GE is sitting on over $100 billion in profits overseas, afraid to pay US taxes on that haul.
I'll let Robert Reich
make the argument.
It's time we eliminated the corporate income tax and made up the shortfall by increasing capital gains taxes. Here's the logic: First, the corporate income tax favors big companies that are able to shift their income abroad and engage in other tax-avoidance activities, while harming small companies that can't do any of this and therefore suffer a competitive disadvantage. Yet small companies are the engines of job growth in America.
Second, the people who actually pay the corporate income tax should properly be the company's shareholders, who are the legal owners of the company and who benefit from increases in its income. But in many cases, depending on the structure of the market, a significant share of the actual burden of paying the corporate income tax is often borne instead by employees in the form of lower wages, or consumers in the form of higher prices.
Pretty simple. Right now, large American companies are slow to repatriate profits made overseas, because they are not taxed on those profits until they do so. As a result, you have companies like GE and
Apple with over $100 billion parked offshore. Overall, U.S. companies are sitting on an
estimated $2.1 trillion in offshored profits.
Eliminating the corporate tax would remove the disincentive for those companies to bring that money home, creating one hell of a stimulus package for the country.
However, this isn't about free money for the corporatists. Fact is, the big companies are good at avoiding taxes by playing offshore finance games, while small businesses end up paying higher tax rates. Aside from the matter of fairness, it's poor economics, as those small businesses—the driver of most job creation in our economy—could use that tax money to invest in new employees and equipment.
But of course, this isn't an effort to starve government, it's to move the tax burden on those who can actually afford it—tax capital gains at the same levels (if not higher!) than regular income. Tax financial transactions, such as stock trades. Put the burden on the shareholders, not on the companies themselves. If those shareholders want to avoid the extra tax burden, then they can spend excess profits on new staff, on new equipment, on higher salaries for their employees. And if they'd rather bleed their employees dry with substandard wages to hoard profits, well then, they can pay for it on the capital gains side.
The real job creators get to create jobs, those sitting pretty on profits get to pay the taxes. Seems like a great deal to me.
Update: More:
For example, a tax of $1 on every $400 of stocks traded (0.25%; one-quarter of one percent) and $1 on every $800 of currency and debt trading including derivatives (0.125%, one-eighth of one percent). This fee (tax) would have raised between $750 billion and $1.2 trillion during each of the past five years (2005 – 2009).
The entire amount raised by the federal corporate income tax,
in 2010, was $198 billion. A financial transaction tax, even a tiny one, wouldn't just make up the lost revenue from lost business taxes, it would dramatically surpass them.
