Well, I never thought that these words would come from my mouth. I might be banished from all the liberal websites and progressive blogs. I might shunned by left-wing friends. But, there is no denying that it is time to cut the federal corporate income tax to zero percent.
Historically, corporate federal income taxes would amount to almost 30% of federal revenue. Last year, the federal government collected approximately $2.2 trillion and corporate income tax revenue amounted to about 6% of this total. This is a whopping $130 billion. When the likes of GE and Exxon pay no taxes and in fact receive a tax refund, something is wrong with the system and needs to be fixed. There should be a better way to raise tax revenue that does not wreak of hypocrisy and does not tie up billions of dollars and thousands of hours seeking to avoid this necessary evil.
Although the US corporate tax rate is 35%, the average tax rate actually paid by a US corporation is in the mid-20% range due to a host of tax advantages offered to corporate entities. For illustrative purposes, let’s say that a corporation earns $100 million before taxes. With an average corporate of 25%, this would equate to $25 million in federal tax revenues. However, if the federal government has a 0% corporate tax rate, the company would have $25 million of excess cash. What are the options for this company with this excess cash in its coffers? First, the company might use the excess cash to pay additional salaries and bonuses. Or, the company might pay out additional dividends to its shareholders. In both these instances, the lost federal revenues would come back to government in the form of the personal income tax for those receiving the additional funds. The tax rate on dividends would have to be increase from the current level of 15% to 35% to keep the federal government revenue neutral. The other choice for this corporation with $25 million, or some portion thereof, in its coffers would be to invest in its own growth through acquisition of capital equipment or the acquisition of another firm that might make it more competitive in the future. Although this investment portion of the might represent a loss in direct federal revenues, the federal government might recoup lost revenue if the acquisition is from a domestic firm in which case the profits go to the employees and shareholders and again would be recouped from personal income taxes. As this $100 million net company grows from this capital expenditure, the federal government would recoup more taxes from employees as salaries increase or from shareholders as dividends are increased as the company increases its profits.
There are many benefits to a zero percent corporate income tax rate. First, it makes our US manufacturing firms more competitive with foreign manufacturers. As companies have more cash in their coffers, they have more funds to invest and to increase their competitiveness in the global economy. Second, the 0% tax rate might draw foreign manufacturers to our shores. Foreign multi-nationals look for competitive environment to locate new manufacturing. a few years back, Ireland cut their corporate tax rate to 12% and a number of multi-nations moved their operations there. A 0% rate would draw new manufacturing to the States creating jobs for US citizens and generating more tax revenue for the federal government. Also, corporations spend billions of dollars and thousands of man-hours on tax avoidance whether through the tax lawyers and accountants that are hired or through the numerous tax havens they must create and maintain just to avoid taxes One Fortune 500 company has over 200 off-shore tax havens to shelter income from the US federal government. All this time and money lost would be eliminated with a 0% corporate tax rate freeing up additional funds to invest in the company’s growth.
And finally, one of the most active forms of lobbying efforts in Washington DC, is tax avoidance. Corporations use their lobbyists to petition Congress for tax breaks for their industries or for certain projects. The passing of new laws to include these new tax deductions or tax credits take-up a good portion of legislative time and energies. In addition, this process perpetuates the “money” influence in Washington as receptive Congressmen are rewarded for their efforts with campaign contributions from their corporate benefactors all the time perpetuating the corporate influence over these legislatures.
In conclusion, this is not a traditional “liberal” proposal. As the federal deficit soars, the talk amongst “lefties” is to reduce the tax shelters for corporations to bring more revenues to the federal coffers. This has not worked in the recent past and I do not believe that it will work in the immediate future. . I believe that by eliminating corporate income taxes the government can earn the same amount of revenues. A 0% corporate tax rate will allow corporations to become more competitive and will hopefully draw new multi-national manufacturing companies to the US and create more jobs here in the States.
H O W A R D S B E N D 
The problem is that then the lobbying will be to get the government to pay these companies to do their business. It is about power as much as money.
I could actually live with nothing but income tax and maybe luxury/sin taxes on tobacco, alcohol, etc. After all, it is really progressive. But I think that top bracket rate would need to be about 66%.
The 66% tax rate sounds like a myth perpetuated by the Tea Party. During the tax debate in December, it was pointed out that just increasing the tax rate to the Clinton rate of 39% on those earning over $1 million would have raised $200 billion a year. Through a combination of raising the capital gain rate now at 15%, increasing the estate tax, and playing with the tax rate a few percentage points on the ultra-wealth, I am sure that hte deficit could be closed significantly. don’t forget that social security and medicare are only paid up to $108,000. If this amount was extended on all income, I believe, the deficit vanishes. The botton line is that the rich have to pay more.
Wait. You then have to tax capital gains in the same way as earned wages. The rationale for a lower capital gains tax has been that those dollars have already been taxed. But if no corporate taxes, no argument.
The other issue this idea brings up for me is usage fees. If car manufacturers move their heavy loads along interstate highways, setting up the need for repairs, how do they contribute? Usage fees?