Let’s get rid of corporate taxes altogether

May 23, 2013

Forget trying to make Apple pay higher taxes. How about if we don't make them pay any taxes at all?

Tim Cook, the Apple CEO, thinks the U.S. should lower its corporate tax rate. (David Paul Morris - BLOOMBERG)
Apple CEO Tim Cook thinks the U.S. should lower its corporate tax rate. (David Paul Morris/Bloomberg)

Mitt Romney got roundly mocked for saying, "corporations are people, too," but he had a point. Talk to tax economists for very long and they'll make a variant of the same argument. The question in corporate taxation isn't whether it's paid by people. Of course it is. It's how much of it is paid by shareholders, how much of it is paid by workers, how much of it is paid by customers, etc.

But there's a simpler way to tax those people then by taxing corporations and having corporations pass the costs along to them: You could just tax the people directly. Depending on who you want to pay, you could raise payroll taxes, or raise capital gains and dividend taxes, or raise income taxes. The problem is we'd need to increase those taxes by quite a lot: The corporate income tax is expected to bring in more than $370 billion this year.

My Wonkbook partner Evan Soltas has a nice overview here  of the case for getting rid of the corporate tax. The question, then, is what to replace it with. I'd suggest increasing taxes on capital gains and dividend income, capping deductions for the affluent and instituting a progressively structured carbon tax. All these tax sources would be far more efficient than corporate taxes. The carbon tax would help us slow global warming. And it would be easy to maintain about the same level of progressivity that we now have in the tax code.

Jim Pethokoukis had an interesting post today on whether any Republicans readying themselves for 2016 will emerge with big, new ideas that revitalize the party. I'd love to see one of them steal this one.

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Neil Irwin · May 23, 2013