I’ve always had a problem with the corporate tax code, We often hear of corporations that pay no taxes. Is it because we base corporate taxes on profits, and then provide so many loopholes that allow these profits to disappear? And does the tax code allow corporations to not only avoid taxes by shipping jobs overseas, but in doing so also remove income from the people that in the long run sustain the economy?
http://www.hlpronline.com/2006…
If we started with a tax code that was based on US sales instead of profit, we may first of all level the playing field between those companies that use American workers with respect to those companies that merely import and sell goods.
And then if we take the corporation and its employees as an entity, and examine the total taxes provided by the operation, we would see that those companies heavy with US workers would be paying far more total tax (sales tax, income tax, payroll taxes) than the distributor company. So, after establishing the sales tax as the base, we could then provide tax credits for taxes paid by the employees to lessen the total tax burden. And with a higher rate of sales tax, this federal income may even be sufficient to pay for health care in a single payer system. With that burden then lifted from the corporations, especially those that currently provide that support to its employees, the best of companies would be in a better position to compete with the worst of companies.
Certainly a drastic change, but one that may be worth considering.
This would really hurt startup company where the founder(s) don’t take a salary initially (even when revenue is coming in). It would also hurt investment in those companies because when they are S corporations, investors can take losses against their personal income tax.
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I suspect there are these as well as other shortcomings with such a drastic change. However, each one that deserves consideration can be compensated by some form of tax credit that would promote start-ups and encourage investment.