No More Gimmicks: Axe the Corporate Income Tax!
posted at 10:34 pm on June 22, 2012 by Mike Rathbone
The following is a post from my work blog, but I think it is appropriate for here. This is an issue that not only affects Missouri, but the entire country as well.
It seems that the Show-Me Institute is not alone in its desire to eliminate the corporate income tax. James Pethokoukis, a columnist at the American Enterprise Institute (AEI), lists several reasons eliminating the corporate income tax would be a good thing. Here are a few:
* The corporate income tax hurts workers. AEI economists Kevin Hassett and Aparna Mathur have found that “corporate tax rates affect wage levels across countries. Higher corporate taxes lead to lower wages. A 1 percent increase in corporate tax rates is associated with nearly a 1 percent drop in wage rates.”
* As (Bloomberg View) points out, “The current system often amounts to double taxation, since income earned by a business is subjected to the 35 percent corporate rate, then taxed again when it’s paid out as a dividend.”
* “Corporate income taxes have a highly significant and negative effect on long-term growth,” according to the Tax Foundation.
My colleague Patrick Ishmael and I have proposed eliminating the corporate income tax and making up any lost revenue with the elimination of economic development tax credits, which cost the state about as much as the corporate income tax generates. Not only would this have the positive impact of getting rid of an economically harmful tax, but it would reduce the government’s ability to pick winners and losers, distorting investment decisions and imperiling overall growth. Now is the right time to make this change.
Not only does the above make sense for Missouri. It makes sense for the entire country. The corporate income tax needs to be abolished and the sooner the policy makers in Washington do this (I’m not holding my breath), the better off we’ll be.