I am not sure that I share Senator Lee’s displeasure at the “financialization” of the U.S. economy (division of labor and all that; why not do what you’re good at?) and I’m not convinced that the United States would be better off if fewer people were working in private-equity firms and investment banks and more of them sewing sneakers or mining limestone. I am certain that I do not think that the Senate has any business trying to manage the economy in that way, and that it is not likely to be any good at it.
But unlike many of our gentle new nationalist critics of capitalism, Senator Lee has made some interesting and intelligent policy proposals for addressing the deficiencies he detects. His tax-reform idea — to tax investment income in the same way as wage income while abolishing the corporate-income tax altogether — has much to recommend it. There is a very good argument for taxing all income the same way, irrespective of its source (wages, dividends, inheritances, gifts, municipal-bond income, etc.) and for taxing it at the individual level, when it hits somebody’s bank account. It may create unwelcome distortions in investment (the amount of risk I’m willing to take on in exchange for 85 percent of the return may be different from what I’m willing to take on for 60 percent of the return), but that 0.00 percent tax on corporate income as such would be a powerful incentive in that firms could invest more in their actual operations and less in tax avoidance. (It’ll be a bloodbath at PwC!) And simplification is desirable in itself.
That being said: I do wonder whether the abolition of the corporate income tax is really what these Wall Street-hating MAGA fellows really have in mind when they are denouncing the wicked elites and their decadent capitalism. It is not my impression that it is.