(From a 2014 e-mail to a professor at Boston University--see 4/26/16.)
I have come to believe that the corporate income tax, assessed on just about all corporations, has become basically a pass-through expense that is ultimately NOT borne by the shareholders but instead is really laid upon the workers, the suppliers and/or the customers. That becomes possible whenever the "rising tide lifts all boats," so there is no competitive disadvantage to paying those taxes. It's just part of the cost of doing business for all corporations. That scenario is not likely to change, so the corporate income tax, which was once considered a fair trade for the limited liability gained by shareholders, is now an anachronism.
I say repeal the corporate income tax, then tax all dividends as ordinary income. I would allow a pass-through deduction or tax credit for corporate income plowed back into certain capital investments at the corporate level, and I would net out losses for pass-through treatment as well.
Alternatively, I would certainly levy a US tax on ALL net corporate income regardless of locus, then allow credits for taxes actually paid elsewhere! I thought that was the rule--I am shocked that corporations are able to place their otherwise-taxable incomes "off-shore" beyond the reach of the US Tax Man.
The revenues lost by repeal of corporate taxes need to be replaced with more taxation of individuals, especially upper-income individuals. The locking in of the so-called 2001 "Bush" tax cuts by Pres. Obama for taxable (not gross) incomes up to $450K was unconscionable, given that the MEDIAN annual household gross income in the US is now somewhere below $52K. Meanwhile, Pres. Obama also RAISED the FICA payroll withholding rate back to its former full level. Wealthier folks don't pay much FICA--lower incomes pay (in addition to income taxes) FICA on 100% of their likely gross incomes! No one talks about the economically adverse affect of FICA sucking currently spendable dollars out of the economy. The only such discussions are about means-testing Social Security and/or misusing payroll-tax-increased FICA receipts to supplement the deficit-driving, grossly inadequate income-tax receipts.
But, I digress.
I am also in favor of repealing the reduced personal capital-gains tax and replacing it with an amortizable capital-investment tax credit, given to an investor upon making an initial investment, subject to a sliding-scale recapture if the investment is liquidated within a given period of time after it is made. Thus, the longer the investment were held, the less the recapture, then zero recapture after a designated period, like 7 years. This would have the effect of rewarding the MAKING of an investment, not its liquidation as the reduced cap-gains tax does.
I would then tax capital gains, per se, at the ordinary-income level, subject to offset with capital losses as now. This should be fine for the average investor/taxpayer, who would receive the net benefits of making investments up front, regardless of what he or she might be paying as cap-gains taxes. The investment tax credit should be an "appropriate" percentage of the total investment. I don't know the numbers, but there should be no net loss of revenues for the govt.
I think payroll taxes are regressive and should be the focal point of a lot of ongoing discussion about taxation, but very few people take the payroll-tax burden into account when discussing taxes. I would repeal the Medicare payroll tax outright and fund Medicare from general revenues, then means-test the bottom end of Medicare with sliding-scale deductibles, covering the high end for everyone, totally independent of the insurance companies. The insurance-centric "Obamacare" is a needlessly complex mess; it may be better than the status quo, but it is not nearly as good as it COULD have been with simply "Medicare For All."
I realize, of course, that my ideas are probably not politically feasible at this time.
