Corporate taxes aren’t so high

Folks like to point out that the USA has an unusually high corporate tax rate (35 percent).  But they don’t mention:

(1)  Some say our corporate taxes paid as a percentage of GDP are about average.  See http://www.oecd.org/dataoecd/48/27/41498733.pdf (Table B); that’s thanks to loopholes — or call them special rules.  Bruce Bartlett says ours are the lowest among developed countries.  http://economix.blogs.nytimes.com/2011/05/31/are-taxes-in-the-u-s-high-or-low/

(2) We don’t have a VAT.  All other developed countries do.

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Keep the Liquor Monopoly

North Carolina Governor Bev Perdue has come out against selling the State liquor monopoly.  Good for her.  Selling income-producing assets to plug revenue holes looks shortsighted.  What’s next, selling Mount Mitchell State Park, http://www.ncparks.gov/Visit/parks/momi/main.php?  Jockey’s Ridge, http://www.jockeysridgestatepark.com/?  Hanging Rock, http://www.ncparks.gov/Visit/parks/haro/main.php?

Yes, we need to clean up the mess in the ABC system, but the free enterprise theoreticians who want private choice to rule supreme always and everywhere shouldn’t cause us to confuse the baby with the contents of the bathtub, be they water or gin.  The profit motive is a powerful force, and we the people have the power and the duty to channel it.  (That’s my opinion.) Continue reading “Keep the Liquor Monopoly”

A harsh view of our tax system

Lee Sheppard, one of America’s top tax journalists, writes:

Congress is completely corrupt, much as it was in the late 19th century, except that we have no Theodore Roosevelt to fight the corruption. The recent Supreme Court decision in Citizens United cements the obvious corporate control of the political process. It is ironic for the president to complain about it, when he, like his opponents, has been bought and paid for by the banks.

The corruption is not just financial but philosophical. The entire ruling class, regardless of party affiliation, has been persuaded to see the world through the eyes of the investor class. The shorthand for this is “free markets,” but markets are never really free, and investors prefer to have them rigged in their favor. And as the meltdown has shown, it is not true that what benefits the investor class benefits everyone else.

The investor class dislikes taxation of investment income or gains, inflation, regulation, and renegotiation of failed debts. The investor class likes deregulation, captive central bankers, and the unfettered flow of capital across national borders.

We are not talking about low taxes. We are talking about no taxation whatsoever, guaranteed by bilateral treaties and foolish practices like respect for paper corporations that allow income to be shifted wholesale to tax havens.

Excerpted from http://www.taxanalysts.com/www/40thpub.nsf/Web/06A5E6CBB0D33888852577FC00765F59?OpenDocument

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That may not be a mainstream view.  But here are some thoughts in reaction:

G.K. Chesterton said when people stop believing in God, the problem is not that we believe in nothing, it’s that we believe in anything.  Now we believe in something like free markets:  I might say instead the profit motive, because (despite what anyone says) we do regulate markets some, but many of us believe in the invisible hand (and want to harness it via incentives, public and corporate, or disincentives, like excise taxes).

As for treaties, some folks defend loopholes against overrides as if some question of national honor were involved — as if all Americans had a duty to sacrifice to show respect for and deserve respect from other countries.  Or something.  See N.Y. State Bar Ass’n Tax Section, “Comments on the Proposed Denial of Treaty Benefits for Certain Related-Party Deductible Payments” 10-11 (May 22, 2010),available at http://www.nysba.org/AM/Template.cfm?Section=Home&CONTENTID=38538&TEMPLATE=/CM/ContentDisplay.cfm.  That might be true if the loophole were bargained for or anticipated, but those aren’t the ones Congress overrides.

IRS verbiage

OK, this is nitpicking, but http://www.irs.gov/pub/irs-pdf/f1023.pdf has this:

User fee increases are effective for all applications postmarked after January 3, 2010.

1. $400 for organizations whose gross receipts do not exceed $10,000 or less annually over a 4-year period.

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They could have said

$400 for organizations whose gross receipts do not exceed $10,000 annually over a 4-year period.

or $400 for organizations whose gross receipts are $10,000 or less annually over a 4-year period.

A virtue of bureaucracy is (or was) to have enough eyes look at drafts to prevent this kind of redundancy.  My faith is the Service is still great enough that I think I may be missing something.

Ethanol as usual

It looks like the late 2010 tax bill will sacrifice revenue to benefit ethanol, which is environmentally unfriendly, http://www.edf.org/page.cfm?tagID=1550, and competes with food production.  If the bill is going to be porked up, Senator Grassley is going to help his people (what else could he do?).   Even as a Democrat, I have admired Senator Grassley as a serious public servant generally, though not for this log-rolling.

Potency as a Base for a Tax on Marijuana — BOE

(For a more comprehensive discussion of this issue, go to http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1741735.)

Excerpt of email from California BOE spokesperson Anita Gore to the author, October 12, 2010 8:24:16 PM (before the outcome of Proposition 19 was knowable):

Staff has discussed the possibility of using potency as a component of an excise tax scheme.  Right now it is an option to consider, and when and if marijuana is legalized, and the legislature moves to impose an excise tax, a potency based tax would be a viable option if the legislature chooses to go in that direction.

With properly crafted legislation and sufficient resources staff believes it is doable.

Staff agrees there are issues around testing and certification like those you raise that would need to be addressed to support a potency based tax.  The question that goes with that is compliance.  Legalization itself will move distribution from an underground economy to a regulated industry.  Will the industry buy into that level of regulation?  No one knows.

Associated revenue – no way to know.