)
– the tax code is around 17,000 pages
– companies spend billions upon billions of dollars on accounting, lawyers, et al, to meet their reporting obligations
– the P/E ratio of the Dow is around 17, which implies a six per cent pre-tax return on investment
– Dividend yield of the Dow is around 3%
– corporate tax rate of 40 per cent, which implies that of the 6 per cent profit, 2.4 percent is paid in tax, while 3 per cent is paid in dividends, and .6 per cent is retained by the company to invest in one way or another.
So, I reason as follows:
We should eliminate corporate tax entirely. It generates little income in the grand scheme of things. The accounting costs associated with corporate tax would disappear, as would lobbying for favor, etc. There would be a surge in capital expenditure as depreciation would disappear. Capital would flood into US business.
Concurrent with that, I would eliminate the preferred dividend rate, and make dividends normal income. Much of the corporate taxs lost – maybe ALL of the corporate taxes lost – would be recovered as result. The entire 6 per cent profit, less retained earnings, would be taxed at 35 percent.
This would, in my opinion, get business booming. A huge, non-productive burden would be shifted from business. Instead of having the world’s highest rate, the US would have the lowest, at fairly modest cost. Plus there would be enormous savings – how many IRS agents are required for corporate work at the moment? No corporate taxes means no need for IRS monitoring. Lobbying would be reduced significantly, etc etc etc. business would only need to calculate profit and loss on a cash basis. So simple even I can do it!
Capital would flood into the US. There is something like $4 trillion dollars perched overseas by corporations that might flow back if no corporate taxes existed. Shareholders would rightfully demand the return of the capital.
Taking things further, I would totally revamp personal taxes. I would introduce either a sales tax and eliminate individual taxes entirely, or I would introduce a flat tax on earnings, and would allow NO deductions. Say the rate was 20% – multiply your income from all sources by 20% and send it in. No accountants needed. Hardly any IRS folks needed. No 17,000 pages of tax regs needed. Add up your income, multiply by 20% (or whatever, 18, 25, etc, to be determined), and that is it.
Hell, maybe I am out of my mind. It just doesn’t seem to be too hard to fix a tax system that has gone crazy. There are hundreds of billions of dollars to be saved, that can be channeled more productively into any number of areas. Congress can totally stop thinking about tax law. Business can concentrate on business. Individuals will know how to calculate their own taxes. Accountants will suffer mightily. Sorry about that. As will tax lawyers – not so sorry about that.
I must have this wrong – surely it cannot be so simple. I am sure you folks can point out the flaws in my reasoning.
Brilliantly simple fix. The only flaw in your reasoning (which I believe you acknowledge) is that the fuckers do not wish to fix the system.
But millions of Americans who do not pay federal income taxes do pay federal payroll taxes. These taxes are regressive, and the dirty little secret is that over the last several decades they have made up a greater and greater share of federal revenues. In 1950, payroll and other federal retirement contributions constituted 10.9 percent of all federal revenues. By 2007, the last “normal” economic year before federal revenues began falling, they made up 33.9 percent. By contrast, corporate income taxes were 26.4 percent of federal revenues in 1950. By 2007 they had fallen to 14.4 percent – http://www.theamericanconservative.com/articles/revolt-of-the-rich/
If corporations are people, as Romney posits, them should not the people be paying corporate rates?
I asked my Corporation what it thought: !imple question:
“Hey, Corpie, whaddaya say to no taxation, but no representation?”
It stared at me with beady eyes and replied coldly:
“I am a person”
What did anyone else’s corporation say?
LLPOH, I couldn’t agree more! Simple is always better. However, GE for example, employs lobbyists to exploit the 17,000 page tax code, (which they helped write) and of course, buy off the elected stooges. For this, they pay zero in taxes and even get a government handout. Bottom line, be it Romney or Obama, your suggestions will land on deaf ears. The only hope of salvation has now retired to Texas with no heir apparent in sight.
KB – my point is the same. Corps are too good at avoiding, so let’s make the game easy. Plus corp taxes are taxes on the owners, so in reality they are individual taxes anyway. The more you earn, the more you will pay, with no way out.
I’ve dreamt of simplification of the tax code since I started helping my dad do his taxes in the late 70s. I didn’t know about the inherent evil present in government tax/other drones until I had 100 accounting clients on my docket.
And compared to today, all that was a walk in the park, so easy a bright eager, math smart, young teen could do them even with gasoline and other expenses. And, generally, if the tax man was after someone it was because they owed the money. Now we put people in prison for failure to file a form while PAYING the taxes.
As for compliance, I don’t even like doing the EZ, even that has gotten way too complex and is better left to experts, though they can barely figure it out anymore.
The entire system is a joke. Those that should pay out the nose – Buffett, Gates, GE, Boeing, Raytheon, Halliburton, don’t pay.
Those in charge don’t pay – as evidenced by the dozens of stories about federal and state employees owing billions and billions in taxes – the fucks probably won’t even have to pay the same fines we do (I know Timmah didn’t, POS).
Us guys in the middle pay, and pay, and pay. Hell, now they are bankrupting little guys over complete bullshit even when the taxes are all paid.
Your suggestions ring true Llpoh.
But, we all know, put the chances of real (helpful & good) change along with all our wishes that this shit wasn’t happening in one hand, then crap in the other.
Let us know which one fills up first.
Hey – I know it is a longshot. But I try not to provide problems but solutions. And I truly believe that there are simple solutions to most problems, if only people have the will to implement them.
Maybe the above isn’t a perfect solution. But I know it would do what I say it will. And it could be done in days – the hardest thing would be printing the one page double spaced individual tax returns. Then rest of then work would largely be shredding 17,000 pages of tax laws.
Please consider that number – 17,000 pages. 17 thou-sand pages. Seven-teen thousand pages. Seventeenthousandpages. No matter how I say it, my mind cannot grasp it. Unbelievable.
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oh darn… check this simplified tax form…
Sounds preety good. I always wondered if an personal consumption tax would work.It would pull in money that is off the books.
I still think pot and prostitution should be legalized and taxed.Its been going on and well continue happening no matter what.You would think anouther revenue stream would appeal to our broke country.
9-9-9
Best plan evah.
“Please consider that number – 17,000 pages.”
That’s why the tax code cannot be fixed. It needs to be scrapped, all 17k pages. Start over from page 1 … using the ideas you suggested, perhaps. But that will never, ever happen.
I believe newsjunkie is trying to post this simplified tax form. Don’t laugh … it’s coming soon.
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When TBPers fill out taxes …
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Hmm, taxes, just as screwed up as everything else the feds have attempted, by design, except the war machine. There is where central planning excels. Everywhere else, dealing with people who are under no requirement to obey even the simplest orders, order breaks down into disorder, and here we are.
It sucks, but those supposedly in charge aren’t willing to accept the consequences of their own malfeasance, and will defend the status quo until the bitter end. It didn’t have to be this way, but today is the same as yesterday, and the current status quo is still unsustainable.
If the markets don’t crash in the fall, it will be quiet enough to hear a pin drop through the election and on to next January, as we approach the fiscal cliff. What will be the undoing that topples the US financial house of cards? If the banks fail, they’ll be taken over with succession plans already in place. Any other black swan will be met with appropriate action. TPTB must be looking through rose colored lenses, because PIIGS is only a foreshadow of what is coming in the mother of all recessions. 1913 gave us the fed, it’s time to kick them out, pay them back with their fiat money, and institute free market reforms in the banking industry. If your bank makes bad loans, you FAIL, BASTARDS!!! If you underwrite bad loans, you FAIL, BASTARDS!!! Fuck Barney Franks, Nancy Pelosi and Harry Reid. Will they ever admit they failed? Not very likely. Those fuckers screwed up so bad with sub-prime loans in the name of affordable housing, then US regulators let MBS and derivatives stew into a toxic brew, which then added $6T to the debt in 4 years, that It should serve as a lesson to TUSCON, don’t fuck with the markets, but it may also be a lesson they’ll never forget.
Here we are four years later, and are we better off? It depends on whether you’re a national defense/security contractor. Business is booming as federal spending replaced private investment. Now at the end of the deficit spending rope, either private industry is allowed to flourish, by scaling back government, or we enter an Orwellian nightmare where a NWO controls everything, and we see how well central planning works.
Let’s see how things look next Spring, and whether this time is different. Either the government backs off, and scales down, or they’ve lost their legitimacy as a government of, by, and for the people.
loopy,
You are correct. We are on the edge of a fiscal cliff starring straight into the jaws of Cthulhu.This is exactly what Cthulhu wants.He wants corporate taxes raised, austerity measures met , causing people to rampage through the streets , burning and pillaging as they go and near the end Cthulhu will rear his head and with with one mighty forward snap devour the entire planet, tenderly wipe his lips and move one….just another midnight snack for Cthulhu.
And all this has been prophesied by the US Chamber of Commerce working selflessly for the greater good of all Americans.You can take their word for it.
They’ve even went to all the trouble to gather together quotes from those who do God’s work which clearly explain the severity of the situation.
There is not time for tax reformation.We must preserve the status quo.
This is the most important issue evah.
http://www.friendsoftheuschamber.com/fiscal-cliff/tax-fact-answers
The Fiscal Cliff: Don’t Take Our Word for It
Thought leaders from a number of organizations, across industry and political affiliations, agree that the fiscal cliff will jeopardize the health of our economy and could result in long term damage to future growth. Read the studies outlined in this week’s Tax Fact of the Week.
“….the fiscal cliff [creates] major uncertainty in the world”. Financial institution, Morgan Stanley also noted that that 40 percent of companies are delaying investment because they fear that a big recession will loom if America hurtles off that ledge.
Lloyd Blankfein, head of Goldman Sachs, (CNBC , August, 2012)
“The most effective way that Congress could help to support the economy right now would be to work to address the nation’s fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery. Doing so earlier rather than later would help reduce uncertainty and boost household and business confidence.”
Fed Chairman Ben Bernanke (Testimony to the Senate Banking Committee , July, 2012)
“Legislative decisions are required to avoid the scheduled expiration of tax cuts and automatic spending cuts, while further reducing the federal budget deficit at a gradual pace, so as to put the federal debt-GDP ratio on a downward path and restore fiscal sustainability.”
The Organisation for Economic Cooperation and Development (OECD) (OECD Economic Surveys: United States, June 2012)
“What I think we need to do is to find some way to avoid the fiscal cliff, to avoid doing anything that would contract the economy now, and then deal with what’s necessary in the long-term debt reduction plans as soon as they can…”
President Bill Clinton (CNBC’s “Closing Bell,” June, 2012)
“The CBO has warned that the economy will enter a recession next year if the country goes over the so-called fiscal cliff….the economy would contract by 0.5 percent in calendar year 2013 if the George W. Bush-era tax rates expire and automatic spending cuts are implemented. Unemployment also would rise from 8.2 percent in 2012 to 9.1 percent next year.”
Nonpartisan Congressional Budget Office (CBO) (The Hill, August 2012)
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That’s a bumper sticker I’d put on my car.
CTHULHU 2012 Why vote for a lesser evil.
The other one would be…
If voting made a difference it would be outlawed.
“Do unto to others.”
Hilarious, and we haven’t even been squeezed yet from the biggest tax increase in history, Obamatax/Obamacare, so you can pay even more for other people that have destroyed their health, and they can’t be held accountable or pay a dime themselves; but they can weigh 400lbs, and it’s your problem, and, by God, you are going to pay and pay and pay for them, ad infinitum and unto eternity.
@llpoh:
I liked most of your list, with the slight addendum that any potential personal taxes should not be on a flat tax, but instead part of an equation that takes into account income level.
Not a complex equation, but something you could plug and chug y = mx+b style to get your answer.
Personally, I’m against a personal tax or corporate tax of any stripe. Tax on sales, call it good. Taxing on sales alone would eliminate the “personal business” tax dodge we currently have, whereas removing corporate taxes and leaving personal would only exacerbate the issue as people would shove their money into whatever their company was in order to protect their finances from the IRS.
@flash
Don’t you find it very amusing, that the VERY SAME men that have been the biggest recipients of government largesse are the ones punting the ball back to DC?
They stole it all and now want others to “fix” it.
bwwaaahahahahhaha
We are so screwed.
llpoh, a noble effort but doomed to fail. Simplicity is not difficult to understand but that is not what those who sow discord and confusion want.
Remember the federal income tax was implemented to pay for a war, not a good start. When it was resurrected in 1894, it was progressive, ‘soak the rich’ (robber barons) and -they- never forgot. The Supremes struck it down on a technicality, though not ruling against the constitutionality of a direct tax. Not an accident!
The confluence of banking reform and revenue was co-opted by propaganda aided by useful academic idiots, bought newspaper owners, with bankers pulling the strings behind the curtain. Success at last in 1913, the culmination of an abomination. The 16th Amendment gave the populists what they wanted and Wilson had an income tax and the FRS to fund his war.
Look at the 1913 tax table, seven tiers (progressive in 1% increments) with exemptions and income levels carefully crafted. The ordinary working man would never have to worry about it … right.
Back in the 1960s, the WSJ would run a story after tax deadline of ‘millionaires who pay no tax’ and thus began my insight that ‘something’s fishy here’ … which led to research at the library into budget and revenue. It wasn’t hard to see that the more a young working bloke earned, the greater more the government took, so the notion of a flat tax seemed do-able. Indeed, crunching the numbers, I came up with around 5% tax on all would work. But that was then.
As of accountants, blame that on the New Deal. The rise of the SEC, first chairman, FDR’s friend, Joseph P. Kennedy. The New Dealer writing the legislation, James McCauley Landis actively pushed cartelization, government-business partnerships. And he courted the accountant class who’d chafed at being subordinate to corporate domination.
Historian Thomas McCraw: “Landis (made) their professional institutions the vehicle of change.”
Instead of being a tool of corporations, accountants became a tool for control of business which worked out well for government.
TPC
It strikes me that any equation is a progressive approach and thus can be gamed. Constituional equality under the law and exemptions and loopholes do not conform to the former. That’s just another way of picking winners and losers.
Colma, my corporation said any taxation plan that begins with paying for war or from a motive of class envy cannot end well.