Wednesday, October 13, 2004

"The corporate income tax is very bad. You should be against it"

Jane Galt does not like the bill reducing corporate taxes on overseas earnings, because it is "larded with so many giveaways to every industry group with a lobbyist and a dream that the overall effect is awful." I don't yet know enough about the bill to have an informed opinion.

But I am intrigued by some of Ms. Galt's other postings on tax policy, notably, her tax simplification plan and her rationale for abolishing corporate income tax.

Highlights of the Jane Galt tax plan:
  1. Get rid of all our poverty programs, except those aimed at the disabled, and temporary unemployment assistance, and institute the negative income tax. That is to say, the system should be continuously progressive, from a steep negative rate of up to 100% on very low earners, gradually declining until it zeroes out around $28,000 a year, and then rising gradually until it maxes out around 35% on the top brackets.
  2. Eliminate FICA and pay for Social Security and Medicare out of general revenue. It's time to stop pretending it's a pension system, when there are no assets in the "trust fund"
  3. Eliminate the corporate income tax
  4. Eliminate the special treatment for capital gains. All income should be taxed at the same level, regardless of its source.
  5. Eliminate all deductions. Period, end of statement. No mortgate, student, child, etc. All causes are equally worthy in the eyes of the person who possesses the deduction; it is a waste of our time as a nation to sit around arguing about who deserves what.
  6. Just say no to the Value Added Tax. In theory, it's a good tax. In practice, because it is extremely hard to tell what proportion of the price of anything represents the tax, it removes the good and natural pressure upon tax rates.
  7. Get rid of the estate tax, and tax the capital gains on whatever is sold.
Highlights of her rationale for abolishing the corporate income tax:
  1. Corporations aren't People
  2. The Corporate Income Tax Costs the Economy More than it Earns
  3. The Corporate Income Tax is Extremely Distortionary
  4. It is Impossible to Close the Loopholes
  5. Eliminating the Corporate Income Tax Makes Corporate Welfare Harder

...Summary: The corporate income tax costs the economy much more than it produces in revenue. Eliminate it and watch a flood of economic activity be unleashed as all those unemployed accountants, tax lawyers, and IRS agents get to work inventing the next Furby. Recoup any lost revenue by eliminating the capital gains tax and treating capital gains as ordinary income in order to equalize the tax treatment of debt and equity, and it will be a long time before we see another Enron.

[Simpler] Summary...: The corporate income tax is very bad. You should be against it.

If any of this interests you, go read her full posts.