Ideal Corporate Taxes, Small Business Taxes

[Bidenworth2020]

?

I'd say

Corporate-28%

Small Business- 10%

This is with strict laws about laundering the money and a 10% tax on foreign intellectual property.

[mileslunn]

On a combined level (For countries with sub-national governments that can tax corporations), I would use the following.  Under the equivalent of 500K USD, 15%, over that 25%.  You also could go to a flat rate as you do want to encourage small businesses to eventually become large so if a flat rate than 20%.

[Free Bird]

On a combined level (For countries with sub-national governments that can tax corporations), I would use the following.  Under the equivalent of 500K USD, 15%, over that 25%.  You also could go to a flat rate as you do want to encourage small businesses to eventually become large so if a flat rate than 20%.

This seems reasonable. Make a true level playing field. I'd make it maybe 18% though. But it's good that we all see the flaws in corporations basically paying their own special flat rate (any corporation worth their salt pays the top rate) while everyone else pays income tax rates.

[courts]

i think status quo is ok. just get rid of a lot of these breaks and deductions.

i'm guessing you support some sort of revised territorial system?

[DC Al Fine]

90%, lots of loopholes (does tax planning for a living)

[Sadader]

0%, but make the cut revenue neutral and place in income tax on high earners. Actually a tax cut that could create net revenue and growth. (people should support more revenue neutral tax cuts)

[kyc0705]

I'd say anywhere from 15–20% is a decent corporate tax rate? Not really familiar with tax policy and economics, but I generally buy into the consensus among economists that lowering corporate tax rates is usually a net positive, and the former 35% was hugely self-defeating. If you want to tax wealthy executives, then do that. Taxing the corporate income itself feels like a weirdly needless workaround.

I'm intrigued by suggestions that a progressive consumption tax could allow for many existing tax rates to be lowered more substantially, but I haven't seen any concrete proposals of if/how that would work in practice, so discussion of more radical amendments to the tax rate are strictly hypothetical.

[courts]

I'd say anywhere from 15–20% is a decent corporate tax rate? Not really familiar with tax policy and economics, but I generally buy into the consensus among economists that lowering corporate tax rates is usually a net positive, and the former 35% was hugely self-defeating. If you want to tax wealthy executives, then do that. Taxing the corporate income itself feels like a weirdly needless workaround.

I'm intrigued by suggestions that a progressive consumption tax could allow for many existing tax rates to be lowered more substantially, but I haven't seen any concrete proposals of if/how that would work in practice, so discussion of more radical amendments to the tax rate are strictly hypothetical.

well here's one proposal that cardin made awhile back:

https://www.forbes.com/sites/taxanalysts/2014/12/19/tax-reform-on-steroids-a-progressive-vat-to-appease-conservatives/#136b93b02acd

not sure if that helps

[Tintrlvr]

0%, but make the cut revenue neutral and place in income tax on high earners. Actually a tax cut that could create net revenue and growth. (people should support more revenue neutral tax cuts)

This. Corporate tax doesn't make any goddamn sense within the logic of taxation and creates all sorts of complications and perverse incentives. Tax the income when it accrues to shareholders, who are the ones who actually use the income for non-income-generating purposes.

[mvd10]

I'd say anywhere from 15–20% is a decent corporate tax rate? Not really familiar with tax policy and economics, but I generally buy into the consensus among economists that lowering corporate tax rates is usually a net positive, and the former 35% was hugely self-defeating. If you want to tax wealthy executives, then do that. Taxing the corporate income itself feels like a weirdly needless workaround.

I'm intrigued by suggestions that a progressive consumption tax could allow for many existing tax rates to be lowered more substantially, but I haven't seen any concrete proposals of if/how that would work in practice, so discussion of more radical amendments to the tax rate are strictly hypothetical.

well here's one proposal that cardin made awhile back:

https://www.forbes.com/sites/taxanalysts/2014/12/19/tax-reform-on-steroids-a-progressive-vat-to-appease-conservatives/#136b93b02acd

not sure if that helps

He calls it a progressive VAT and it'd probably function as a progressive VAT because of the rebates, but technically it isn't a pure progressive VAT. A progressive VAT would be collected much like the income tax. But the taxable income would be: income + dissavings -  savings (which is your consumption). That way you get the same taxable base as a VAT, but because it's collected like an income tax you can make rates progressive. Rates would need to be insanely progressive for this to be distribution neutral, but the general consensus is that a progressive VAT would be great economically.

Anyway, the corporate tax rate is only part of the discussion. Perhaps a more interesting discussion is what the corporate tax base should be. How should debt and equity be treated? Currently corporate interest payments are deductible, but dividend payments are not. Some say debt and equity don't necessarily have to be treated neutral and they're like apples and oranges (though personally I prefer a tax code to be as neutral as possible). Making dividends deductible (and taxing them like normal income for investors) could be a solution. Alternatively you could ditch the corporate interest deduction and move to full expensing, which means that the value of depreciable assets can be deducted immediately instead of over a certain time period determined by a depreciation schedule. I'm curious about the destination-based cash flow tax (which Ryan suggested in 2016/2017). It kinda works as a VAT, but with a deduction for wages (the tax base would be something like domestic sales - domestic business inputs - capital investments - wages). But it would be "border-adjusted" meaning that exports wouldn't be taxed and imports can't be deducted. That's allowed for a VAT, but the WTO could consider the DBCFT as a corporate tax and then it would be illegal under WTO rules.

[parochial boy]

Anyway, the corporate tax rate is only part of the discussion. Perhaps a more interesting discussion is what the corporate tax base should be. How should debt and equity be treated? Currently corporate interest payments are deductible, but dividend payments are not. Some say debt and equity don't necessarily have to be treated neutral and they're like apples and oranges (though personally I prefer a tax code to be as neutral as possible). Making dividends deductible (and taxing them like normal income for investors) could be a solution. Alternatively you could ditch the corporate interest deduction and move to full expensing, which means that the value of depreciable assets can be deducted immediately instead of over a certain time period determined by a depreciation schedule. I'm curious about the destination-based cash flow tax (which Ryan suggested in 2016/2017). It kinda works as a VAT, but with a deduction for wages (the tax base would be something like domestic sales - domestic business inputs - capital investments - wages). But it would be "border-adjusted" meaning that exports wouldn't be taxed and imports can't be deducted. That's allowed for a VAT, but the WTO could consider the DBCFT as a corporate tax and then it would be illegal under WTO rules.

I'm really glad that someone finally brought this up, as it is the calculation of taxable profits far more than headline top tax rates that drive fiscal optimisation and yadda, yadda. The questions around depreciation v full expensing is obviously a pretty high profil one at the moment (personally I favour the capital allowances style system the UK uses), but you lso have questions about what revenue and expenses re counted ("patent box" style dedcuctions and so on), as well as where exactly revenue and profits are generated.

This is really the thing that we need to talk about when talking about corporate tax evasion and the like, as it is the byzantine world of various structures used to calculate taxable profit that allow corporations to exploit the system.

0%, but make the cut revenue neutral and place in income tax on high earners. Actually a tax cut that could create net revenue and growth. (people should support more revenue neutral tax cuts)

This. Corporate tax doesn't make any goddamn sense within the logic of taxation and creates all sorts of complications and perverse incentives. Tax the income when it accrues to shareholders, who are the ones who actually use the income for non-income-generating purposes.

Corporations are insistutions separate from their shareholders, and are among the most powerful institutions in the world in terms of the way they allocate capital and wealth. Add in shareholders living in shareholders outside of the jurisdiction the corporation is incorporated in; and the way that multinationals are structured thorough separate legal entities throughout the world... I think doing away with corporate taxes would be rife for exploitation.

[Kingpoleon]

10%: <$400,000(5%)
15%: $400,000-$800,000(7.5%)
20%: $800,000-$20,800,000(10%)
15%: >$20,800,000(7.5%)

The parantheses are in the case of a recession for a 1-3 year period to restart economic growth. Pair it with a .125% Wall Street transaction tax that is reduced to .05% during recessions, and we would have a tax system designed to take down recessions.

[kyc0705]

I'd say anywhere from 15–20% is a decent corporate tax rate? Not really familiar with tax policy and economics, but I generally buy into the consensus among economists that lowering corporate tax rates is usually a net positive, and the former 35% was hugely self-defeating. If you want to tax wealthy executives, then do that. Taxing the corporate income itself feels like a weirdly needless workaround.

I'm intrigued by suggestions that a progressive consumption tax could allow for many existing tax rates to be lowered more substantially, but I haven't seen any concrete proposals of if/how that would work in practice, so discussion of more radical amendments to the tax rate are strictly hypothetical.

well here's one proposal that cardin made awhile back:

https://www.forbes.com/sites/taxanalysts/2014/12/19/tax-reform-on-steroids-a-progressive-vat-to-appease-conservatives/#136b93b02acd

not sure if that helps

It's an interesting idea, to be sure. I think there could be a good, hypothetical compromise with a low corporate tax rate and a progressive/rebate-workable VAT. And under this system, most people would pay vastly less income tax. I would probably support something like this.

[RINO Tom]

21% starting in 2018.

[OSR stands with Israel]

21% starting in 2018.

[courts]

I'd say anywhere from 15–20% is a decent corporate tax rate? Not really familiar with tax policy and economics, but I generally buy into the consensus among economists that lowering corporate tax rates is usually a net positive, and the former 35% was hugely self-defeating. If you want to tax wealthy executives, then do that. Taxing the corporate income itself feels like a weirdly needless workaround.

I'm intrigued by suggestions that a progressive consumption tax could allow for many existing tax rates to be lowered more substantially, but I haven't seen any concrete proposals of if/how that would work in practice, so discussion of more radical amendments to the tax rate are strictly hypothetical.

well here's one proposal that cardin made awhile back:

https://www.forbes.com/sites/taxanalysts/2014/12/19/tax-reform-on-steroids-a-progressive-vat-to-appease-conservatives/#136b93b02acd

not sure if that helps

It's an interesting idea, to be sure. I think there could be a good, hypothetical compromise with a low corporate tax rate and a progressive/rebate-workable VAT. And under this system, most people would pay vastly less income tax. I would probably support something like this.

its a start..we're going to need to be paying taxes more in some areas.we have a bad situation with infrastructure in a lot of the country on top of the boomers getting older..but yeah there's a lot i like here

[parochial boy]

I'd say anywhere from 15–20% is a decent corporate tax rate? Not really familiar with tax policy and economics, but I generally buy into the consensus among economists that lowering corporate tax rates is usually a net positive, and the former 35% was hugely self-defeating. If you want to tax wealthy executives, then do that. Taxing the corporate income itself feels like a weirdly needless workaround.

I'm intrigued by suggestions that a progressive consumption tax could allow for many existing tax rates to be lowered more substantially, but I haven't seen any concrete proposals of if/how that would work in practice, so discussion of more radical amendments to the tax rate are strictly hypothetical.

well here's one proposal that cardin made awhile back:

https://www.forbes.com/sites/taxanalysts/2014/12/19/tax-reform-on-steroids-a-progressive-vat-to-appease-conservatives/#136b93b02acd

not sure if that helps

It's an interesting idea, to be sure. I think there could be a good, hypothetical compromise with a low corporate tax rate and a progressive/rebate-workable VAT. And under this system, most people would pay vastly less income tax. I would probably support something like this.

its a start..we're going to need to be paying taxes more in some areas.we have a bad situation with infrastructure in a lot of the country on top of the boomers getting older..but yeah there's a lot i like here

And here is just a few problems with the propositions made in that article

1. As has already been mentioned, a headline corporate rate deduction does not really mean that much, for a batch of reasons including:
        a) Different ways of calculating taxable income, which can have a vast impact on the base that corporation tax due is being calculated based on. The article refers to reducing those mythical loopholes, which could easily cancel out much, or all, of a headline cut.
        b) It is contestable to what extent reducing corporate taxes would even attract business on the basis that, many countries already have unfeasibly low rates (ie potentially near to zero on Luxembourg) that the US can't compete with.
        c) In any case, it is easy to shift profits to a low tax jurisdiction without necessarily shifting operations (post-boxes in Liechtenstein, famously). When the UK introduced a "patent box" of an especially low rate on profit made from patents, it did not result in R&D operations being shifted to the UK, but instead patents that were developed abroad were merely registered in the UK.
     
2. The VAT is still regressive in that it represents a shifting of taxation from capital (ie corporations and their owners) to normal people/income earners who ultimately pay the VAT

3. The VAT is allegedly made "progressive" through a gutting of federal income taxes, which creates a further shortfall on top of the corporation rate cut. Apparently this is going to be filled in by getting rid of various deductions and loopholes, which never, ever actually works in practice

[Starry Eyed Jagaloon]

0%, but make the cut revenue neutral and place in income tax on high earners. Actually a tax cut that could create net revenue and growth. (people should support more revenue neutral tax cuts)

This. Corporate tax doesn't make any goddamn sense within the logic of taxation and creates all sorts of complications and perverse incentives. Tax the income when it accrues to shareholders, who are the ones who actually use the income for non-income-generating purposes.

[Thunder98]

CT: 20%

SB: 13%

[WritOfCertiorari]

0%, but make the cut revenue neutral and place in income tax on high earners. Actually a tax cut that could create net revenue and growth. (people should support more revenue neutral tax cuts)

This. Corporate tax doesn't make any goddamn sense within the logic of taxation and creates all sorts of complications and perverse incentives. Tax the income when it accrues to shareholders, who are the ones who actually use the income for non-income-generating purposes.

This already exists. They're called S-corporations.

[Kyle Rittenhouse is a Political Prisoner]

0%, but make the cut revenue neutral and place in income tax on high earners. Actually a tax cut that could create net revenue and growth. (people should support more revenue neutral tax cuts)

This. Corporate tax doesn't make any goddamn sense within the logic of taxation and creates all sorts of complications and perverse incentives. Tax the income when it accrues to shareholders, who are the ones who actually use the income for non-income-generating purposes.

[Republican Left]

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So basically match long-term capital gains tax rates with income taxes on labor? Granted, if you do away with the corporate income tax, that'd still be a burden off companies (both in taxes and paperwork).

I know this sounds crazy (since it would exacerbate the current deficit situation even further) but if we were to do away with the federal corporate and small business income taxes (I'm guessing you're referring to pass throughl taxes), what magnitude do you think would the boon be for the US economy be (unless you think it's bad idea for growth and development)? Could the US experience 5% growth for the first time in awhile and could we see real wages rise even further?

[Torie]

If a small business is a sub S corp or LLC, and its income flows through without taxation to the owners' individual tax returns, that income should be taxed as if the small business were an individual. Anything else is profoundly unfair. Why should small business owners be taxed differently from employees? Entities where the income is taxed at the entity level, should be taxed at approximately the same rate as is generally true elsewhere in the developed world. Otherwise, if taxed higher, they are put at a competitive disadvantage.

[Antonio the Sixth]

Hot take: corporate taxes are unnecessary as long as you have sufficiently high, comprehensive and progressive taxes on individual income and wealth.

[136or142]

https://twitter.com/Abdou_econ/status/1026586452069703680

(Not sure how much I can repost here legally.)  This is actually about capital taxes and not income taxes.

Let's start in 1971, Diamond and Mirrlees publish eponymous production efficiency theorem. Productive efficiency is welfare-maximizing and requires optimal linear taxes on intermediate goods equal to zero. This led to belief that capital as intermediate good should not be taxed!

1976: Atkinson and Stiglitz prove that redistribution should be done with non-linear labor income taxes when available. When consumption and leisure affect welfare separately, differentiated tax of cons today and tomrrw through capital is undesirable. Capital should not be taxed!

1985/86: Chamley shows in neoclassical growth economy w/ linear taxes, initial old capital should be taxed BUT future capital should be untaxed. When expropriation of old capital is unfeasible, capital should remain untaxed in long-run ASSUMING economy converges to a steady-state...

... Judd finds that optimal zero capital tax result holds even when government only cares about poor assetless households bc of large distortion of long-run capital tax to output. This led to Chamley-Judd paradigm that dominated policy debate on capital taxation for many decades.

1995: Aiyagari analyzes linear capital taxation in economy w uninsured uncertainty about individual earnings. Bc of precautionary savings against bad luck, there is overaccumulation of capital compared to productive-efficient level in laisser-faire. Thus capital should be taxed!

2003: Golosov, Kocherlakota and Tsyvinski prove that optimal non-linear capital tax is positive in economy w individual productivity unobserved to govermt. When consumption and leisure affect welfare separately, leisure is normal good. High future wealth workers want to work less

... an income effect. Positive capital tax deters capital accumulation of high earners from today to tomorrow and provides better incentives to work tomorrow. This positive optimal capital tax result laid the foundations of the New Dynamic Public Finance literature.

2014: Straub and Werning revisit result of Chamley and Judd and show that when the propensity of substituting consumption today with consumption tomorrow is low, future tax increases imply higher savings today, higher capital stock and higher wages along the path to growth.

... Thus full expropriation of capital in long-run is optimal. But when elasticity of intertemporal substitution is high, intuition is in reverse. Substitution effect dominates and optimal long-run capital tax converges to zero, when it does, albeit slowly at scale of centuries.

At end of the day, should capital be taxed? Robust answer to this question is YES as none of the canonical studies can rule out positive tax on capital in complex envmts. How should capital be taxed (dividends/corporate profits...) and by how much? That will be for another day!