Slate's Yglesias: Eliminate the Corporate Income Tax

Friday, 24 May 2013 08:11 AM

By Michael Kling

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
If you want Apple and other multinational corporations to stop engaging in schemes to avoid paying billions of dollars, the solution is simple, says Slate business and economics writer Matthew Yglesias.

Just eliminate the corporate income tax.

The corporate tax prompts high-tech firms like Apple to send money overseas. The problem is that once sent abroad it cannot be used unless brought home, or repatriated, which means it would be taxed.

Editor's Note:
Use This Single Loophole to Pay Zero Taxes in 2013

"Consequently," he writes, "you get the bizarre spectacle of cash-rich Apple going into debt to finance a dividend in order to continue avoiding taxes."

While Apple has been castigated for using offshore shell companies to avoid paying taxes, it did pay $6 billion to Uncle Sam last year. Meanwhile, 26 major U.S. companies, including Boeing, Verizon and GE, paid no taxes at all from 2008 to 2011 by claiming "accelerated depreciation" of their physical assets to offset earnings, Yglesias points out.

In this unfair corporate tax structure, big retailers and health insurance companies are the big losers since they lack manufacturing tax subsidies and major foreign operations where they can hide earnings.

If Apple has huge profits, it can give them to shareholders through dividends or share buy backs and they'll be taxed as dividend or capital gains income. If it gives profits to its employees, the money is taxed as income. If it buys other companies, it becomes the taxable income of the company's previous owners.

If Congress wants Apple to pay more taxes, Yglesias argues, it should raise taxes on high-income individuals or taxes on dividend rates. "Congress could even levy an excise tax on consumer electronics if it wanted to simultaneously raise revenue and hurt Apple’s profits," he says.

Rather than trying to tax corporations, Congress should decide what people to tax, preferably wealthy executives and shareholders, he explains.

"It won’t make as good political theater, but it’ll be simpler and fairer in the end."

Many observers argue that Apple's tax case shows the need for corporate tax reform, although not everyone wants to eliminate the corporate tax.

Companies move money overseas because the U.S. tax rate is so high, states a Washington Post editorial, noting that all the company's actions were legal and rational actions.

"The Apple case illustrates, seemingly for the millionth time, the need for corporate tax reform, a need already recognized by everyone from the Obama administration's Treasury Department to the Republican chairman of the House tax-writing committee," the Post states. "There is also broad consensus that reform should consist of closing loopholes in return for lower rates."

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2013

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink

 
Email:
Retype Email:
Country
Zip Code:
Privacy: We never share your email.
 
Follow Newsmax
Facebook
Google Plus
You May Also Like

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved