I am delighted to welcome Kevin Williamson to the Zero Corporate Income Tax Club. He makes a highly persuasive case today for eliminating said tax altogether. My one quibble is actually not with his argument, but with one word choice: Several brilliantly explained points that he lists among what he calls “the non-revenue consequences” of eliminating the tax are, actually, directly related to federal revenue. For example, this one:
Third, that corporate cash hoard that so incenses the Left could come home. U.S. businesses are holding trillions of dollars in cash overseas — estimates of how much run from about $2 trillion to nearly $8 trillion. They do this mostly to avoid the U.S. corporate income tax. Shareholders would like for that money to end up in their bank accounts — they are, after all, the owners of those profits.
As Kevin notes, about this result of eliminating the tax and others, the net effect of this would be to substantially increase revenue through other taxes (such as income taxes, capital-gains taxes, etc.), thus making up a significant portion of the revenues “lost” by eliminating the corporate income tax.
I’ve been repeatedly advocating the elimination of this tax for more than six years, now. I was sold on the idea by a former top Democratic staffer on House budget-related committees, a guy who is decidedly not a supply sider, but one who told me that his back-of-envelope calculations were that eliminating the tax would, truly, “pay for itself” because so much of the income would merely show up other places and because so much economic growth would occur.
On a different level, eliminating corporate income taxes also would amount, effectively, to ethics reform. As I explained in one of my NRO pieces advocating an end to this tax:
Getting rid of the corporate income tax would have the happy effect of reforming how lobbyists function, because probably half of D.C. lobbying involves not appropriations or regulatory matters but the tax code. And the tax code’s complexity makes that sort of lobbying more susceptible than others to legal and ethical shenanigans, because the ways to “game the system” on tax loopholes, without being caught, are more numerous.
Eliminating the corporate income tax would benefit shareholders through higher profits (thus leading either to higher capital gains or higher dividends, or both), would benefit consumers through downward pressure on prices (if the profit margin isn’t reduced by as much as 35 percent via these taxes, businesses can make the same net profit after taxes at lower prices than before), would benefit workers (as Lawrence Kotlikoff explained), would repatriate trillions of dollars (and “in-source” jobs accordingly), and would lead, as Kevin noted, to far more productive uses of the time and effort of corporations.
What’s needed is a major elected official to adopt this as a leading cause. House Majority whip Steve Scalise is on record (via Larry Kudlow, again here at NRO) favoring it; now, can he convince Kevin McCarthy and John Boehner?
(Thanks again to Kevin for his superb column.)