TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, October 19, 2017

Toder Presents Replacing Corporate Revenues With A Mark-to-Market Tax On Shareholder Income Today At San Francisco

Toder (2017)Eric Toder (Tax Policy Center) presents Replacing Corporate Revenues With a Mark to Market Tax on Shareholder Income (with Alan D. Viard) at San Francisco today as part of its Tax Policy Lecture Series:

We propose reducing the corporate tax rate to 15 percent and replacing the foregone revenue with a tax at ordinary income rates on the accrued, or mark-to-market, income of American shareholders of publicly traded corporations, accompanied by an imputation credit for U.S. corporate income taxes paid. The proposal would dramatically reduce the tax significance of the source of corporate profits and the residence of corporations, both of which can be easily manipulated. Lowering the corporate tax rate to 15 percent would encourage a flow of capital into the United States and reduce incentives to shift reported profits overseas and to engage in inversion transactions, while continuing to impose tax on foreigners who earn economic rents from investing in the United States.

The proposal includes provisions for averaging of mark-to-market income, transition relief for firms that move from closely held to publicly traded status, and other measures to address the challenges of mark-to-market taxation. We estimate that the proposal would be approximately revenue-neutral and would make the distribution of the tax burden slightly more progressive.

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What happened to the idea of true tax reform, so that we have a "simple" tax system? This recommendation adds complexity, a lot of complexity.

Posted by: Peter | Oct 20, 2017 5:35:32 AM

I've got a better idea. Let's tax public companies on their GAAP income. Multiply whatever GAAP income they report to the SEC by 10%, and we're done. No NOLs, no FTC, no "locked out" earnings.Simple is as simple does.

Posted by: Dale Spradling | Oct 20, 2017 7:16:26 AM