Corporate taxes

[belic3000]

Again. I am not an economic major. But, I do find it interesting that we have one of the highest corporate tax rates in the world, yet only collect 1.4% of our GNP.

Why not remove the loopholes from the corporate tax code, making each corporation pay. Drop the rate to 25%, offer companies a chance to reduce their tax liability by purchasing up to 30% in muni bonds in the city/county/state that they are doing business in. To further reduce what they will owe in taxes, they could employ more workers, offer them better health insurance plans, offer health insurance to the temperary workers they employ.

By offering the tax break on munis. Local, county and state governments could provide with better roads, schools, infrastructure to its citizens. And doing this, the US would still collect $2.2 trillion in corporate taxes.

Am I oversimplifying this? Is the fact that we are not collecting corporate taxes one of the reasons that we are hurting?

[kork13]

shhh!! Simplicity, making sense, and transparency is what makes tax preparers lose business!

[belic3000]

I agree kork13. But what I was getting at, would this help to stimulate the economy without the Federal government stepping in to social businesses?

[kork13]

I think the biggest impact of what you've suggested would be the encouragment to hold local muni's. That would push funds directly into local communities, giving more money for public projects which, in turn, provide work and jobs. Muni's are already a good deal (tax free returns), so to provide additional encouragement would be expected to make them even better.

However, you can't simply tell companies "Hire more people and we'll give you a tax cut." Some (many) companies have the manpower they need, and to hire more people would be a waste. Also, the tax cut may or may not adequately balance out the added cost (in salary, benefits, etc.) of employing more people.

[jIM_Ohio]

Why require a company to own municipal bonds which have a ROI of 2-4% when the company could invest that money in the business and grow the business by 10 or 20%?

Before suggesting a company be required by law to invest in a community, brush up on cineman and history. I would suggest watching Roger and Me then rethinking the position.

Would small businesses of 1-4 people also need to hold muni bonds? Small businesses employ a good number of people in many industries- most of housing industry is small businesses, most of farming is too, and the profit margins and need to reinvest in their businesses is more important than holding muni bonds to develop infrastructure. I would guess that healthcare (doctors) are also small businesses, and again they need their capital to keep the business operating and not going to make sure there are roads and bridges.

Would these be muni bonds in the city of the company or where the company does business? Duke energy is located in NC, yet supplies my power in Ohio. I want them to buy Ohio muni bonds which pay 3% tax free in Ohio, but NC will charge them tax on that money. Is that fair?

If you want to build up infrastructure, a better solution would be to allocate more federal tax dollars to it, then find the federal tax revenue to fund it by cutting programs like welfare and food stamps, then enouraging the people living for free to start working. Raise the earned income tax credits so that people making less than $Y per year (but more than $1) get a non refundable tax credit. non refundable means you need to file a tax return because you have income to get the credit.

If you make companies pay more tax, they will move their headquarters from the USA, then still do business here- so now the profits leave the country and might not get taxed at all. This will also reduce the jobs in the USA, removing even more tax revenue from the fed.

A better idea is to make corporations pay NO tax on any profit, or lower the tax to be next to nothing.
Then simplify the tax code so the only taxes paid are payroll/income and property taxes paid by workers and investors.

No sales taxes, no taxes on cable, telephone, cell phone or similar. No gas taxes, no cigeratte taxes, no sin taxes or similar. Excise taxes on imports OK, because foreign companies are paying those, not US companies.

Instead of a tax rate at 10% and 15% at bottom end, the poor might have a tax rate of 25% and 30%. But all money they spend would not have taxes built into them. Bread and milk would be cheaper, there are more tax credits available and people are working, which is good for economy.

Take a car- might cost $15000 new. I bet that same price goes down $12000 without taxes. No transportation taxes, no taxes that the company needed to pay on it's telephones, internet or similar. The company would also not be paying taxes on any transaction like buying copier paper, ink toner or similar.

The company could do 2 things
1) reduce the cost of the car (probably won't happen)
2) have 3k in profit it can use to pay dividends, create new jobs or improve the business.

In addition pass the following corporate taxes:
If a person is laid off or stops working, the corporation must pay the tax bill that person's payroll would have paid for 5 years. Meaning once a job is created, the government "banks" on that job being in the USA, if job is eliminated or moved overseas, the company must pay.
Any corporation holding money in the bank beyond 50% of operating revenue is taxed at some marginal rate of 2 or 3%. This tax might need to be indexed to inflation and interest rates. Companies should not be allowed to bank profits and keep them.
Increase taxes and penalties for companies which have highly compensated employees deferring more taxes (in 401ks and similar) and make these restrictions even tighter-

example- currently there is a "means test" on 401k's which prevent "highly compensated employees" from having more than X% of assets in the whole corporate 401k plan.

The reason companies have a match is to make sure the layman workers have at least the % invested to allow HCE to contribute and max out 401ks while earning in high income tax brackets.

My proposal is to increase the X% to 2X or 4X. This will encourage companies to increase the match by 2X or 4X what it is now.

[belic3000]

Think the point was missed. I am saying take away the tax loopholes. Corporate taxes are based on the GNP. Of which we collect 1.4%. Even though our corporate tax rate is around 37%. I am suggesting dropping it to 25%, cutting out tax loopholes. Then offering them a chance to lower the taxation of their profits if they invest in their local communities/state.

As to hiring more people, giving them btter insurance. That is not required either. Just another way that corporate can lower their profits...which is what should be taxed. Not going into the pocket of some Senator or Congressman, who is helping push through some new tax loophole.

[jIM_Ohio]

Think the point was missed. I am saying take away the tax loopholes. Corporate taxes are based on the GNP. Of which we collect 1.4%. Even though our corporate tax rate is around 37%. I am suggesting dropping it to 25%, cutting out tax loopholes. Then offering them a chance to lower the taxation of their profits if they invest in their local communities/state.

As to hiring more people, giving them btter insurance. That is not required either. Just another way that corporate can lower their profits...which is what should be taxed. Not going into the pocket of some Senator or Congressman, who is helping push through some new tax loophole.

Lowering taxes is not the answer
raising the taxes is not the answer

More direct taxation is the answer. Remove the hidden taxes (like on gas) and you will see the price of a gallon drop $.40 to $.60 depending on where you live.

Make this tax up by taxing income

Then all tax code centers around one thing- income tax. It then becomes to everyone's advantage for people to work. No more social assistance, all tax benefits are based on earned income or income in general.

You missed my point- you are "requiring" companies to hold an asset (muni bonds) which have a low ROI-around 2-3. Any good company can get an ROI of between 5-20% on it's capital. That increased ROI is what keeps and creates jobs. Anything which stifles that or restricts that is opposite of a sound tax policy.