Reforming the Tax Code : Corporate Tax is Stupid

The Fair Tax Book does a better job at explaining this than I ever could, and even if you don't like the tax system they propose in the book, its hard to disagree with their evaluation of the Corporate tax.

For those of you who don't intend to spend the time or money on the book, here is what I got out of it....

No matter how much you tax a corporation, what you are really doing is taking money that would ultimately go to a person in one way or another.   Now, the general feeling among those who support the Corporate tax is that the person you are taxing is the CEO and the other people who run off with all of the profit earned by the company .... rich people.    Therefore, its a tax on the rich, and how can anyone be against that?

But, paying dividends is not the only thing companies do with their earnings.  If you want to tax rich people then tax the dividends, not the corporation.   Corporations spend their earnings in lots of ways, many of which are VERY desirable.  Such as expanding into new areas, building new plants, buying equipment, paying employees more, hiring more employees, investing in other companies, .... these are all good things.

So, while I agree that not every penny of every dollar of profit that a company earns goes to create higher paying jobs for the little guy, that doesn't mean that we should pillage the earnings of companies.

The real problem with this tax though is that it chases business away from America.   Its not who ultimately pays the tax, its the ugly trend in manufacturing job loss that it creates that is the real problem.   America taxes corporations 35%.  Other countries tax around 15%.  So, American businesses move their manufacturing to places where they can keep more of the money the make.   Its fairly simple really.

Now, if we decided not to tax corporations AT ALL, wouldn't that have the exact opposite effect?  companies that get taxed at 15% in other areas of the world would say .... hey, if we move our manufacturing plant to America, we could avoid that 15% tax....

The corporate tax chases jobs away plain and simple, and that is stupid.