If Democrats really want to increase taxes on the uber-rich. How about this idea?

Question

Right now we have one of the highest if not the highest taxes on corporations in the world. As a result jobs and companies are leaving at a high rate. Even smaller companies (like the one I work for) are looking to send the work they do outside of the USA. What can the US Government do to reverse this trend?

I've a novel plan that should satisfy almost everyone. Before you say it's pure BS think about it. No corporate taxes at all. Over seas companies would be moving here, and in droves. And no federal taxes other than personal income taxes. I know your first thoughts are that can't possible work. But it can. I'll explain how.

Corporations are in business to make money period. If they don't they don't stay in business. But although they want to make money that also don't want a lot of money lying around doing nothing. They want it working as well. So they put it to work. They renovate, renew, or rebuild their facilities. The purchase new equipment, update older equipment, retool, and other things like that. All these things means the money keeps moving. And when money moves someone makes a profit. Sooner or later all that money will end up with individuals in some shape, form, or fashion.

HERE is where the taxes come in. Any salary, wage, commision, or benefit given to an individual is subject to being taxed. And here's where you start. If someone is living above the poverty line thay will pay some tax. How much will they pay depends on how far above the poverty line they are. No flat tax, but a graduated tax with no upper limit. It make no sense to tax someone making $40K at the same rate as someone who makes $40M a year. Democrats are always saying they ony want to increase taxes on the uber-rich while lowering the taxes on the lower and middle class people. Here's their chance. I'll leave it to the statisticians and mathmaticians to figure out how fast the percentage curve rises.

And here's another thing that will make it work. All the loopholes in the present tax code will cease to exist. The only things you would be allowed to deduct would be for each member of the household(plus on additional deduction for special needs cases) and family health insurance. But other than that NO DEDUCTIONS.

This years US Budget was about $3 Trillion (that's 12 zeros) to provide for every man, woman, and child, legal and illegal (about 300M) living in the USA. You do the math, I could have made a mistake. But doesn't that figure out to be about $10K each? I don't know about you but I'm not sure I got my $10K worth of services out of the Federal Government. How much of that was eaten up in buracracy. But that is an whole ball of worms. Let individuals pay all the taxes. What's wrong with that idea?

Answer 1

I'm not sure it would have the impact you say it would.

If personal taxes are going to have to go up, you've just increased the cost to employ someone in the United States, because they will need to earn a larger pre-tax salary to have the same amount of diposable income.

So, under this plan, the marginal cost of hiring an additional American worker goes up, and the marginal cost of hiring an additional non-American worker goes down (because the corporation doesn't have to pay taxes on the product of that worker's labor).

Corporations don't leave the US because of taxes; taxes only apply in real force once you make a profit, anyway (as I understand it--I could be wrong). Rather, corporations likely diversify out of the US mostly because of labor costs.

You may be right; I'm neither a labor economist nor a macro economist. But, methinks its a great idea for a country with cheap labor and a bad idea for a country with expensive labor

Answer 2

On paper that is great, but this isnt a world that runs on paper.

Number one...Corporations have been thriving, been getting away with environmental crimes, and have enjoyed corporate welfare during the Bush Administration.  That isnt enough?  We already watch the Oil Industry make record profits WITHOUT reinvesting in infrastructure (when was the last refinery made in America?).

Meanwhile, when Enron, Bear Stearns, Fannie Mae, or Freddie Mac go under, we the people have to fork over BILLIONS to pay for it.

That still isnt fair enough for the corporations?

What you are talking about is Trickle Down economics....it relies on Corporations being considerate of the people that support them and to reinvest in a country that allows them to thrive.  Instead, even under Bush, those corporations have moved overseas where they can pay less taxes, exploit the environment, and make workers of the world compete to work for the lowest amount.

You have to keep in mind that we only have had 2 Dem presidents since 1970.....Bush had a Republican run Congress for the first 6 years of his administration.

This ISNT a problem we can blame on Democrats.

Answer 3

I think the flaw in your idea is that the whole economic balance would depend upon corporations sinking back a fat portion of their revenues into the population.  

The previous strength of the US worker was in manufacturing goods.  Now we are mostly a country of service sectors.  This shift has made it more possible for corporations to export aspects of their business.  I'm no financial wizard, so I don't have the answers as to how to make this all work either.  

I just don't see where you make up the losses for the lack of tax revenue currently generated by the taxing of corporations.  We want to make it attractive for corporations and businesses to set up shop here, but you can't give them free parking.

Answer 4

You are forgetting many things. Start with the low tax on dividends, how would you handle people that don't receive a salary, instead just receive dividends. What about property tax? Property tax is the largest reason for all of the clever accounting to hide stuff. For example Wal-mart has been caught trying to avoid paying a lot by shuffling responsibilities between the companies it owns.

Also be aware that only about 1/3 of the government income comes from taxes. Businesses and individuals pay a ton of government fees for many types of services.

Answer 5

Yes, just want I want to do is trust big corporations to take some of their profit and reinvest it in the American government. (Sarcasm) The level of corruption that would occur would be infinite. How are you so sure that the loopholes would be closed. The deregulation caused the loopeholes to occur in the first place. I don't like the idea of companies having free reign and not having to own up to any type of regulation whatsoever. Seems to me like a good way to increase corruption and greed.  

Answer 6

So should I forget about the current republican administrations failure to adequately regulate financial markets, which has led to the credit and housing collapse, and allowed a few greedy corporations and individuals to make obscene, tax-free profits at the expense of the nation as a whole.

Congress gets a share of the blame.  They don't have the guts to stand up to the White House, or do what they were elected to do: act in the interest of the nation as a whole rather than  being yes-men for whatever special interest group they think will help get them re-elected.

Other than that, your plan sounds just peachy.

Answer 7

There you go trying to use logic again to fix buracracy. Why not just use the fair tax while you're at it?  

Answer 8

Hmmm i kinda like that...

Star

Answer 9

i love this idea!!

the only thing is this: you said that "But although they want to make money that also don't want a lot of money lying around doing nothing. They want it working as well"

no who says thats true? maybe they'll hord it all for themselves and not use their wealth to renovate etc.

oooh maybe they'll expand the company thereby provifding more jobns for people....

i see....