fredag 5 augusti 2011


Här är en intressant artikel från 28 juli.

Is the Corporate Tax Worth Saving?

We can only hope the corporate income tax is doomed. That's because -- in my cynical view -- it was never much of a tax system to begin with. As a society we place too much faith in it. We expect more than it can reasonably deliver.

Bergin is correct to advocate a broadening of the tax base and lowering of tax rates. That's the goal to which any tax framework should aspire. Sadly, the American incarnation of the corporate income tax is an unspeakable mess characterized by high rates and a narrow tax base. Precisely the opposite of how the system should be designed. I'd like to tell you this unsatisfactory outcome is some kind of aberration or accident of history, but if I did I'd be lying. Dysfunction is the income tax's natural state.

Every few generations our political leaders -- upon realizing how ridiculous the tax code has become -- attempt a major legislative overhaul. These tax reform episodes have occurred in 1939, 1954, and 1986. Each reform effort has merit when considered in isolation, but genuine progress is illusory. The income tax inevitably reverts back to its rotten old ways during the years that follow.

Now it's 2011 and there's more talk of radical tax reform. Good luck with that, guys. You'll NEVER fix transfer pricing. You'll NEVER fix deferral. You'll NEVER fix income stripping. And you'll NEVER eliminate the plethora of tax expenditures that infect the tax code. Tax expenditures are like herpes, you're stuck with them forever.

But let's back up. Is the corporate income tax even worth fixing?

During most of the 20th century the tax was viewed as a necessary tool for delivering socially desirable ends. Today that notion strikes me as utterly laughable. (I warned you I'm a Bastard.) The tax is premised on principles of 'source of income' and 'corporate residence', but these concepts make little sense in the modern economy -- especially for multinational enterprises. Corporate profits can be sourced anywhere; corporate residence is wherever you want it to be.

For the 21st century, a new global trend has emerged. Everywhere you look governments are increasing the tax burden on that which is immobile (labor and consumption) while lessening the tax burden on that which is highly mobile (capital). Think of this as a law of nature -- like gravity. Countries that ignore this mega-trend do so at their peril.

Are any countries raising their corporate tax burden? None that I can think of. Most are slashing rates and moving to territorial regimes for the sake of "global competitiveness" -- the penultimate step before you throw in the towel altogether on taxing corporate activity. (Heck, why not cut to the chase and deem every commercial enterprise an S corp?)

Yet people are surprised when they learn the corporate tax collects so little revenue. Really? What's more surprising is that it collects any revenue at all. Adjusting for the swings of the business cycle, the corporate income tax collects a diminishing share of total government revenues with each passing year. It's on the path to statistical oblivion. I can easily envision the day when net receipts from the corporate income tax amount to little more than a rounding error in the federal budget.

Meanwhile, consumption tax revenues around the world continue to climb every year. Eventually VAT receipts will account for half of all taxes paid on the planet.

Do you want the VAT Bastard's advice for 'fundamental' tax reform? Here it is: Don't even bother trying to fix the inefficient and distortionary corporate income tax. The tax is anti-investment and anti-growth. Besides, it just plain stinks at generating revenue for expensive things like foreign wars and grandma's entitlement programs. In contrast, VAT exempts personal savings and is therefore pro-investment and pro-growth relative to the income tax.

It's time for Congress to get a clue and think seriously about a broad-based consumption tax.

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