May 20, 2001

7:47 AM

Abolish corporate taxes!?Just saw this on c-span. I doubt it'll happen, but this is the view of our Treasury Secratary (and former CEO of Alcoa). It's on the frontpage of the FT, wonder if it'll make headlines in the States.
posted by kliuless (15 comments total)

I would have been prepared to support part of this--at least a serious reduction in corporate capital gains--but they already gave away the store by slashing the top personal rate from 39 to 36 percent.

I don't mind seeing Alcoa's growth accelerate--and its workers and vendors benefit--but the boss can afford to pay the top rate on his $2.5 million salary when the money is taken out of the corporation.

He should have said something about this before he got his $80,000+ personal windfall courtesy of the GOP. BTW, how are you going to spend your $600?
posted by steve_high at 8:45 AM on May 20, 2001

point taken s_h, expand a thriving private sector so more people can partake of the wealth generated by our nation's natural entrepreneurial spirit :)
posted by kliuless at 9:18 AM on May 20, 2001

Yeah, gimmie some of that trickle-down! Where can I get a job scrubbing the toilet of an executive? That's the path to prosperity for me!
posted by owen at 9:26 AM on May 20, 2001

but they already gave away the store by slashing the top personal rate from 39 to 36 percent.

39 to 36 percent is slashing?? Sounds more like a paper cut than a slash to me.
posted by ljromanoff at 9:47 AM on May 20, 2001

stick it to the man, huh owen? Rather get a check from uncle sam then from scrubbing toilets?

Larger corporations have a large number of accountants that find loop-holes so they have to pay little to no corporate taxes.

If Mr.O'Neill's proposal is implemented it would have a bigger benefit for small to medium businesses then IBM, AOL, and the like.
posted by Mick at 10:43 AM on May 20, 2001

Nothing's worse than a paper cut.
posted by steve_high at 11:00 AM on May 20, 2001

Pay up or get out, you freeloaders.
posted by Twang at 2:25 PM on May 20, 2001

What about abolishing corporate welfare instead?
posted by keithl at 8:50 PM on May 20, 2001

Way to go keithl!!!! Corporations make massive profits for their chief executives and pay little or no taxes already. I say let's get rid of a truly pernicious scheme of corporate welfare. And I might add that all the welfare paid to the poor for the history of the US wouldn't match one year of corporate welfare. And they now own our government in Washington!
posted by nofundy at 8:45 AM on May 21, 2001

I'm not necessarily for the abolition of corporate taxes, but I've never understood what difference it makes if, say 50 million in corporate profits is tax at the corporate level, or if that 50 million is distributed to shareholders who pay the tax. Is it that the later would be taxed at capital gains rates? Could someone please explain????
posted by ParisParamus at 8:54 AM on May 21, 2001

Given that these corporate taxes are generally passed on to consumers in the form of higher prices for goods, I'm not entirely opposed to this idea on principle. Is there any chance that eliminating corporate taxes could put a few cracks in the legal fiction of corporation-as-person?
posted by harmful at 9:21 AM on May 21, 2001

A corporation is a separate legal person. As such, liability is limited to the corporate level and does not flow through to the shareholders, except in very rare instances. This corporate shield is a powerful protection, and the corporate income tax is the price that corporations and shareholders pay for that protection. That's the rationale.

In a partnership, for example, income is only taxed once (there is no partnership-level tax; income is attributed to the partners), but the partners are personally liable for the partnership's obligations.

The S Corporation and Limited Liability Corporation forms give shareholders the best of both worlds, but there are limits on the use of these forms. S Corporations have a limited number of shareholders, and most states will require that the certain types of business cannot be formed as an LLC unless they carry adequate insurance.
posted by anapestic at 9:23 AM on May 21, 2001

anapestic, if that was in response to my question, you didn't explain why eliminating corporate taxes would necessairly reduce the tax base.
posted by ParisParamus at 9:38 AM on May 21, 2001

Because corporate income is taxed twice, Paris. Example: Corporation has a 50million capital gain. It pays 10million in tax. It distributes the remaining 40 million as a dividend. That 40million is taxable as ordinary income (i.e., not at the reduced capital gains tax rate) to the shareholders. In effect, tax has been paid on 90million of income, albeit at different rates.

If a partnership had a 50million capital gain, the only tax would be paid by the partners, and the income would be taxed at the lower capital gain rate.
posted by anapestic at 10:35 AM on May 21, 2001