Want corporate money out of political campaigns?
Want to jumpstart the economy?
Here is one stone for both of those birds: Eliminate the corporate income tax.
Consider this. The primary focus of every corporation is the bottom line – net after-tax profits. In the U.S., with a top corporate income tax rate of about 40%, corporations get to keep only 6 dollars out of every 10 they earn; the other 4 go to taxes. Eliminating the corporate income tax would have the same impact to after-tax profits as a 66% increase in sales. Imagine the impact to the economy if every company received an immediate 66% jump in sales.
- Imagine the reinvestment and growth opportunities a company would have with 66% more after-tax cash in its coffers.
- Imagine what U.S. multinationals would do with the cash they are holding overseas if they were able to keep 10 out of 10 dollars they bring back home instead of just 6.
- Imagine where foreign companies would invest their money if they knew they got to keep all of their profit here in the U.S. versus just some of it in other countries.
- Imagine the additional savings U.S. corporations would reap by eliminating the expense of corporate tax compliance.
- Imagine the jobs being created in, and flowing back into, the U.S. from all of that new investment.
- Imagine businesses making investment decisions on the merits of the investment itself, not whether it saves them taxes.
- With no need to distinguish between for-profit versus not-for-profit corporations, imagine the elimination of the arcane rules for 501c3 and 501c4 organizations and the like, and imagine the associated IRS targeting shenanigans completely vaporized.
- In fact, imagine the vast volumes of tax laws that could be entirely eliminated.
- Imagine the savings in federal spending gained by eliminating the corporate division of the IRS.
- With the value of tax loopholes reduced to zero, imagine what happens to the level of corporate lobbying in DC.
- With corporations unable to get a return on investment from their political contributions, imagine what happens to corporate cash in political campaigns.
- With corporate cash drying up for politicians and no favors to be gained or given, imagine what happens to crony capitalism.
Politicians from both sides of the aisle have been advocating corporate tax reform for years but have taken no action. Why? Two reasons: a) both the liberals and the media would howl at Republicans for aiding and abetting the enemy – corporations – regardless of the above-mentioned political and economic benefits; and b) power. The vast amounts of cash in The Capital that are associated with corporate income tax are a big conduit of power for politicians and corporations alike. Eliminate that conduit by eliminating the corporate income tax, and the problems will go with it. Simply reducing corporate income tax rates is not enough. We must wipe away the entire rat’s nest. Besides, corporate income taxes account for only about 10% of federal tax revenue, and the net drop in revenue would be much, much less due to the positive impact on the economy.