Bush said the current income tax code is complex. I don't think there is one citizen in America who would argue with this. If different people who work for the IRS give different answers to the same question, the code is complex. If a professional employee needs to hire a tax consultant to fill out the IRS form, the code is complex. If multinational corporations can arrange to pay NOTHING in taxes, the tax code is complex and unfair. If rich people can invest in loophole-tax investments to avoid income tax, the tax code is complex, unfair and discourages economic growth.
Most of the ideas stemming from conservatives seem to favor the rich over the poor. You hear a lot about tax-free savings and tax-free capital gains, which would primarily benefit people with money. The poor and the middle class earn their money through employment. You also hear about a consumption tax - something like a sales tax - which would also be good for people with money. The poor and middle class spend a greater proportion of what they earn than do the rich, thus making the consumption tax worse for them.
Liberals prefer taxes on rich people and on rich corporations. They believe it is outrageous not to tax personal investments, thus making it possible for the rich to live tax-free. Liberals would prefer taxes would be removed from emplyees, especially poorer ones. Some liberals are recommending a tax on personal wealth. Others are recommending closing corporate loopholes so corporations pay their fair share. Obviously, conservatives are not enamored of any of these ideas.
My idea is unusual. I think it should appeal to both conservatives and liberals. Before I present it, I want to state that I am not an economist. But I hope you will keep your mind open. And if you see flaws in my proposal, let me know.
My idea is to tax only corporations and only their net worth.
A corporation gets from the government the special privilege of limited liability. Those who invest may lose only what they invest, not anything more, regardless of the corporation's fortune or misfortune. This privilege is worth a lot. I propose that a corporation beyond a certain size ($10 million, let's say) should pay a yearly tax, or fee, that is proportional to its net worth.
The tax would not be on income. There would be no need for pages of deductions. There would be no need for calculations. No need for thousands of regulations. No need for tax accountants. No need for the IRS (at least not in its current form). A corporation's net worth is public knowledge, so there is no problem in tax (or fee) administration.
Taxing the net worth of corporations has many advantages. Here are some of them:
- Extremely Simple - Simpler than the consumption tax and any type of simplification of the income tax
- No Need for IRS - a bureaucracy no one likes will hit the dust
- No Need for Tax Advisory Industry - just think of all the saved time and fees
- Personal Savings and Investments Untaxed - this will encourage growth (and make conservatives happy)
- Personal Wages Untaxed - this will increase consumption (and make liberals happy)
- No New Consumption Tax - we already have sales taxes in many cities and states that people are upset with
- Fair for All Citizens - though the burden will be on corporations, the taxes they pay will influence wages and consumption of citizens throughout the land, though not directly
- Increase Economic Efficiency - workers and investors would be freed to follow their aspirations. Just think of the increased efficiency caused by the destruction of the tax advisory industry alone
There is an overriding philosophical reason for adopting the taxing of corporations for their net worth:
PEOPLE ARE MORE IMPORTANT THAN CORPORATIONS
We in the U.S. want to develop people. We want people to be able to reach their potential. We want all the people to live a decent, healthy and prosperous life. Some people may use corporations as tools for achieving their goals. But that is all they are - tools. Let's tax corporations and not the people.
