Can a tax resolution solve our economic problems? Tax resolutions can solve tax problems. That is common sense. But in economics, there is a whole body of knowledge talking about fiscal arsenals as well as monetary ones influencing the economy. We have no beef with those concepts and the logic behind tax influencing our decisions. My problem is finding that politicians, for lack of vision and courage, desperately hang all their imagination on the tax code.
I would have hoped to find someone gutsy enough, be it the president or one of the Republican candidates, to say, as unrealistically and possibly crazy as it may be perceived, that we will do away with the corporate tax system in totality. The closest to my thinking is Ron Paul, although he is proposing 12 % corporate income tax rate.
The current system, in addition to being a burden on the average citizens who have to face IRS Audits, IRS levy, tax lien, wage garnishments, property seizure and possibly criminal charges, the system brought nothing to the table but a complicating factor to the economic decisions. It should not be a principal in the economic mix. But now it is, and every dignified economist knows the impact of taxes and must address that impact. How can a non value generating factor have such a prominent place in our social and economic life?
I am reminded of a silly joke that used to be told in a socialist country where people had to stand in line for everything they bought, from bread to groceries. The last one at the end of the line was asked, "What are you here for?" "I don't know, I just found a line and I just stood there." Perhaps that represents the taxation system. Everyone falls in line without questions as to why we are in line. Dare we to ask what the line is for?
The president is proposing cutting corporate tax from 35% to 28% and manufacturing taxes to effectively 32%. This president is intending to spur growth and revive the economy. That is good and well and I am sure cutting taxes would have an effect. The corporate tax brought about 1.2% of our GDP and 7.9 of the total tax pot. I am asking a simple question: if a little reduction, as Obama is proposing, is billed as a way to enhance our economy, why not do away with about 8% of the tax pot if it is going to be compensated by more economic activity?
We collected one hundred eighty billion dollars from corporate taxes. We spent four trillion dollars on wars that are, at best, questionable. Can't we have the imagination to do the right calculation? If we can find four trillion to launch a war, we can certainly experiment with one hundred and eighty billion dollars and totally abolish corporate tax. The risk will be minimum because we all believe that reducing corporate income tax will increase our economic activity and growth. The more, then, the merrier.
I believe we can do away with both individual income tax and corporate tax. The individual tax will be replaced by a national sales tax. The corporate tax will be replaced by a zero tax. We can survive without it. Nations and empires did without a corporate tax. This will be a tax relief to the citizens and the best tax help to the economy.