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Bill Nelson pitches corporate income tax reform

Democratic Sen. Bill Nelson is set to speak tonight in Washington to the Florida Council of 100. They'll hear about corporate tax reform from the senator, according to his prepared remarks. Nelson, who sits on the Senate Budget Committee, will tell them that in many areas, "the tax code borders on incoherence."

"Our corporate tax is too high and too complex, and it stifles competition," his remarks say. "In fact, the United States has the highest statutory corporate income tax rate in the developed world. It's imperative to have a healthy, vibrant, private sector that creates new, well-paid jobs for American workers."

Rules related to corporate mergers and acquisitions "reflect a long line of cases, statutory amendments, and IRS rulings that are staggering in their complexity and unpredictability," Nelson will say.

"At best, these can be burdensome and inefficient.  At worst, they can stifle economic growth. Although we have the highest corporate tax rate, we rank around 18th out of 25 among developed countries in corporate tax revenue as a percentage of gross domestic product."

"I believe that we can actually cut the corporate income tax rate and improve tax fairness at the same time. That's because, right now, some firms pay an effective rate well above 30 percent, whereas other corporations pay nothing at all."

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Eugene Patrick Devany

"cut the corporate income tax rate and improve tax fairness at the same time" ...
In 2010 the Simpson Bowles Commission questioned income tax expenditures and some spending programs but were not permitted to explore a value added tax (VAT) or net wealth tax due to the constraints of the Executive Order that set up the commission. Research has been done on the FairTax-a proposed national 23-30% sales tax (thanks to $20 million in private contributions) but congress has not studied all tax reform alternatives. Even the Peter G. Peterson Foundation (-sponsors research into long term fiscal solutions) seems afraid to consider wealth rather than capital gains and estate assets as part of a broader tax base. John Boehner announced he will schedule major tax reform milestones in December and let congress work on them in 2013 (setting the stage for short term comprimise on tax extenders and the next debt cieling).

The US is the only developed country without a VAT and that is why our business tax rates are so high. It is political arrogance and economic suicide not to add a small VAT to the tax blend and reduce the 35% corporate tax rate. The only rational reason for eschewing a net wealth tax is the sacred cow of avoiding “double taxation”. This common knee jerk reaction fails to appreciate the potential benefits of very low rates and delayed taxes (i.e. much better to tax 8% of income now and 2% of retention for each of the next 10 years than to tax 28% now).

Consider the 2-4-8 Tax Blend which can be described in one sentence. Tax individual and corporate income at a flat 8% rate (with no deductions, credits or loopholes), tax individual net wealth at 2% (excluding $15,000 cash and retirement funds) and impose a 4% Value Added Sales Tax (VAT) on business. The 2-4-8 Tax Blend has the lowest rates and will produce about $500 billion more than current federal revenue with no need for payroll, estate, and capital gains taxes or deferral of foreign income.

Eugene Patrick Devany, JD, MPA
www.TaxNetWealth.com

Steve Abramson

Yes, it has been absurdly limiting to not engage discussion of Value Added Tax, when the absence of a VAT makes the U.S. less competitive in world trade.

All our trading partners and over 100 countries use VAT to eliminate the cost of government from the price/value relationship of goods crossing borders. (VAT is added to imports and subtracted from exports.)

If the U.S. replaced the Corporate Income Tax with a VAT, more jobs would be created in the by multi-national corporations. Gone would be the corrupting practice of lobbying for loopholes in the CIT. Gone would be the double-taxation of dividends. Profits that multi-nationals park in lower taxed countries would flow home, as would more foreign investment.

See an illustration of sweeping tax reform replacing the CIT by VAT and a progressive personal income tax without deductions: http://vatinfo.org/2012/01/the-smart-tax-proposal/

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