Greens Against Corporate Taxation

Posted by Nick Bradley at February 12, 2008 02:29 PM

GreenCommons.org, the NetRoots for the Green Party, recently published a blog post advocating the elimination of the Corporate Income Tax:

The business conservatives are screaming for a corporate income tax cut. They claim that the tax rate that US corporations must pay is far higher than their overseas competitors. They are right...kind of. Some are screaming for the rate to be dropped to 25%. We should publicly agree and take it to the extreme by calling for the rate to be cut to 0%.

The Green Party ought to apply a surprising jujitsu move by coming out strongly in favor of the complete elimination of corporate income taxation. After you lift your jaw up off the floor, hear me out.

The only business form that pays a separate income tax is the standard "C" corporation. Sole proprietors, partnerships, subchapter S corps, and regular limited liability companies do not. (Some LLC's opt to be treated as a C corp for tax purposes and they are the exception.) All those other forms of business legal structure have to pass through their income and capital gains to the owners during the tax year. The individual owners then have to pay income taxes on the income and capital gains at their individual personal income tax rate.

If C corp's were treated like all other business forms, then they would no longer have an income tax to pay -- essentially reducing it to zero. However, forcing wealthy individuals to account for that income at their personal marginal tax rates would provide a huge boost in tax receipts. And it would be highly progressive. Whereas, the current corporate income taxation is in actuality just another cost of doing business and is passed on to the consumer via cost-plus pricing.

Passing the cost on to consumers in this way is no different than a sales tax, which is very regressive in nature. We fix that problem and increase tax receipts at the same time while also making US corporations more competitive in the global market.

I think the Green NetRoots are on to something, and a democrat running on a left-libertarian platform could use such a platform to garner support in the business community and on the right. While a corporation cannot pass taxes on to the consumer in the form of higher prices, the massive regulatory burden associated with the corporate income tax can cause overall prices to rise. In addition, the government uses the corporate income tax as a carrots-and-sticks scheme to keep corporations in line: corporations that play ball, fork over millions to their representatives, and tote the state line get tax credits and legal protection while those that don't get nothin’ but a competitive disadvantage or, even worse, an FTC bureaucrat threatening “anticompetitive business practice” litigation. By increasing the cost of doing business in the United States, via high regulation, middle-class jobs are pushed overseas to lower-cost areas; higher American productivity levels are negated by Leviathan.

After all is said and done, the corporate income tax encourages the reinvestment of capital, the overexpansion of business operations, and the concentration of capital in the market. And who is hurt most by the corporate income tax? None other than the Left’s self-proclaimed constituents: the poor, minorities, immigrants, blue-collar workers, co-ops, family farms, etc.

If a democrat wanted to run on a true left-libertarian platform, they could adopt some of the following policy proposals:

1. End the Federal Reserve to stop the transfer payments to the financial services industry
2. Eliminate the corporate income tax to reduce the cost of living for the masses, retain blue-collar jobs, and minimize the concentration of corporate power in a few firms
3. Exempt the first $10,000 of every worker’s income from all payroll and income taxes
4. Eliminate all agricultural subsidies; subsidies encourage inefficient energy-and-chemical intensive corporate farming methods and discourage small farms and organic farms
5. Eliminate all transportation expenditures; transportation expenditures encourage urban sprawl, spur petrol consumption, and stretch local services thin over a wide area
6. Eliminate the Department of the Interior’s socialist land-use policies; force conservationists to buy the land they wish to preserve and force resource extractors to buy the land they want instead of paying sweetheart prices to strip public land
7. End the patent office; end all government intellectual monopoly grants (i.e. patents and copyrights). Prescription drugs prices will fall 80%; the cost of producer goods and software programs will plummet -- productivity will skyrocket
8. End the drug war; prevent millions of low-and-middle class Americans from being branded with the scarlet letter of “drug offender”
9. Eliminate environmental restrictions on experimental carbon sequestration methods

If they were serious about what they promise, implementing these policies would go a long way towards accomplishing their own self-described goals of promoting equality, preventing racism, and protecting the environment.