Thursday, March 5, 2009

Why Making the United States a Corporate Income Tax-Free Business Zone Makes Immediate Sense

Consider these valid business and job-creating reasons why repeal of the U.S. corporate income tax code makes enormous immediate sense:
  1. Corporations, both large and small, will invest in more plant and equipment immediately.
  2. More jobs will be created in the United States immediately.
  3. Allow more marginal start-up companies to be funded due to lower thresholds required for return-on-investment (ROI) calculations
  4. Jobs currently overseas will likely be shifted back to the United States due to lower costs of doing business domestically.
  5. Immediate increase in stock prices and corporate value due to projected higher earnings (EBITDA)
  6. Prices should fall somewhat due to lower costs of doing business in the US
  7. US products become more competitive around the globe versus products
  8. produced in countries with high corporate tax rates
  9. Immediate restoration of some proportion of the lost value in 401(k), IRA and pension plans caused by the recent stock market crash
  10. Allow for more rapid investments in new “green” technology and business creation
  11. Redirect money now wasted on efforts to avoid corporate income taxes, possibly into research and development of new technologies

Repealing the U.S. corporate income tax code as a way to stimulate the economic recovery we need and want may sound like a “radical” concept. But just how “radical” of an idea is it to deficit-spend over $1.7 trillion in this year and probably close to $1.5 trillion in 2010 on traditional Keynesian federal spending programs reminiscent of the 1930’s?

One key advantage of the corporate tax repeal is that it could be immediate and go into effect tomorrow if President Obama and Congress acted as swiftly as they did when they passed the recent stimulus bill.

The second advantage is that the cost of the corporate tax repeal would be roughly 1/5th of the cost of the Obama packages in 2009 and 2010 in terms of its impact on the deficit. Corporate tax repeal would mean roughly a $370 billion per year hit in terms of “revenue foregone” to the US Treasury for each of the next five years or about $1.8 trillion. The accumulated deficits from the Obama proposals could reach over $5 trillion when all is said and done.

If we are going to “deficit-spend” our way back into prosperity, give me the $1.8 trillion dollar figure over the $5 trillion hit any day of the week.

And if those are not enough reasons to abolish the corporate tax code, consider lots of other “unintended consequences” of repealing the corporate tax code, almost all of them positive, which is unusual for any federal legislation since it usually goes the other way in terms of “bad consequences”. Consider, for example:

  • No corporate tax code means no more loopholes for corporations to exploit.
  • No more loopholes means no more reasons for lobbyists to curry favor with elected officials.
  • No more corporate lobbying for tax breaks means tremendously reduced amounts of fundraising or PACs to support Members of Congress or the U.S. Senate.
  • No more fundraising removes the amount of time our elected officials have to waste on raising money for the next campaign (it is incessant and never-ending now)
  • No more fundraising means a much lower amount of campaign commercials every 2 years.

In fact, the only downside that could come out of the repeal of the U.S. corporate tax code would be an economic depression in the lobbying community on K Street in Washington, D.C.

So don’t let those clever lobbyists defeat corporate income tax repeal!

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