TN CONA 2011

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Darrian's Proposal

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1 Darrian's Proposal on Thu May 19, 2011 1:47 pm


Abolishing the Corporate Income Tax to Alleviate Unemployment


The United States Corporate Income Tax is the second highest in the world at 39.21%. Japan has the highest corporate tax but they are planning to lower their rate. Corporations that make over 18 million are required to pay 35% of their revenue. Personal Service Corporations are required to pay 35% regardless of how much money they take in and Personal Holding Companies pay an additional 15%. The United States’ corporate tax is 50% higher than the other member nations of the Organization for Economic Coordination and Development. Having such and extremely high corporate tax cause for businesses to take their production to countries where there is a lower tax or no tax at all. It also causes corporations to hire less workers and charge more for their good or service. Some 70 percent of the corporate tax burden is borne by the workers in the form of lower wages and fewer high-paying jobs. The OECD (Organization for Economic Coordination and Development) recommends that countries move away from corporate and personal income taxes toward consumption taxes, and they also found that for every dollar the government collects in revenue, the corporate tax may actually cost the government $1 in revenue through slower economic growth. In the current economic situation that the United States is in, eliminating the corporate income tax would help unemployment and stimulate economic growth.

The proposal is that the corporate income tax be gradually eliminated. The best way to do that would be to decrease the tax percentage over a five year period. Just like the federal income tax, the corporate income tax has different levels. Some businesses pay only 15% each year while larger corporations pay 35%. This would mean that the amount that was decreased each year would be different based on the different tax brackets. Regardless of the percentage, the tax would be nonexistent after five years. Abolishing the tax gradually would be the best option. It would allow for companies to return to the United States and for companies already here to expand. This would increase the personal federal income tax (people not working would have jobs, and people that were working could possibly be making more money), and the state sales tax. This would make up for what some might consider to be lost revenue.

By abolishing the corporate income tax, we can expect to see a decrease in unemployment. Companies will have increased revenue because they will not have to pay large portions to the government. This will allow them to hire more people in existing locations and expand their business to new areas. Moving the companies to new areas does many things for that new location. It will give more business to realtors, who will sell the land for the new business, and for contractors who will build the new businesses. Abolishing the tax would decrease the amount of unemployment benefits that the government and businesses would have to pay and it would add for an increased amount of money paid to the government through the federal income tax. When businesses layoff someone, their unemployment insurance premiums increase. By abolishing the corporate income tax they will be able to hire more workers. This would decrease their premium and leave them more money to continue to grow and pay higher wages. People that were unemployed would be given jobs due to businesses expanding and they would then have to pay an income tax.

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