It’s time for the Liberals to get the truth about business



If political philosophy were a religion, the belief that corporations do not pay their fair share of federal taxes would be at the top of the commandments. Businesses, you will pay more. So, I am going to commit liberal economic heresy by arguing that the Liberals must reverse this belief and take the position that businesses should not pay taxes.

I am not saying this because I am in the pockets of multinationals. I say this because the emphasis on corporate taxes distracts from the reality that corporations are not people and that only people can or should pay taxes. We have overcome this fantasy that corporations are like other “natural” Americans with rights such as due process, the right to engage in political speech and – soon, if Republicans get what. they want – maybe even the right to vote. The Supreme Court’s Citizen’s United decision has led to the utter corruption of our political process by allowing businesses and their thinly veiled political action committees to purchase the services of elected officials. This decision was largely based on the concept that companies have “rights”.

If businesses doubled the amount of taxes they pay to the federal government today, that would still represent less than 15% of total federal tax revenue. The fight to raise corporate taxes is a mad rush. We should change the way we treat all businesses.

Many, if not most, small businesses form companies also known as relays. These are S corporations, limited liability companies, and other forms where, if the company makes a profit, those profits are allocated to the owners of the company who report those profits on their tax returns. We already have the structure to accomplish what I am suggesting. Indeed, all companies should be intermediaries like S companies.

Shareholders in public companies only receive their share of the profits when the boards of directors of those companies decide to distribute some, usually not all, of those profits as dividends. What if this decision was taken out of the hands of business leaders and all profits were to be distributed to business owners? This would fundamentally change the financial behavior of companies. Companies might be more likely to be interested in expanding their business by borrowing money than by sharing the profits with shareholders. Economists characterize this conflict of interest in corporate behavior as agency problems. And think of all the brains that are currently used to avoid corporate income tax could be reused into something that actually benefits society.

I don’t think we, as average American taxpayers, should lose sleep over how companies might adjust to a reality that they have to distribute all of their profits to shareholders. They have some of the best legal and accounting minds money can buy. Our concern should be to raise from the American people the amount of money the federal government needs to do its job for the American people.

Shareholders would receive their share of the company’s profits. Many shareholders would need these profits to pay taxes on their share of corporate profits. This would put pressure on business leaders to be better stewards of the company’s resources. And that would force investors to stop treating their investments as tax avoidance strategies.

The elimination of corporate tax would also eliminate a double taxation complaint made by right-wingers for years. Corporate profits are taxed and when dividends are paid, beneficiaries then pay taxes on those dividends. The abolition of the first tax eliminates double taxation.

The abolition of the corporate tax rate should only happen if it is accompanied by a further simplification of the tax system. First and foremost, income is income. A second harmful illusion that we suffer from is that the income earned by those who own stocks is different from the income earned by workers, or the income of people and businesses who own commercial real estate. Income is income and there must be a single tax rate on all income in a given bracket.

That’s not to say that there shouldn’t be tax rate escalation. If you are in the higher income bracket, your taxes should be determined by your total income, whether it comes from rent, labor, capital, financial shenanigans like deferred interest, or distinctions between capital gains to long term and short term. If we gradually tax income, the efficiency of the economy will increase tremendously.

Eliminating corporate income tax and simplifying our tax system is an important step in eliminating abuse, embezzlement, corruption from our political processes, and the unproductive war between real Americans and pseudo-people. fictitious like companies. I think we should bluff the corporate income tax right and eliminate the corporate income tax. I suspect they would not be in favor of what I am suggesting.

Fred McKinney is the co-founder of BJM Solutions, an economics consulting firm that has conducted public and private research since 1999, and is the Director Emeritus of the Peoples Center for Innovation and Entrepreneurship at Quinnipiac University.



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