Thursday, August 11, 2016

Do You Want Your Corporate Employer to Pay More Taxes?

Aside from the the fun and games about whether Donald Trump told gun owners to cry havoc and let loose the dogs of war, there is the difference in economic policy between Trump and Clinton.

Trump has just released an economic plan that calls for a reduction in corporate income taxes to 15% -- although it sounds a bit more complicated than that.

This is probably a no idea. Most other first world nations have a corporate income tax rate more like 15% while the nominal rate in the US is 35% for federal corporate income tax.

Hillary Clinton claims that Trump's plan is "tax breaks for corporations."

I'd say that this is an argument we need to have, on the merits. Do the American people want corporations to be tax farmed by government or do they want corporations to be lightly taxed so they can make more money, create more jobs and pay their employees more?

Now maybe Donald Trump can make that argument or maybe he can't. But the science is settled. The Great Enrichment of the last 200 years occurred because of innovations that government failed to smother in their cradles.

The idea put out by progressives that government should pick winners and losers and fight inequality is economic rubbish. Everywhere that equality politics has been practiced it has resulted in more inequality. That's because whatever government says it is doing, or thinks it is doing, it always ends up rewarding its supporters. And that means that the supporters have to pay less attention to what the market is telling them to do in the way of producing for the consumers and more attention to what government is telling them in the way of signing up for free stuff.

The basic fact of our economic system is that government has succeeded beyond the dreams of the 1848 radicals in using corporations as government ATMs and tax collectors. And the corporate income tax is the least of it. Right now, in FY 2016 government, federal, state, and local, is collecting about 11 percent of GDP in individual income taxes and 10 percent GDP in social insurance taxes like the federal FICA tax. Nearly all of that money is stripped off the wages of US workers by deductions from worker paychecks. In other words the government uses employers as tax collectors to strip workers of about 20 percent of their wages before they even see the money.

By the way, the corporate income tax, federal and state, comes in at about 1.9 percent of GDP.

Now just imagine that the 20 percent GDP was not conveniently collected by employers for the government and was paid directly once a year to the government by taxpayers. What do you think would happen? I must admit that I just can't imagine. And I don't want to say what I think might happen because Democratic operatives with bylines might suggest that I am inciting violence and I wouldn't like that.

If you want to get mad at corporations why don't you get mad at them for acting as the government's tax collectors, where they are creaming 20 percent off the top to give to government. Because the 1.9 percent that they are paying in corporate income tax is just penny-ante stuff. But it sure keeps a lot of lobbyists trying to buy loopholes from the politicians.

I say let's abolish the corporate income tax and pray for jobs. That is certainly a lot more rational that electing Hillary Clinton, the crony capitalist enabler, and hoping for better times.

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