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Saturday, June 1, 2013

NY Times: Corporate Tax Reform, Not Repeal

New York Times editorial:  No Replacement for Corporate Taxes:

In response to the recent Senate hearing on tax avoidance at Apple, some pundits have argued that the best solution is to abolish the corporate income tax altogether. Their contention is that multinational corporations — which hold trillions of dollars in mostly untaxed profits offshore — are so complex and so expert at avoidance that even trying to tax them is pointless. It would be better, they say, to quit trying and to raise needed tax revenue in other ways. This would be a completely wrong approach.

Eliminating the corporate tax would not fix the broken tax system. The corporate share of the overall tax burden has declined as the labor force’s share has increased. At the same time, the nation has gone deeper into debt to provide the social and economic foundation on which corporate success is built — including security, education, infrastructure, scientific research, health care, environmental protection and legal, financial and regulatory systems.

Ending the corporate tax would only make that bad situation worse. Abolishing the corporate income tax would be a huge tax cut for the wealthy, which would ultimately result in even heavier burdens on everyone else or a government that is far too small to meet the nation’s needs. The corporate income tax — which is projected to raise $4.8 trillion in the next 10 years even with all the avoidance that is going on — falls most heavily on corporate shareholders, who tend to be wealthy. ...

Corporate taxes need to be reformed to ensure that the profits of American multinationals are taxed by the United States when those profits are earned. In an era of mobile global capital, that will require international cooperation, a painstaking process. In the meantime, however, there are many steps Congress can take to curb tax avoidance, like ending procedures that allow companies to easily shelter profits abroad.

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