Corporate Income Tax Is a Game No One Wins

Megan McArdle thinks we should get rid of it entirely

By Kevin Spak,  Newser Staff

Posted Jul 17, 2014 1:44 PM CDT

(Newser) – This week, Treasury Secretary Jack Lew asked Congress to make it harder for US corporations to evade taxes by being "acquired" by a foreign corporation in a low-tax country. It's the latest in the long back-and-forth game of corporate taxation, writes Megan McArdle at Bloomberg. For every move the government makes to try to close loopholes, business comes up with a counter move—and all of those moves wind up draining money from the economy. "I've got a better idea," she writes. "What if we made our tax system so attractive to corporations that they would have no interest in moving themselves abroad?"

Yes, McArdle's radical suggestion is that we eliminate corporate income taxes entirely. "There is no such thing as a fair, simple corporate tax code that can't be gamed," she reasons, because you need to take into account corporate expenses, which turns out to be inherently complicated. Besides, "you can't tax a corporation at all. All 'corporate taxes' ultimately come out of the pocket of some person: an owner, a manager, a customer, an employee." So let's cut the middle man and tax those individuals directly, raising taxes on the wealthy and taxing capital gains as regular income. Then we can "stop wasting everyone's time and money on this insane, unwinnable chess game." (Click for the full column.)

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